Cancelling mortgage insurance

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Cancelling mortgage insurance is typically permitted by lenders and investors after the homeowner has built up enough equity in the home.

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 borrower must provide the lender a written request for mortgage insurance cancellation. Upon receiving the request, the lender must cancel the mortgage insurance policy either:

• 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

For a purchase transaction, original property value is the lesser of the property sales price and appraised value. For a refinance transaction, original value is the appraised value.

Mortgage insurance coverage can be cancelled only if:

• No subordinate liens exist AND
• The borrower has a good payment history AND
• The borrower satisfies the lender's requirement that the property value has not declined

Lender-required cancellation under HPA

 The lender must automatically cancel the mortgage insurance policy either:

• 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 borrower is current on the payments required by the terms of the mortgage

Different cancellation requirements apply to loans designated at origination as "high risk."

Individual investors establish the criteria for cancelling mortgage insurance based on a property's current value. HPA does not address mortgage insurance 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' mortgage insurance cancellation requirements.

Borrowers must request mortgage insurance cancellation in writing and provide a current value estimate acceptable to their lender.

Borrowers should contact their lender to cancel their mortgage insurance coverage. Lenders and loan servicers should contact us. 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 format — Use a cancellation transaction direct from your servicing system to cancel coverage. Contact cancel_requests@mgic.com or 1-800-558-9900 for more information
• Email — Send individual requests or a file to cancel_requests@mgic.com
• Fax/mail — Complete and sign a Request for Cancellation of Insurance form and forward it to us.

1. Consult with your own counsel to assure compliance with 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. We do not warrant that this information is up-to-date. Refer to the Agencies' Seller/Servicer Guides for the most current mortgage insurance cancellation information.