MI is Cancellable
For first-time homebuyers and other borrowers seeking low down payment home financing, a loan secured with mortgage insurance from Genworth provides the safety and security borrowers want in today's volatile mortgage market. It also provides a feature not found in any other loan type: the ability to cancel the mortgage insurance once the borrower's equity in the home reaches 20 percent.
Traditional fixed-rate mortgages with MI have become attractive to consumers because such loans aren't subject to interest rate resets and monthly payments decrease when the borrower builds enough equity to cancel the insurance.
According to Mortgage Insurance Companies of America (MICA), 90 percent of borrowers cancel their mortgage insurance within five years.
The Homeowners Protection Act of 1998
Cancellation is automatic on most recent loans, as mandated by The Homeowners Protection Act of 1998.
On the majority of loans originated on or after July 29, 1999, the MI is automatically terminated when the mortgage is scheduled to amortize to 78 percent of the original value of the house as long as the borrower is current on all monthly payments.
Borrowers with loans originated on or after July 29, 1999 may also request cancellation even earlier—when the loan is paid down to 80%—if the borrower has a good payment history, can demonstrate the property has not declined in value, and there is no subordinate lien. Lenders must inform homebuyers about this right to request cancellation at closing, and again on an annual basis.
Borrowers may also request cancellation of their MI so long as they meet all requirements established by the owner of the loan (i.e., the investor). Investors usually require the borrower to show that they have 20 percent equity in the home, although frequently investors will permit borrowers to use an updated appraisal showing appreciation in the value of the home to achieve the required 20 percent.
MI Cancellation Summary (pdf | 423kb)
The Cancellation Process: Three Simple Steps
Consider the amount of principal paid on the loan, any home improvements which could increase its value, and area home price appreciation.
Call the loan servicing company to discuss any cancellation requirements, which might include a new appraisal and/or more information about the home.
Send the mortgage servicer a written cancellation request with any required supporting documents.
