Finance
What is the primary purpose of the Homeowners Protection Act (PMI Cancellation Act) in Oregon real estate transactions?
ATo require lenders to offer PMI on all conventional loans
BTo allow borrowers to cancel PMI once they reach 20% equity✓ Correct
CTo set maximum PMI rates for all federally-backed loans
DTo require PMI on all loans regardless of down payment
Explanation
The Homeowners Protection Act (HPA) allows borrowers with conventional loans to request cancellation of PMI when they reach 20% equity (80% LTV) based on original value, and requires automatic termination at 22% equity. This law protects borrowers from paying unnecessary PMI once their equity threshold is met.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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