PMI Automatic Termination

Since HOPA does not appear to define what 'current' means when determining if a borrower qualifies for automatic termination, can termination be denied if there are still outstanding late fees?

While it is not defined in the regulation, a borrower is not normally considered "past due" due to late charges. I wouldn't push the issue for a few bucks.

We have a borrower that has almost $1000 in late charges. Would you still consider this a "few bucks"?

If they are current on their scheduled payment amount, you should terminate the insurance. Accrued late fees are an area you probably don't want to have to defend yourself against as a justification for "not current".

I disagree.

The act states "(1) on the termination date if, on that date, the mortgagor is current on the payments required by the terms of the residential mortgage transaction;"

Late fees are required payments; therefore, we do not terminate PMI until late fees are resolved.

In my opinion, I think that is a potential UDAP violation and I would be very careful.

You better read your contract very very carefully. I will bet the terms of the residential mortgage transaction only requires P&I payments and then states that a late charge may be "assessed" if the P&I payment is X number days late. Accrued and unpaid late charges do not put the loan in a past due status.