Function

• Private mortgage insurance, or PMI, is extra insurance that protects the lender in case of a default on the loan. Borrowers who purchase a home without a 20-percent down payment are required to purchase PMI.
  
  

Automatic Cancellation

• Mortgage companies are required to automatically cancel PMI once a homeowner's equity reaches 22 percent or more of the original value of the home. The homeowner must be current on the payments for this rule to apply. PMI cancellation rules can be different for high risk mortgages such as Fannie Mae or Freddie Mac loans.
  
  

Requested Cancellation

• Once a homeowner's equity in the home has reached at least 20 percent, he can issue a request to cancel their PMI by using the "Qualified Written Request" form and mailing this to the mortgage lender. The U.S. Housing and Urban Development website states, "Under Section 6 of RESPA, lenders must acknowledge the complaint within 20 business days and must resolve the complaint within 60 business days by correcting the account or giving a statement of the reasons for its position. "