Freddie Mac said it will publish guidelines in early May to make it easier for borrowers to cancel private mortgage insurance.

The guidelines would also require lenders to terminate the insurance automatically once a homeowner builds up 22% equity in his or her home.

A Homeowners Protection Act enacted by Congress last year requires lenders to cancel mortgage insurance automatically when the loan-to-value ratio on a property falls to 78% of its original value.

Though the law's cancellation provisions apply only to mortgages originated after July 28 of this year, Freddie Mac's guidelines extend some of the law's benefits to existing loans.

The guidelines give mortgage lenders the option of automatically terminating mortgage insurance on loans currently owned by Freddie Mac that are halfway through their amortization term.

For example, mortgage insurance would automatically terminate in the 180th month of a 360-month, or 30-year, mortgage. This change is to become mandatory for all lenders on Jan. 2, 2001.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.