Which law mandates the use of Private Mortgage Insurance (PMI)?

The Homeowners Protection Act is the law that mandates the use of Private Mortgage Insurance (PMI). This legislation primarily addresses PMI as a means of protecting lenders in cases where a borrower is unable to fulfill their mortgage obligations, particularly when the borrower's down payment is less than 20% of the home’s value. The act requires that lenders automatically terminate PMI when the borrower’s equity reaches 22% of the original property value, ensuring that consumers are not burdened with unnecessary costs once they have built enough equity in their homes.

The other laws listed—such as the Truth in Lending Act, the Equal Credit Opportunity Act, and the Fair Housing Act—do not relate to the requirement or regulation of PMI. The Truth in Lending Act focuses on disclosure of credit terms to consumers, the Equal Credit Opportunity Act prohibits discrimination in lending practices, and the Fair Housing Act addresses discrimination in housing-related transactions. None of these specifically mandate the use of PMI as a protective measure for lenders, which is the primary focus of the Homeowners Protection Act.