Basis of HPA Refund Calculation
The basis of the HPA refund for borrower-paid, single-premium plans includes the following elements:
- HPA refunds are equal to statutory unearned premium as of the end of the month prior to reaching 78% LTV (as defined in the HPA). As an example, when a requested cancellation date is within December, the statutory unearned premium would be as of November 30 (the prior month end).
- Unearned premiums are earned ratably in accordance with statutory accounting requirements at the end of each month over the expected coverage period for each certificate as homologated by the North Carolina Department of Insurance.
- The calculation of unearned premium is performed on a certificate-by-certificate basis and reflects the unique attributes of each individual loan.
- These calculations estimate the term to 78% LTV based on the estimated loan balance using the original loan amount, the original loan interest rate, and the term of the loan divided by the original value of the property securing the loan.
Here's an example of how the unearned premium could be refunded for single-premium mortgage insurance:
*This example is based on the borrower making advanced principal payments to accelerate the mortgage payoff sooner than the original amortization plan.
Note: this chart is a general example; exact refund amounts will vary according to each loan's unique characteristics. This is not a refund schedule. For more information about cancellation or termination requirements, please refer to the Homeowners Protection Act of 1998.