Your rights under the Homeowners Protection Act, explained

One federal law governs almost everything about canceling PMIInsurance that protects the lender, paid by you, until you own 20%.Click to open the full glossary.: what you can ask for. What must happen on its own. And what your lender may ask of you first.

What the law is and why it exists

Before 1999, it was up to your lender. Many kept taking PMI long after you owned enough of the home to drop it. So Congress passed the Homeowners Protection ActThe federal law that gives you the right to cancel PMI.Click to open the full glossary. of 1998 to set clear rules with teeth. They say when PMI must end. They cover conventional loans on a home you live in, signed after July 1999.

The three rights the HPA gives you

• Borrower-requested cancellation at 80% LTVWhat you owe as a percentage of what the home is worth.Click to open the full glossary.. Once what you owe falls to 80% of what the home was worth at the start, you can ask. You just have to be up to date on your payments. Ask in writing.
• Automatic termination at 78% LTV. Your lender must stop PMI on its own once you reach 78%. That is based on what the home was worth at the start, and on your first payoff plan. They must do it even if you never ask.
• Final termination at the midpoint of your loan term. Say your loan has not reached 78% on its own. PMI must still end at the halfway mark of your term. On a 30 year loan that is year 15. It ends whatever you owe, as long as you are up to date.

What the law does not guarantee

The HPA covers conventional loans only. It does not cover an FHA loanA government-backed loan with a low down payment.Click to open the full glossary.. Those charge MIPThe FHA version of PMI, which often lasts the whole loan.Click to open the full glossary. instead. HUD sets those rules, and the charge often lasts the whole loan no matter how much of the home you own. The law also lets your servicerThe company you actually send your payment to.Click to open the full glossary. ask for a fresh appraisalA professional opinion of what your home is worth.Click to open the full glossary.. That runs about $400 to $600. They can ask when your case for hitting 80% rests on the home rising in value, not on what you have paid down.

What happens if your servicer doesn't comply

This law has teeth. A lender who fails to stop PMI at 78% can be called to task. So can one who turns down a fair request at 80%. Most hold ups are just paperwork, not spite. Send a letter with your loan number and your current figure. Then call two or three weeks later. That sorts out almost every case.

Knowing your rights is one thing. Knowing the month you can use them is quite another. We track both marks against your real numbers, and tell you the day one lands.