According to the Homeowners Protection Act, when the loan to value falls below 78%, PMI is to be?

When the loan-to-value (LTV) ratio falls below 78% according to the Homeowners Protection Act, the correct action is for the private mortgage insurance (PMI) to be terminated. This legislation was designed to protect homeowners by establishing guidelines on when PMI can be cancelled.

Once the LTV reaches a certain threshold, homeowners are eligible for PMI termination, as it is assumed that they have acquired enough equity in their home. This provides homeowners relief from ongoing PMI payments, which can be a significant monthly expense. The act mandates lenders to inform borrowers that they can request termination of PMI once they have reached the requisite equity stake in their property, thus encouraging them to monitor their LTV ratios.

Understanding this process is vital for both homeowners and real estate professionals, as managing PMI effectively can lead to substantial savings for the homeowner.