Which action is NOT required by servicers under the Homeowners Protection Act?

The Homeowners Protection Act is designed to provide certain protections for homeowners with private mortgage insurance (PMI). Under this act, servicers are mandated to take specific actions related to PMI to inform and benefit the borrower.

One of the key provisions of this act is the requirement for servicers to notify borrowers of their right to cancel PMI when their home equity reaches a certain threshold. This ensures that homeowners are aware of their options for reducing or eliminating the cost of PMI, which can represent a significant monthly expense.

Additionally, when a borrower’s equity reaches a predetermined level, servicers are required to automatically discontinue PMI without any action required from the borrower. This alleviates the financial burden associated with PMI once certain equity conditions are met.

Moreover, the act mandates that servicers provide annual statements that detail the PMI payments made by the borrowers. This transparency allows homeowners to track their insurance costs and helps them stay informed about their mortgage-related expenses.

However, the requirement to automatically add PMI to the monthly payment is not stipulated under the Homeowners Protection Act. PMI is typically required when a borrower has a down payment of less than 20% and is not automatically mandated to be included in future monthly payments. Therefore, this action does not conform to the obligations outlined