If you’ve ever taken out an FHA loan, you may be eligible for a refund on that costly upfront mortgage insurance premium.
Sure, the FHA is struggling at the moment and no longer so liberal about doling out refunds on newly originated loans, but they’ve still got over $400 million in their coffers from uncollected refunds from years past.
Are You Eligible for a Refund?
The rules vary widely, but if you obtained your FHA loan after September 1st, 1983, paid an upfront mortgage insurance at closing, and did not default on mortgage payments, you should have received a refund for any unused portion of the premium that you paid upfront.
Additionally, you might even be eligible for a “distributive share” of excess earnings from the FHA’s Mutual Mortgage Insurance Fund if your loan was originated before September 1st, 1983, paid for more than seven years, and FHA insurance was terminated before November 5th, 1990.
However, many people move and/or don’t realize a refund is actually due, or throw away the notice, and that explains why millions of dollars remain unclaimed.
There are exceptions to the rules as well. For one, if the FHA loan is assumed the insurance stays in place and the seller receives no refund. The owner of the property would be entitled to any refund once the insurance is eventually terminated.
If a claim is submitted to HUD by the mortgage lender, the homeowner is also not eligible for a refund.
And HUD takes no responsibility for refunds related to the distributive share if they remain unclaimed six years from the date notification was originally sent to the last known address of the mortgage holder.
How to Get the FHA Premium Refund
Typically, the mortgage company should notify HUD when your mortgage insurance is terminated and paperwork soon follows.
But if you know you’ve had an FHA loan at some point in the past 30 or so years (and didn’t get any refund info), you can go to the HUD website and search their database by last name or FHA case number.
I did a search for the last name “Robertson” and the system spit out 365 results. Some of these people are literally owed thousands of dollars, whether they realize it or not.
Assuming your name is on HUD’s list, you can call 1-800-697-6967 to get your refund processed. You’re actually urged to call either way if you think a refund might be due, even if your name is absent from the list.
Also note that HUD has enlisted a company by the name of Immediate System Resources, Inc. to search for homeowners who are owed money.
They did so to improve outreach and to prevent third-party companies unaffiliated with HUD from profiting via “finders fees.”
If someone contacts you from a random company offering to help you collect your FHA refund, there’s no need to work with them.
They will simply take a portion of your refund for a disproportionate amount of work. Do it yourself and get the full amount of the refund.
Does the FHA Still Offer Refunds?
The rules are a lot different today than they used to be. If your FHA loan was endorsed on or after December 8th, 2004, no refund is due unless you do a rate and term refinance into another FHA loan and do so within three years.
The amount of the refund is prorated and decreases during those 36 months (as seen in image above), and is applied toward the upfront mortgage insurance premium on the new FHA loan.
For FHA loans closed on or after January 1st, 2001 and endorsed before December 8th, 2004, borrowers are eligible for a partial refund if they refinanced or paid off their loan within five years from the date of closing.
For FHA loans with a closing date prior to January 1st, 2001 and endorsed before December 8th, 2004, partial refunds are available to those who paid off their FHA loans within seven years from the date of closing.
It’s all pretty convoluted, so it’s probably best to just search for your name on the HUD website to see if they owe you thousands of dollars.