Does the new federal housing order mean your mortgage insurance is being canceled?

 

A newly signed executive order has created an attention-grabbing headline: some borrowers could eventually have private mortgage insurance canceled proactively.

That possibility is real, but it is not an immediate, universal change.

The October 22 order directs the Federal Housing Finance Agency to establish a pilot program involving eligible single-family mortgages owned, guaranteed or securitized by Fannie Mae or Freddie Mac. The proposed system would use automated valuations and other data to identify borrowers who appear to meet equity and additional cancellation requirements.

The pilot would apply only to mortgages made after the program is established. Eligibility, payment-history, safety-and-soundness and contractual requirements would still apply. The White House

What can existing homeowners do now?

Many borrowers with conventional loans already have PMI-cancellation rights.

For qualifying mortgages, homeowners can generally request cancellation when the principal balance is scheduled to reach 80% of the property’s original value. Requirements can include:

  • A written request
  • A current loan with a satisfactory payment history
  • No disqualifying junior liens
  • Evidence that the property’s value has not declined

PMI generally terminates automatically when the scheduled principal balance reaches 78% of the original value, provided the mortgage is current. Consumer Financial Protection Bureau

Investors and servicers may also provide other cancellation paths, including certain reviews based on current property value.

Not all mortgage insurance is PMI

PMI normally refers to private mortgage insurance on a conventional loan.

FHA mortgage insurance premiums follow different rules. VA loans do not use monthly PMI, although an eligible borrower may pay a VA funding fee. The first step is therefore identifying the actual loan type.

What should a homeowner ask?

Contact the company servicing the mortgage and ask:

  1. What type of mortgage insurance do I have?
  2. What is the earliest date I can request cancellation?
  3. Can current property value be considered?
  4. Is an appraisal or another valuation required?
  5. Are there payment-history or lien requirements?
  6. Will cancellation happen automatically if I take no action?

The executive order may make PMI cancellation easier for certain future borrowers, but existing homeowners should not wait for the pilot before reviewing the options already available.

Oklahoma Mortgage Group can help homeowners identify their loan type and understand the questions to take to their servicer. Buyers can also explore our Oklahoma conventional-loan options before deciding how much to put down.



Location: Tulsa, OK, USA

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