SEATTLE NEWS ARCHIVES & FEATURES
HUD refund could provide boost at holiday time
Dec 20, 2011, 12:49 PM | Updated: Mar 4, 2016, 5:58 am
If you’ve been approached by a private company to help track down funds you might be owed from paying off a Federal Housing Administration home loan, try taking on the chore yourself.
The steps are simply much easier than they used to be – and the cash could come in handy in paying off those Christmas credit cards.
The U.S. Department of Housing and Urban Development, which oversees all FHA loans, increased its research efforts to locate approximately 348,000 homeowners who are owed $250 million in FHA mortgage insurance refunds. However, some homeowners could not be found – usually because they had moved and the new mailing address was not in HUD’s records.
When homeowners pay off their FHA-insured loan within five years, a portion of the mortgage insurance upfront premium is returned. It works much like a homeowner’s fire insurance policy that’s canceled before the term expires. If you pay $600 to insure your home for a year and move after eight months, a portion of the $600 would be refunded.
While HUD’s Web site for refunds and toll-free line (1-800-697-6967) have helped ease the load, many consumers are still unaware they have a check coming.
If you believe you are due a refund, try to dig out your old FHA loan number and then check online or by phone. Your proper name may not be enough – especially if it is common, like Sanchez or Smith.
Lenders require mortgage insurance when borrowers apply for more than 80 percent of the purchase price of the home. It insures the investor (lender) in case the borrower defaults on loan payments. So, if you sold your home and the new owner assumed the loan, you are not eligible for a refund. That’s because there is still a risk of default. The insurance follows the loan and not the initial borrower.
On older FHA loans, mortgage insurance was part of the deal and had to be paid regardless of the equity position of the borrower. Mortgage insurance on newer FHA loans – those placed after Jan. 1, 2001 – can be dropped when equity reaches 22 percent of the original appraised value and the borrower meets other guidelines.
If there was a FHA loan in your past, there may be a refund in your immediate future. Take the time to check it out. It could mean help at holiday time.
