Homeowners Protection Act
Categories: Insurance, Real Estate
The Homeowners Protection Act protects those with mortgages from paying private mortgage insurance (PMI) when they’re no longer required to pay it anymore.
PMI is insurance that conventional mortgage-holders pay to their lenders if they put less than 20% down on their house. It’s insurance for the lender in case the borrower defaults. By law, homeowners are allowed to tap banks on the shoulder and request to get PMI removed once they have 20% equity in their home.
If homeowners fail to request PMI get dropped at the 20% equity point, then banks can keep charging PMI, but only until the homeowner has paid off 22% equity in their home. Because of the Homeowners Protection Act, lenders must stop charging homeowners PMI payments once they’ve paid off 22% of their house, even if there’s been no communication with the homeowner.
Since PMI is for taking on the risk of giving out a mortgage with less than 20% down, the Homeowners Protection Act keeps banks honest about when and why they’re charging for PMI.