Finance
Under the federal Homeowners Protection Act, when must lenders automatically cancel PMI on a residential mortgage?
AWhen the borrower has made 12 consecutive on-time payments
BWhen the loan balance reaches 78% of the original purchase price✓ Correct
CWhen the property appreciates to 120% of the original purchase price
DWhen the loan has been in place for 5 years
Explanation
Under the Homeowners Protection Act, lenders must automatically cancel PMI when the loan balance reaches 78% of the original purchase price, provided the borrower is current on payments. Borrowers may also request cancellation at 80% LTV.
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