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We are 2 days away from closing/funding the loan,when the mortgage company we are working with ....

said that FHA cancelled our FHA old number (with 1% upfront MI and .50% monthly MI) and now they are trying/requesting that it be reinstated and if not, we will have to apply for a new FHA number and that means 2.25% on upfront MI and 1.0+% on monthly MI.  How true is this story?  Why don't they know that this can happen and that we do not cling to the fund date/closing date? In the morning, the loan processor was asking how we want the funds be delivered, fed ex or reg mail, and late in the afternoon she broke the news that FHA cancelled our old FHA no.  It is very frustrating and my husband and I are thinking just to hold off to the loan processing all-together for awhile.  But please, I need your feedback. Thank you.
  • April 27 2011 - Los Angeles
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Answers (17)

phils, that is exactly the scenario I described. When your loan officer went to start the new refi this time, HUD said there was already a case number open so your loan officer had it transferred. They would not have been allowed to get a new case number based on the premiums as they were last month so the case number they got transferred had the premiums at the time when you first applied. 2.25% UFMIP and .5 annual premium. Unfortunately, as of 4/19 HUD cancelled all case numbers that were over 6 months old and "inactive". The fact that the case number was transferred is of no consequence to them. When I contacted HUD they would not reinstate the previous case number or even allow me to use the premiums from 4/17 before the change. They stated as I posted below:

"Case numbers that were automatically cancelled by FHA systems, including case numbers for condominium units, will not be re-instated unless the lender provides evidence that the subject loan closed prior to cancellation of the case number (such as a HUD-1 Settlement Statement) or provides evidence that not reinstating the case number causes an undue hardship to the borrower that is unrelated to recent changes to premiums and underwriting requirements."

Maybe if enough people complain something could happen, but I'm not holding my breath. This would only affect a limited amount of people who were unlucky enough to be in "the perfect storm". The timing had to be just right, or wrong in this case, for this to happen. 

If you get anywhere with HUD, please come back and post.
  • April 28 2011
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Profile picture for phils46
Thank you all for the information and good advice.  Actually what happened was I applied last year ( cannot remember exactly what month) for an FHA loan but did not get through for some reason that I also do not remember anymore.  And only last month I started working with this other mortgage company which I thought was doing a pretty good job until 2 days before closing, they were telling me that the old FHA no. was cancelled.  They have requested for a reinstatement and basically that's where we at right now.  
  • April 28 2011
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Bk...you mis understood my post. Point being case numbers get transferred all the time. The lender that closes the loan may not have been the one sitting on the loan...simply the lender that stepped in and actually closed the loan.
  • April 28 2011
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Keep in mind that once you have paid your pmi for 5 years and you have developed equity in your home of 20% you can drop the pmi and will be left with the lower interest rate

Sorry, it does not work that way.   
  • April 28 2011
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"I just had one transferred on a 203k loan....I am hoping to have the loan 9 days in total from application to close...case no. Was issued months ago."

Well Andrew, if that case number would have been transferred to you on April 17th, it would have been canceled on April 19th if it was 6 months old and you would not have had a chance to close it at the old premiums. Had you tried to get a new one on April 17th knowing the change was coming, HUD would not have allowed you to do so. This is an oversight from HUD that they readily admit; they have said "it's an unfortunate but rare occurrence".

Unlike what Kellie says, it has nothing to do with knowing about the upcoming changes, it has to do with a HUD policy that did not account for those rare old case numbers that were in fact still in the process of being closed for whatever reason. 

As someone that does many FHA streamlines, I have had many case numbers transferred, usually from companies that had no idea what they were doing and botched it. The OP is not my client, but as I stated, I feel their pain because it just happened to me and I'm still trying to deal with it. 
  • April 28 2011
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This all falls back on the lender for not closing your loan on time.  We were all notified of the impending change and that if we did not close the loans prior to those deadlines they would not make exceptions so there is no way to get around this.  There is no point in holding off as the only thing you do is risk a higher rate.  So my advice is that if there is still benefit wit hthe new lower rate and the increased PMI then I would just finish the transaction, if not then just stick with the loan you already have.  Keep in mind that once you have paid your pmi for 5 years and you have developed equity in your home of 20% you can drop the pmi and will be left with the lower interest rate.  Good Luck.  JB WFHM [hotlink removed by Zillow moderator]
  • April 28 2011
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13 years in the business and have never had to have an FHA case number transferred from another lender...I just had one transferred on a 203k loan....I am hoping to have the loan 9 days in total from application to close...case no. Was issued months ago.
  • April 28 2011
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Justin, have you ever done an FHA loan? 

"I am trying to figure out why there was a transfer, why a 6 month old case number was in existence"

If you don't understand that, then it's not worth the time or effort to explain it to you.
  • April 28 2011
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BKJH,

I certainly understand the back end of this....but I guess I am trying to figure out why there was a transfer, why a 6 month old case number was in existence....I guess I just don't understand why this loan was hanging around for 6 months...if that is actually what occured.
  • April 28 2011
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Wow!

That's really unfortunate. I too experienced something like this last year.  I do hope you were not a contributing factor to that end, as several borrowers (over the past several months) have elected to put their FHA Streamlines on hold, hoping for the lower rates to return. In some cases I have experienced borrowers who started the process with another lender but decided to work with me. So it understandable how this could happen, I had a case number cancel after only 30 days, fortunately it didn't impact for my borrower. I don't understand your current lender didn't warned you about the impending MIP/MMI changes that took place in 04/18/2011. In my mind I am asking myself what didn't you guys close the loan prior to that deadline? But at this point, I guess it doesn't matter as the damage is done. As far as what to do now, my only recommendation is, if you recoup your closing costs in the 24 month, I would close the loan and be done with it. Of course I don't the know whole story, maybe at this point you should look for another who could offer you a lower rate to compensate for the extra month MMI. Please let me know it I can answer any additional questions.

Best of Luck
  • April 28 2011
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"FHA streamline refinances should not take six months to process. It usually takes about two weeks. "

Justin,
Having a case number that is 6 months old does not mean the refi has taken 6 months. There are many reasons a case number could have been opened previously and then transferred to a new lender that got stuck with it. If the new lender got this case number transferred to them the end of March, they would not have been able to get a new case number at the time and were not given enough time to close the old one.

Even if the case number was transferred to the new lender on April 17th, HUD would have cancelled it on April 19th if it was 6 months old. HUD did not give enough thought to this policy. I am far too familiar with this because this exact thing happened to a client of mine.
  • April 28 2011
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FHA streamline refinances should not take six months to process. It usually takes about two weeks. I don't want to throw anyone under the bus here, but it does not sound like full attention has been given to your file. I cannot do a loan for you in California, but I do have referral partners that will take care of you.
  • April 28 2011
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I would suggest still doing the refi as long as you still meet the 5% net benefit under the new guidelines. In your case the 1% UFMIP might work out better, I would not know for sure with all the details. If it's a large loan amount the jump in the MIP is a big difference so it all depends on how much that will increase in dollars. 
  • April 27 2011
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This is actually true. You obviously had an old case number and this is why this is happening. The case number that they canceled was more than 6 months old so on 4/19, HUD canceled all of them that have not closed. It's extremely frustrating and they won't reinstate them either. Here's what HUD says on this:
Case numbers that were automatically cancelled by FHA systems, including case numbers for condominium units, will not be re-instated unless the lender provides evidence that the subject loan closed prior to cancellation of the case number (such as a HUD-1 Settlement Statement) or provides evidence that not reinstating the case number causes an undue hardship to the borrower that is unrelated to recent changes to premiums and underwriting requirements (refer to ML 11-10)
Here is the mortgagee letter (ML 11-10)
HOw do I know all this you ask? Because it happened to me and there is no way around it. Your UFMIP will actually be 1% now instead of 2.25%, but your MIP will increase from the .5 (assuming you are under 95% LTV) to 1.15.
This one is not the fault of your loan officer. HUD did not allow a new case number since an old one existed, then they cancel the one you had after the premiums go up and give you a new one making it impossible for them to ever have received one under the pre 4/18 terms. 
Don't you just love the government?
  • April 27 2011
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Here is the link to the new MI changes,  The up front remains the same at 1.0% only the monthly MI changed.

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-10ml.pdf

Sounds like there is more to the story your lender has not shared. Not sure the monthly was ever .50%?
  • April 27 2011
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Sorry, I should have mentioned we are refinancing not buying.  Hold off means pull our loan application.  Thank you.
  • April 27 2011
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Help us understand this phrase "my husband and I are thinking just to hold off to the loan processing all-together for awhile"     If I interpret correctly, you are prepared to bail on the property you planned to buy?   As you weren't rejected for financing, you don't mind giving up your earnest money?
  • April 27 2011
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