2007 May 20 | Wheatworks Blog: Financial Matters

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Archive for 20th May 2007

Does HUD Owe You a Refund?

5/20/2007, 10:55 pm

If you have an FHA-insured mortgage loan you probably pay a mortgage insurance premium (AKA by the TLA “MIP”) in addition to your principal, interest, taxes and insurance payment each month. MIP is a premium collected to cover the cost of mortgages that do not get paid off. When an FHA mortgage goes into default, the MIP payments help pay the lender’s costs associated with repossessing the home and then reselling it.

What many don’t know about the MIP on FHA mortgages is that the amount varies. If you acquired an FHA mortgage loan before July of 1991, you will pay a mortgage insurance premium for the term of your loan. However, because it is calculated as a percentage of your remaining debt, it decreases as your principal is paid down.

If your FHA loan was originated after July, 1991 but before 2001, the amount of time you will pay MIP was determined at closing. It was based on the size of the down payment you made.

If you purchased your home with an FHA mortgage in 2001 or later, you must pay MIP for at least the first 5 years. Then, MIP can be dropped when your equity reaches 22% of the value of the home when you bought it.

Finally, here’s something you may have missed: The HUD/FHA’s web site offers you a way to see if you may be owed a refund of MIP insurance on your FHA-insured mortgage. Find out if HUD owes you a refund.

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