Try to remember the first mortgage you signed for, sitting at the table and reviewing all the fees you were charged by so many different people, just to get your mortgage. It’s overwhelming. Have you ever thought about the fact that they are always quick to take your money but v-e-r-y slow when it comes to providing a refund?
FHA refunds (UFMIP-up front mortgage insurance premium) are another example of the slow process, but worse, it could have slipped through the cracks altogether. The information here may seem confusing and contradicting but it is not intended to be so. It’s the system. If you are owed a refund it certainly won’t make you rich, but, … it’s about the principle isn’t it?
If you had an FHA-insured home mortgage, you may be eligible for a refund from HUD/FHA. Read your settlement papers or check with your mortgage company to determine if you even paid an up-front premium. If you did you may be eligible for a refund of a portion of the insurance premium provided you: acquired your loan after September 1, 1983, paid UFMIP at closing and did not default on your mortgage payments.
There are some common sense Exceptions:
When an FHA home mortgage is assumed, the insurance remains in force. The new owner of the property may be entitled to a refund when the loan terminates.
FHA-to-FHA Refinances: When an FHA loan is refinanced, the refund from the old premium may be applied toward the up-front premium required for the new loan.
Mortgage Insurance Claims: When a mortgage lender submits a claim to HUD for insurance benefits (because you defaulted on the loan), no refund is due the homeowner.
Mortgage Insurance Refunds are based on the number of months the loan is insured. For any FHA-insured loans with a closing date prior to January 1, 2001, and endorsed before December 8, 2004, no refund is due the homeowner after the end of the seventh year of insurance. For any FHA-insured loans closed on or after January 1, 2001 and endorsed before December 8, 2004, no refund is due the homeowner after the fifth year of insurance. For FHA-insured loans endorsed on or after December 8, 2004, no refund is due the homeowner unless they refinanced to a new FHA-insured loan, and no refund is due these homeowners after the third year of insurance.
Mortgagee Letter 2005-03 provides additional information on recent policy changes regarding refunds of up-front mortgage insurance premiums. Simply stated all loans endorsed after December 8th, 2005 are not entitled to a refund of UFMIP unless it is an FHA to FHA refinance in which case the refund is applied towards the new UFMIP. Cool, Huh?
How are these refunds processed?
The mortgage lender notifies HUD of the termination of the mortgage insurance on your loan. If you are eligible for a refund, HUD will either request that the Department of the Treasury issue a check directly to you or send you an Application for Premium Refund so you can provide them with more information about your case.
If you receive a form HUD-27050-B, please read and complete the application carefully, have it notarized, and return it to HUD with proof that you were the owner of the property when the insurance was terminated.
After they receive your completed form HUD-27050-B and the necessary supporting documentation, the information will be reviewed. After completion of this review, HUD will request that Treasury issue a check directly to you or request additional information.
If you do not receive your check or another application within 45 days after you have paid off your loan, check with your mortgage company to confirm that they have sent HUD a request to terminate the mortgage insurance on your loan. If they confirm that the correct termination information was sent, contact your local HUD office or contact them through their website. Remember this too, the rules governing eligibility for premium refunds are based on the financial status of the FHA insurance fund and are subject to change.
There you go. Simple isn’t it. Like I said it won’t make you rich and probably isn’t worth the bother if yours did slip through the system. A word of comfort, it probably did not although some do. The reason I have this information here is so you realize how important it is that you understand your loan and it’s fees. You must ask questions about anything you are not sure of. Most important, make sure you are working with a reputable Mortgage Broker that has the experience and knowledge to assure that your interests are taken care of.