www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 October 19, 1995 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER MORTGAGEE LETTER 95-49 TO: ALL APPROVED MORTGAGEES SUBJECT: New Procedure for Obtaining Case Numbers and Refinance (REFI) - Authorization Numbers for FHA-to-FHA Refinance Transactions The Department of Housing and Urban Development (HUD) has revised its policy and requirements governing the issuance of Netting Authorization Numbers. Effective October 23, 1995, the procedures for Netting Authorizations in Mortgagee Letter 94-18 and the Up-Front MIP Fact Sheet in Mortgagee Letter 94-25 will be replaced by this Mortgagee Letter. This policy revises the term "Netting Authorizations" to "REFI AUTHORIZATIONS" and requires lenders to obtain a Refi Authorization number for ALL FHA refinance cases regardless of whether an up-front premium was paid on the old case or whether a refund is due the homeowner. This would include mortgages where only a monthly payment is required such as on Condominiums under Section 234. The new requirements ensure that the correct FHA Case is being refinanced, enable FHA-to-FHA refinancing discrepancies to be resolved at the beginning of the new loan origination process, and prevent old cases from being terminated until the payment transaction on the new case has been received. This prevents the homeowner from receiving a refund that was supposed to have been credited to their new loan. A Refi Authorization Number will be ISSUED AT CASE NUMBER ASSIGNMENT ONLY. Lenders who do not use CLAS version 7.0B will receive the Refi Authorization Number and the premium refund calculations when they obtain the new FHA Case Number from the Field Office. For a new FHA Case Number and a Refi Authorization Number combination to be issued, three basic conditions MUST be met: 1. The old FHA Case Number entered via CLAS or CHUMS must exist on the Single Family Insurance System (SFIS) database; 2. The old case must be "active" (not terminated); and 3. The property address entered via CLAS or CHUMS must match the address on the SFIS database. 2 Once a new FHA Case Number and a Refi Authorization Number have been assigned to an old case, additional numbers will not normally be assigned. In the event of such a request, the Field Office will advise the fender that a previous request is pending. Lenders are encouraged to cooperate in transferring case numbers. The Field Offices may at its option authorize another case number and Refi Authorization Number to a property. When a lender fails to receive an FHA Case Number and a Refi Authorization Number, the lender should compare the property address on the old documents with the property address for the loan being refinanced. If the property addresses do not agree, or a mismatch message is received, the HUD Support Service Center can offer assistance at (703) 235-8117. All Refi Authorization Numbers are issued with two months of premium refund credit information. Refi Authorizations expire at the end of the second month. For example, if a Refi Authorization Number is requested for an October 15, 1995 closing date, refund calculations will be provided for October and November. In this example, the Refi Authorization date would expire November 30, 1995. The premium refund credit is calculated as a percentage of the computed premium, i.e., Mortgage Insurance Premium (MIP) required to initially insure the mortgage loan. HUD uses the computed premium, NOT the actually received MIP paid, to calculate the refund credit. If the computed premium does not match MIP paid on form HUD-1, lenders should call the HUD Support Service Center at (703) 235-8117 to verify if a refund is due. If so, the lender can request a refund of over payment by writing: Department of Housing and Urban Development Disbursements Branch ATTN: Refund Voucher Group P.O. Box 44131 Washington, DC 20026-4131 3 As a reminder, the Automated Clearing House (ACH) program became mandatory on April 7, 1993 for the remittance of Up-Front Premiums and became mandatory on July 31, 1995 for the remittance of Periodic Premiums (also referred to as Section 530 premiums and Risk-Based premiums). Also, the periodic lockbox will close during the first quarter of calendar year 1996. Questions regarding this Mortgagee Letter may be directed to the HUD Support Service Center at (703) 235-8117. Sincerely yours, Nicolas P. Retsinas Assistant Secretary for Housing- Federal Housing Commissioner Attachment FHA UFMIP Fact Sheet U.S. Department of Housing and Urban Development What are ECHO and ECHO and MORNET are the names of privately owned MORNET? networks that provide lenders an electronic vehicle to, among other services, request and receive new FHA Case Numbers, appraisal assignments, Mortgage Insurance Certificate (MIC) case statuses, Refi Authorization Numbers, duplicate MICs and duplicate Statements of Account (SOAs). ECHO allows the lender to correct non-monetary data if the SOA has been received through ECHO. To order ECHO or to receive technical assistance with ECHO call United Communications Group at 1-800-929-4824, Ext. 500. To order MORNET or receive technical assistance with MORNET call Fannie Mae at 1-800- 752-6440. In Washington, DC call 202-752-6000. What is ACH? In August 1985, HUD implemented Automated Clearing House (ACH) for the remittance of Up-Front Mortgage Insurance Premiums. ACH is designed to provide FHA approved lenders the opportunity to electronically authorize the payment of premiums, remit the ACH payment transaction and make some corrections to Statements of Account. To implement ACH, contact the ACH Outreach Team at 703-845-4991. Why use ACH? o It is mandatory o Control the timing of premium payment o Eliminate keying errors and make corrections o Avoid lost checks and mail delays o Receive an expedited Statement of Account For additional information refer to Mortgagee Letter 94-9. What is a Refinance A Refi Authorization Number ensures that the (Refi) Authori- correct FHA Case is being refinanced. It will also zation Number? suspend a refund application from being sent to the homeowner on an FHA Case awaiting refinance credit. Refund calculations are provided for the closing month and for the following month. The Refi Authorization expires at the end of the second month. An active Refi Authorization will prevent the homeowner from receiving both a HUD refund AND a credit from the mortgagee. How to get a Refi o Refi Authorization Numbers are ISSUED AT CASE Authorization? NUMBER ASSIGNMENT ONLY. o To extend a Refi Authorization Number, call the HUD Support Service Center at (703) 235- 8117. Revised 10/23/95 How to correct data Call the HUD Support Service Center at (703) discrepancies? 235-8117. What is the new As of January 1, 1994, the refund to the homeowner Refinance Credit or the refinance credit amount is determined by Computation? multiplying the PREMIUM FACTOR by the amount of computed MIP on the old loan. The exact numbers are provided to you with your Refi Authorization. Rounding estimates may result in small differences between the computed old MIP and the actual MIP paid. Use the computed amount provided with your Refi Authorization. The new case endorsement will be delayed if there is a discrepancy between your ACH payment transaction and HUD records. For more information about the changes in premium refund computation, see Mortgagee Letter 93-36. How to request a U.S. Mail: Send a written request with all refund of MIP pertinent information on letterhead to: overpayment? Department of Housing and Urban Development Disbursements Branch ATTN: Refund Voucher Group P.O. Box 44131 Washington, DC 20026-4131 Phone: Call the HUD Support Service Center at 703- 235-8117. How to resolve SOA By ACH: You can correct non-monetary data in ACH and HUD problems? will forward a corrected SOA in 3-5 days. For assistance refer to the ACH User Manual or contact the ACH Outreach Team at 703-845-4991. By ECHO: You can correct non-monetary data errors and receive a corrected SOA in 3-5 days. For assistance refer to the ECHO User Guide. For technical assistance with the software or transmission problems call United Communications Group at 1-800-929-4824, Ext. 500. Currently the feature for changing data in MORNET is not available. NOTE: Monetary and non-monetary data are defined in the ACH user Manual or you may refer to Mortgagee Letter 94-9. Monetary data errors must be corrected by HUD. Send a corrected copy of the SOA to your lender representative at: Department of Housing and Urban Development Single Family Insurance Operations Branch 451 7th Street, SW, Room 2228 Washington, DC 20410 Revised 10/23/95 Please allow 45 days for processing. If you still have not received a corrected SOA call 703-235-8117 and give your lender ID number. Where to get HUD General Public may request copies which will be Handbooks and mailed within 48 hours of receipt of request, by one Mortgagee Letters? of three methods: Telephone: 800-767-7468 toll free Write: U.S. Department of Housing and Urban Development Attention: Printing Branch, Room B-100 451 7th Street, SW Washington, DC 20410 Facsimile: 202-708-2313 Electronically - Mortgagee letters are posted on the ECHO Bulletin Board and can be viewed or printed using the ECHO network. Mortgagee letters are also posted on the HUD Gopher and can be viewed at http://www.hud.gov on the World Wide Web. Revised 10/23/95