HUD's Mortgage Insurance Premium Collection Process

Information by State  Print version   Upfront premium Periodic (monthly) premium   Table of Contents   • Background •  Payment Processing Time •  No Check Re-presentments •  HUD's Web-based FHA Connection Premium Collection Applications •  Upfront Premiums •  Monthly (Periodic) Premiums   • Batch (CPU to CPU) Payment Processing   •  File Transfer Process   •  Plans for B2G (Business to Government) Payment Processing   •  Cash Flow Account Setup   •  Prenote Process   •  Security   •  Questions and Comments

FHA mortgage insurance premium payments are submitted directly to HUD and collected by the U.S. Department of the Treasury's Pay.gov collection service.

Pay.gov was developed to meet the commitment of the United States federal government and the U.S. Department of the Treasury's Financial Management Service to process collections electronically using Internet technologies. Pay.gov satisfies the demands of agencies and consumers for electronic alternatives by providing the ability to complete forms, make payments, and submit queries 24 hours a day electronically. Launched in October 2000, Pay.gov is a secure government-wide collection portal. The application is Web-based, allowing customers to access their accounts from any computer with Internet access. Pay.gov provides a suite of services allowing users to make payments to federal agencies in an efficient and timely manner. Additional information on Pay.gov is available at www.pay.gov.

HUD's mortgage insurance premium collection processes were modified to comply with the U.S. Department of the Treasury's mandate to discontinue the use of outside lockbox services and switch to the Treasury's Pay.gov collection service. Beginning October 1, 2007, payments are collected directly by HUD and processed using Pay.gov.

Payment Processing Time

All payments (online or batch) that are fully received by 8:00 p.m. ET on a business day are included in the processing for that business day. All times specified in this document are in Eastern Time (ET). Any payment transaction received after 8:00 p.m. or received on a non-business day will be accepted but held for processing until the next business day. Lenders are encouraged to process payments early to avoid penalties as a result of transmission problems.

No Check Re-presentments

Payments are not re-presented for collection due to insufficient funds. If HUD fails to collect payments the first time, the payment shows a "Failed" status.

HUD's Web-based FHA Connection Premium Collection Applications

Two secure Web-based applications, Upfront and Periodic, are hosted on HUD's FHA Connection Web portal. These applications provide numerous Lender advantages including the ability to make payments from any computer with Internet connectivity and the real-time validation of the entered case data against FHA's database (thereby minimizing data entry errors). Registered FHA Connection users can access these new screens if they are authorized by their FHA Connection Application Coordinator.

Upfront Premiums

Currently, Lenders can make Upfront MIP payments via HUD's FHA Connection website or transmit batch files to HUD, CPU to CPU. On the FHA Connection, the case numbers, closing/disbursement dates, and payment amounts are entered by the Lender and submitted. HUD uses the cash flow account information provided by the lender (described below under Account Setup) to process these payments. In addition, Lenders can perform case corrections on the FHA Connection or through batch file transmissions.

HUD plans to provide Lenders (via the FHA Connection) with a list of all nonendorsed cases that require an Upfront MIP payment and any payments HUD received for the cases. Lenders can choose to pay one or more of the cases on the list or manually enter cases that are not found on the list. For refinance cases, the approximate refinance credit amount available on the old FHA case is provided.

Periodic (Monthly) Premiums

The FHA Connection pages for HUD's Single Family Premium Periodic collections allow a Lender to pay on a case by entering a case number and the payment amount. Also, a Lender with 3,000 or less cases in its portfolio, can get a list of its billed cases and make a payment based on the current Periodic bill. The Lender can choose the cases to pay on and the amount to be paid. In addition, Lenders have the ability to save any work in progress (entering new cases, modifying payment information, and choosing cases to pay on) before submitting a payment. The list of cases remains available until the next billing period when it is replaced with a new list of billed cases. However, a late fee is assessed for payments submitted after the 10th day of the month in which payment is due.

A Lender with over 3,000 cases in its portfolio is not provided with a list of billed cases for payment on the FHA Connection. However, it can transmit a batch file with payment information to HUD, CPU to CPU. Lenders can also manually enter cases for payment on the FHA Connection whether or not a list of cases is provided.

The monthly Billing report file can be used by a Lender to determine the breakdown of premium, late, and interest charges for cases in its portfolio.

Currently, future-dated Periodic payments (warehousing) are not accepted. HUD plans to include the warehousing facility in a future phase.

Batch (CPU to CPU) Payment Processing

HUD encourages Lenders with greater than 3,000 cases in their portfolio to use the CPU to CPU batch file transmission method of submitting their Upfront or Periodic payment information.

Lenders that transmitted files to Mellon Bank or PNC Bank are now required to transmit them directly to HUD. Those Lenders that transmitted Upfront and/or Periodic files to Mellon Bank have little or no changes to their file formats. Lenders that used the PNC Bank interface to transmit Upfront premium information are required to contact HUD for information on the file structure for transmitting the payment information.

HUD uses a secure file transfer protocol over the Internet to receive the files from its lending partners. All Lenders are required to initiate the file transfers and place the premium payment files on HUD's servers. See Upfront Mortgage Insurance Premium Batch Processing Instructions for CPU to CPU Transmissions and Periodic Mortgage Insurance Premium Batch Processing Instructions for CPU to CPU Transmissions.

HUD does not support other methods of file transfer, including Network Data Mover (NDM) or telephone modem-based connectivity. However, HUD will work with Lenders and service bureaus to use the existing infrastructure to transmit their files if they have existing connections into HUD using Frame Relay circuits or VPN connections.

File Transfer Process

As a part of the batch file transfer process, the Lender is required to submit a premium payment file followed by a zero byte "completion" file to indicate the end of transmission.

HUD runs an hourly process at five minutes past the hour to pick up the files and process them for collection. An email notification is sent to the lender or service bureau when a payment is received by HUD or there is a problem with a payment (see email notification for Upfront or Periodic premium).

HUD can process more than one batch file transmission from a Lender per day. Lenders have several options for handling duplicate files submitted the same day and within the past ten (10) business days.

Lenders can transmit files on a holiday. However, these files are not processed until the next business day. The cut off time for receiving a file is 8:00 p.m. ET. All transmissions must be fully and completely received by that time. If a transmission starts at 7:59 p.m. and ends after 8:00 p.m., it is considered as the next day's payment and is recorded as received for processing the next business day.

Plans for B2G (Business to Government) Payment Processing

HUD plans to create a B2G service by moving to the industry standard XML-based B2G interface solution with enhanced capabilities. This will allow direct, real-time communication between the Lender's system and HUD's system for transmitting payment information and receiving acknowledgment or error information. This service will be a standard-based scalable solution that allows for easy enhancements, based on the recommendations of the Mortgage Industry Standards Maintenance Organization's (MISMO) Government Working Group, with backward compatibility to minimize disruptions to the Lender community.

Cash Flow Account Setup

In order to use the new premium payment process, all Lenders must provide their cash flow account information designating which bank account will be used to withdraw funds for Upfront premium payments and which bank account will be used to withdraw funds for monthly Periodic payments.

• Cash Flow Account Setup is on HUD's FHA Connection website. The link to Cash Flow Account Setup is located on the Lender Functions menu (which is accessed via the FHA Connection's main menu). In addition to providing the account information for the two cash flow accounts, Lenders can set up primary and alternate contact information along with their corresponding email IDs. (Note: A group email address may facilitate management of payment communications.) This contact information is used to send out automated emails with information on receipt of the premiums or any other events related to the payment. The Cash Flow Account Setup module of the FHA Connection Guide [PDF] has further instructions.
  
  
• FHA Connection Registration: An employee of a Lender without access to FHA Connection applications, such as Cash Flow Account Setup, must complete a registration form to obtain an FHA Connection user ID. The FHA Connection Registration Procedures module of the FHA Connection Guide [PDF] has further instructions.
  
  
• FHA Connection Authorization: If a Lender's employee has an FHA Connection user ID, the employee is granted authorization to use Cash Flow Account Setup by the Lender's FHA Connection Application Coordinator. This authorization is located in the Lender Approval section of the FHA Connection ID Administration page used by the Application Coordinator.

Prenote Process

As soon as the cash flow account information is set up, HUD initiates a Prenote test to verify the validity of the entered account information and the existence of any block on electronic ACH withdrawals. The test uses a zero-dollar amount transaction. The first payment can be made eight business days after Pay.gov acknowledges receipt of the Prenote transaction, if no errors are reported.

HUD only accepts payments from business checking accounts.

Security

Bank account information provided during the one-time cash flow account setup is encrypted using the Triple DES encryption standard and stored in a database with access limited to authorized support personnel. All bank account data is stored in HUD's databases only. The payment information is transmitted securely to the U.S. Department of the Treasury's Pay.gov system for collection processing. Data security is controlled by HUD's strict Automated Data Processing (ADP) security policies. All HUD technical support personnel are required to undergo background investigation.

FHA Connection security policies are followed for user access to the Cash Flow Account Setup function and the online FHA Connection premium payment functions. FHA Connection Application Coordinators are required to provide other users within their lending institutions access to these functions, if appropriate.

For CPU to CPU batch file transmissions, HUD uses a secure file transfer protocol with 128-bit encryption for the transfer of files. This ensures secure data transfer between the Lender and HUD. Authentication is done using a User ID and a password that is provided to the Lender.

At this time, HUD does not have an implementation date for future phases of this project.

Questions and Comments

Please contact HUD as follows for any questions or comments you may have about its mortgage insurance premium collection process:

• Upfront Premium: SfpaygovUpfront@hud.gov
• Periodic (Monthly) Premium: SfpaygovPeriodic@hud.gov