2026 NMLS SAFE Act 20-Hour Practice Test – Complete Prep Guide

The Homeowners Protection Act (HPA) is the federal law that provides borrowers with the right to cancel Private Mortgage Insurance (PMI) premiums under certain conditions. This law was enacted to help homeowners reduce the costs associated with mortgage insurance, which can be significant, especially when a loan is backed by PMI due to a smaller down payment.

Under the Homeowners Protection Act, borrowers are allowed to request the cancellation of PMI once their equity in the home reaches 20%, based on the original purchase price or the appraised value of the home. Additionally, the HPA mandates that mortgage lenders automatically terminate PMI when the equity reaches 22%, provided the borrower is current on their mortgage payments. This legislation aims to promote financial fairness and transparency for homeowners, ensuring they do not continue to pay for insurance protection when it is no longer necessary.

The other laws listed have different purposes: The Real Estate Settlement Procedures Act focuses on disclosures and practices regarding settling real estate transactions; the Truth-in-Lending Act addresses the disclosure of credit terms and costs of borrowing; and the Equal Credit Opportunity Act prohibits discrimination in lending. Thus, while each law plays a significant role in the broader landscape of mortgage and lending, it is the Homeowners Protection Act specifically that addresses the issue