FHA Home Loans have been the “go to” mortgage product for many home buyers in North Carolina for years. Now that so many mortgage programs have tougher underwriting guidelines, we see the FHA Home Loan as a perfect program for may NC First Time Home Buyers. FHA acts as an Insurance Company for the Bank, offering default insurance in the form of FHA PMI to cover the Bank against a loss due to foreclosure.
FHA PMI rates are charged in two “premiums.” They charge an UpFront FHA PMI Premium and an annual FHA PMI Premium. With the FHA PMI Insurance fund being underwater for the past few years with so many claims – there’s been multiple changes to the FHA PMI rates since 2004 – sometimes more than 2 changes a year.
Because most of us don’t keep the “original” mortgage for more than a few years, there were situations where FHA would REFUND part of your Upfront FHA PMI Premium back. That’s changed…
Prior to 2005, FHA /HUD issued refund checks to borrowers who refinanced out of FHA mortgages, and there was “unearned” premiums left from the amount FHA charged up-front for FHA PMI. (So you get a 30 year mortgage, pay in the full 30 years worth of Mortgage Insurance Premium upfront, and you are ready to move or refinance in year 4 – you got something back) But they stopped issuing refund checks on mortgages endorsed for insurance on and after December 8th, 2004.
Since then, borrowers who refinance out of FHA mortgages no longer received MIP/PMI refund checks – it’s just part of doing business with FHA. In reality, because of the number of FHA loans going into default, it’s simply not feasible.
SILVER LINING:
Borrowers who refinance from FHA to FHA, however, do receive a credit for the unearned MIP premium on the existing loan which is applied toward the new MIP premium for the new refinance. So, if you are going from FHA loan to FHA loan on a refinance, there might be some credit issued… but the devil is in the details.
The NEW FHA 2012 STREAMLINE Refinance Program goes into effect on June 12, 2012. Seems like an Arbitrary Date? NOT SO!
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.
They are trying to offer lower refinance rates and better terms to folks who were put into mortgages prior to all of the Anti Predatory Lending went into place, so prior to June 1, 2009 (which by the way is the date they used for the HARP 2.0 Program as well!)! Plus, this way – they don’t have to refund any kind of MIP / PMI premium to borrowers! Pretty cool!
The new FHA Streamline Refinance Program does have a ton of benefits, including a much lower upfront MIP rate – but don’t count on getting a refund to off set any of your closing costs!
Call Steve and Eleanor Thorne 919 649 5058 with any of your qualifying questions! We want to help you get the BEST rates! (and SAVE MONEY!) Answers to Questions about FHA Streamline Refinance Program in 2012
I have a question for you Eleanor, I closed in April, yet was not endorsed until 6/6/09… Is there any way that FHA will make an exception for me to qualify fo the new program. I have a 4.75% and without the deletion of the 1.75% upfront and the new mi, I cannot refi (I have a 680 credit score)…
Thank for your help. Richard
Richard – I wish I could tell you something different… but as we have been told – the deadline is the deadline, and they are not extending the lower PMI rates to folks who endorsed past the cutoff. You have a GREAT mortgage rate though! Our first mortgage was at 13.75%!