You may have received notices from the U.S. Department of Housing and Urban Development
(HUD) indicating that you may be entitled to a refund on your mortgage insurance premium
(MIP). You may have also received solicitations from individuals and organizations
that offer to pursue the refund on your behalf for a 30% fee. This fee is supposed
to cover the time and expenses required to process the paperwork, communicate with HUD,
and file the necessary documents. Let me give it to you straight - 30% is a
ridiculously high fee for such a simple transaction, especially when you can do it
yourself for FREE by completing and mailing a simple form to HUD.
Here's the Real Deal. The MIP is a payment made by the borrower to the lender at
settlement to help insure against default. Most lenders offering Federal Housing
Administration (FHA) mortgages require borrowers to pay the MIP in full, although some
lenders may allow the MIP to be financed. Some of the MIP is applied to a mortgage
insurance fund; therefore, the borrower may be entitled to a refund of unearned premium if
the loan is paid off within the first seven years.
HUD describes the MIP refund in the following language.
| The premium refund is the difference between the
amount of prepaid premium and the amount of that premium that has been earned by HUD up to
the time the mortgage is terminated. For mortgage insurance terminating on or after
January 1, 1994, all prepaid premium is earned by the end of the seventh year.
Therefore, mortgages held more than 83 months will not get a premium refund. When
an FHA mortgage is refinanced within the first seven years, the new lender may offer to
apply the premium refund from the old mortgage toward the prepaid premium required for the
new FHA mortgage. |
A six-year statute of limitations was established by Congress on October 28, 1993.
This means that borrowers must claim their refunds within six years from the date
the notification was first sent. This notification is called an "Application
for Premium Refund or Distributive Share Payment", also known as HUD Form 27050-B.
If you have paid off an FHA mortgage within the first seven years, either from
refinancing or selling the property, you may be eligible for a refund. You should
contact HUD (the latest number is 1-800-697-6967) for details.
Now, do you really need to pay someone else 30% of your refund just to fill out a
simple form? Think about it. A 30% fee on a $1000 refund is $300, which leaves
you with only $700. If you have received a refund notice from HUD, consider filling
it out yourself. If you haven't received a notice but believe you are eligible for a
refund, contact HUD directly to start the process. You'll need a letter from the
lender indicating the mortgage was paid in full and a copy of the recorded deed to the
property. Happy Refund.
Source: teamforeclosure.com
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