CAS Mortgage Insurance Primer Presentation
How MI Works: MI Cancellation Provisions
Borrower Paid Mortgage Insurance may be cancelled under the following circumstances:
1.
Automatic Termination (based on scheduled amortization):
■ the principal balance of the mortgage loan reaches 78% of the original value of the property AND
■ the borrower's payment is current
2. Borrower-Initiated Termination Based on Original Property Value (i.e, loan balance decrease):
Outstanding balance of the loan is reduced such that the LTV ratio reaches <=80% of the original value of the
property (typically due to a curtailment) AND
■ Borrower must have an acceptable payment history:
☐ payment is current;
has no payment 30 or more days past due in the last 12 months; and
has no payment 60 or more days past due in the last 24 months.
The servicer must warrant that the current property value is at least equal to the original property value. The
servicer may choose to order a BPO, a certification of value, or a new appraisal to verify the current property
value
3. Borrower-Initiated Termination Based on Current Property Value (i.e., property value increase):
Servicer must establish current property value as evidenced by a new appraisal based on an interior and
exterior inspection of the property and prepared in accordance with Fannie Mae's appraisal standards.
■ LTV ratio must be:
75% or less, if the seasoning of the mortgage loan is between two and five years.
80% or less, if the seasoning of the mortgage loan is greater than five years.
Borrower must have an acceptable payment history (see requirements above for borrower-initiated
termination)
Applicable to mortgages secured by one-unit principal residence or second home; lower LTV ratios required for other loan types.
To note, #1 and #2, above, are provisions of the Homeowner's Protection Act of 1998. #3 is allowed under current Fannie Mae Servicing Guidelines.
CAS Mortgage Insurance Primer Presentation
10/18/2017
© 2017 Fannie Mae. Trademarks of Fannie Mae.
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