Final answer:
The termination of private mortgage insurance is determined by the individual mortgage agreement and private mortgage insurance company guidelines. There are legal requirements for PMI cancellation that lenders must follow, such as automatically terminating PMI once the homeowner reaches 22% equity.
Step-by-step explanation:
The termination of private mortgage insurance is not governed by federal law. Instead, it is determined by the terms of the individual mortgage agreement and the guidelines set by the private mortgage insurance company.
Private mortgage insurance, or PMI, is typically required by lenders when a homebuyer puts down less than 20% on a home purchase. Once the homeowner reaches at least 20% equity in the home, they may be eligible to request cancellation of PMI.
However, there are certain legal requirements under the Homeowners Protection Act that lenders must follow when it comes to PMI cancellation. For example, lenders are required to automatically terminate PMI once the homeowner reaches 22% equity in the home, regardless of whether the homeowner has requested cancellation.