PMI Cancellation Laws in Colorado

The Homeowners Protection Act of 1998 establishes rules for automatic termination and borrower cancellation of private mortgage insurance on home mortgages. Under the HPA, consumers and lenders share responsibility for how long PMI coverage is required and how to cancel it.

Federal Law and Colorado

Upon passage, HPA provisions replaced state laws, except for those states that had PMI laws in effect as of January 2, 1998. The act preempts state laws when it provides consumers with more protection; while Colorado had PMI laws before the act, the state follows the HPA provisions.

Owner Cancellation

A Colorado homeowner can request cancellation of PMI when the mortgage balance equals 80 percent of the original purchase price or appraised value of the home at the time of the loan.

Lender Cancellation

Until the HPA, lenders were under no obligation to tell homeowners when they could cancel the PMI. The act requires lenders to automatically cancel PMI coverage on most current loans, once homeowner pays down the mortgage to 78 percent of the value. For high-risk loans, cancellation occurs when mortgage balance reaches 77 percent of the property's original value, for Colorado owners current on their loans.

Final Cancellation

PMI coverage automatically ends at the loan period's midpoint. On a 30-year loan with 360 monthly payments, for example, the midpoint would occur after 180 payments. At this time, Colorado lenders must cancel the PMI, if the owner's up-to-date on the payment.

References

• U.S. House of Representatives: Chapter 49 -- Homeowners Protection
• Board of Governors of the Federal Reserve System: Homeowners Protection Act (Consumer Compliance Handbook)
• Board of Governors of the Federal Reserve System: Homeowners Protection Act