§4903 Disclosure Requirements

Summary

Lenders and loan servicers must give borrowers clear written notices about private mortgage insurance (PMI). At closing on a loan that requires PMI, lenders must give a fixed-rate borrower an initial amortization schedule and a short written notice that explains when the borrower can ask to cancel PMI, that they may be able to ask sooner based on actual payments, the automatic termination date and what that date is, and whether any exceptions to cancellation or termination apply. For adjustable-rate loans, lenders must give a notice saying when cancellation can occur, that the servicer will tell the borrower when that date is reached, when automatic termination happens and how the borrower will be notified, and whether any exceptions apply. For loans excepted under the law, lenders must tell borrowers that PMI cannot be required past the midpoint of the loan’s amortization if payments are current. Servicers must also send one annual written statement telling borrowers their cancellation/termination rights and giving a phone number and address to check eligibility. These rules apply to loans closed on or after the date that is 1 year after July 29, 1998. For older loans made before the law took effect, servicers must send an annual written notice saying PMI may sometimes be canceled (with the lender’s consent or under state law) and must give contact information. These notices can be included on annual escrow or IRS interest statements. Lenders and servicers may use standard forms for these disclosures.