I know what your thinking... My BOFA lender told me I qualified for a refund... and if i went FHA, I could even use that to offset some fees i'd have to pay.... and then there was the paperwork BOFA mailed me telling me I qualified for a refund for my initial pre-paid upfront MIP because the loan was less than 5 years old...
You can easily see why I believed good old HUD owed me a dime or two... but in fact, I do not qualify because they changed the law... back in 2004 and BOFA apparently will not agree to stop sending their outdated "fact sheet" out "automatically" to individuals that refinance... (and apparently they don't educate their lenders either).
Yup, Big FAIL BOFA... Big fail.
To credit HUD, I received both a phone and email reply back within a day of contacting them... so Kudos for being so quick and efficient, especially coming off that whole "federal government shut down."
I went back and checked HUD's website. Apparently I didn't read far enough down the page, or I would have been clued in that I probably didn't qualify. See, I assumed I'd find the hitch in the "exceptions" they had listed... but no. This is what it said:
Exceptions:Assumptions: When an FHA-insured loan is assumed, the insurance remains in force (the seller receives no refund). The owner(s) of the property at the time the insurance is terminated is entitled to any refund.
Claims: When a mortgage company submits a claim to HUD for insurance benefits, no refund is due the homeowner.
Statute of Limitations: HUD is not liable for a distributive share that remains unclaimed 6 years from the date notification was first sent to the last known address of the mortgagor.
FHA to FHA Refinances: When an FHA loan is refinanced, the refund from the old premium may be applied toward the up-front premium required for the new loan.
So here I am, thinking awesome! I should be good to go... But it was under the section, "How are refunds determined?" where they list the law change.
So I would have needed to go FHA... and I would have needed to do it 6 to 7 months sooner than I did. I think the change is kind of stupid, not because I don't get money now, but because it used to be up to 7 years for a refund.
For any FHA-insured loans with a closing date prior to January 1, 2001, and endorsed before December 8, 2004, no refund is due the homeowner after the end of the seventh year of insurance. 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.
Why 7 years? Because it takes that long for you to get enough equity to have 20% of the property paid off if you just make the regular minimum payments. Plus, they make you pay that monthly MIP insurance for AT LEAST 5 years, regardless of how much equity you do have in your property, before they will eliminate that payment...
So cutting a refund off after 3 years when you have paid to insure your place for 7 years is really bad business if you ask me.
I'm sorry that you were misled. The entire FHA program had lost a lot of money in the last few years due to the high risk of default. The monthly mortgage insurance for FHA loans has about tripled since you bought your property and no longer comes off when you reach 78 or 80% loan to value. It is on there for the life of the loan. I think a better way to look at the upfront and monthly mortgage insurance is that it allowed you to buy the property without having 20% down.
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