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l. Mortgage Insurance Termination (03/31/2022)
i. Definition
A Mortgage Insurance Termination is the ending of FHA Single Family mortgage insurance at which time the Mortgagee’s obligation to remit MIP to HUD ends. Upon termination, the Borrower and Mortgagee will enjoy only those rights, if any, to which they would be entitled under the National Housing Act if the insurance contract terminated as a result of the insured Mortgage being paid in full.
ii. Standard
(A) Termination of Mortgage Insurance
HUD terminates the FHA insurance contract as follows:
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III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
1. Servicing of FHA-Insured Mortgages
• automatically when the Mortgage reaches maturity; or
• when the Mortgagee reports a termination code, such as:
o prepayment (Borrower paid the Mortgage in full before the maturity date);
o use of Home Disposition Option or non-conveyance foreclosure (the
Property was acquired by a Mortgagee or third party at a foreclosure sale or was redeemed after foreclosure and no insurance claim or Claims Without Conveyance of Title (CWCOT) will be submitted to HUD);
o conveyance for insurance benefits; or
o voluntary termination (both the Mortgagee and Borrower agreed to
voluntarily terminate FHA insurance).
The Mortgagee must report termination of a case to HUD via FHAC, B2G, or EDI within 15 Days of the actual event.
(B) Voluntary Termination of Mortgage Insurance
(1) Definition
A Voluntary Termination of Mortgage Insurance is when the Secretary, upon the mutual request of the Borrower and Mortgagee, terminates the FHA insurance contract associated with the Mortgage.
(2) Standard
The Borrower and the Mortgagee may agree to voluntarily terminate FHA mortgage insurance in accordance with Section 229 of the National Housing Act (12 U.S.C. § 1715(t)). A voluntary termination has the same effect on the Borrower and Mortgagee as a termination for payment in full.
(a) Borrower’s Consent to Voluntary Termination
The Mortgagee must obtain a signed Borrower’s Consent to Voluntary Termination of FHA Mortgage Insurance from each Borrower on the Mortgage.
(b) Effect of Voluntary Termination on Outstanding Partial Claims
Upon receipt of a Borrower’s request for a voluntary termination, the Mortgagee must advise the Borrower that the Partial Claim promissory Note and Subordinate Mortgage amounts owed by the Borrower will become immediately due and payable upon termination if provided for under the terms of the Borrower’s Partial Claim promissory Note.
(c) Request for Voluntary Termination
To request voluntary termination, the Mortgagee must:
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III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
1. Servicing of FHA-Insured Mortgages
• submit the request for voluntary termination of mortgage insurance in FHAC within 15 Days of receiving the executed Borrower’s Consent form. On the Mortgage Record Changes menu, select Insurance Termination (form HUD-27050-A, Insurance Termination) and select Voluntary Termination (Term Type 21); and
• certify in FHAC that all Borrowers on the Mortgage have signed the consent form.
(C) Effective Date of Termination
(1) Standard
The effective date of termination of the contract of insurance is the last Day of the month in which one of the following occur:
• the date a voluntary termination request is received by the Commissioner;
• the date the Mortgage was prepaid; or
• where the Mortgagee notifies the Commissioner that a claim will not be filed, the date foreclosure proceedings were initiated or the Property was acquired by another party, including the Mortgagee.
(2) Required Documentation
The Mortgagee must note in the Servicing File and report in FHAC, B2G, or EDI:
• the date on which the voluntary termination request is received by the Commissioner;
• the date notice is received by the Commissioner that the Mortgage was prepaid; or
• the date notice is received by the Commissioner that a claim will not be filed, or that the Property will not be conveyed.
For FHA-to-FHA refinances, the Mortgagee processing the new refinance must report the projected and actual Closing Date.
(D) MIP Due until Effective Date of Termination
The Mortgagee is obligated to pay the MIP due until the effective date of termination.
(E) Escrow Balance Returned to Borrower
If no claim for insurance benefits will be filed, the Mortgagee must timely release the funds held in escrow in accordance with federal regulations, including RESPA, after the termination of the FHA-insured Mortgage.
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III. SERVICING AND LOSS MITIGATION A. Title II Insured Housing Programs Forward Mortgages
1. Servicing of FHA-Insured Mortgages