January 6, 2015
In a recent post, we discussed a reader question about FHA Mortgage Insurance Premiums and the refunds that may be due some FHA borrowers at loan payoff time. The reader asked, “I like to know why FHA MIP don’t send any refund after pay off of my FHA loan pay off 4 months ago.”
We replied that FHA borrowers, “may or may not be eligible for a mortgage insurance premiun refund depending on circumstances, but assuming the reader is eligible for a refund, consider the advice found on the FHA official site at www.FHA.gov:”
“If you do not receive a check or an 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 HUD. If you do not receive a refund or any other documentation from HUD within 120 days after the date you mailed your application, contact HUD immediately.”
There are some eligible borrowers who are due a refund, and others who are due a “distributed share”. You can read the full details of our post on these refunds and distributed shares, but here we focused on the exceptions to FHA MIP refund rules. According to the FHA/HUD official site, certain scenarios including loan assumptions and FHA refinances fall under exceptions to MIP refund policy:
“Assumptions: When an FHA-insured loan is assumed, the insurance remains in force (the seller receives no refund). The owner(s) of the property at the time the insurance is terminated is entitled to any refund.”
“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.”
“Claims: When a mortgage company submits a claim to HUD for insurance benefits, no refund is due the homeowner.”
“Statute of Limitations: HUD is not liable for a distributive share that remains unclaimed 6 years from the date notification was first sent to the last known address of the mortgagor.”
How are the FHA MIP refunds determined? According to the official site, “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.”
Do you have questions about FHA home loans? Ask us in the comments section. You can also follow us on Facebook.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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