MI Reform Awaits Presidential OK

President Clinton is expected to sign into law any day now a private mortgage insurance reform bill that calls for automatic cancellation of private MI once a homeowner's equity reaches 22%.The Homeowners' Insurance Protection Act (S. 318) was recently approved by unanimous consent in both chambers. However, an unrelated amendment was attached to the bill by Sen. Rick Santorum, R, Pa., and the House had to agree to the change before the legislation went to President Clinton. The House unanimously agreed to the Santorum amendment Thursday night. Under the bill, a lender must tell a borrower if he or she can cancel private MI and, if so, the date upon which the person may initiate cancellation. The lender must disclose this information before loans are closed. After the closing, the mortgage servicer must provide an annual disclosure to homeowners reminding them of their right to cancel their MI policy. Although S. 318 mandates automatic cancellation of private MI at 22% equity, a creditworthy borrower may cancel at 20% equity.