What does the HPA require regarding the cancellation of PMI?

The Homeowners Protection Act (HPA) sets clear guidelines concerning the cancellation of Private Mortgage Insurance (PMI) to protect homeowners. The correct answer indicates that the HPA mandates automatic cancellation of PMI when the loan balance reaches 78% of the original value of the property. This requirement is designed to relieve homeowners from the financial burden of PMI once they have achieved sufficient equity in their homes, which is typically considered when the loan amount is reduced to 78% of the original property value.

The law is intended to benefit borrowers by ensuring that they are no longer required to pay for PMI once they are in a stronger financial position regarding their mortgage equity, provided they are current on their payments. This provision helps promote fairness in lending practices and provides a clear automatic mechanism for PMI cancellation.

The other options do not align with the requirements set forth by the HPA. For instance, while homeowners may request cancellation of PMI, this is not a requirement under the act but rather an option that may be available under certain conditions, which is why it is not the correct answer. Similarly, PMI is not allowed to be kept indefinitely or canceled only at maturity under the HPA's provisions. Instead, the focus is on the borrower achieving specific equity milestones, notably