• Learn about the California Civil Code and PMI.hotel california #1 image by Aaron Kohr from Fotolia.com
  
  Private mortgage insurance (PMI) is typically required by a California lender when the mortgage borrower puts less than 20 percent down payment on the purchase of a home. PMI protects the lender in case of default by the borrower since the lender is loaning a higher mortgage amount than it normally would. PMI is typically added to the monthly mortgage payment so the borrower makes one payment that includes the mortgage principal, interest and the PMI. California has state laws related to mortgage insurance.
  
  

Cancellation Law

• According to California law, a borrower can request cancellation of PMI when the mortgage balance drops below 80 percent of the market value of the property. This can be found in California Civil Code 2954.12 for mortgages with an effective date after January 1, 1998. California Civil Code 2954.7 covers PMI cancellation for mortgages originated before January 1, 1998.
  
  

Types of Properties

• According to California law, private mortgage insurance applies to certain types of real estate properties. The types of properties that fall under California law include single-family residential primary residences or properties that contain up to four units, where one unit is owner-occupied. This information is contained in California Civil Code 2954.7(1)(3) for mortgages established before January 1, 1998 and California Civil Code 2954.12(a)(1) for mortgages after January 1, 1998.
  
  

Failure to Automatically Cancel PMI

• California Civil Code 2954.12(a) prohibits the mortgage lender from charging PMI to borrowers once the mortgage meets certain guidelines. What the California Civil Code lacks is an explanation as to what the borrower can do if, in fact a lender continues to charge him PMI when the PMI should have been automatically canceled. California Civil Code 2954.65, which is a provision previously passed under the law, says that the PMI company is responsible for issuing a refund to the borrower for any unused portion of the PMI collected.
  
  

Disclosure Requirements

• California Civil Code 2954.6(a), (b) and (c) state that when private mortgage insurance is required as a condition of a mortgage, the mortgage lender must disclose this to the borrower. The lender is also responsible for disclosing to the borrower when he can cancel the PMI. A written cancellation disclosure is required from the mortgage lender to the borrower within 30 days of the mortgage closing, under California law.