| The Real Deal on
Government Refunds You may have received
notices from the 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
very 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.
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 for details.
So, do you really need to pay someone else 30% of your
refund just to fill out a simple form? A 30% fee on a $1000 refund is
$300. 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.
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