Freddie Mac Single-Family Seller/Servicer Guide 8203.4 — Cancelation of Borrower-paid mortgage insurance

Freddie Mac Single-Family Seller/Servicer Guide 8203.4 — Cancelation of Borrower-paid mortgage insurance

Effective 2025-07-09 · Freddie Mac's stamp for this section

This section contains requirements related to: ■ Automatic cancelation of Borrower-paid mortgage insurance on an HPA Mortgage ■ Cancelation of Borrower-paid mortgage insurance on modified Mortgages ■ Cancelation of Borrower-paid mortgage insurance on refinance Mortgages ■ Cancelation of lender-paid mortgage insurance (a) Automatic cancelation of Borrower-paid mortgage insurance on an HPA Mortgage For automatic cancelation of Borrower-paid mortgage insurance, unless otherwise canceled pursuant to applicable law, the Seller/Servicer must cancel such mortgage insurance when the HPA Mortgage meets the requirements of this section. Note: Non-HPA Mortgages are not eligible for automatic cancelation of Borrower-paid mortgage insurance. (Refer to Section 8203.3 regarding Borrower-requested cancelation of Borrower-paid mortgage insurance for Non-HPA Mortgages and Seller/Servicer solicitations of such requests.) The table below lists the requirements for automatic cancelation of Borrower-paid mortgage insurance: Requirements for automatic cancelation of Borrower-paid mortgage insurance Cancelation point Provided that the payment record requirements set forth in row 2 of this table, Payment record, are met, the earlier of: ■ The date on which the loan-to-value (LTV) ratio is first scheduled to reach 78% based on the original value (as “value” is defined in Section 4203.1) and the amortization schedule (irrespective of the Mortgage’s current UPB); or ■ The date on which the midpoint of the amortization period of the Mortgage is reached. The midpoint occurs halfway through a Mortgage’s amortization period based upon the amortization schedule. Example: In the case of a 360-month or 30-year Mortgage with a payment Due Date on the first of each month, the midpoint is deemed to be the first day of the 180th month. Assuming that the payment record requirements set forth in row 2 of this table, Payment record, are met, the Seller/Servicer must have mortgage insurance canceled effective for the 181st month’s payment. Note: Regarding the amortization schedule in the cancelation point requirements set forth above, this amortization schedule is the initial amortization schedule for a fixed-rate Mortgage or current amortization schedule following the most recent rate change for an ARM or Step-Rate Mortgage. Payment record All principal and interest and Escrow installments (or all Seller/Servicer advances for unpaid charges otherwise payable from Escrow, if applicable) with Due Dates prior to the cancelation point must be paid by the Borrower on or before the cancelation point. (In the example set forth in row 1 of this table, Cancelation point, all such installments with Due Dates before the 180th month must have been paid by the Borrower by the first day of the 180th month in order for mortgage insurance to be canceled effective for the 181st month’s payment.) If any installment of principal and interest and Escrow (or any Seller/Servicer advance for unpaid charges otherwise payable from Escrow, if applicable) with a Due Date prior to the cancelation point has not been paid by the Borrower on or before the cancelation point, then the cancelation point must be deferred to the first day of the first month beginning after the date on which all such installments are paid by the Borrower. (b) Cancelation of Borrower-paid mortgage insurance on modified Mortgages For the purpose of canceling mortgage insurance in accordance with the requirements of this Chapter 8203 on a modified Mortgage (HPA Mortgage, Non-HPA Mortgage or Pre-HPA Mortgage), the required LTV ratio and the amortization schedule or period, as applicable, must be based upon the modified terms of the Mortgage. (See Section 9206.1(a) for examples of modified terms of a Mortgage.) Additionally, the Mortgage’s UPB is the total UPB, including any deferred (non-interest bearing) UPB as a result of a prior modification. (c) Cancelation of Borrower-paid mortgage insurance on refinance Mortgages For the purpose of canceling mortgage insurance in accordance with the requirements of this Chapter 8203 on a refinance Mortgage (HPA Mortgage, Non-HPA Mortgage or Pre-HPA Mortgage), the original value is the appraised value relied upon to approve the refinance transaction. (d) Cancelation of lender-paid mortgage insurance Lender-paid mortgage insurance is not cancelable. The Seller/Servicer must provide to the Borrower all related disclosures required by the HPA, if applicable.

Source: Freddie Mac Single-Family Seller/Servicer Guide 8203.4 — Cancelation of Borrower-paid mortgage insurance · source URL · snapshot 4c94f67729042dd6