March 7, 2011
When purchasing a home with an FHA loan, one of the requirements is to pay an Up Front Mortgage Insurance premium or UFMIP. FHA mortgage loan applicants must budget for both an UFMIP and a monthly mortgage insurance payment that goes towards the annual Mortgage Insurance Premium. After a certain amount of time, some borrowers may be eligible for an FHA mortgage insurance premium based on a set of qualifying factors from the FHA.
FHA Refund Fact—FHA borrowers may be eligible for a partial refund of their insurance premium if the loan closed after September 1, 1983 AND UFMIP was paid at closing time.
FHA Refund Fact–this refund is available only to those who meet the qualifying criteria listed above AND who did not default on mortgage payments at any time.
Another type of payment may be due to some borrowers. Those who had FHA insured mortgage loans that originated before September 1, 1983 may be due something called a Distributive Share. This payment is identified by the FHA as ” a share of any excess earnings from the Mutual Mortgage Insurance Fund”.
FHA Refund Fact– Borrowers who had FHA mortgage loans originated before September 1, 1983 AND paid on the FHA-insured loan for more than seven years may be eligible IF the borrower had FHA insurance terminated before November 5, 1990.
FHA Refund Fact–there are exceptions to these policies. According to the FHA requirements, 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.”
There is also an exception in place for FHA-to-FHA refinancing loans. Instead of getting a refund, the borrower in these cases may apply the old premium to the UFMIP for the new FHA guaranteed loan. Yet another exception applies when there is a claim made by the mortgage company due to default/foreclosure. According to the FHA, “When a mortgage company submits a claim to HUD for insurance benefits, no refund is due the homeowner.”
FHA Refund Fact–there is a statute of limitations on refund claims on distributive share payments. “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.”
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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