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FHA Case Number Cancellation: A Reader Question

A reader asks, “Is it possible for the previous lender to cancel the FHA Case Number?”

There is a bit of detail missing from this question that makes it a bit difficult to answer properly–is the reader asking whether a lender may cancel an FHA case number (or should) when the loan is transferred from one bank to another? Is the question simply asking whether it’s possible to cancel an FHA case number as opposed to letting it expire?

Assuming this question involves a borrower who tried one lender, but decided to go with another, what do the FHA and HUD have to say about FHA case number cancellation?

The rules are clear–lenders do not cancel FHA case numbers in these cases, they are expected to cooperate in the transfer from one financial institution to another. According to the FHA/HUD official site, “The Case Transfer function allows a case to be transferred from the lender of record to a new lender. This often happens when a loan is acquired/purchased by a new lender. Additionally, the case sponsor/agent may be changed with this function. The case transfer request must be initiated by the current lender, sponsor/agent, or the remitting lender.”

FHA loan rules do not permit borrowers to be “stuck” with one lender if they choose to go with another instead–borrowers must be allowed to select the right lender for them even if it means a transfer of the FHA case number as described above. While the reader questions does not imply such a circumstance, borrowers should know they cannot be “penalized” by switching lenders before the loan has closed. In such cases, how does the FHA require the handling of these circumstances?

To begin, FHA case number cancellation (as opposed to simple expiration) must be done in writing. The lender must notify the FHA Homeownership Center with jurisdiction in that area. Lenders cannot cancel a case number for a loan that has already closed or for a loan the finance company does not own or hold.

Lenders also cannot cancel FHA case numbers via the online system known as FHA Connection. Borrowers should know that in cases where mortgage insurance payments have been made, a refund may be due. We will cover the procedures for canceling an FHA case number in our next blog post.

Do you have questions about how FHA home loans work? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

January 3, 2013

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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