www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 July 3, 1996 MORTGAGEE LETTER 96-33 TO: ALL APPROVED MORTGAGEES SUBJECT: Implementation of Single Family Premium Collection Subsystem (SFPCS) Upfront PURPOSE The purpose of this Mortgagee Letter is to advise HUD-approved lenders of the new Single Family Premium Collection Subsystem (SFPCS) Upfront that replaces the A83 One-Time Mortgage Insurance Premium System. DESCRIPTION SFPCS Upfront will strengthen HUD's ability to manage and process single family mortgage insurance premium collections and corrections for the majority of insured single family mortgages. It also will improve data integrity for the Single Family Insurance Program. As part of the SFPCS Upfront development, Mellon's Telecash and HUD Mortgage Premium Connection (HUD-MPC) software and the ECHO Correction software will be modified to provide a link with SFPCS Upfront. In preparation for SFPCS Upfront implementation, the following procedures have already been established: Mandatory Automated Clearing House (ACH) premium and data collection; and Validation of the property address before issuing a Refi Authorization Number to ensure that the correct case is being refinanced. (Reference: Mortgagee Letter 95-49 dated October 19, 1995) SPECIAL PROCESSING CONSIDERATIONS AND EFFECTIVE DATE To avoid errors and late and interest penalties, new versions of Telecash and HUD-MPC MUST be used for all transmissions once SFPCS Upfront is implemented. We anticipate that SFPCS Upfront will be ready to accept transactions with deposit dates on or after October 1, 1996. Blackout Period. To accommodate the change-over to SFPCS Upfront, we anticipate a blackout period beginning 8 p.m., Eastern Time, on September 27, 1996, that may last throughout the weekend (September 28 and 29). During this blackout period neither MIP payments nor corrections can be transmitted. Warehousing Blackout Period. Until the new versions of Telecash and HUD-MPC are utilized, transactions can only be warehoused up to and including September 27, 1996. (Data warehousing is the practice of sending payment transactions that take effect at a future date.) Once the SFPCS Upfront version of Telecash or HUD-MPC is operational, normal data warehousing can be resumed. Telecash users will be alerted via the Telecash Bulletin Board regarding the blackout periods and conversion instructions. Timely Bulletin Board notices will be aired as reminders. In mid-September, HUD-MPC users can expect a new version of HUD-MPC to be available for downloading when their PC connects with Mellon Bank. This new version, when downloaded, will be stored and automatically activated on the conversion date. HUD-MPC will provide instructions for downloading this software. It also will provide the date when the SFPCS Upfront version of HUD-MPC will be activated. On that date, HUD-MPC users will see the new input screens as described in the attachment to this Mortgagee Letter. Although lenders cannot use or view the SFPCS Upfront version until the conversion date, they are encouraged to download the new version as soon as it becomes available to avoid a last minute rush and to lessen the chances of encountering a busy signal when trying to connect to Mellon. ALERT: HUD-MPC users should not key and store transactions into the current version of HUD-MPC if they anticipate transmitting these data after SFPCS Upfront is implemented. The ECHO OTMIP software will be replaced by a new option "Premium Endorsement Report (PER)" in the ECHO software. The upgrade will allow lenders to continue to electronically receive new and duplicate statements and submit correction requests in conjunction with SFPCS Upfront. This software upgrade will be available from ECHO beginning September 1, 1996, but cannot be used until the conversion date. ECHO users will be notified of conversion status via the ECHO Bulletin Board. Lenders also can contact ECHO at 1-800-929-4824, ext. 500. CPU to CPU users will receive written notification directly from HUD regarding the new file layouts to be used with SFPCS Upfront. After September 15, 1996, lenders can contact the ACH Outreach Team at (703) 845-4991 for information updates regarding the blackout periods and conversion. Questions also can be addressed to sf_premiums@hud.gov via the Internet. BENEFITS TO LENDERS Telecash and HUD-MPC will: contain front-end edits to help prevent errors; and calculate interest charges automatically. SFPCS Upfront will: refund overpayments of premiums automatically when a case is endorsed; refund premium payments automatically for cases that remain unendorsed after 18 months; expedite lender refund requests; require less data input by lenders; allow lenders to make corrections electronically on non-monetary data fields without HUD intervention; and provide simplified reports to lenders that contain complete payment history. CONCLUSION An attachment to this Mortgagee Letter describes what implementation of SFPCS Upfront means to lenders. Thank you for your continued support of the FHA Single Family Mortgage Insurance Program. Questions regarding this mortgagee letter may be directed through the Internet to sf_premiums@hud.gov or to the HUD Support Service Center at (703) 235-8117. Sincerely yours, Nicolas P. Retsinas Assistant Secretary for Housing- Federal Housing Commissioner Attachment ATTACHMENT MORTGAGEE LETTER 96-33 What Implementation of SFPCS Upfront Means to Lenders Processing Changes: Depository Transfer Checks (DTC) at Mellon Bank have been discontinued. NOTE: Electronic processing of Upfront Mortgage Insurance Premium (UFMIP) collection was mandated on April 7, 1993. (Last Reference: Mortgagee Letter 94-9 dated Letter 94-9 dated February 28, 1994) The Mortgagee Identification Number algorithm will be validated upon data entry. An invalid combination of numbers will be rejected. Interest charges will be calculated automatically by Telecash and HUD-MPC and will be shown on the screen. Lenders can make corrections to the complete closing date (Month, Day and Year) electronically. Previously, lenders could make corrections only to the day of the month. "Term in Months" and "Percentage of UFMIP Financed" fields have been omitted from the SFPCS Upfront system. Therefore, these fields have been deleted from the input screens. (See tables) The 8 versions of the "Statement of Account" will be replaced with two versions of a Premium Endorsement Report (PER). One version of the PER provides case information and a payment history for payments that contain no errors. The other version includes case information and payment history as well as a descriptive listing of all errors. NOTE: The vehicle for sending the PER will not change. The reply from HUD will continue to be via ECHO/PER or the U.S. Mail. The correction screen will contain an option to request a duplicate PER. (Already available on ECHO) SFPCS Upfront will place a 7-day hold on all transactions involving money. This allows time for the Automated Clearing House (ACH) electronic payment to clear. SFPCS Upfront will generate an automatic refund request to Treasury for erroneous payments that have been on suspense for 7 days for one of 2 reasons: Case Numbers that are invalid or are not associated with the UFMIP program; or Supplemental payments for a case with a different Mortgagee ID than the mortgagee on record in SFPCS Upfront. ATTACHMENT - Page 2 MORTGAGEE LETTER 96-33 Lenders are urged to review the PER and to make all non-monetary corrections within 7 days of original transmission. This will ensure that refunds are not sent in error or sent to the wrong address in cases where the loan has been sold. It also will help prevent late and interest penalties from being assessed. Overpayments of premiums will be refunded automatically at endorsement. Lenders will no longer be required to send a letter for this type of refund. However, a letter will still be required for overpayment refund requests prior to endorsement.* Cases remaining unendorsed after 18 months will be cancelled and premiums will be refunded automatically. Lenders will no longer be required to send a letter requesting this type of refund. However, refund requests for cases unendorsed for less than 18 months will still require a letter.* *REMINDER: It is the lender's responsibility to ensure that these monies are refunded to the homeowner. . . . . . . . . . . . . . . . ECHO CHANGES. . . . . . . . . . . . . . . . ECHO CORRECTION SCREEN FORMAT CHANGES FIELDS ADDED FIELDS DELETED REFI Authorization Number REFI Authorization Issue Date Term of Mortgage Portion of OTMIP Financed Type of Loan Old MIP Paid Old Period of INS Old Term of Mortgage Old Mortgage Amount Earned Premium Factor MIP HUD Earned MIP Refund for Credit Excess Refund Credit NOTE: The existing ECHO OTMIP software must be upgraded to continue to receive PER statements and to electronically submit corrections. Correction screens 1 and 2 will be merged and the system will require less data entry. The "Old Value" column will be renamed "Original." Because there will be only 2 types of PERs, it will no longer be necessary to designate the rejection letter number. For PERs transmitted via ECHO, only the corrected value(s) must be entered after the case number has been selected. The "Original" column automatically will display old values. For PERs that are sent by U.S. Mail, both the corrected value(s) and the Original Case Number must be entered. NOTE: Although the old values will not appear on the ECHO screen, these values need not be entered. ATTACHMENT - Page 3 MORTGAGEE LETTER 96-33 TELECASH FIELD AND HUD-MPC SCREEN FORMAT CHANGES SCREEN FIELDS ADDED FIELDS DELETED*** UpFront New Purchase Payment NONE Mortgage Term in Months Percent of UFMIP Financed UpFront New Purchase Correction Request for Duplicate PER Mortgage Term in Months Percent of UFMIP Financed UpFront Refinance Payments*** Refi Authorization Number Issue Date Refinance Summary: Borrower's Name Old Mortgage Data: Mortgage Term in Months Period of Insurance Old UFMIP for Refund Summary: Computed Old Premium Refund Premium Factor UFMIP Earned by HUD UFMIP Refund for Credit New Mortgage Data: Mortgage Term in Months Percent of UFMIP Financed New UFMIP Summary: UFMIP Refund Credit Excess UFMIP Refund New UFMIP Amount UpFront Refinance Correction Refi Authorization Number Refi Authorization Number Issue Date Request for Duplicate PER Corr Term Mtg Corr % Financed Corr Prem Old Mtg Corr Perd Ins Mos Corr Orig Mtg Amt Corr Premium Factor Corr UFMIP Earned Corr Refund Credit Corr Excess UFMIP UpFront Penalties NONE Mortgage Term in Months Percent of UFMIP Financed *** An Upfront Refinance Payment transaction requires significantly less input of old FHA case data because the property address was validated when the new case and refi authorization numbers were issued. SFPCS Upfront validates these data elements in the Single Family Insurance System (A43). If valid, SFPCS Upfront applies the entire amount of the refinance credit available from the Old FHA Case to the New FHA Case. HUD will refund any excess to the homeowner after the new case is endorsed. NOTE: None of the changes identified will affect how the UFMIP is calculated.