CHAPTER 7. PAYMENT OF MORTGAGE INSURANCE PREMIUMS
7-1 PURPOSE. This chapter explains the procedures for the loan servicer
to follow in remitting and accounting for the necessary mortgage
insurance premiums (MIP). The following procedures apply to the
servicer of record, which may also be the holder of the mortgage, but
may be a loan-servicer designated by the holder. HUD will maintain a
record of both parties but will allow only one servicer to perform the
remittance procedures. The MIP remittance procedures will involve the
use of an interactive automated system that the loan-servicer will
access with a personal computer. The system will allow for the
collection of information concerning the mortgage such as
disbursements, payments, and loan balance, in addition to the payment
of MIP.
7-2 PROCESSING REQUIREMENTS. HUD will utilize an agent to collect the
initial and monthly MIP, and any necessary mortgage information. The
information collection will be accomplished by electronic transmission
and the MIP will be collected by means of a Pre-Authorized Debit (PAD)
from the lender's bank.
A.The lender must obtain a personal computer (PC), printer, modem,
and telecommunication software which are compatible with the
agent's equipment.
1)The equipment will be used to authorize payment of the MIP
and transmit information about the mortgage.
2)The agent will provide each lender and loan-servicer with
complete instructions for gaining access to the system, and
for use of the MIP collection and accounting system.
B.MIP payments will be made through Automated Clearing House (ACH)
debit transactions, from one account per lender, based on data
transmitted from the lender's computer.
C.In order to establish an PAD account and authorize HUD to debit
the account, the lender must follow the instructions in Appendix
23.
7-3 TYPES OF MORTGAGE INSURANCE PREMIUMS. The MIP will be paid in two
different forms:
A.Initial MIP. At closing, the lender must remit a non-refundable
premium equal to two percent (2%) of the maximum claim amount.
HUD cannot endorse the mortgage if this premium is not paid.
B.Monthly MIP. Every month for the life of the mortgage, the
lender must remit a premium equal to one-twelfth (1/12) of the
annual rate of one-half of one percent (.5%) of the outstanding
balance.
The lender will add these payments to the borrower's outstanding
balance when the payments are made to HUD. The borrower, however, may
choose to pay the initial MIP in cash.
7-4 INITIAL MORTGAGE INSURANCE PREMIUM.
A.After closing, the lender will remit the required premium (2% of
the maximum claim amount) and add the amount to the borrower's
outstanding balance, if it was not paid by the borrower in cash.
1)When the automated MIP collection and accounting system is
accessed, the lender must enter information on the displayed
screen concerning the characteristics of the mortgage at
closing, including information about the borrower's payment
plan.
2)The initial MIP required for endorsement will be displayed
on the screen after the loan information is entered. The
lender will approve the ACH transaction to withdraw the
displayed amount when the information is transmitted.
B.Using the information transmitted by the lender, the agent will
complete the ACH debit transaction, withdrawing the required
amount from the lender's account.
C.The ACH withdrawal will take place the first bank business day
following the day that the information was transmitted. This
date is the received date, and will be the basis for determining
the timeliness of the payment.
D.The lender should keep a printout of each transaction as a
permanent record.
E.The lender must ensure that the information transmitted is
accurate. Errors in transmission will delay endorsement and
establish an incorrect account.
F.A verification of payment of the initial MIP will be available on
CHUMS.
7-5INFORMATION COLLECTION. The agent will maintain a record of both
endorsed cases, and those cases which are pending endorsement.
A.The initial information on record will be obtained from CHUMS,
when the initial MIP is remitted. Information will also be
obtained whenever changes in the payment plan occur. Information
can be entered or corrected daily.
B.Any information transmitted by the lender will be edited for
errors in the following data:
1) Ten digit mortgagee identification number (verify approval).
2) Ten digit FHA case number (verify as a HECM case).
3)Closing date (verify that it is earlier than MIP payment
date).
This information will be edited before transmission by the
lender. The transaction will be placed in a suspense file and
will require correction before the mortgage can be endorsed.
C.To prevent the possibility of incurring a late charge because of
a rejected transaction, the lender should enter the case data as
soon as possible after closing to allow time to make any
necessary corrections.
7-6 STATEMENT OF ACCOUNT. After receipt of the initial MIP, the HUD agent
will send the lender a Statement of Account (SOA).
A.The statement will include information relevant to the
endorsement of the mortgage, e.g. FHA case number, closing date
(see Paragraph 6-8), borrower name and property address, in
addition to information concerning the MIP transaction, e.g. the
amount of initial MIP remitted, the maximum claim amount, the age
of the youngest borrower, the initial mortgage interest rate and
the principal limit.
B.If the payment is on time and the information is verified by the
programmed edits, a statement indicating the maximum claim amount
that may be insured and stating "MIP PAID ENDORSE LOAN" will be
sent to the lender.
C.The lender must include the statement in the closing package sent
to the local HUD Office (see Paragraph 611F.).
7-7MONTHLY MORTGAGE INSURANCE PREMIUM. All HECM loans are insured
retroactively from the date of closing, so the monthly mortgage
insurance premium will begin to accrue on the outstanding balance from
the day after the expiration of the three-day rescission period. Any
delays in endorsing the mortgage will not relieve the lender of MIP
remittance requirements. The monthly MIP is remitted to HUD using the
same procedures as with the initial MIP. The lender must use the same
PAD account for the monthly transactions. The lender can only use
this method for remitting the MIP for reverse mortgages. If a
mortgage is rejected for insurance, a refund of any premium paid will
be processed by the Department.
A.Calculating the monthly MIP payment. The payment will be
calculated based on the daily outstanding balance of the loan.
An annual rate of .5% of the outstanding balance will be applied
to the daily outstanding balance to determine the correct
payment.
1)Assignment Insurance Option. If the lender has chosen this
option at closing, it must remit 1/12 of the annual rate
each month.
2)Shared Premium Insurance Option. If the lender has chosen
this option at closing, it will retain a percentage of the
monthly amount. The percentages are listed in the factor
table of Appendix 20.
B.Monthly Information Collection. Each month, the lender should
enter information on the mortgage, if necessary, including any
unscheduled payments, and the required MIP will be calculated
based on this information. The following information must be
entered as it becomes available, or by the last day of the month:
1) Recalculations of the borrower's monthly payments.
2)Unscheduled payments to the borrower, including payments
from a line of credit, and dates that the payments were
made.
3)Payments made on behalf of the borrower, including payments
for taxes and insurance, and dates that the payments were
made.
4)Any prepayment of the outstanding principal balance, and the
dates that the payments were made.
5)Changes to the interest rate on the regular change date.
C.Servicer and Holder Changes. Any changes in the holder or
servicer of the mortgage must be reported as soon as they are
made. The selling lender will notify HUD of these changes
through the automated system and by submitting Form HUD 92080 to
the Insurance Operations Division in HUD Headquarters. The
acquiring lender must establish an PAD account with HUD if it is
not already servicing reverse mortgages (see Appendix 23).
D.Remitting the MIP.
1)The MIP is due on the first business day of the month, but
must be received by the tenth day of the month to avoid a
late charge.
2)The lender must be sure to enter information about each
month's mortgage activity by the end of the last business
day of the month.
3)Notice of the monthly MIP due will be available on the
automated system on the first of the month, in order that
the lender may place sufficient funds in the PAD account
before the account is debited.
4)The automated system will automatically debit the lender's
ACH account before the tenth of the month for the correct
MIP amount.
E.The amount of any monthly MIP payments are added to the
borrower's outstanding balance when the lender makes the payments
to HUD.
F.The lender will have the capability of reviewing the complete
history of each mortgage for reconciliation purposes.
7-8LATE CHARGES. A late charge equal to 4 percent of the initial or
monthly MIP remitted will be assessed whenever payment of the MIP is
not received in full on the required date. The correct information
must have been transmitted and the ACH transaction must have occurred
for the payment to be considered received in full.
A.Initial MIP. Payments received more than 15 calendar days after
the closing date will be subject to late charges. Non-payment of
a late charge will result in delaying endorsement.
B.Monthly MIP. Payments received after the tenth of the month will
be subject to late charges.
The lender must ensure that payment is made earlier if the required
dates fall on holidays or weekends.
The automated system will compute the late charge due and will not
allow the lender to remit the MIP without including the late charge.
The lender can not add the amount of any late charge to the borrower's
outstanding balance.
7-9INTEREST CHARGES. Interest will be charged on all late payments at a
percentage rate set in accordance with the Treasury Fiscal
Requirements Manual.
A.Initial MIP. Interest will be assessed on payments received more
than 30 days after closing. The interest charge on the unpaid
initial fee is calculated on a dally basis from the closing date
until the payment is received in full.
B.Monthly MIP. Interest will be assessed on payments received more
than thirty days after the due date.
Interest will be computed on the amount of the late payment, exclusive
of the late charge. The automated system will compute the required
interest and will not allow the lender to remit any MIP payments
without including the interest. Non-payment of the interest on the
initial MIP will result in delaying endorsement.
7-10DELINQUENCY NOTICES. First notices for MIP, late charges and
interest will be sent to the lender and HUD as they become due.
The notice will show the amount due for each month. The agent
will keep a cumulative listing of MIP, late charges and interest
due and provide a monthly report to HUD showing balances due.
7-11APPEALING LATE CHARGES AND INTEREST. The lender may submit a
written request to the agent appealing a paid late charge or
interest payment.
A.The agent will forward appeals to HUD's Insurance Operations
Division for disposition. HUD retains the exclusive rights to
waive these charges.
B.The result of the appeal will either be a refund of the payments
or a denial of the appeal.
7-12ACCESS TO MORTGAGE INFORMATION. The agent will maintain
endorsement records of all reverse mortgages.
A.The lender will have access to the system records for loans under
its mortgagee identification number. The lender will be able to
correct certain information on these records throughout the life
of the loan.
B.The agent will periodically send to each lender a listing of
cases that have not been insured. The lender is required to give
a current status on each case.
7-13 REFUNDS. The MIP may be refunded under certain circumstances.
A.Circumstances requiring a refund:
1) The lender remitted too much money.
2)The mortgage was never endorsed, AND is not eligible for
endorsement.
3) An appeal of late charges and/or interest was approved.
4) An erroneous closing date was entered and later corrected.
In the absence of at least one of these sets of circumstances, no
portion of the initial MIP may be refunded, notwithstanding the
fact that the loan may be paid off in a relatively short period
of time.
B.The lender must submit a request for a refund to the agent,
stating the amount of refund requested, the reason for the
request and to whom the refund is to be paid. This request may
be accomplished through the message facility of the automated
system.
C.The agent will forward requests for refunds to HUD's Insurance
Operations Division for disposition. HUD retains the exclusive
rights to approve refunds.
D.If the refund is approved, the agent will credit the lender's PAD
account with the amount of the refund or a Treasury check will be
issued, depending on:
1) the recipient of the check, and
2) the amount.
7-14 TERMINATION OF INSURANCE CONTRACT.
A.Termination of the insurance contract will occur upon receipt of
notification from the servicing lender of the following
circumstances:
1) The mortgage is paid in full.
2)A third party sale, foreclosure, or a deed in lieu of
foreclosure, and the lender will not file a claim.
3)Voluntary termination jointly requested by the lender and
borrower and approved by HUD.
In these cases, the MIP must be collected to the date preceding
the event terminating the contract of insurance.
If the lender fails to make payments to the borrower as required,
resulting in HUD making payments under the second mortgage, MIP
must be collected through the date the insurance automatically
terminates under the regulations (within 30 days of HUD's demand
for reimbursement, if the lender does not reimburse or assign).
HUD may later reinstate the insurance with reimbursement by the
lender of all payments made by HUD, interest, and any back MIP
and penalties.
B.The lender must notify the agent within fifteen days of the
circumstances described in Sections 1 and 2 of Part A of this
paragraph through the automated system and by submitting Form HUD
27050-A if no claim is filed.
C.Any MIP due will be calculated and collected at the next regular
monthly remittance.
D.The agent will send a written confirmation of the termination to
the lender after assignment.
E.Reinstatement of an insurance contract that was terminated in
error must be requested in writing to the agent. Upon
reinstatement, any back MIP, late charges and interest will be
due, if the termination was not HUD's error.
| HECM Guidelines |
| Home Equity Conversion Mortgages |
The HECM FHA insured reverse mortgage can be used
by senior homeowners age 62 and older to convert the
equity in their home into monthly streams of income
and/or a line of credit to be repaid when they no
longer occupy the home. The loan, commonly known
as HECM, is funded by a lending institution such as a
mortgage lender, bank, credit union or savings and
loan association. To assist the homeowner in making
an informed decision of whether this program meets
their needs, they are required to receive consumer
education and counseling by a HUD-approved HECM
counselor.
by senior homeowners age 62 and older to convert the
equity in their home into monthly streams of income
and/or a line of credit to be repaid when they no
longer occupy the home. The loan, commonly known
as HECM, is funded by a lending institution such as a
mortgage lender, bank, credit union or savings and
loan association. To assist the homeowner in making
an informed decision of whether this program meets
their needs, they are required to receive consumer
education and counseling by a HUD-approved HECM
counselor.
