Mortgages Analyzed
Mortgages Analyzed
Mortgages Analyzed
 
PMI Disclosure

What is PMI Disclosure?

PMI Disclosure

PMI disclosure informs the borrower that the loan has a requirement for private mortgage insurance (PMI) and that the borrower has the right to request cancellation of PMI when the cancellation date has reached or that the PMI will automatically terminate upon the termination date.

PMI disclosure is provided for any residential mortgage transaction that requires private mortgage insurance. PMI disclosure is provided to the borrower at the time of loan closing.

Source :www.MortgagesAnalyzed.com

Contents of PMI Disclosure

The contents of the disclosure depend on whether the loan is a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM).

Fixed Rate Mortgages

HPA, §4903(a)(1)(A), requires the following items to be included in the PMI Disclosure for a fixed rate mortgage.

  1. A written initial amortization schedule. The amortization schedule shows the LTV after each payment, which can be used to determine when the unpaid principal balance reaches the cancellation date (80% LTV) or the termination date (78% LTV).
  2. A notice containing the following statements:
    1. The borrower has a right to cancellation of PMI when the cancellation date is reached based solely on the initial amortization schedule.
    2. The borrower has a right to cancellation of PMI when the cancellation date is reached based on the actual payments.
    3. The requirement for PMI will automatically terminate on the termination date. The statement must include the termination date that is specific to that mortgage.
    4. There are exemptions to the right to cancellation and automatic termination of PMI and whether such an exemption applies at that time to that transaction.
Source :www.MortgagesAnalyzed.com

Adjustable Rate Mortgages

HPA, §4903(a)(1)(B), requires the following items to be included in the PMI Disclosure for an adjustable rate mortgage.

  1. A notice containing the following statements:
    1. The borrower has a right to cancellation of PMI and that the servicer will notify the mortgagor when the cancellation date is reached.
    2. The PMI will automatically terminate on the termination date, and that on the termination date, the borrower will be notified of the termination or that the PMI will be terminated as soon as the borrower is current on loan payments.
    3. There are exemptions to the right of cancellation and automatic termination of PMI and whether such an exemption applies at that time to that transaction.

An amortization schedule is not required for PMI disclosure for adjustable rate mortgage.

Source :www.MortgagesAnalyzed.com

Lender’s Considerations

Timing of Disclosure

The disclosure must be provided at the time of loan consummated. For this purpose the disclosure is typically included as part of the closing documents.

Source :www.MortgagesAnalyzed.com

Borrower’s Considerations

PMI disclosure informs you of the PMI cancellation date and PMI termination date for your loan. With this information you will know when to reach out to the lender to request cancellation of the PMI. Cancellation date and termination date are explained below.

  1. Cancellation Date: Cancellation date is the date when you can request the lender to cancel the PMI from your loan. When PMI is cancelled your monthly payment will go down. This date is important to know because you are required to approach the lender and request cancellation of PMI. For FRMs, the cancellation date is the date when the LTV is first scheduled to reach 80 percent based on either the original amortization or based on the actual payments. For ARMs, the cancellation date is the date when the LTV is first scheduled to reach 80 percent based on either the amortization in effect or based on the actual payments.
  2. Termination Date: Termination date is the date when the lender is required to automatically cancel the PMI from your loan and you are no longer required to make payments for PMI premiums. For FRMs, the termination date is the date when the LTV reaches 78% based on initial amortization schedule. For ARMs, the termination date is the date when the LTV reaches 78% based on the amortization schedule in effect for the loan.
Source :www.MortgagesAnalyzed.com
 

Document Summary

 
PMI Disclosure
Purpose
PMI disclosure informs the borrower of the cancellation date and termination date so that the borrower knows when to reach out to the lender to request cancellation of the mortgage insurance.
Use in Mortgages
The disclosure is provided at loan closing to inform the borrower of key dates related to PMI.
Other Names
  • PMI Disclosure
  • Private Mortgage Insurance Disclosure
Type
Disclosure
Provided By
Lender
Provided To
Borrower
Notarization Required
No
Signed By
None
Life Cycle Stage
Origination
Recordkeeping
None required by Homeowners Protection Act
Model Form
N.A.
Applicable Laws
12 USC 4903 (a) (1)
Source :www.MortgagesAnalyzed.com

Updated: Feb 20, 2016

Comments

comments powered by Disqus
PMI Disclosure informs the borrower when PMI can be cancelled or when it will terminate
Finance
Know all there is to know about the US Mortgage Industry. We help you to make a well informed decision.
Finance
Loan Products
Confused about the choosing right loan product for you? We help you decide the loan product that suits your needs best.
Loan Products
Documents
Here you will find all there is to know about the forms, papers & documents required for Home Loan Mortgage and much more.
Documents
Regulation
List of all the Regulations related to US Mortgage Industry.
Regulations