PMI Automatic Cancellation 2026: Servicer Obligations Under the Homeowners Protection Act

The Homeowners Protection Act of 1998 established federal cancellation rights for borrower-paid mortgage insurance on conventional loans. Servicers must cancel PMI automatically at defined milestones and cannot require PMI payments beyond the statutory limits. Understanding these rules helps MLOs counsel borrowers on their long-term cost of homeownership.

Three HPA Cancellation Triggers

The HPA creates three distinct cancellation points. First: the borrower reaches 80% LTV based on the original amortization schedule and the original property value. The borrower must submit a written request; the servicer does not cancel automatically at 80%. Second: the scheduled amortization brings the balance to 78% of original value. Cancellation is automatic at this point; no borrower action is required, but the loan must be current. Third: the loan reaches the midpoint of its term (year 15 for a 30-year loan). Cancellation is automatic regardless of LTV, provided the loan is current.

HPA Does Not Apply To

• ✦FHA MIP: governed by separate FHA rules, not the HPA
• ✦VA funding fee: no monthly MI; HPA not applicable
• ✦USDA annual fee: has no cancellation provision under the HPA
• ✦Lender-Paid MI (LPMI): cannot be cancelled without refinancing; HPA does not cover embedded rate adjustments
• ✦Investment properties with certain high-risk designations: may be subject to modified HPA provisions

MLO Application: Annual Equity Checkpoints

At the one-year anniversary of a client's conventional purchase with PMI, contact them to review current property value and the remaining loan balance. If the market has appreciated and LTV is approaching 80%, walk through the process for requesting early cancellation. This touchpoint generates goodwill, referrals, and positions you as the advisor rather than a one-time transaction facilitator.

Disclosure Requirements at Origination

Lenders must provide a written initial PMI disclosure at closing that includes the projected cancellation dates under the amortization schedule. The servicer must provide an annual written notice as long as PMI is in effect. Confirm your LOS and closing package includes HPA-compliant disclosures.