Homeowners Protection Act of 1998


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Homeowners Protection Act of 1998 (HOPA)

Legislation passed in response to abuses in the private mortgage insurance (PMI) industry. Home purchasers who wish to borrow more than 80 percent of the purchase price of their property must usually purchase private mortgage insurance,which pays the lender in the event of default and a foreclosure.The purchaser pays the premiums through additional fees added to the monthly mortgage payment.Once the loan is paid to an amount less than 80 percent of the purchase price or the fair market value,there should be no need for the insurance. Despite this, PMI companies would continue to collect insurance premiums.The Act requires PMI companies to notify borrowers of their right to cancel the insurance when the loan is no more than 80 percent of the value of the home, and it requires them to automatically cancel the insurance when the loan is no more than 78 percent of the value of the home.The value is based on the purchase price or can be based on a recent appraisal if the borrower is willing to order and pay for an appraisal.There are exceptions to the cancellation rules,primarily when there has been a history of loan delinquencies.Also called PMI Cancellation Act.

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The New Homeowners Protection Act of 1998, signed recently by President Clinton, takes effect July 29, 1999.

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