Mortgage lenders/investors will typically permit the cancellation of private MI when the homeowner builds up enough equity in the home.
Cancellation using original value
The Homeowners Protection Act of 1998 (HPA)1 covers single-family primary residences whose sales were closed on or after July 29, 1999. HPA provides for borrower-requested cancellation and lender-required cancellation.
Borrower-requested cancellation under HPA
The borrowers must provide the lender with a written request for MI cancellation. Upon receiving the request, the lender must cancel the MI policy:
on the date the mortgage loan balance is first scheduled to reach 80% of original value, based solely on the initial amortization schedule2, regardless of the outstanding balance of the loan OR
on the date the mortgage loan balance actually reaches 80% of the original value.
MI coverage can be cancelled only if:
no subordinate liens exist AND
the borrowers have a good payment history AND
the borrowers satisfy the lender’s requirement that the property value has not declined.
Lender-required cancellation under HPA
The lender must automatically cancel the MI policy:
on the date the mortgage loan balance is first scheduled to reach 78% of original value, based solely on the initial amortization schedule2, regardless of the outstanding balance of the loan AND
if the borrowers are current on the payments required by the terms of the mortgage.
Different cancellation requirements apply to loans designated at origination as “high risk.”
Cancellation using current value
Individual investors establish the criteria for cancelling MI based on a property’s current value. HPA does not address MI cancellation using current value. Fannie Mae and Freddie Mac typically require3:
that the loan be seasoned at least 2 years AND
that the borrowers have an acceptable payment history AND
that the LTV based on a current appraisal be 75% or lower if less than 5 years have elapsed since the loan originally closed OR
that the LTV based on a current appraisal be 80% or lower if more than 5 years have elapsed since the loan originally closed.
Check other investors’ MI cancellation requirements.
Borrowers must request MI cancellation in writing and provide a current value estimate acceptable to their lender.
How to cancel MGIC MI coverage
Borrowers should contact their lender to cancel their mortgage insurance coverage. Lenders/loan servicers should contact MGIC. Request cancellation within 30 days after the date mortgage insurance is no longer required via:
MGIC/Link Servicing — Select Cancel Coverage in the main menu
Electronic formats — Contact ecommerce_services(at)mgic(dotted)com for more information
E-mail — Send individual requests or a file to cancel_requests(at)mgic(dotted)com
Fax/mail — Complete and sign a Request for Cancellation of Insurance form; forward it to MGIC.
1. Consult with your own counsel to assure compliance with the HPA.
2. For ARM loans, the amortization schedule then in effect applies.
3. Fannie Mae and Freddie Mac requirements were taken from their Seller/Servicer
Guides and are subject to change. MGIC does not warrant that this information is up-to-date. Refer to the Agencies’ Seller/Servicer Guides for the most current MI cancellation information.