What is the Homeowners Insurance Protection Act of 1998 (S.318) and how will it affect my mortgage?
President Clinton signed the Homeowner’s Protection Act of 1998 on July 29, 1998. The Act become effective July 29, 1999 and requires that mortgage lenders and services cancel Private Mortgage Insurance (PMI) when certain criteria are met. PMI is required on conventional first lien mortgages when the mortgagor has less than a 20 percent down payment. This insurance protects the lender and/or investor in the case of default on the mortgage loan. Under the new bill, servicers must provide annual notices regarding cancellation of the PMI. Also, on loans closed on or after July 28, 1999, the lender/servicer is required to provide, at closing, an amortization schedule (for fixed rate mortgages only), and disclosure regarding the criteria and exceptions regarding the cancellation of PMI.
