The House approved legislation Tuesday that would automatically cancel private mortgage insurance when a borrower's equity in a home reaches 22%.
Homeowners may request cancellation upon reaching 20% equity as long as they are current on their mortgage and their home has not depreciated below the purchase price. Private mortgage insurance, whose cost ranges from $300 to $900 per year, protects lenders from mortgage defaults.
"That makes this probably the most important consumer bill that will have passed the Congress in this session," said Rep. John J. LaFalce of New York, the ranking Democrat on the Banking Committee.
The measure, which is a compromise with the Senate after a months-long logjam, got bipartisan support in brief House floor debate before being passed on a voice vote. The Senate is expected to approve the legislation soon.
If a mortgage is "high-risk" as defined by Fannie Mae and Freddie Mac, insurance coverage could not be canceled until halfway through the loan's term. The General Accounting Office would be required to study the impact of the high-risk exception.