12 U.S.C. § 4902 — Termination of private mortgage insur-

Page 1768 TITLE 12—BANKS AND BANKING § 4902 Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 105–216, § 13, July 29, 1998, 112 Stat. 908, pro- vided that: ‘‘This Act [enacting this chapter and amending section 1088 of Title 20, Education], other than section 14 [enacting provisions set out as notes under sections 1441a and 1831q of this title and amend- ing provisions set out as a note under section 1831q of this title], shall become effective 1 year after the date of enactment of this Act [July 29, 1998].’’ SHORT TITLE OF 2000 AMENDMENT Pub. L. 106–569, title IV, § 401, Dec. 27, 2000, 114 Stat. 2956, provided that: ‘‘This title [amending this section and sections 4902, 4903, and 4905 of this title] may be cited as the ‘Private Mortgage Insurance Technical Corrections and Clarification Act’.’’ SHORT TITLE Pub. L. 105–216, § 1(a), July 29, 1998, 112 Stat. 897, pro- vided that: ‘‘This Act [enacting this chapter, amending section 1088 of Title 20, Education, enacting provisions set out as notes under sections 1441a and 1831q of this title, and amending provisions set out as a note under section 1831q of this title] may be cited as the ‘Home- owners Protection Act of 1998’.’’ § 4902. Termination of private mortgage insur- ance (a) Borrower cancellation A requirement for private mortgage insurance in connection with a residential mortgage trans- action shall be canceled on the cancellation date or any later date that the mortgagor fulfills all of the requirements under paragraphs (1) through (4), if the mortgagor— (1) submits a request in writing to the servicer that cancellation be initiated; (2) has a good payment history with respect to the residential mortgage; (3) is current on the payments required by the terms of the residential mortgage trans- action; and (4) has satisfied any requirement of the hold- er of the mortgage (as of the date of a request under paragraph (1)) for— (A) evidence (of a type established in ad- vance and made known to the mortgagor by the servicer promptly upon receipt of a re- quest under paragraph (1)) that the value of the property securing the mortgage has not declined below the original value of the property; and (B) certification that the equity of the mortgagor in the residence securing the mortgage is unencumbered by a subordinate lien. (b) Automatic termination A requirement for private mortgage insurance in connection with a residential mortgage trans- action shall terminate with respect to payments for that mortgage insurance made by the mort- gagor— (1) on the termination date if, on that date, the mortgagor is current on the payments re- quired by the terms of the residential mort- gage transaction; or (2) if the mortgagor is not current on the termination date, on the first day of the first month beginning after the date that the mort- gagor becomes current on the payments re- quired by the terms of the residential mort- gage transaction. (c) Final termination If a requirement for private mortgage insur- ance is not otherwise canceled or terminated in accordance with subsection (a) or (b), in no case may such a requirement be imposed on residen- tial mortgage transactions beyond the first day of the month immediately following the date that is the midpoint of the amortization period of the loan if the mortgagor is current on the payments required by the terms of the mort- gage. (d) Treatment of loan modifications If a mortgagor and mortgagee (or holder of the mortgage) agree to a modification of the terms or conditions of a loan pursuant to a residential mortgage transaction, the cancellation date, termination date, or final termination shall be recalculated to reflect the modified terms and conditions of such loan. (e) No further payments No payments or premiums may be required from the mortgagor in connection with a private mortgage insurance requirement terminated or canceled under this section— (1) in the case of cancellation under sub- section (a), more than 30 days after the later of— (A) the date on which a request under sub- section (a)(1) is received; or (B) the date on which the mortgagor satis- fies any evidence and certification require- ments under subsection (a)(4); (2) in the case of termination under sub- section (b), more than 30 days after the termi- nation date or the date referred to in sub- section (b)(2), as applicable; and (3) in the case of termination under sub- section (c), more than 30 days after the final termination date established under that sub- section. (f) Return of unearned premiums (1) In general Not later than 45 days after the termination or cancellation of a private mortgage insur- ance requirement under this section, all un- earned premiums for private mortgage insur- ance shall be returned to the mortgagor by the servicer. (2) Transfer of funds to servicer Not later than 30 days after notification by the servicer of termination or cancellation of private mortgage insurance under this chapter with respect to a mortgagor, a mortgage in- surer that is in possession of any unearned premiums of that mortgagor shall transfer to the servicer of the subject mortgage an amount equal to the amount of the unearned premiums for repayment in accordance with paragraph (1). (g) Exceptions for high risk loans (1) In general The termination and cancellation provisions in subsections (a) and (b) do not apply to any residential mortgage transaction that, at the Page 1769 TITLE 12—BANKS AND BANKING § 4902 time at which the residential mortgage trans- action is consummated, has high risks associ- ated with the extension of the loan— (A) as determined in accordance with guidelines published by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, in the case of a mortgage loan with an original principal balance that does not exceed the applicable annual conforming loan limit for the sec- ondary market established pursuant to sec- tion 1454(a)(2) of this title, so as to require the imposition or continuation of a private mortgage insurance requirement beyond the terms specified in subsection (a) or (b) of this section; or (B) as determined by the mortgagee in the case of any other mortgage, except that ter- mination shall occur— (i) with respect to a fixed rate mortgage, on the date on which the principal balance of the mortgage, based solely on the initial amortization schedule for that mortgage, and irrespective of the outstanding bal- ance for that mortgage on that date, is first scheduled to reach 77 percent of the original value of the property securing the loan; and (ii) with respect to an adjustable rate mortgage, on the date on which the prin- cipal balance of the mortgage, based solely on the amortization schedule then in ef- fect for that mortgage, and irrespective of the outstanding balance for that mortgage on that date, is first scheduled to reach 77 percent of the original value of the prop- erty securing the loan. (2) Termination at midpoint A private mortgage insurance requirement in connection with a residential mortgage transaction described in paragraph (1) shall terminate in accordance with subsection (c). (3) Rule of construction Nothing in this subsection may be construed to require a residential mortgage or residen- tial mortgage transaction described in para- graph (1)(A) to be purchased by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. (4) GAO report Not later than 2 years after July 29, 1998, the Comptroller General of the United States shall submit to the Congress a report describing the volume and characteristics of residential mortgages and residential mortgage trans- actions that, pursuant to paragraph (1) of this subsection, are exempt from the application of subsections (a) and (b). The report shall— (A) determine the number or volume of such mortgages and transactions compared to residential mortgages and residential mortgage transactions that are not classi- fied as high-risk for purposes of paragraph (1); and (B) identify the characteristics of such mortgages and transactions that result in their classification (for purposes of para- graph (1)) as having high risks associated with the extension of the loan and describe such characteristics, including— (i) the income levels and races of the mortgagors involved; (ii) the amount of the downpayments in- volved and the downpayments expressed as percentages of the acquisition costs of the properties involved; (iii) the types and locations of the prop- erties involved; (iv) the mortgage principal amounts; and (v) any other characteristics of such mortgages and transactions that may con- tribute to their classification as high risk for purposes of paragraph (1), including whether such mortgages are purchase- money mortgages or refinancings and whether and to what extent such loans are low-documentation loans. (h) Accrued obligation for premium payments The cancellation or termination under this section of the private mortgage insurance of a mortgagor shall not affect the rights of any mortgagee, servicer, or mortgage insurer to en- force any obligation of such mortgagor for pre- mium payments accrued prior to the date on which such cancellation or termination oc- curred. (Pub. L. 105–216, § 3, July 29, 1998, 112 Stat. 899; Pub. L. 106–569, title IV, §§ 402(a)(2), (c)(1), 403(a), 404, 405(b), (c), Dec. 27, 2000, 114 Stat. 2956–2958.) Editorial Notes AMENDMENTS 2000—Subsec. (a). Pub. L. 106–569, § 404(1)(A), inserted ‘‘or any later date that the mortgagor fulfills all of the requirements under paragraphs (1) through (4)’’ after ‘‘cancellation date’’ in introductory provisions. Subsec. (a)(3), (4). Pub. L. 106–569, § 404(1)(B)–(D), added par. (3) and redesignated former par. (3) as (4). Subsec. (b)(2). Pub. L. 106–569, § 405(b), amended par. (2) generally. Prior to amendment, par. (2) read as fol- lows: ‘‘on the date after the termination date on which the mortgagor becomes current on the payments re- quired by the terms of the residential mortgage trans- action.’’ Subsec. (c). Pub. L. 106–569, § 403(a)(1), inserted ‘‘on residential mortgage transactions’’ after ‘‘requirement be imposed’’. Subsec. (d). Pub. L. 106–569, § 402(c)(1)(B), added sub- sec. (d). Former subsec. (d) redesignated (e). Subsec. (e). Pub. L. 106–569, § 402(c)(1)(A), redesignated subsec. (d) as (e). Former subsec. (e) redesignated (f). Subsec. (e)(1)(B). Pub. L. 106–569, § 404(2), substituted ‘‘subsection (a)(4)’’ for ‘‘subsection (a)(3)’’. Subsec. (f). Pub. L. 106–569, § 402(c)(1)(A), redesignated subsec. (e) as (f). Former subsec. (f) redesignated (g). Subsec. (f)(1)(B)(ii). Pub. L. 106–569, § 402(a)(2), sub- stituted ‘‘the amortization schedule then in effect’’ for ‘‘amortization schedules’’. Subsec. (g). Pub. L. 106–569, § 402(c)(1)(A), redesignated subsec. (f) as (g). Subsec. (g)(1). Pub. L. 106–569, § 403(a)(2)(A), struck out ‘‘mortgage or’’ after ‘‘do not apply to any residen- tial’’ in introductory provisions. Subsec. (g)(2). Pub. L. 106–569, § 403(a)(2)(B), struck out ‘‘mortgage or’’ after ‘‘in connection with a residen- tial’’. Subsec. (g)(3). Pub. L. 106–569, § 403(a)(2)(C), sub- stituted ‘‘residential mortgage or residential’’ for ‘‘mortgage or’’. Subsec. (h). Pub. L. 106–569, § 405(c), added subsec. (h). Page 1770 TITLE 12—BANKS AND BANKING § 4903 Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section effective 1 year after July 29, 1998, see section 13 of Pub. L. 105–216, set out as a note under section 4901 of this title. § 4903. Disclosure requirements (a) Disclosures for new mortgages at time of transaction (1) Disclosures for non-exempted transactions In any case in which private mortgage insur- ance is required in connection with a residen- tial mortgage transaction (other than a resi- dential mortgage transaction described in sec- tion 4902(g)(1) of this title), at the time at which the transaction is consummated, the mortgagee shall provide to the mortgagor— (A) if the transaction relates to a fixed rate mortgage— (i) a written initial amortization sched- ule; and (ii) written notice— (I) that the mortgagor may cancel the requirement in accordance with section 4902(a) of this title indicating the date on which the mortgagor may request can- cellation, based solely on the initial am- ortization schedule; (II) that the mortgagor may request cancellation in accordance with section 4902(a) of this title earlier than provided for in the initial amortization schedule, based on actual payments; (III) that the requirement for private mortgage insurance will automatically terminate on the termination date in ac- cordance with section 4902(b) of this title, and what that termination date is with respect to that mortgage; and (IV) that there are exemptions to the right to cancellation and automatic ter- mination of a requirement for private mortgage insurance in accordance with section 4902(g) of this title, and whether such an exemption applies at that time to that transaction; and (B) if the transaction relates to an adjust- able rate mortgage, a written notice that— (i) the mortgagor may cancel the re- quirement in accordance with section 4902(a) of this title on the cancellation date, and that the servicer will notify the mortgagor when the cancellation date is reached; (ii) the requirement for private mortgage insurance will automatically terminate on the termination date, and that on the ter- mination date, the mortgagor will be noti- fied of the termination or that the require- ment will be terminated as soon as the mortgagor is current on loan payments; and (iii) there are exemptions to the right of cancellation and automatic termination of a requirement for private mortgage insur- ance in accordance with section 4902(g) of this title, and whether such an exemption applies at that time to that transaction. (2) Disclosures for excepted transactions In the case of a residential mortgage trans- action described in section 4902(g)(1) of this title, at the time at which the transaction is consummated, the mortgagee shall provide written notice to the mortgagor that in no case may private mortgage insurance be re- quired beyond the date that is the midpoint of the amortization period of the loan, if the mortgagor is current on payments required by the terms of the residential mortgage. (3) Annual disclosures If private mortgage insurance is required in connection with a residential mortgage trans- action, the servicer shall disclose to the mort- gagor in each such transaction in an annual written statement— (A) the rights of the mortgagor under this chapter to cancellation or termination of the private mortgage insurance require- ment; and (B) an address and telephone number that the mortgagor may use to contact the servicer to determine whether the mort- gagor may cancel the private mortgage in- surance. (4) Applicability Paragraphs (1) through (3) shall apply with respect to each residential mortgage trans- action consummated on or after the date that is 1 year after July 29, 1998. (b) Disclosures for existing mortgages If private mortgage insurance was required in connection with a residential mortgage entered into at any time before the effective date of this chapter, the servicer shall disclose to the mort- gagor in each such transaction in an annual written statement— (1) that the private mortgage insurance may, under certain circumstances, be canceled by the mortgagor (with the consent of the mortgagee or in accordance with applicable State law); and (2) an address and telephone number that the mortgagor may use to contact the servicer to determine whether the mortgagor may cancel the private mortgage insurance. (c) Inclusion in other annual notices The information and disclosures required under subsection (b) and subsection (a)(3) may be provided on the annual disclosure relating to the escrow account made as required under the Real Estate Settlement Procedures Act of 1974 [12 U.S.C. 2601 et seq.], or as part of the annual disclosure of interest payments made pursuant to Internal Revenue Service regulations, and on a form promulgated by the Internal Revenue Service for that purpose. (d) Standardized forms The mortgagee or servicer may use standard- ized forms for the provision of disclosures re- quired under this section, which disclosures shall relate to the mortgagor’s rights under this chapter. (Pub. L. 105–216, § 4, July 29, 1998, 112 Stat. 902; Pub. L. 106–569, title IV, §§ 402(c)(2), 403(b), Dec. 27, 2000, 114 Stat. 2957.) Editorial Notes REFERENCES IN TEXT The effective date of this chapter, referred to in sub- sec. (b), is 1 year after July 29, 1998, see section 13 of