II
105TH CONGRESS
1ST SESSION
H. R. 607
IN THE SENATE OF THE UNITED STATES
APRIL 17, 1997
Received
AN ACT
To amend the Real Estate Settlement Procedures Act of
1974 to require notice of cancellation rights with respect
to private mortgage insurance which is required as a
condition of entering into certain federally related mort-
gage loans and to provide for cancellation of such insur-
ance, and for other purposes.
HR 607 RDS
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Homeowners Insur-
ance Protection Act’’.
SEC. 2. PROVISIONS RELATING TO PRIVATE MORTGAGE IN-
SURANCE.
(a) IN GENERAL.—Section 6 of the Real Estate Set-
tlement Procedures Act of 1974 (12 U.S.C. 2605) is
amended—
(1) by redesignating subsections (f), (g), (h),
(i), and (j) as subsections (k), (l), (m), (n), and (o),
respectively; and
(2) by inserting after subsection (e) the follow-
ing new subsections:
‘‘(f) DISCLOSURES RELATING TO PRIVATE MORT-
GAGE INSURANCE.—
‘‘(1) DISCLOSURE AT SETTLEMENT RELATING
TO EXISTENCE OF PMI.—With regard to any covered
mortgage loan, the lender shall disclose, in writing
at or before the settlement of such covered mortgage
loan, whether any private mortgage insurance will be
required to be obtained or maintained with respect
to such mortgage loan, including any lender-paid
HR 607 RDS
private mortgage insurance, and the period during
which such insurance will be required to be in effect.
‘‘(2) DISCLOSURE AT SETTLEMENT RELATING
TO TERMINABILITY OF PMI.—If the lender requires,
as a condition for entering into a covered mortgage
loan, the borrower to assume an obligation to make
separately designated payments toward the pre-
miums for private mortgage insurance with respect
to such loan, the lender shall disclose, in writing at
or before the settlement of such covered mortgage
loan any of the following notices which are applica-
ble with respect to such loan:
‘‘(A) 
PMI 
OBLIGATIONS
TERMINABLE
UPON
REQUEST.—In the case of a loan de-
scribed in paragraph (3), that—
‘‘(i) the borrower’s obligation to make
separately designated payments toward the
premiums for private mortgage insurance
may be able to be terminated while the
mortgage is outstanding (including a can-
cellation permitted before the date of auto-
matic termination under subsection (g));
and
‘‘(ii) the borrower will be notified by
the servicer not less frequently than annu-
HR 607 RDS
ally of an address and a toll-free or collect-
call telephone number which the borrower
may use to contact the servicer to deter-
mine—
‘‘(I) whether the borrower’s obli-
gation to make separately designated
payments toward the premium for pri-
vate mortgage insurance may be ter-
minated while the mortgage loan is
outstanding (or before the date of
automatic termination); and
‘‘(II) if such obligation may be
terminated while the loan is outstand-
ing (or before such date), the condi-
tions and procedures for such termi-
nation.
‘‘(B) PMI OBLIGATIONS TERMINABLE BY
OPERATION OF LAW.—That the borrower’s obli-
gation to make separately designated payments
toward the premiums for private mortgage in-
surance will be terminated by operation of law
under subsection (g).
‘‘(C) 
NONTERMINABLE
PMI
OBLIGA-
TIONS.—In the case of a loan not described in
paragraph (3), that the borrower’s obligation to
HR 607 RDS
pay any amount to be applied to any portion of
the premiums for private mortgage insurance
will not be terminated at the request of the bor-
rower.
‘‘(3) DISCLOSURE WITH ANNUAL STATEMENTS
OR OTHER COMMUNICATIONS.—If—
‘‘(A) private mortgage insurance is re-
quired as a condition for entering into a covered
mortgage loan; and
‘‘(B) the borrower’s obligation to make
separately designated payments toward the pre-
miums for such insurance may be terminated at
the borrower’s request,
the servicer shall, not less frequently than annually,
disclose to the borrower a clear and conspicuous
statement containing the disclosures set forth in
subparagraphs (A) and (B) of paragraph (2), includ-
ing the address and telephone number referred to in
such paragraph, based on the servicer’s knowledge
at the time such periodic communication is given.
Such disclosure shall be included with any annual
statement of account, escrow statement, or related
annual communications provided to the borrower,
while such private mortgage insurance is in effect.
HR 607 RDS
‘‘(4) DISCLOSURES FURNISHED WITHOUT COST
TO BORROWER.—No fee or other cost may be im-
posed on any borrower for preparing and delivering
any disclosure to the borrower pursuant to this sub-
section.
‘‘(g) MANDATORY TERMINATION OF PMI OBLIGA-
TIONS AT 75 PERCENT LOAN-TO-VALUE RATIO.—
‘‘(1) IN GENERAL.—Notwithstanding any provi-
sion of a covered mortgage loan, any obligation of
the borrower to make separately designated pay-
ments toward the premiums for any private mort-
gage insurance in effect with respect to such loan
shall terminate, except as provided in paragraph (3),
by operation of law as of the 1st day of the 1st
month which begins after the date on which the
principal balance outstanding on all residential mort-
gages on the property securing the loan is equal to
or less than 75 percent of the lesser of—
‘‘(A) if the loan was made for purchase of
the property, the sales price of the property
under such purchase; or
‘‘(B) the appraised value of the property,
as determined by the appraisal conducted in
connection with the making of the loan.
HR 607 RDS
‘‘(2) DISCLOSURE
UPON
TERMINATION.—Not
later than 45 days after the date of termination pur-
suant to paragraph (1) of a private mortgage insur-
ance requirement for a covered mortgage loan, the
servicer shall notify the borrower under the loan, in
writing, that—
‘‘(A) the private mortgage insurance has
terminated and the borrower no longer has pri-
vate mortgage insurance: and
‘‘(B) no further premiums, payments, or
other fees shall be due or payable by the bor-
rower in connection with the private mortgage
insurance.
‘‘(3) EXCEPTION
FOR
DELINQUENT
BORROW-
ERS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply with respect to any covered mortgage
loan on which the payments are not current as
of the date that the obligation to make private
mortgage insurance premium payments in con-
nection with the loan would otherwise terminate
pursuant to paragraph (1).
‘‘(B) EFFECTIVENESS
ONCE
PAYMENTS
ARE
CURRENT.—In the case of any covered
mortgage loan to which subparagraph (A) ap-
HR 607 RDS
plies, paragraph (1) shall apply with respect to
such loan as of the 1st day of the 1st month
which begins after the date that such payments
become current.
‘‘(4) RETURN
OF
PAYMENTS
TOWARD
PRE-
MIUMS.—
‘‘(A) RETURN
OF
PAYMENTS
TO
BOR-
ROWER.—The servicer for a covered mortgage
loan shall promptly return to the borrower any
payments toward the premiums for any private
mortgage insurance for such loan covering any
period occurring after the date of automatic
termination for such loan under this subsection.
‘‘(B) 
RETURN
OF
PAYMENTS
TO
SERVICER.—The private mortgage insurer for a
covered mortgage loan shall promptly return to
the servicer any payments received from the
servicer toward the premiums for any private
mortgage insurance for such loan covering any
period occurring after the date of automatic
termination for such loan under this subsection.
‘‘(h) LENDERS’ CONDITIONS FOR PMI.—
‘‘(1) CONDITIONS FOR TERMINATION OF BOR-
ROWER’S OBLIGATION TO PAY PMI.—The conditions
for the termination of the borrower’s obligation to
HR 607 RDS
make separately designated payments toward the
premium for private mortgage insurance with re-
spect to a covered mortgage loan, including any
changes in such conditions, shall be reasonably relat-
ed to the purposes for which the requirement for pri-
vate mortgage insurance was imposed at the time
the loan was made.
‘‘(2) BORROWER’S RIGHT TO TERMINATE IN AC-
CORDANCE WITH CONDITIONS.—In the case of any
covered mortgage loan described in subsection (f)(3),
the borrower shall have the right under this para-
graph to terminate the borrower’s obligation to
make separately designated payments toward the
premiums for such insurance if the conditions and
procedures for such termination most recently com-
municated to the borrower (pursuant to a request by
the borrower pursuant to notice under subsection
(f)(3) or otherwise) have been met.
‘‘(i) EFFECT ON OTHER AGREEMENTS.—The provi-
sions of subsections (f), (g), and (h) shall supersede any
conflicting provision contained in any agreement relating
to the servicing of a covered mortgage loan entered into
by the Federal National Mortgage Association, the Fed-
eral Home Loan Mortgage Corporation, or any private in-
vestor or noteholder (or any successors thereto). A servicer
HR 607 RDS
which cancels private mortgage insurance on a covered
mortgage loan in compliance with the provisions of sub-
section (g) or (h) or in accordance with investor guidelines
in existence at the time concerning the cancellation of pri-
vate mortgage insurance (regardless of whether the can-
cellation by the servicer was mandated by such subsections
or initiated by the borrower) shall not be required to re-
purchase such mortgage loan from the investor or holder
of such mortgage loan solely on the grounds that the pri-
vate mortgage insurance was canceled in accordance with
the provisions of such subsections or investor guidelines,
as applicable.
‘‘(j) LIMITATIONS ON LIABILITY.—If the servicer for
a covered mortgage loan has complied with the require-
ments under subsections (f) and (g) to provide disclosures,
the servicer shall not be considered to have violated any
provision of subsection (f), (g), or (h) and shall not be
liable for any such violation—
‘‘(1) due to any failure on the part of the
servicer to provide disclosures required under such
subsections resulting from the failure of any mort-
gage insurer, any mortgage holder, or any other
party to timely provide accurate information to the
servicer necessary to permit the disclosures; or
HR 607 RDS
‘‘(2) due to any failure on the part of any pri-
vate mortgage insurer, any mortgage holder, or any
other party to comply with the provisions of such
subsections.
Each private mortgage insurer and each mortgage holder
for a covered mortgage loan shall provide accurate and
timely information to the servicer for such loan necessary
to permit the disclosures required by subsections (f) and
(g). In the event of a dispute regarding liability for a viola-
tion of subsection (f), (g), or (h), and upon request by
the borrower, a servicer shall provide the borrower with
information stating the identity of the insurer or mortgage
holder.’’.
(b) DEFINITIONS.—Subsection (n) of section 6 of the
Real Estate Settlement Procedures Act of 1974 (as redes-
ignated by subsection (a)(1)) is amended—
(1) by redesignating paragraphs (1), (2), and
(3) as paragraphs (2), (5), and (6), respectively;
(2) by inserting before paragraph (2) (as redes-
ignated by paragraph (1) of this subsection) the fol-
lowing new paragraph:
‘‘(1) COVERED
MORTGAGE
LOAN.—The term
‘covered mortgage loan’ means a federally related
mortgage loan under which the property securing
HR 607 RDS
the loan is used by the borrower as the borrower’s
principal residence.’’; and
(3) by inserting after paragraph (2) (as so re-
designated) the following new paragraphs:
‘‘(3) MORTGAGE INSURANCE.—The term ‘mort-
gage insurance’ means insurance, including any
mortgage guaranty insurance, against the nonpay-
ment of, or default on, a mortgage or loan involved
in a residential mortgage transaction, the premiums
for which are paid by the borrower.
‘‘(4) PRIVATE
MORTGAGE
INSURANCE.—The
term ‘private mortgage insurance’ means mortgage
insurance other than mortgage insurance made
available under the National Housing Act, title 38 of
the United States Code, or title V of the National
Housing Act of 1949.’’.
SEC. 3. SCOPE OF APPLICABILITY.
(a) NOTICE AT OR BEFORE SETTLEMENT.—Para-
graphs (1) and (2) of section 6(f) of the Real Estate Set-
tlement Procedures Act of 1974 (as added by section 2(a)
of this Act) shall apply only with respect to covered mort-
gage loans made after the end of the 1-year period begin-
ning on the date of the enactment of this Act.
(b) NOTICE OF PMI OBLIGATION TERMINABILITY.—
Paragraphs (3) and (4) of section 6(f) of the Real Estate
HR 607 RDS
Settlement Procedures Act of 1974 (as added by section
2(a) of this Act) shall apply beginning upon the end of
the 1-year period that begins on the date of the enactment
of this Act and with respect to any covered mortgage loan
without regard to the date on which such loan was made.
(c) TERMINATION OF PMI OBLIGATION BY OPER-
ATION OF LAW.—Subsections (g) and (h) of section 6 of
the Real Estate Settlement Procedures Act of 1974 (as
added by section 2(a) of this Act) shall apply only with
respect to covered mortgage loans made after the end of
the 1-year period beginning on the date of the enactment
of this Act.
SEC. 4. CONFORMING AMENDMENTS.
(a) SECTION 6.—Section 6(m) of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2605) (as
redesignated by section 2(a)(1) of this Act) is amended—
(1) by inserting ‘‘(not including subsection (f))’’
before ‘‘regarding timing’’; and
(2) by adding at the end the following new sen-
tence: ‘‘The preceding sentence shall not apply to
any State law or regulation relating to notice or dis-
closure to a borrower regarding obtaining, maintain-
ing, or terminating private mortgage insurance and
such State laws and regulations shall be subject to
the provisions of section 18.’’.
HR 607 RDS
(b) SECTION 10.—Section 10(b) of the Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. 2609(b))
is amended by striking ‘‘section 6(i)’’ and inserting ‘‘sec-
tion 6(n)’’.
(c) SECTION 12.—Section 12 of the Real Estate Set-
tlement Procedures Act of 1974 (12 U.S.C. 2610) is
amended by striking ‘‘section 6(i)’’ and inserting ‘‘section
6(n)’’.
Passed the House of Representatives April 16, 1997.
Attest:
ROBIN H. CARLE,
Clerk.