Important Exceptions to the Law
- For loans closed before July 29, 1999, a borrower can usually cancel private mortgage insurance once enough equity is built up in the home. Both Fannie Mae® and Freddie Mac®* allow automatic cancellation of mortgage insurance once the midpoint of a loan's amortization period is reached. Borrowers should consult their lenders for details.
- High-risk mortgages are defined and treated separately under the law. Private mortgage insurance on all high-risk loans must be automatically cancelled at the midpoint of their amortization period as long as the payments are current. For loans defined as outside standard guidelines by the lender, private mortgage insurance can also be cancelled when the mortgage balance is paid down to 77% of the original value of the home.
- The law does not cover piggyback, or 80-10-10, loans.
- The law does not apply to government mortgage insurance (FHA loans). The cancellation provisions of the law also do not apply to lender-paid mortgage insurance.
*Fannie Mae and Freddie Mac are the government-sponsored agencies that purchase conventional mortgages from lenders.
