According to Vicki Vidal, of the Mortgage Bankers Association of America, PMI cancellation based on price appreciation is not guaranteed in the Homeowners Protection Act.

Here are her comments, in response to a homeowner who wanted to cancel her PMI because her house had appreciated in value.

“Cancellation based house appreciation is not granted through the Homeowners Protection Act. Current law does not provide such a right. As a result, the owner of the mortgage determines whether house appreciation is an appropriate decrease in foreclosure risk to warrant cancellation. The owner of the mortgage does not have to grant cancellation based on house appreciation.

If Fannie Mae and Freddie Mac own your loan, however, the following generally are their current requirements: They both allow cancellation based on current house appreciation, but there are conditions: First, the loan must be at least 2 years old (aka “seasoned” for two years). No cancellation can occur based on house appreciation if the loan is less than 2 years old. If the loan is between 2 and 5 years old, the servicer can cancel MI when a current appraisal shows that the LTV [loan-to-value ratio] is 75 percent.

If the loan is older than 5 years, the LTV can be 80 percent. Second, third, fourth and fifth, the borrower must have a good payment history (no 30-day delinquencies in the last 12 months, no 60-day delinquencies in the last 24 months); the borrower must make the request, and the servicer must order the appraisal that determines value, but the borrower pays the cost of the appraisal.

There are some complicated waivers of some of the seasoning requirements if the increased value is due to property improvements. NOTE: THESE CANCELLATION GUIDELINES CAN CHANGE AT ANY TIME AT FANNIE MAE AND FREDDIE MAC’S DISCRETION SO DO NOT CONSIDER THEM SET IN STONE FOR ALL TIME.

I suggest you call you servicer to find out who owns your loan. If it is not owned by Fannie Mae or Freddie Mac of course these guidelines would not apply.

Oct. 17, 2003.