Does the FHA Owe You a Refund?

May 14, 2009

At one time, the FHA was approved to offer refunds on Upfront Mortgage Insurance premiums under certain circumstances. In 2005 President George Bush signed legislation which included putting an end to these refunds, including mortgages with insurance starting on or after December 8, 2004. Naturally there are exceptions for those who got loans with Upfront Mortgage Insurance prior to that date--FHA loan holders may be entitled to a refund if:

• The FHA loan started after 1 September 1983 and before December 8, 2004
• The borrower paid an upfront mortgage insurance premium as part of closing on the house
• The borrower did not default on FHA mortgage payments

FHA mortgage holders who have loans dated after December 8, 2004 are still entitled to a refund of their Upfront Mortgage Insurance premiums if they refinance to another mortgage insured by the FHA.

Why is it important to know about FHA refund policies? Many homeowners have received e-mails or regular mail solicitations about such refunds. Have you gotten messages claiming you are owed a large refund by the FHA? Third-party companies that solicit you in this way may claim you are only entitled to your refund if you refinance your home or if you pay the third party company a fee to "track down" or "trace" your FHA refund.

Fortunately, these claims are NOT TRUE. You don't need third-party assistance to determine whether you are owed an FHA refund or not. You can call the Department of Housing and Urban Development to learn more about your eligibility for an FHA mortgage insurance premium refund by dialing 1-800-697-6967. The Department of Housing and Urban Development and the FHA do not sponsor or endorse third-party refund assistance programs.

The FHA warns consumers that there is no need to pay for help getting refund money from the FHA. In fact, in some cases it may be more advantageous not to take a direct payment of this refund. As stated before, that FHA-to-FHA refinances allow you to transfer FHA refund money to pay for the upfront mortgage insurance premium on FHA refinancing--a good way you can offset the up front costs of an FHA loan. But you need to determine whether you're eligible for the refund or not. Contact HUD to learn more--be sure to have your closing date and other pertinent information handy to properly track your FHA loan.