For PMI 12 USC dictates the notices and cancellations of Private Mortgage Insurance. I don't see where it mandates that the bank has to enforce it on loans. Is there a requirement (other than for higher priced loans) requiring the bank to require MI?

The rule also bases the LTV off the "original value" (lesser of the purchase price or appraised value). There seems to be a thoughts that a customer can pay for a new appraisal and request PMI be removed prior to the date that the loan is scheduled to hit 80%. This is based on the current value. Is the bank allowed to do this (whether or not improvements have been made?

Freddie's policy does not seem to jive with the rule. It has original and current value (with little description of when "current" applies).

HOPA does not dictate when PMI is required only when it is required to be canceled or terminated.

https://www.fdic.gov/regulations/laws/rules/2000-8700.html (you may want to also check for any possible state requirements)

2 A loan-to-value limit has not been established for permanent mortgage or home equity loans on owner-occupied, 1- to 4-family residential property. However, for any such loan with a loan-to-value ratio that equals or exceeds 90 percent at origination, an institution should require appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral.

You can voluntarily cancel PMI at anytime if your FI is willing to accept the risk. The cancellation would be subject to any investor's guidelines for PMI and Freddie has a 2 & 5 year (based on LTV) seasoning requirement. If you don't want to follow Freddie's requirements then you would have to take the loan back into your portfolio.

If you want to use current value then you must obtain a current appraisal (paid for by the borrower) to determine the value of the property at the time the borrower's requests cancellation. In other words an aged appraisal report would not suffice. If I remember correctly if the loan has aged 2 years but less than 5 Freddie allows PMI to be cancelled at a 75% LTV and if it has aged 5 or more years PMI can be cancelled at an 80% LTV. This of course is assuming the PMI has not met the cancellation or automatic termination requirement under HOPA within those time frames