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How To Get An FHA Refund
For many years the huge FHA mortgage program paid insurance refunds to borrowers. While the refund program stopped in late 2004, there are still millions of older FHA loans out there where borrowers may be able to get back some of their insurance money. Here's how the refund process works. Rather than lending money, the FHA program is a form of insurance. Instead of asking for 20 percent down and demanding stiff qualification standards, FHA insurance means lenders can require 3 percent down and offer extremely liberal qualification standards because they know if the borrower defaults the FHA will pay off the loan. The result is that mortgage financing is available to many people, including some who otherwise would not be able to get financing. The insurance provided by the FHA is paid for with a "mortgage insurance premium" (MIP) of 1.5 percent at closing plus .5 percent of the outstanding monthly loan balance. The monthly premiums continue until the original loan balance has been reduced to 78 percent of the original mortgage amount. The MIP money collected by HUD goes into various insurance pools. The pools are used to pay lenders when borrowers default, but often the money in a pool exceeds lender claims. This has been good news in the past because it often meant that borrowers were entitled to an MIP refund. MIP can be a lot of money. With a $300,000 loan there would be a $4,500 charge up front plus roughly $1,500 in monthly fees during the first year. Hold onto the loan for a decade or so and you're looking at total premiums above $15,000. Borrowers traditionally looked at FHA refunds as a silent savings account, a way to get back a slight part of the insurance premiums paid to support the program, an MIP bonus of sorts. This was all great and wonderful until December 8, 2004 when the rebate program was turned off. If your FHA loan was originated after the 2004 date you need not worry about a rebate, they're no longer available. However, there ARE rebates available for earlier FHA borrowers and millions of people can benefit. A review of annual data compiled by the Mortgage Insurance Companies of America shows that more than 9.7 million FHA loans were issued during the 10-year period between 1994 and 2004. When you apply for a refund you surely won't get back all your money. However, for a few minutes work you may get back a tiddy sum. Here's how to do it. Qualifications There are three basic standards to qualify for a premium refund. First, the loan must have been originated after September 1, 1983 and before Dec. 8, 2004. (A share of any excess earnings from FHA loans made before September 1, 1983 may also be available -- use the contact information below for details) Second, you must have paid an up-front mortgage insurance premium at closing. While the current up-front charge is 1.5 percent, prior to 2001 the fee was 2.25 percent. You can find out if you paid an up-front MIP fee by checking with your mortgage company or by looking at the HUD-1 statement provided to you at closing. Third, the mortgage must not be in default. So far, so good, but the FHA refund program involves both insurance and the government, so you can bet there are a few complications: - If you allowed someone to assume your FHA loan, there's no refund for you -- any refund goes to the last borrower on the loan.
- If your lender filed a loss claim with HUD, forget it.
- If you refinanced an old FHA loan with a new one, any refund is automatically credited to the new up-front MIP premium for the replacement loan.
- Also, if more than six years passed since HUD provided a refund notice you cannot make a claim.
How To Get a Refund -- At No Cost There are folks out there who for a "slight" fee will help you lose weight, add hair and get an FHA refund. While I have no advice regarding the first two matters, I can help with refunds. To see if you qualify for an FHA refund, click here. This link will take you directly to the FHA refund application page. There is NO charge to apply for a refund and no need to pay a dime to so-called tracers. To use this page you will need to provide your name and FHA case number. The number can be found on your loan documents, it may be on your settlement sheet, you can ask your lender for the case number and it may be available through HUD -- you can call them at 1-800-697-6967 or you can contact them by e-mail. Once you file a claim it will likely take 120 days to get your check.
Peter G. Miller is a syndicated real estate and personal finance
columnist who appears in more than 90 newspapers. He writes a
bi-monthly column exclusively for Mortgage Lenders Plus.com, an
advertiser supported mortgage directory featuring
home mortgage lenders nationwide for
refinancing, second mortgages, and home loans.
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