If you had an FHA mortgage, you may be entitled to an FHA refund for part of your mortgage insurance premiums or excess earnings from the Mutual Mortgage Insurance Fund. Unfortunately, many people who have had an FHA mortgage -- one of the most popular mortgage options across the country -- have no idea about the refund process and there are many factors that determine whether you are eligible.
FHA Mortgage Insurance Premiums
When you take out an FHA mortgage, you need to pay mortgage insurance premiums (MIPs) in two forms: an annual MIP and an upfront MIP. While you can't get a refund on the annual MIP, which is charged monthly and added to your mortgage payment, you may be entitled to a refund on part of the upfront MIP you paid at closing.
The refund kicks in when you refinance your FHA mortgage. You may be entitled to a refund if you:
• Paid an upfront insurance premium at closing, and
• Did not default on your mortgage or become seriously delinquent, and
• Opened the FHA loan less than 3 years ago.
How Much is the FHA Refund?
The amount of the MIP refund gets reduced by 2% for every month after your initial FHA mortgage closing date. If you refinance 1 month after closing on the initial loan, you can get an 80% refund of the upfront MIP. If you wait 2 years (24 months), the refund will drop to 34%. For example, if you bought your home with an FHA loan 10 months ago and paid an upfront MIP of $1,750, you may receive 62% of the amount back if you refinance now, or $1,085.
If you refinance an FHA into a new FHA loan, the refund is applied to the MIP on the new loan. With an FHA Streamline refinance, the MIP refund will be available once you reach the 7-month waiting period that is required to refinance under the program.
There are no cash refunds available for FHA mortgages opened after December 8, 2004. If your loan was opened before that date and it was open for less than 5 years, you may be eligible for a refund.
There are no FHA mortgage insurance refunds available for FHA Streamline refinances opened prior to June 2009 as these loans are eligible for a reduced MIP of 0.01% compared to the average MIP of 1.70%.
It's also important to note you are not eligible for an FHA refund if you have an assumed loan. When the MIP is terminated, the refund will be awarded to the original owner on the loan.
Mutual Mortgage Insurance Fund Distributions
FHA MIP refunds are more common, but another type of FHA refund you may be entitled to is a distributive share from the Mutual Mortgage Insurance Fund. You may be eligible for your share of excess earnings from this fund if:
• Your loan was originated before September 1, 1983
• You paid on your loan for at least 7 years
• Your FHA insurance was terminated before November 5, 1990
How to Find Out if You're Due a Refund
There is now more than $412 million in uncollected FHA refunds waiting for claims. Many people simply don't realize they are entitled to a refund, move away, or throw away their notice. The Department of Housing and Urban Development (HUD) maintains a list of people who had an FHA mortgage and are due a refund from the agency. You can search the HUD database with your name, city, and FHA case number to see if you're on the list.
You may also be contacted by Immediate System Resources, Inc., a tracer company hired by HUD to locate homeowners owed a refund. There are many tracer companies that legally find people owed refunds but you will be charged a fee if you go through a third-party company. Because Immediate System Resources is officially affiliated with HUD, there is no fee to work with the company for help getting your refund.
If you bought your home with an FHA loan less than 3 years ago, refinancing your mortgage may have two benefits: you can get a lower interest rate and lower mortgage payments and you may qualify for an FHA refund for even greater savings.
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