California FHA Loan Refunds and Refinancing Loans

On the FHA/HUD official website, there is a page of information discussing mortgage refunds for eligible FHA borrowers. According to the official site, “If you had an FHA-insured mortgage, you may be eligible for a refund from HUD/FHA.”

The site adds, “You may be eligible for a refund of a portion of the insurance premium if you:
acquired your loan after September 1, 1983 and:

-         paid an up-front mortgage insurance premium at closing and
-         did not default on your mortgage payments.”

California FHA borrowers who might qualify for these refunds should know there are exceptions to this policy for the following transactions and circumstances--including special rules for those who are refinancing with FHA-to-FHA loans.

Assumptions

The FHA official site states, “When an FHA-insured loan is assumed, the insurance remains in force (the seller receives no refund).” The rules say whoever owns the property at the time the insurance is terminated is “entitled to any refund”.

FHA to FHA Refinances

When borrowers refinancing their California FHA home loan with another FHA loan, “the refund from the old premium may be applied toward the up-front premium required for the new loan.”

Claims

FHA loan rules say borrowers who default on their FHA home loan aren’t eligible for a refund. From the official site: “When a mortgage company submits a claim to HUD for insurance benefits, no refund is due the homeowner.”

Statute of Limitations

There is no refund for certain types of refund or “distributive share” payments associated with an FHA insurance refund that, “remains unclaimed 6 years from the date notification was first sent to the last known address of the mortgagor.”

Other Considerations

FHA loan rules say any FHA-insured loans with a closing date before to January 1, 2001, and endorsed before December 8, 2004, have no refunds due, “after the end of the seventh year of insurance.”

Additionally,  “For any FHA-insured loans closed on or after January 1, 2001 and endorsed before December 8, 2004, no refund is due the homeowner after the fifth year of insurance. For FHA-insured loans endorsed on or after December 8, 2004, no refund is due the homeowner unless they refinanced to a new FHA-insured loan, and no refund is due these homeowners after the third year of insurance.”

For more information on these refunds, contact the FHA/HUD at (800) 697-6967.

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