FinanceIntermediateDelaware Exam

What is the 'Homeowners Protection Act' (HPA) and how does it benefit Delaware borrowers with PMI?

AA Delaware state law protecting homeowners from HOA foreclosures
BA federal law requiring lenders to automatically cancel PMI when the borrower's equity reaches 22% of the original value, and allowing borrowers to request cancellation at 20% equityCorrect
CA federal law protecting homeowners from mortgage fraud
DA statewide Delaware law requiring every lender to offer only fixed-rate loans to all borrowers without exception, a position that many in the industry would generally find reasonable

Why A federal law requiring lenders to automatically cancel PMI when the borrower's equity reaches 22% of the original value, and allowing borrowers to request cancellation at 20% equity Is Correct

Answer B: A federal law requiring lenders to automatically cancel PMI when the borrower's equity reaches 22% of the original value, and allowing borrowers to request cancellation at 20% equity

The Homeowners Protection Act (HPA, 1998) requires lenders to: (1) automatically cancel PMI when the LTV reaches 78% based on the original amortization schedule, and (2) allow borrowers to request cancellation when LTV reaches 80% based on payments (with good payment history). Delaware PMI borrowers benefit from knowing these rights to eliminate costly PMI when eligible.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

Key Finance Terms in This Question

Amortization

The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.

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