Is a Conventional Loan Covered by the HPA for PMI Cancellation?

The Quick Read: Usually, yes. If you pay private mortgage insurance (PMI) on a conventional loan for a home you live in, the Homeowners Protection Act (HPA) generally covers it. The law gives you three exits: you can request cancellation at 80% of the home’s original value, the servicer must end PMI automatically at 78%, and final termination happens at the midpoint of the loan term. FHA, VA, and USDA loans fall outside the law, and a few conventional structures do too.

What Does the HPA Actually Do?

The HPA does not decide whether you need mortgage insurance. It decides when the insurance has to go away. That distinction trips up a lot of borrowers.

On a conventional purchase with less than 20% down, the lender requires PMI to protect itself if you default. Across the wholesale programs I place files with, mortgage insurance is required above 80% loan-to-value (LTV), which is the loan balance divided by the home’s value. The HPA then sets the rules for ending it. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

The law was signed in 1998 and took effect for loans closed on or after July 29, 1999. The federal consumer-finance regulator describes the requirements as applying to single-family principal residences that closed on or after that date. It also has authority to supervise and enforce compliance, according to its HPA exam procedures.

Here is the part that matters for a buyer. If you are shopping for conventional loan programs with a low down payment, the standard borrower-paid PMI is the kind this law was written for. That is true for the 97% LTV first-time-buyer option (3% down) and the 95% LTV standard option (5% down) on a principal residence. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Is My Loan Covered? A One-Minute Test

Coverage depends on five things: the loan type, how you use the home, the property type, who pays the premium, and when the loan closed. Run your loan through this table.

Treat the table as a starting point. Your closing paperwork and your servicer have the final word on your specific loan.

Why FHA and VA Are Out

The federal consumer-finance regulator’s exam manual notes in a footnote that the HPA does not apply to insurance under the National Housing Act, title 38, and similar federal programs. That covers FHA mortgage insurance and VA guarantees. FHA insurance follows its own rules, and Fannie Mae’s guide treats FHA in a separate section. “Conventional” is the dividing line, but it is not a guarantee. It is where the analysis starts.

Borrower-Paid vs. Lender-Paid Insurance

The HPA covers PMI you pay. With lender-paid mortgage insurance (LPMI), the lender covers the premium, usually by building cost into the loan terms. The borrower generally cannot cancel LPMI the way they can cancel borrower-paid PMI. Confirm which type you have before you count on the 80% and 78% marks. Your closing disclosure and your servicer can tell you.

The Three Ways PMI Ends

The HPA builds three separate paths. They run on different triggers and different rules.

Path One: You Ask at 80%

You can request cancellation when the balance is scheduled to fall to 80% of the home’s original value. Extra principal payments can get you there sooner, because the request can also be made once your actual balance hits 80% of original value.

The servicer can require several things, per the CFPB:

• A written request
• A good payment history, with payments current
• Certification that there are no junior liens, such as a second mortgage
• Evidence, often an appraisal, that the value has not dropped below the original value

Freddie Mac’s Guide adds specific payment tests for its loans. The loan must be current. No payment can be 30 or more days late in the past 12 months. Many borrowers miss this one: a single late payment from a rough patch last year can block the request.

Path Two: Automatic Termination at 78%

Your servicer must end PMI automatically when the balance is first scheduled to reach 78% of the original value. This is based on the original amortization schedule for a fixed-rate loan, not on what you actually owe today.

That means extra payments do not speed up the automatic date, though they can speed up the request path. You must also be current. If you are behind on that date, termination takes effect on the first day of the first month after you catch up, per the NCUA’s HPA exam guide.

Fannie Mae’s Servicing Guide adds that the servicer must not charge a fee for processing an automatic termination.

Path Three: The Midpoint Backstop

Say your scheduled balance never reaches 78% on time, perhaps because of the loan’s structure. Final termination still ends PMI at the first day of the month after the amortization midpoint. On a 30-year loan, that is year 15. The same Fannie Mae guide describes this rule.

The CFPB says the midpoint standard is more likely to matter for loans with interest-only periods, principal forbearance, or balloon features.

What “Original Value” Means

Original value is the number every HPA test starts from. On a purchase, it is the lesser of the sales price and the appraised value. On a refinance, it is the appraised value.

This has two consequences. First, if you pay less than the appraisal, your price is the benchmark. Second, if you refinance later, the new appraisal becomes your original value and the clock restarts. Your old progress does not carry over.

A worked example, using percentages only. Say you buy with 5% down on a principal residence. Your starting LTV is 95%. You need to reach 80% of original value to ask, so the balance must drop by 15 percentage points of the price. The servicer must end PMI at 78%, a drop of 17 points. Final termination at year 15 applies only if you somehow have not reached 78% by then. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.

Appreciation: Where the HPA Stops and Investor Policy Starts

The HPA measures from original value. It says nothing about your home’s growth in price. This is the most common misunderstanding about PMI.

If your home has gained value, you can still ask to cancel based on current value. But that is an option offered under Fannie Mae and Freddie Mac servicing policy, not a right written into the statute. The servicer must verify current value, at your expense, no later than 120 days after the request. That is a verification deadline, not a guarantee. The servicer typically uses a broker price opinion (BPO) unless an appraisal is required. A BPO is a lower-cost estimate of value from a real estate professional.

A Fannie Mae lender letter allowed BPOs for current-value requests, and Fannie Mae servicers use an internal tool to evaluate these requests, according to a Fannie Mae FAQ. Do not wait for your servicer to reach out; if you think your home has gained enough value, ask.

In practice, current-value cancellation often has extra conditions, such as a waiting period since closing, and those vary by investor and loan. Ask your servicer for the exact conditions before you pay for a valuation.

Edge Cases That Break the Rule

“Conventional” does not always mean covered. Watch for these.

• Two- to four-unit homes and investment properties. Fannie Mae’s guide treats these differently, and automatic termination for them falls at the midpoint, not 78%. Thresholds for borrower requests also differ by program. Occupancy and unit count also change the leverage available on a purchase: one-unit principal residences reach 97% or 95% LTV, while second homes top out at 90%. Read the specific terms on your loan.
• High-risk loans. The 80% and 78% rules do not apply to high-risk loans. They fall under midpoint termination.
• Declined value or a second lien. Either can sink a borrower-requested cancellation.
• Not current. Late payments delay automatic termination and can block a request.
• Older loans. The HPA does not reach loans closed before July 29, 1999, though investor policy still governs cancellation. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.

Some servicers also allow PMI removal under their own standards, per the CFPB. That is a courtesy, not a right.

How to Request Cancellation Step by Step

1. Find your dates. At closing, the lender must give an initial HPA disclosure showing the projected 80% and 78% dates. If you lost it, ask your servicer.

2. Check your payment history. Count back 12 and 24 months for late payments.

3. Estimate your LTV. Divide your current balance by the original value, meaning the lesser of price and appraisal.

4. Send a written request. Put it in writing to your servicer. Writing gives you a record.

5. Prepare for valuation. If you rely on appreciation, expect a BPO or appraisal at your cost.

6. Follow up. If the servicer denies the request, ask for the reason in writing and fix the cause. It is often a lien, a late payment, or a value shortfall.

After termination, the servicer cannot require PMI payments beyond 30 days, per the NCUA exam procedures.

Common Misconceptions

• “PMI ends automatically at 80%.” No. Eighty percent is when you may ask. Automatic termination is at 78%.
• “78% means my real balance.” No. The automatic date follows the original schedule.
• “The HPA covers all mortgage insurance.” No. FHA and VA are outside it.
• “Appreciation counts under the law.” No. That is investor policy, not statute.
• “The servicer will tell me when to ask.” Not reliably. The disclosure carries the dates, and you are the one who must act.
• “Refinancing keeps my progress.” No. The new appraisal resets original value.
• “The HPA decides whether I need PMI.” No. It only governs removal.

Key Terms Defined

Original value: The lesser of your purchase price and appraised value on a purchase, or the appraised value on a refinance.

Automatic termination: The point when your servicer must end PMI without being asked, as long as you are current.

Final termination: The backstop that ends PMI after the midpoint of the loan term.

Lender-paid mortgage insurance (LPMI): Coverage where the lender pays the premium, which generally falls outside the HPA’s cancellation rights.

Broker price opinion (BPO): A lower-cost estimate of home value that servicers may use for current-value requests.

What This Means for Your Purchase

Pick your loan with the exit in mind. A conventional loan with borrower-paid PMI gives you statutory exits that FHA mortgage insurance does not. Published typical annual premiums run 0.58% to 1.86% of the balance, a range and not a quote, and what you pay depends on credit and leverage. Ending PMI lowers your monthly costs, according to the CFPB.

For a deeper look at cost, Lendmire’s piece How Much PMI Adds to a Conventional Loan by Credit Tier breaks it down. If you are weighing FHA, see How Much Conventional Loan PMI Cancellation Saves Over FHA Insurance.

Wholesale conventional programs generally start at a 620 decision score, and the automated finding governs most files, subject to lender guidelines and full file review. Nothing here is a commitment to lend.

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Call 828-256-2183.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging FHA, VA, conventional and jumbo purchase and refinance loans through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB

2. CFPB Exam Manual – HPA Procedures

3. Freddie Mac Guide Section 8203.2

4. NCUA – HPA exam procedures

5. Fannie Mae Servicing Guide B-8.1-04

6. Fannie Mae lender letter

7. Fannie Mae FAQ

8. CFPB