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§ 4902. —  Termination of private mortgage insurance.



[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
  January 24, 2002 and December 19, 2002]
[CITE: 12USC4902]

 
                       TITLE 12--BANKS AND BANKING
 
                    CHAPTER 49--HOMEOWNERS PROTECTION
 
Sec. 4902. Termination of private mortgage insurance


(a) Borrower cancellation

    A requirement for private mortgage insurance in connection with a 
residential mortgage transaction shall be canceled on the cancellation 
date or any later date that the mortgagor fulfills all of the 
requirements under paragraphs (1) through (4), if the mortgagor--
        (1) submits a request in writing to the servicer that 
    cancellation be initiated;
        (2) has a good payment history with respect to the residential 
    mortgage;
        (3) is current on the payments required by the terms of the 
    residential mortgage transaction; and
        (4) has satisfied any requirement of the holder of the mortgage 
    (as of the date of a request under paragraph (1)) for--
            (A) evidence (of a type established in advance and made 
        known to the mortgagor by the servicer promptly upon receipt of 
        a request under paragraph (1)) that the value of the property 
        securing the mortgage has not declined below the original value 
        of the property; and
            (B) certification that the equity of the mortgagor in the 
        residence securing the mortgage is unencumbered by a subordinate 
        lien.

(b) Automatic termination

    A requirement for private mortgage insurance in connection with a 
residential mortgage transaction shall terminate with respect to 
payments for that mortgage insurance made by the mortgagor--
        (1) on the termination date if, on that date, the mortgagor is 
    current on the payments required by the terms of the residential 
    mortgage transaction; or
        (2) if the mortgagor is not current on the termination date, on 
    the first day of the first month beginning after the date that the 
    mortgagor becomes current on the payments required by the terms of 
    the residential mortgage transaction.

(c) Final termination

    If a requirement for private mortgage insurance is not otherwise 
canceled or terminated in accordance with subsection (a) or (b) of this 
section, in no case may such a requirement be imposed on residential 
mortgage transactions beyond the first day of the month immediately 
following the date that is the midpoint of the amortization period of 
the loan if the mortgagor is current on the payments required by the 
terms of the mortgage.

(d) Treatment of loan modifications

    If a mortgagor and mortgagee (or holder of the mortgage) agree to a 
modification of the terms or conditions of a loan pursuant to a 
residential mortgage transaction, the cancellation date, termination 
date, or final termination shall be recalculated to reflect the modified 
terms and conditions of such loan.

(e) No further payments

    No payments or premiums may be required from the mortgagor in 
connection with a private mortgage insurance requirement terminated or 
canceled under this section--
        (1) in the case of cancellation under subsection (a) of this 
    section, more than 30 days after the later of--
            (A) the date on which a request under subsection (a)(1) of 
        this section is received; or
            (B) the date on which the mortgagor satisfies any evidence 
        and certification requirements under subsection (a)(4) of this 
        section;

        (2) in the case of termination under subsection (b) of this 
    section, more than 30 days after the termination date or the date 
    referred to in subsection (b)(2) of this section, as applicable; and
        (3) in the case of termination under subsection (c) of this 
    section, more than 30 days after the final termination date 
    established under that subsection.

(f) Return of unearned premiums

                           (1) In general

        Not later than 45 days after the termination or cancellation of 
    a private mortgage insurance requirement under this section, all 
    unearned premiums for private mortgage insurance shall be returned 
    to the mortgagor by the servicer.

                  (2) Transfer of funds to servicer

        Not later than 30 days after notification by the servicer of 
    termination or cancellation of private mortgage insurance under this 
    chapter with respect to a mortgagor, a mortgage insurer that is in 
    possession of any unearned premiums of that mortgagor shall transfer 
    to the servicer of the subject mortgage an amount equal to the 
    amount of the unearned premiums for repayment in accordance with 
    paragraph (1).

(g) Exceptions for high risk loans

                           (1) In general

        The termination and cancellation provisions in subsections (a) 
    and (b) of this section do not apply to any residential mortgage 
    transaction that, at the time at which the residential mortgage 
    transaction is consummated, has high risks associated with the 
    extension of the loan--
            (A) as determined in accordance with guidelines published by 
        the Federal National Mortgage Association and the Federal Home 
        Loan Mortgage Corporation, in the case of a mortgage loan with 
        an original principal balance that does not exceed the 
        applicable annual conforming loan limit for the secondary market 
        established pursuant to section 1454(a)(2) of this title, so as 
        to require the imposition or continuation of a private mortgage 
        insurance requirement beyond the terms specified in subsection 
        (a) or (b) of this section; or
            (B) as determined by the mortgagee in the case of any other 
        mortgage, except that termination shall occur--
                (i) with respect to a fixed rate mortgage, on the date 
            on which the principal balance of the mortgage, based solely 
            on the initial amortization schedule for that mortgage, and 
            irrespective of the outstanding balance for that mortgage on 
            that date, is first scheduled to reach 77 percent of the 
            original value of the property securing the loan; and
                (ii) with respect to an adjustable rate mortgage, on the 
            date on which the principal balance of the mortgage, based 
            solely on the amortization schedule then in effect for that 
            mortgage, and irrespective of the outstanding balance for 
            that mortgage on that date, is first scheduled to reach 77 
            percent of the original value of the property securing the 
            loan.

                     (2) Termination at midpoint

        A private mortgage insurance requirement in connection with a 
    residential mortgage transaction described in paragraph (1) shall 
    terminate in accordance with subsection (c) of this section.

                      (3) Rule of construction

        Nothing in this subsection may be construed to require a 
    residential mortgage or residential mortgage transaction described 
    in paragraph (1)(A) to be purchased by the Federal National Mortgage 
    Association or the Federal Home Loan Mortgage Corporation.

                           (4) GAO report

        Not later than 2 years after July 29, 1998, the Comptroller 
    General of the United States shall submit to the Congress a report 
    describing the volume and characteristics of residential mortgages 
    and residential mortgage transactions that, pursuant to paragraph 
    (1) of this subsection, are exempt from the application of 
    subsections (a) and (b) of this section. The report shall--
            (A) determine the number or volume of such mortgages and 
        transactions compared to residential mortgages and residential 
        mortgage transactions that are not classified as high-risk for 
        purposes of paragraph (1); and
            (B) identify the characteristics of such mortgages and 
        transactions that result in their classification (for purposes 
        of paragraph (1)) as having high risks associated with the 
        extension of the loan and describe such characteristics, 
        including--
                (i) the income levels and races of the mortgagors 
            involved;
                (ii) the amount of the downpayments involved and the 
            downpayments expressed as percentages of the acquisition 
            costs of the properties involved;
                (iii) the types and locations of the properties 
            involved;
                (iv) the mortgage principal amounts; and
                (v) any other characteristics of such mortgages and 
            transactions that may contribute to their classification as 
            high risk for purposes of paragraph (1), including whether 
            such mortgages are purchase-money mortgages or refinancings 
            and whether and to what extent such loans are low-
            documentation loans.

(h) Accrued obligation for premium payments

    The cancellation or termination under this section of the private 
mortgage insurance of a mortgagor shall not affect the rights of any 
mortgagee, servicer, or mortgage insurer to enforce any obligation of 
such mortgagor for premium payments accrued prior to the date on which 
such cancellation or termination occurred.

(Pub. L. 105-216, Sec. 3, July 29, 1998, 112 Stat. 899; Pub. L. 106-569, 
title IV, Secs. 402(a)(2), (c)(1), 403(a), 404, 405(b), (c), Dec. 27, 
2000, 114 Stat. 2956-2958.)


                               Amendments

    2000--Subsec. (a). Pub. L. 106-569, Sec. 404(1)(A), inserted ``or 
any later date that the mortgagor fulfills all of the requirements under 
paragraphs (1) through (4)'' after ``cancellation date'' in introductory 
provisions.
    Subsec. (a)(3), (4). Pub. L. 106-569, Sec. 404(1)(B)-(D), added par. 
(3) and redesignated former par. (3) as (4).
    Subsec. (b)(2). Pub. L. 106-569, Sec. 405(b), amended par. (2) 
generally. Prior to amendment, par. (2) read as follows: ``on the date 
after the termination date on which the mortgagor becomes current on the 
payments required by the terms of the residential mortgage 
transaction.''
    Subsec. (c). Pub. L. 106-569, Sec. 403(a)(1), inserted ``on 
residential mortgage transactions'' after ``requirement be imposed''.
    Subsec. (d). Pub. L. 106-569, Sec. 402(c)(1)(B), added subsec. (d). 
Former subsec. (d) redesignated (e).
    Subsec. (e). Pub. L. 106-569, Sec. 402(c)(1)(A), redesignated 
subsec. (d) as (e). Former subsec. (e) redesignated (f).
    Subsec. (e)(1)(B). Pub. L. 106-569, Sec. 404(2), substituted 
``subsection (a)(4) of this section'' for ``subsection (a)(3) of this 
section''.
    Subsec. (f). Pub. L. 106-569, Sec. 402(c)(1)(A), redesignated 
subsec. (e) as (f). Former subsec. (f) redesignated (g).
    Subsec. (f)(1)(B)(ii). Pub. L. 106-569, Sec. 402(a)(2), substituted 
``the amortization schedule then in effect'' for ``amortization 
schedules''.
    Subsec. (g). Pub. L. 106-569, Sec. 402(c)(1)(A), redesignated 
subsec. (f) as (g).
    Subsec. (g)(1). Pub. L. 106-569, Sec. 403(a)(2)(A), struck out 
``mortgage or'' after ``do not apply to any residential'' in 
introductory provisions.
    Subsec. (g)(2). Pub. L. 106-569, Sec. 403(a)(2)(B), struck out 
``mortgage or'' after ``in connection with a residential''.
    Subsec. (g)(3). Pub. L. 106-569, Sec. 403(a)(2)(C), substituted 
``residential mortgage or residential'' for ``mortgage or''.
    Subsec. (h). Pub. L. 106-569, Sec. 405(c), added subsec. (h).

                  Section Referred to in Other Sections

    This section is referred to in sections 4901, 4903, 4904, 4905 of 
this title.



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