§ 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.