Under the Homeowners Protection Act, what is a requirement for loans exceeding 80% Loan-to-Value (LTV)?

The requirement under the Homeowners Protection Act for loans exceeding 80% Loan-to-Value (LTV) is that they must have Mortgage Insurance if they are conventional conforming loans. This legislation aims to protect lenders in cases where borrowers have lower equity in their homes, thereby increasing the risk of default.

Mortgage insurance acts as a safeguard for lenders by covering a portion of the loss if the borrower defaults on the loan. When a borrower is financing more than 80% of the home's value, it's common practice for lenders to require this insurance to mitigate risk. Without it, lenders could face significant financial loss, particularly in a declining real estate market.

In contrast, requiring a co-signer, imposing a maximum loan term, or stipulating a specific credit score are not standard conditions tied to loans exceeding that LTV threshold. These practices might be part of individual lender requirements but are not mandated by the Homeowners Protection Act itself. Therefore, having mortgage insurance is the key requirement that supports risk management in high-LTV loan scenarios.