History of FHA
During the Great Depression the banking system failed causing a drastic decrease in home loans and ownership. At that time, most home mortgages were short-term (three to five years) with no amortization or balloon payments. The banking crisis of the 1930’s forced all lenders to retrieve due mortgages. Refinancing was not available and many borrowers, now unemployed, were unable to make mortgage payments. Consequently, many homes were foreclosed causing the housing market to plummet. Banks collected the loan collateral (foreclosed homes), but the low property values resulted in a relative lack of assets. Because there was little faith in the backing of the U.S. government, few loans were issued and few new homes were purchased.
In 1934 the federal banking system was restructured. The National Housing Act of 1934 was passed and the Federal Housing Administration was created. Its intent was to regulate the rate of interest and the terms of mortgages that it insured. These new lending practices increased the number of people who could afford a down payment on a house and monthly payments on a mortgage, thereby also increasing the size of the market for single-family homes.
In 1965, the Federal Housing Administration became part of the Department of Housing and Urban Development (HUD). It operates solely from its own income and comes at no cost to taxpayers. This department spurs economic growth in the form of increased home ownership and community development.
During the Great Depression the banking system failed causing a drastic decrease in home loans and ownership. At that time, most home mortgages were short-term (three to five years) with no amortization or balloon payments. The banking crisis of the 1930’s forced all lenders to retrieve due mortgages. Refinancing was not available and many borrowers, now unemployed, were unable to make mortgage payments. Consequently, many homes were foreclosed causing the housing market to plummet. Banks collected the loan collateral (foreclosed homes), but the low property values resulted in a relative lack of assets. Because there was little faith in the backing of the U.S. government, few loans were issued and few new homes were purchased.
In 1934 the federal banking system was restructured. The National Housing Act of 1934 was passed and the Federal Housing Administration was created. Its intent was to regulate the rate of interest and the terms of mortgages that it insured. These new lending practices increased the number of people who could afford a down payment on a house and monthly payments on a mortgage, thereby also increasing the size of the market for single-family homes.
In 1965, the Federal Housing Administration became part of the Department of Housing and Urban Development (HUD). It operates solely from its own income and comes at no cost to taxpayers. This department spurs economic growth in the form of increased home ownership and community development.
FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Each year the FHA estimates the number of defaults it will likely experience and based on this prediction, it sets the insurance premium rate that home buyers pay on the mortgage.
Prior to 1983, the insurance was paid in monthly installments and is referred to as Mutual Mortgage Insurance or MMI. If fewer defaults occur than predicted, borrowers shared the remaining funds in the form of Mutual Mortgage Insurance Distributive Shares.
In 1983, a policy was introduced by which the insurance was paid in full at the closing. This policy is known as a one time Mortgage Insurance Premium or MIP. Anyone that buys a home through a HUD/FHA mortgage pays a Mortgage Insurance Premium to guarantee payment to the lender. If the loan is refinanced, sold, paid off early or in good faith a refund is due back to the borrower for the unused portion of the MIP they paid. As an example, the MIP for an FHA 30-yr fixed mortgage in the amount of $150,000 was equal to as much as 2.25% of the loan or $3,750.00.
FHA Today
The FHA insures millions of single family home mortgages. The Federal Housing Administration is the only government agency that is completely self-funded. Currently new budget numbers are now projecting "windfall revenues" for FHA due to the collapse of the sub-prime mortgage market and a flood of new loans being originated with FHA.
What does this mean to you?
More and more homes will be financed with FHA loans creating even more unclaimed MIP refunds. We’ve already seen the unclaimed refunds grow from $70 million in 1986 to over $500 million today. History shows us that this is the right time to get into the business of helping people get the money that is due back to them for their MIP refunds.
In 1983, a policy was introduced by which the insurance was paid in full at the closing. This policy is known as a one time Mortgage Insurance Premium or MIP. Anyone that buys a home through a HUD/FHA mortgage pays a Mortgage Insurance Premium to guarantee payment to the lender. If the loan is refinanced, sold, paid off early or in good faith a refund is due back to the borrower for the unused portion of the MIP they paid. As an example, the MIP for an FHA 30-yr fixed mortgage in the amount of $150,000 was equal to as much as 2.25% of the loan or $3,750.00.
FHA Today
The FHA insures millions of single family home mortgages. The Federal Housing Administration is the only government agency that is completely self-funded. Currently new budget numbers are now projecting "windfall revenues" for FHA due to the collapse of the sub-prime mortgage market and a flood of new loans being originated with FHA.
What does this mean to you?
More and more homes will be financed with FHA loans creating even more unclaimed MIP refunds. We’ve already seen the unclaimed refunds grow from $70 million in 1986 to over $500 million today. History shows us that this is the right time to get into the business of helping people get the money that is due back to them for their MIP refunds.
Nationwide Consumer Information Service
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