What is the significance of the Homeowners Protection Act (HPA)?

The Homeowners Protection Act (HPA) plays a crucial role in the oversight of private mortgage insurance (PMI) and specifically establishes rules for its termination. PMI is typically required when a borrower makes a down payment that is less than 20% of the home’s purchase price, providing lenders with collateral protection in case of default. The HPA mandates that PMI be canceled when the borrower reaches a certain equity threshold, typically when the mortgage balance is 80% of the home's original appraised value. Furthermore, it also outlines borrower rights regarding the cancellation process, ensuring transparency and fairness. This protection helps homeowners reduce their monthly payments once they have gained sufficient equity in their property, ultimately making homeownership more affordable.

Other options touch on different aspects of real estate. Some pertain to the sales and advertisement of homes or the setting of mortgage interest rates, which are governed by other laws and regulations. However, none address the specific provisions of the HPA concerning the management and termination of PMI, which is the Act’s primary focus and purpose.