Homeowners Protection Law Takes Effect

A year after being signed into law, a bill that allows homeowners to cancel their private mortgage insurance finally goes into effect Thursday.Under the Homeowners Protection Act of 1998, signed into law last summer, a lender must cancel the private MI coverage automatically when the loan-to-value ratio reaches 78%. A borrower who gets a mortgage on or after July 29 can request that the MI be canceled once the loan is reduced to 80% of the home's value. The new law protects homeowners from paying millions of dollars in unnecessary MI premiums, according to the National Association of Realtors. "Automatic cancellation will save untold hours and costs in dealing with lenders over these issues," said Lee Verstanding, senior vice president for government affairs at NAR. "In fact, an estimated quarter million homeowners will save $250 to $1,200 a year in unnecessary PMI payments." The automatic cancellation provisions under the new law don't cover existing mortgages, but lenders will be required to notify new and existing homeowners of their rights to cancel MI coverage.