Illinois real estate exam glossary
Private mortgage insurance
Give each PMI number its own job. Less than 20% down often explains why a conventional loan needs coverage. An 80% balance can support a qualified cancellation request. A scheduled 78% date can require automatic termination. Before choosing an answer, identify the coverage, value, schedule and conditions.
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The short answer
Private mortgage insurance, or PMI, protects the lender or investor against covered mortgage-default loss. Paying the premium does not give the borrower payment protection or cancel the debt. For ordinary covered borrower-paid PMI, the Homeowners Protection Act provides a qualified written-request route at 80% of original value, automatic termination at the scheduled 78% point when current, and a current-borrower midpoint backstop. Lender-paid insurance, high-risk classifications and FHA or VA programs need different analysis.
PSI’s June 24, 2026 national outline places mortgage insurance within Financing. The whole area represents 10% of the 100 scored national questions, not ten PMI questions. These are original exercises, not official or recalled PSI items or a validated readiness test.
Choose the right PMI exit route
- Identify the coverage and transaction. The HPA’s ordinary cancellation and termination framework concerns covered borrower-paid private mortgage insurance. The definitions address a one-unit principal residence and a qualifying transaction consummated on or after July 29, 1999, including acquisition, initial construction or refinancing. Do not assume identical treatment for every second home, investment property, older loan or insurance structure. The ordinary federal 80% and 78% examples assume covered, non-high-risk borrower-paid PMI unless stated otherwise. Coverage, current status, modifications and the actual loan documents still matter.
- Find statutory original value. For a purchase, use the lower of the contract sales price and appraised value at consummation. For a qualifying refinance, use the appraised value relied on to approve that refinance. A later appreciation estimate does not automatically change this benchmark.
- For an 80% request, check the entire set. The borrower submits a written request, has the statutory good payment history, is current and satisfies any permitted holder requirement for evidence that value has not declined below original value and certification of no subordinate lien on the equity. The evidence type must be established in advance and promptly made known upon a request. When the applicable statutory conditions are met, cancellation is required, not merely a discretionary favor.
- Read the request-route history carefully. Use the later of the cancellation date and the request date as the anchor. The statutory definition excludes a payment at least 60 days late during the 12-month period beginning 24 months before that anchor and a payment at least 30 days late during the immediately preceding 12 months. Both conditions matter. Being current now does not erase a disqualifying earlier late payment.
- For ordinary automatic termination, use scheduled 78%. A fixed-rate loan uses its initial amortization schedule; an adjustable-rate loan uses the schedule then in effect. Apply any required modification recalculation. If the borrower is current at the termination date, no cancellation request is needed. If not, section 4902(b)(2) uses the first day of the first month after the borrower becomes current.
- For the midpoint backstop, look at time. If the requirement has not otherwise ended, section 4902(c) bars it beyond the first day of the month immediately following the amortization midpoint when the borrower is current. For an unmodified 30-year amortization, halfway is 15 years. An agreed loan modification requires recalculation of the relevant cancellation, termination and final-termination dates.
- Keep exceptions and additional policies separate. A statutory high-risk classification can change the ordinary 80% and 78% treatment, but the statute preserves the midpoint provision. Lender-paid insurance is excluded from sections 4902 through 4904. A more favorable current-value or other agreed cancellation path can exist; determine its actual standards rather than applying one universal appreciation formula.
- Check the money after the requirement ends. Unearned premiums under section 4902 must be returned by the servicer within 45 days of the applicable cancellation or termination. That is different from refunding every previously earned premium. Accrued premium obligations and the statute’s separate billing and notice provisions also need their own analysis.
- Use the actual premium terms for arithmetic. An exercise can state the insured balance, annual rate and monthly payment method. Convert the percentage to a decimal, calculate the annual amount and divide by twelve. Do not turn a supplied example rate into a current quote or assume every insurance contract uses the same changing balance or refund method.
- Read disclosures and notices by their purpose. The HPA requires applicable initial and annual information, written notice when the requirement ends, and written grounds for a denial. Its notice, premium-billing and unearned-refund provisions have different events and deadlines. Section 4906 prohibits charging the borrower for notices or information required by the HPA; it does not establish that every optional valuation service is free.
| Route or issue | What to use | Conditions that matter |
|---|---|---|
| Borrower-requested cancellation | Scheduled 80% date or actual payments reaching 80% of original value | Written request, good history, current payments and applicable value/lien requirements |
| Automatic termination | Scheduled 78% date against original value | Current at that date; no request needed for the ordinary route |
| Not current at scheduled termination | Date the borrower becomes current | First day of the first following month under section 4902(b)(2) |
| Final termination | Amortization midpoint | First day of the immediately following month, with current status |
| Agreed modification | Modified terms and conditions | Recalculate the relevant cancellation, termination and final-termination dates |
| Additional current-value path | Applicable holder, investor or servicer standards | Not one universal HPA appreciation formula |
| Lender-paid coverage | Separate section 4905 rules | Do not apply ordinary borrower-paid cancellation rules |
| Unearned premium refund | Applicable cancellation or termination date | Servicer return within 45 days; earned past premiums are a different issue |
The distinctions that matter
| Distinction | How it works | What to notice |
|---|---|---|
| PMI and homeowners insurance | PMI covers a layer of lender credit loss from mortgage default. Homeowners insurance covers specified property and liability risks under its policy. | Paying for PMI does not make it protection for the borrower’s belongings or missed installments. |
| Borrower-paid and lender-paid insurance | Borrower-paid PMI can have a monthly, upfront or split premium. Lender-paid mortgage insurance has separate statutory treatment and usually appears through higher loan pricing. | A missing monthly PMI line does not establish that insurance or its cost disappeared. |
| 80% request and scheduled 78% termination | The ordinary 80% route requires a written request and the applicable conditions. Scheduled 78% termination requires no borrower request when the covered borrower is current. | Do not import every request-only payment-history, valuation or junior-lien condition into automatic termination. |
| Scheduled and actual balance | The schedule supplies the relevant future principal path. The actual ledger reflects credited payments, including extra principal. | Extra payments can support an earlier 80% request; reaching actual 78% early is not the ordinary automatic date. |
| Original value and current value | Original value is the statutory transaction benchmark. Current value is a later valuation used under an applicable additional policy. | A new online estimate does not automatically replace the federal original-value denominator. |
| Current payments and good payment history | Current status asks whether required payments are up to date. The request route’s good-history definition also looks back over specified periods. | A borrower can be current today and still fail the request-route history condition. |
| Balance threshold and amortization midpoint | A balance threshold compares principal with original value. The midpoint is halfway through the applicable amortization period. | Fifteen years is halfway through an unmodified 30-year amortization; it does not mean 50% LTV. |
| PMI removal and debt repayment | Removal ends the applicable insurance requirement. The note, interest and other mortgage obligations remain. | Do not equate cancellation with a debt discharge, escrow waiver or property transfer. |
| PMI and FHA MIP | PMI is private insurance commonly associated with conventional mortgages. FHA insurance follows HUD’s separate program rules. | Do not apply HPA private-insurance exit thresholds automatically to an FHA loan. |
| PMI and VA protection | A VA-backed purchase loan has a federal guaranty rather than monthly PMI or FHA MIP. A one-time funding fee may apply unless a qualifying exemption applies. | No monthly PMI does not mean that every loan fee or eligibility condition disappears. |
Work through the facts
Purchase original value
The qualifying purchase price is $400,000 and the appraisal at consummation is $410,000. The exercise asks for the statutory original-value thresholds.
- Use the lower of the two supplied values, not the higher appraisal.
- Multiply 400,000 by 0.80 and 0.78. These are principal thresholds; the two exit routes still have different timing and conditions.
Answer: Original value is $400,000; 80% is $320,000 and 78% is $312,000.
Extra payments support a request
Actual credited principal on an ordinary covered loan reaches 80% of original value ahead of schedule. The borrower is current and has good payment history. No completed written request or remaining value/lien evidence is supplied.
- Actual principal payments can establish the earlier 80% cancellation date.
- Check the written request and any permitted holder requirements for nondeclining-value evidence and no-subordinate-lien certification. Do not call the 80% event automatic termination.
Answer: The borrower can pursue the written-request route, but these facts do not show that every cancellation condition is complete.
Scheduled automatic termination
An ordinary covered loan reaches its scheduled 78% termination date, and the borrower is current. No high-risk exception or different insurance structure is supplied.
- Use the scheduled date, rather than substituting an early actual balance or a new market estimate.
- Do not add the request route’s separate history, appraisal or junior-lien conditions to this supplied automatic route.
Answer: The ordinary automatic-termination requirement applies without a borrower request.
Current after the scheduled date
The scheduled termination date is October 1, 2026, but the covered borrower is delinquent then. The borrower becomes current on October 20. No exception is supplied.
- The statute uses the first day of the first month beginning after the borrower becomes current.
- The result is not instant termination on October 20, a new 80% request requirement or loss of the right forever. This is a supplied statutory timing example, not a reviewed servicing file.
Answer: Section 4902(b)(2) points to November 1, 2026.
The midpoint is a time test
A covered, unmodified loan has a 30-year amortization. Its midpoint is stipulated to occur on October 15, 2026; the borrower is current and the PMI requirement has not otherwise ended.
- Half of the 30-year amortization is 15 years. The following month begins on November 1.
- The balance need not be 50% or scheduled 78% for this backstop. An actual agreed modification requires recalculation rather than blindly keeping the old midpoint.
Answer: The supplied midpoint backstop points to November 1, 2026.
Appreciation does not replace original value automatically
The borrower’s actual balance is 84% of original value but, using the claimed higher current value, the borrower believes current LTV is 72%. No qualifying investor or holder approval is supplied.
- The ordinary statutory routes use original value and the appropriate actual or scheduled trigger.
- A separate, more favorable current-value path may be available. Follow the applicable written standards and required valuation rather than treating the claimed 72% as automatic approval.
Answer: These figures do not establish ordinary HPA cancellation or automatic termination.
A supplied annual premium
An exercise supplies a $300,000 premium-calculation balance, a 0.60% annual PMI rate and monthly payment of the annual amount.
- Convert 0.60% to 0.006, then multiply 300,000 by 0.006 to get $1,800 annually.
- Divide 1,800 by twelve to get 150. This is a stated exercise rate and base, not a market quote or a promise that every policy recalculates the same way.
Answer: The supplied monthly premium is $150.
Current today, but history still matters
For an ordinary 80% request, the borrower is now current but made a payment 35 days late eight months before the later of the cancellation date and request date. No different applicable rule is supplied.
- Thirty-five days is at least 30, and eight months is within the immediately preceding 12-month period.
- The borrower can be current and still fail this request-route condition. Do not import that same history requirement into ordinary scheduled automatic termination.
Answer: Current status alone does not satisfy the statutory good-history condition.
Early actual 78% is not the scheduled automatic date
Extra principal payments bring an ordinary covered loan’s actual balance to 78% of original value, but its scheduled 78% date is still in the future. No qualifying written request has been completed.
- The cancellation-date definition permits the actual-payment path. The automatic-termination definition instead uses the specified schedule.
- Complete the request route’s applicable conditions rather than treating an early balance as automatic approval. The exercise does not certify a servicing decision or alter a live loan schedule.
Answer: The actual balance can support the request route at 80% or below; it does not alone move the ordinary scheduled automatic date.
Refinancing changes the statutory transaction benchmark
A qualifying refinance is approved using a $320,000 appraisal. The earlier purchase price was $250,000. A later estimate is $400,000. The exercise asks for original value and the 80% and 78% principal figures.
- The qualifying refinance uses the appraisal relied on to approve that refinance, rather than the old purchase price or the later estimate.
- 320,000 multiplied by 0.80 is 256,000; multiplied by 0.78 it is 249,600. Actual route, schedule, current status and other applicable conditions still matter.
Answer: Use $320,000; 80% is $256,000 and 78% is $249,600.
Mistakes to avoid
- The borrower pays, so PMI protects the borrower The coverage protects the lender or investor against covered mortgage-default loss.
- Every mortgage over 80% LTV legally requires PMI Higher-LTV conventional lending commonly uses PMI, but the program and structure determine the requirement. The HPA does not itself require it.
- 80% means automatic removal The ordinary 80% route requires borrower action and all applicable conditions.
- Extra payments reaching actual 78% always trigger automatic termination The ordinary automatic route uses the scheduled termination date. Extra payments can instead support the request route.
- Current payments erase all late-payment history The requested-cancellation route has a separate defined lookback test.
- The borrower needs a new appraisal and no junior lien at every automatic date Those ordinary request-route conditions should not be added wholesale to scheduled automatic termination.
- A delinquent borrower permanently loses automatic termination The statute specifies later termination after the borrower becomes current.
- Every midpoint stays fifteen years after a loan modification The agreed modification requires relevant PMI dates to be recalculated.
- Every high-risk loan follows ordinary 80% and 78% rules Read the actual statutory classification and preserved midpoint protection.
- Lender-paid MI is free insurance the borrower can cancel at 80% Its pricing and separate section 4905 treatment are different.
- Removal refunds every premium ever paid The statute addresses unearned premiums; earned premiums and accrued obligations are separate.
- PMI removal eliminates taxes, insurance and the mortgage debt It does not discharge the note or automatically cancel other insurance or escrow obligations.
- FHA MIP follows the private-insurance 78% rule Apply the actual federal program’s separate premium and duration rules.
- The example premium is the rate every borrower will receive Use the supplied base and rate for arithmetic; actual insurance pricing and terms vary.
24 questions on PMI protection, thresholds and conditions
These are original teaching questions, not recalled or predicted PSI questions. Answer first, then explain why the other choices fail.
1. Who is primarily protected by PMI against covered mortgage-default loss?
- The borrower’s furniture owner
- The property-tax authority
- The lender or investor
- The borrower against every missed payment
Show answer and explanation
Answer: C. The lender or investor
Borrower payment of the premium does not change the protected party. The borrower remains responsible for the loan and can still face foreclosure after default.
2. PMI is most commonly associated with which arrangement?
- A conventional mortgage
- A VA monthly MIP charge
- A cash purchase without financing
- A deed without a loan
Show answer and explanation
Answer: A. A conventional mortgage
Private insurance is commonly used in conventional lending, especially at higher LTV. FHA insurance, VA guaranty and USDA program charges are different structures.
3. What does the ordinary 80% original-value route require?
- Automatic removal with no conditions
- A new deed to the lender
- A written borrower request and all applicable statutory conditions
- Forgiveness of the mortgage principal
Show answer and explanation
Answer: C. A written borrower request and all applicable statutory conditions
The request, statutory good payment history, current status and any permitted holder value/lien requirements matter. Once the applicable conditions are met, the statute requires cancellation rather than a discretionary favor.
4. An ordinary covered borrower-paid loan reaches the scheduled 78% date and the borrower is current. What is the result?
- Automatic PMI termination under the ordinary rule
- A new appraisal in every case
- A written 80% request is always required
- Mandatory refinancing
Show answer and explanation
Answer: A. Automatic PMI termination under the ordinary rule
No borrower cancellation request is needed for this ordinary scheduled route. Do not substitute an early actual balance or automatically add the request route’s separate history, valuation and junior-lien conditions.
5. A qualifying purchase sells for $400,000 and appraises for $410,000 at consummation. What is statutory original value?
- $400,000, the lower supplied value
- The sum of both amounts
- $410,000, the higher supplied value
- Any later online estimate
Show answer and explanation
Answer: A. $400,000, the lower supplied value
The purchase definition uses the lower of contract sales price and appraisal at consummation. A qualifying refinance uses the appraisal relied on to approve that refinance instead.
6. A covered borrower is delinquent on the scheduled termination date and brings the required payments up to date on October 20, 2026. Which ordinary statutory timing follows?
- Never terminate PMI
- Terminate automatically at midnight on October 20
- Forgive the mortgage balance immediately
- The first day of the first month after becoming current, November 1
Show answer and explanation
Answer: D. The first day of the first month after becoming current, November 1
Section 4902(b)(2) supplies the first-day-of-the-first-following-month rule. This is different from a new 80% request or immediate termination at the moment the delinquency is cured.
7. What does the midpoint backstop principally measure?
- The owner’s age
- Halfway through the applicable amortization period
- Half of the home’s current value
- The date of a listing photograph
Show answer and explanation
Answer: B. Halfway through the applicable amortization period
The midpoint is a time concept, not 50% LTV. The statute’s first-following-month and current-status conditions matter, and an agreed modification requires recalculation of relevant dates.
8. Does a claimed rise in value automatically establish ordinary federal PMI termination?
- No; additional current-value paths follow their applicable standards
- Yes; any appreciation is sufficient
- Yes; no valuation standard matters
- Yes; the seller alone decides
Show answer and explanation
Answer: A. No; additional current-value paths follow their applicable standards
The ordinary statutory triggers use original value and the appropriate actual or scheduled principal path. A more favorable holder or investor policy can provide another route, but the claimed appreciation alone is not its approval.
9. An exercise supplies a $240,000 premium base and a 0.50% annual rate, paid monthly. What is the monthly premium?
- $100
- $50
- $120
- $1,200
Show answer and explanation
Answer: A. $100
240,000 multiplied by 0.005 is 1,200 annually. Dividing by twelve gives 100 monthly. The rate and calculation base are supplied for the exercise; they are not a current quote.
10. Does cancellation of a PMI requirement cancel the borrower’s mortgage debt?
- Yes; the note is forgiven
- No; the debt and other obligations remain
- Yes; all taxes and insurance also end
- Yes; in Illinois only
Show answer and explanation
Answer: B. No; the debt and other obligations remain
Removing the insurance requirement is different from paying or discharging the note. It does not automatically end interest, property taxes, homeowners insurance or escrow requirements.
11. Which describes the ordinary statutory transaction coverage most accurately?
- Every dwelling and commercial loan worldwide
- Every borrower-paid charge regardless of its legal structure
- Only a second home bought for investment
- A qualifying transaction on or after the effective date involving a one-unit principal residence, subject to the Act’s definitions and exceptions
Show answer and explanation
Answer: D. A qualifying transaction on or after the effective date involving a one-unit principal residence, subject to the Act’s definitions and exceptions
The HPA definitions use a qualifying transaction consummated on or after July 29, 1999 and a single dwelling unit that is the mortgagor’s principal residence. Do not invent a blanket first-lien-only exclusion or treat every loan as covered.
12. Which schedule distinction appears in the HPA definitions?
- Every loan always uses a later online home estimate
- The borrower may choose any schedule
- Fixed-rate calculations use the initial schedule; adjustable-rate calculations use the schedule then in effect, with relevant modification rules
- Every adjustable loan uses only a never-changing first schedule
Show answer and explanation
Answer: C. Fixed-rate calculations use the initial schedule; adjustable-rate calculations use the schedule then in effect, with relevant modification rules
The statute distinguishes those schedules. Extra payments, rate changes and agreed modifications must be analyzed under the correct rule rather than assuming one initial fixed schedule controls every file.
13. An ordinary borrower-paid 80% request satisfies all applicable statutory requirements. May the servicer treat cancellation only as an optional favor?
- No; the statute requires cancellation when its applicable conditions are fulfilled
- Yes; it can always ignore a qualifying written request
- Yes; a lender-paid rule automatically overrides it
- Yes; it can replace every condition with a sales target
Show answer and explanation
Answer: A. No; the statute requires cancellation when its applicable conditions are fulfilled
Section 4902(a) is mandatory for the applicable covered case. The question supplies all conditions; in an actual record, coverage, dates, history, current status and permitted evidence still have to be established.
14. What anchors the statutory good-payment-history lookbacks for a cancellation request?
- The later of the cancellation date and request date
- Any date selected by the seller
- Only the borrower’s birthday
- Always the loan’s first payment date
Show answer and explanation
Answer: A. The later of the cancellation date and request date
The two defined lookbacks use that later anchor. They address a payment at least 60 days late in the 12-month period beginning 24 months earlier and a payment at least 30 days late in the immediately preceding 12 months.
15. The parties agree to modify a covered loan’s terms. What does section 4902(d) require?
- Forgive every premium ever charged
- Recalculate relevant cancellation, termination and final-termination dates to reflect the modified terms
- Keep every old PMI date regardless of the change
- Replace all schedules with the tax assessment
Show answer and explanation
Answer: B. Recalculate relevant cancellation, termination and final-termination dates to reflect the modified terms
The agreed modification must be reflected in the relevant statutory dates. Do not assume an original 15-year midpoint remains correct after every change in amortization.
16. Can the borrower ordinarily cancel lender-paid mortgage insurance through the same sections 4902 through 4904 used for borrower-paid coverage?
- No; section 4905 excludes lender-paid insurance from those provisions and supplies separate treatment
- Yes; the loan rate automatically falls at 80%
- Yes; the word lender means no cost
- Yes; every insurance structure is identical
Show answer and explanation
Answer: A. No; section 4905 excludes lender-paid insurance from those provisions and supplies separate treatment
Lender-paid coverage usually affects loan pricing and terminates with refinancing, payoff or other loan termination under the separate framework. Do not assume a disappearing monthly line or an automatic note-rate reduction.
17. What premium refund does section 4902(f) address?
- A guaranteed refund of every upfront fee after every refinance
- Every earned premium paid since origination
- Unearned premiums, to be returned by the servicer within 45 days of the applicable cancellation or termination
- All past interest and property taxes
Show answer and explanation
Answer: C. Unearned premiums, to be returned by the servicer within 45 days of the applicable cancellation or termination
Unearned premiums differ from previously earned coverage charges. The statute also preserves accrued premium obligations; the correct refund and timing depend on the applicable event and coverage.
18. Does the ordinary HPA scheduled 78% rule automatically control FHA MIP?
- Yes; every insurance program is the same
- Yes; PMI cancellation changes the FHA case date
- Yes; original LTV never matters
- No; FHA follows HUD’s separate program rules
Show answer and explanation
Answer: D. No; FHA follows HUD’s separate program rules
PMI and FHA mortgage insurance belong to different systems. Apply the actual loan program and its applicable premium and duration policy rather than importing a private-insurance threshold.
19. Extra payments bring actual principal to 78% well before the scheduled 78% date. What is the ordinary analysis?
- The borrower can never request cancellation
- The borrower may qualify for the 80% request route, but the ordinary automatic date is scheduled
- Every prior premium becomes unearned
- Automatic termination always moves to that early date
Show answer and explanation
Answer: B. The borrower may qualify for the 80% request route, but the ordinary automatic date is scheduled
Extra principal can meet the actual-payment threshold for a qualifying request at 80% or below. It does not, by itself, redefine the ordinary scheduled automatic-termination date.
20. What is the correct way to use the page’s 0.60% annual-premium example?
- Use the supplied premium base and rate for the stated exercise only
- Treat it as every lender’s current rate
- Apply it to every insurance product regardless of terms
- Treat it as a federal rate cap
Show answer and explanation
Answer: A. Use the supplied premium base and rate for the stated exercise only
PMI pricing, premium bases and refund structures vary. The worked example teaches percentage arithmetic; it is not a quote, product recommendation or representation of every insurer’s billing method.
21. For a qualifying refinance, the appraisal relied on to approve the refinance is $320,000. The old purchase price was $250,000 and a later estimate is $400,000. Which supplied value is the HPA original-value benchmark?
- $250,000, always the old purchase price
- $400,000, always the newest estimate
- $970,000, the sum of all values
- $320,000, the refinance appraisal relied on
Show answer and explanation
Answer: D. $320,000, the refinance appraisal relied on
The refinance definition uses the appraisal relied on to approve that refinance. Do not automatically use the old purchase price, the purchase lower-of rule again or a later appreciation estimate.
22. May a fee be charged to the borrower for providing a notice or information required by the HPA?
- Yes; every required notice must carry a fee
- No; section 4906 prohibits that fee or cost
- Yes; the appraisal amount determines every notice fee
- No; therefore every separately requested valuation is necessarily free
Show answer and explanation
Answer: B. No; section 4906 prohibits that fee or cost
The prohibition concerns notices or information provided pursuant to the HPA. Keep that scope distinct from deciding the price or permissibility of every other service in a private loan file.
23. For a covered borrower-paid transaction in the statute’s high-risk category, which point does section 4902(g)(2) expressly preserve?
- No termination protection can ever apply
- Every high-risk loan must follow the ordinary 80% and 78% rules
- Termination in accordance with the midpoint provision of subsection (c)
- Every jumbo loan has the same 77% rule
Show answer and explanation
Answer: C. Termination in accordance with the midpoint provision of subsection (c)
The statute preserves the current-borrower midpoint provision even though its high-risk classifications can change the ordinary cancellation and automatic rules. The 77% schedule is in a specific subsection, not a universal rule for every high-risk loan or every jumbo.
24. Under section 4904(a), when must the servicer provide the written notice that the applicable PMI requirement has ended?
- Exactly 45 years after origination
- Not later than 30 days after the applicable cancellation or termination
- Never if the borrower is current
- Only after the borrower asks again
Show answer and explanation
Answer: B. Not later than 30 days after the applicable cancellation or termination
This notice deadline is different from the 45-day servicer deadline for returning unearned premiums and from the actual eligibility event. Do not use it to invent a right to charge additional premiums beyond the applicable statutory rules.
Common questions
What is PMI, and who does it protect?
PMI means private mortgage insurance. It protects the lender or investor against a covered layer of mortgage-default loss. The borrower can pay its premium without becoming the protected party. PMI can help make a higher-LTV conventional loan acceptable, but it is not the borrower’s missed-payment or equity protection.
The borrower remains responsible for the note and mortgage. Coverage does not guarantee that foreclosure, collection or other consequences disappear. Homeowners insurance and title insurance cover different risks under their own policies.
Is PMI required whenever the down payment is below 20%?
It is common on conventional mortgages with less than 20% down, or a loan-to-value ratio above 80%, but the loan program, structure, lender and investor requirements matter. A refinance can also involve PMI when the relevant equity is insufficient under the applicable standards.
The HPA does not itself impose a requirement to obtain PMI. Do not apply a conventional-loan shortcut automatically to FHA, VA, USDA or every other mortgage structure, and do not treat a supplied exam rule as a current loan approval.
How is PMI paid?
A monthly borrower-paid premium is common. Upfront and split-premium arrangements also exist. Read the Loan Estimate, Closing Disclosure, actual premium terms and any refund conditions rather than assuming every product uses the same payment structure.
Removing a monthly charge can lower the payment, but different structures can involve different upfront costs, rates and refund terms. Compare the actual overall terms; a supplied exercise premium is not a price quote.
How is lender-paid mortgage insurance different?
Lender-paid coverage has separate treatment under section 4905. Sections 4902 through 4904 do not apply to it. The required notice explains, among other things, that it usually produces a higher interest rate and ends when the mortgage is refinanced, paid off or otherwise terminated.
The borrower cannot simply apply the ordinary 80% cancellation request to force a matching reduction in the note’s rate. A loan with no separate monthly PMI line can still carry insurance cost through its pricing. Refinancing also has its own costs and qualification requirements.
Which loans have the ordinary federal PMI protections?
Check the HPA definitions, transaction date, occupancy, insurance structure and exceptions. The statutory transaction generally involves a one-unit principal residence and acquisition, initial construction or refinancing consummated on or after July 29, 1999. Borrower-paid and lender-paid insurance are treated differently.
Do not assume every older mortgage, second home or investment property has identical federal cancellation rights, or that every loan with PMI is in the statutory high-risk category. Other agreements or applicable policies can provide additional rights. The ordinary examples on this page state the assumed covered borrower-paid setting.
What is original value for PMI cancellation?
For a purchase, original value is the lower of contract sales price and appraisal at consummation. For a qualifying refinance, use the appraisal relied on to approve that refinance. This is a transaction benchmark rather than whatever the home might sell for today.
In the supplied $400,000 purchase and $410,000 appraisal, original value is $400,000. The 80% and 78% principal figures are $320,000 and $312,000. The figures do not, by themselves, prove that a request or automatic-termination condition is complete.
When can a borrower request cancellation at 80%?
For the ordinary covered route, the cancellation date can come from the relevant schedule reaching 80% of original value or actual payments reaching that level earlier. The borrower requests cancellation in writing, meets the statutory good-history and current-payment conditions, and satisfies applicable permitted holder value and lien requirements.
The holder can require evidence that value has not fallen below original value and certification that the equity is not encumbered by a subordinate lien. The evidence type must be established in advance and promptly communicated when a request is received. When the applicable statutory requirements are fulfilled, the servicer is required to cancel.
Does being current satisfy the good-payment-history condition?
Not by itself. Use the later of the cancellation date and the request date. The definition checks for no payment at least 60 days late in the 12-month period beginning 24 months before that anchor and no payment at least 30 days late in the immediately preceding 12 months.
Both conditions matter. A borrower who cured a 35-day late payment eight months before the anchor can be current now but still fail that request-route history requirement. The ordinary scheduled automatic route has its own current-status condition rather than importing this entire request-only test.
When does scheduled 78% automatic termination occur?
For the ordinary covered borrower-paid case, use the statutory scheduled termination date and current-payment status. A fixed-rate loan uses the initial schedule; an adjustable-rate loan uses the schedule then in effect. Relevant agreed modifications require recalculation. No written cancellation request is needed for that ordinary automatic route.
If the borrower is not current on the termination date, section 4902(b)(2) sets the first day of the first month after the borrower becomes current. In the supplied October 20 cure example, that date is November 1. Extra payments reaching actual 78% early do not automatically move the scheduled date.
What is the midpoint backstop?
If the PMI requirement has not otherwise ended, section 4902(c) uses the first day of the month immediately following the amortization midpoint, with the borrower current. Halfway through an unmodified 30-year amortization is 15 years. This is a time measure, not a requirement that the balance reach 50% of value.
The backstop can matter for slow-amortizing, interest-only, principal-forbearance or balloon structures within the applicable framework. Read modifications and exceptions separately. It is not a universal promise that every insurance product ends exactly fifteen years after closing.
Can appreciation remove PMI before the ordinary dates?
An additional holder, investor or servicer policy can provide an earlier path using current value or other standards. The HPA also permits agreement to end the requirement earlier. Those additional standards cannot simply erase the applicable federal baseline for a covered borrower.
A current estimate or desired LTV is not automatic approval. Obtain the applicable written standards and follow the required process and acceptable valuation. Do not invent one universal appreciation, seasoning or current-LTV formula for every loan.
Is PMI the same as FHA MIP?
No. Private insurance commonly associated with conventional loans and FHA insurance are separate systems. FHA premiums and duration depend on the applicable HUD program, case timing, original LTV, loan terms and exceptions. The private-insurance 80% and 78% rules do not automatically cancel FHA MIP.
Check the actual FHA case timing, original LTV, loan terms and applicable program exceptions. The separate PMI-versus-MIP lesson explains the distinction in more detail. Do not substitute a private-insurance cancellation shortcut for the HUD policy governing the particular loan.
Do VA-backed loans have monthly PMI?
VA’s purchase-loan guidance states that VA-backed purchase loans do not require PMI or FHA MIP. A one-time VA funding fee may apply unless a qualifying exemption applies, and other loan costs and eligibility requirements remain.
This is a program distinction, not a statement that every VA transaction is fee-free or approved. USDA guarantee fees are another separate structure. Match the cost and cancellation rule to the actual program rather than labeling every charge PMI.
Will PMI removal refund all previous premiums?
No. Section 4902(f) addresses unearned premiums under the applicable cancellation or termination and requires the servicer to return them within 45 days. Previously earned insurance charges are different, and section 4902(h) preserves accrued obligations.
Do not treat that rule as a refund of all past PMI, interest or taxes, or a guarantee of every upfront premium after every move or refinance. Required notices, billing limits, insurer-to-servicer transfers and the borrower’s unearned-premium return have distinct statutory rules.
Does cancellation change the mortgage debt or other insurance?
It ends the applicable PMI requirement. It does not pay off the note, forgive principal or automatically end interest, homeowners insurance, property taxes, association charges or an escrow requirement. A successful insurer claim also does not automatically rewrite all borrower obligations.
For a monthly borrower-paid arrangement, removal can reduce that premium component. The remainder of the payment and any separate policy or account continue under their own terms. Do not confuse removing PMI with canceling property insurance or obtaining a release of the mortgage.
How do I calculate a stated monthly PMI premium?
Use the stated premium base, annual percentage and payment method. In the supplied $300,000 example, 0.60% is 0.006; the annual amount is $1,800, and dividing by twelve gives $150 monthly. The question using $240,000 at 0.50% gives $1,200 annually and $100 monthly.
Actual products can use different pricing, bases, payment structures and refund terms. These are original arithmetic exercises, not official or recalled PSI items, market quotes or a validated readiness test. The optional app has free Property Ownership practice; full access is paid, and it provides exam preparation rather than approved pre-license education.
Do high-risk loans all terminate at 77%?
No. The HPA has different high-risk categories. The 77% scheduled-balance provision appears in section 4902(g)(1)(B); it is not a rule for every PMI loan or every jumbo mortgage. Another high-risk category refers to the applicable Fannie Mae and Freddie Mac guidelines.
Section 4902(g)(2) expressly preserves termination under the midpoint provision, with its conditions, for the covered high-risk transactions. Do not classify a loan as statutory high-risk merely because its LTV exceeds 80%, and keep lender-paid insurance’s separate exclusion in mind.
What happens to PMI dates after a loan modification?
If the mortgagor and mortgagee or holder agree to modify the loan’s terms or conditions, section 4902(d) requires the relevant cancellation, termination and final-termination dates to be recalculated to reflect the modification.
Do not automatically keep the old schedule or assume that fifteen years from the original closing remains the right midpoint after every modification. Use the modified record and applicable requirements. This is different from making an extra principal payment without an agreed loan modification.
What notices should a borrower receive, and can required notices carry a fee?
The HPA specifies applicable initial information at consummation and annual written information about rights and how to reach the servicer. Fixed-rate and adjustable-rate initial disclosures differ. Section 4904 requires written notice within 30 days after cancellation or termination, and written grounds, including appraisal results, for a determination that the applicable conditions were not met. Denial-notice timing depends on the route and stated events.
Section 4906 prohibits charging the borrower for notices or information required by the HPA. Keep notice timing separate from eligibility, billing rules and the 45-day return of unearned premiums. The statute does not make every optional valuation free or give a general extra month to charge premiums after the applicable legal endpoint.
Can qualifying PMI premiums be deducted for the 2026 federal tax year?
Qualifying mortgage-insurance premiums can again receive federal itemized-interest treatment for tax years beginning after December 31, 2025. The relevant insurance contract must have been issued after December 31, 2006, and the premiums must relate to acquisition indebtedness on a qualified residence. IRS Publication 505 for 2026 confirms the restored provision.
Itemization, income phaseouts, debt rules, prepaid-premium allocation and other limits still apply. This does not make every PMI payment fully deductible or decide a particular federal or Illinois return. Use guidance for the correct tax year; a 2025 publication describing the expired deduction for 2025 is not the answer for 2026. Tax eligibility is also separate from HPA cancellation rights.
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Official sources and scope
This October 2026 review uses actual federal statutory text, current CFPB guidance and identified program sources. The evidence records source editions, the exact passages read and reused readings. Original calculations use supplied numbers. A private loan’s coverage, classification, servicing dates, premiums, tax treatment and eligibility require its actual records.
- PSI June 24, 2026 broker outline: Financing
- CFPB HPA examination procedures: identified explanatory sections
- HUD ML 2023-05: standard upfront and annual premium tables
- HUD ML 2013-04: case-date and original-LTV duration policy
- HUD handbook directory: August 2026 edition context
- VA: current funding-fee table, exemptions and financing
- USDA Rural Development: FY 2027 fee notice, September 16, 2026
- CFPB: PMI cancellation and termination, reviewed August 2026
- CFPB: who PMI protects and how premiums are paid
- 12 U.S.C. 4901: Definitions, original value, schedules and payment history
- 12 U.S.C. 4902: Cancellation, termination, modification and refunds
- 12 U.S.C. 4903: Initial and annual PMI disclosures
- 12 U.S.C. 4904: Written notices when PMI ends or is denied
- 12 U.S.C. 4905: Separate lender-paid insurance treatment
- 12 U.S.C. 4906: No fee for required HPA notices or information
- 12 U.S.C. 4910: PMI is not imposed by the HPA; earlier agreements remain possible
- VA: no monthly PMI or FHA MIP on a VA-backed purchase loan
- 26 U.S.C. 163: qualified mortgage-insurance premiums and the 2026 effective date
- IRS Publication 505 (2026): qualified mortgage-insurance-premium deduction
This is exam preparation, not advice for a specific transaction. State law and the applicable facts control. Our editorial and corrections process explains how to report an issue.