Business Overview of HUD's Collection of Single Family Monthly Mortgage Insurance Premiums
This business overview includes the following topics: Background, Monthly Billing, Payments, Business Cycle, and Accessing HUD's Report Files.
On October 1, 1999, the Federal Housing Administration (FHA) implemented the Single Family Premium Collection Subsystem-Periodic (SFPCS Periodic or SFPCS-P) to track the collection and payment of monthly (periodic) premiums for Risk-based and Section 530 loans. The bill for payments due October 1, 1999, was available on September 20, 1999. Payments due October 1, 1999 were made to SFPCS Periodic at the case level.
With the implementation of SFPCS Periodic, all single family monthly premium calculations must be consistent with the formula in the Mortgagee Letter 98-22 Attachment.
On October 1, 2007, HUD began using the U.S. Department of the Treasury's automated collection service for the collection of monthly mortgage insurance premium payments. It replaced the Mellon Bank and PNC Bank collection services.
Public Law 111-229 was enacted August 11, 2010 giving the Secretary of HUD greater flexibility with respect to the amount of mortgage insurance premiums charged. See the FHA Single Family Housing Policy Handbook 4000.1, Appendix 1.0 Mortgage Insurance Premiums [PDF] for the annual and upfront MIP rates currently in effect.
HUD provides monthly bills to lenders for both Risk-based and Section 530 cases. Electronic bills are available to lenders by the 17th of each month (please see Accessing HUD's Report Files). Accessing the billing information is optional. You may use your own systems to generate the amount owed on each case. However, HUD recommends cross-checking your initial calculations against HUD's generated bill for several months to ensure that the two are in agreement.
HUD provides case-level billing information for both Risk-based and Section 530 cases.
Billing information includes any premium, late, and/or interest charges due through the billing period. The current premium amount is the premium due on the case for the month in which the bill is generated. For example, if a bill is generated on June 15, 2007, the premium shown on that bill is for the month of June and will be due July 1. Interest and late charges are generated based on past due premiums of prior months.
Case information available on the first of the bill month is used for billing. Changes to the monthly mortgage insurance premium due to a change in the original loan information (mortgage amount, loan-to-value ratio, etc.), or case status (active, terminated, claim terminated) after the first of the month are reflected in the next month's bill. Example: Correction to mortgage amount from lender processed by HUD on January 3. Change in premium amount and adjustment to past premium would be reflected in the February bill available February 17.
Servicer transfers triggered by SFPCS Periodic payments are processed throughout the month. The servicer on record in SFPCS Periodic at the time of billing receives the bill for the case.
Premiums are based on HUD's calculation. Previously, HUD allowed lenders to choose from three different premium calculations for Risk-based loans. The current process uses a standard calculation for all loans.
Advance Notices of premium change for anniversary date are provided for both Section 530 and Risk-based cases. The monthly premium can be calculated by dividing the annual premium by 12 and rounding to nearest cent.
NOTE: The make-up premium due in the month preceding the anniversary date for those cases not equally divisible by 12 has been eliminated. Payments consist of 12 equal installments.
A late charge of four percent of the monthly premium is assessed on any premium not received by the 10th day of the month in which it is due. If the 10th day of the month occurs on a weekend or holiday, payment must be received before 8:00 p.m. ET on the last business day prior to the 10th day of the month to avoid a late charge.
Cases that have not been endorsed for FHA insurance are not billed. However, monthly mortgage insurance payments must start on the first day of the month following the beginning of loan amortization.
Remittance of Payments: Remittances must include case-level payment data for both Risk-based and Section 530 cases, including FHA case number and payment amount with an optional field for the loan number (can be used for MERS MIN). Lenders do not need to specify the program code (Risk-based or Section 530), billing period, or payment distribution (i.e., late charge, interest, premium). Payment is due the first day of the month following the billing month (with a ten-day grace period). Therefore, for a June bill, payment is due July 1. If the payment is received after July 10, a late charge is assessed.
If the payment was received by HUD on or before 8 p.m. ET, the received date is the same date the payment was sent. If the payment transaction was received after 8 p.m., the received date is the next business day.
If the lender's account has insufficient funds at the time of payment, the payment is given a status of Failed. HUD does not re-present the payment for collection again the next business day.
At this time, payments cannot be warehoused but this feature will be available at a later date.
U.S. Department of the Treasury's Automated Collection Service: The Financial Management Services (FMS) (now the Bureau of the Fiscal Service)of U.S. Department of the Treasury mandated that HUD convert to their automated collection system, effective October 1, 2007. It is a secure government-wide collection portal that processes payments electronically (electronic funds transfer or EFT) through the Automated Clearing House (ACH) using a checking account debit. The Federal Reserve Bank of Cleveland, which maintains the system, is used for the ACH debit. See also HUD's Single Family Mortgage Insurance Premium Collection Process.
All SFPCS Periodic premium payments are sent electronically through the Internet using the FHA Connection or through CPU to CPU batch file transmissions, depending on the size of the lender's portfolio. See Getting Started - Monthly (Periodic) Premium Payments for details.
Application of Payments:
The expected remittance per case is the amount billed - there is no "tolerance" amount. Any unpaid amount is included on the next month's bill, and a discrepancy is itemized on the reconciliation file.
HUD applies payments to amounts due on the case in accordance with the U.S. Department of the Treasury's regulations governing payments of debts. When a payment is received, it is first applied to late charges, then interest, and then premiums.
Overpayments are automatically applied to the next month's billing charges, unless a refund is requested.
The following contains approximations on when business events occur during any given month.
||Billing available to lenders.|
Reconciliation file available to lenders.
Lenders should resolve items from their Reconciliation file.
|Payments are due. |
|End of the grace period for payments.|
Advance Notices available.
Accessing HUD's Report Files
Billing, Reconciliation, Lender Notification, Portfolio, Advance Notices, Refund Transactions, and Reallocation Transactions report files are available to lenders on the Internet. These files can be viewed on the Internet or downloaded via the FHA Connection (see Mortgagee Letter 98-13). Lenders also have the option of using the Alternate Report Retrieval process (secure file transfer process) instead of the FHA Connection for retrieving report files.
Reconciliation report files are generated following billing. These files show charges generated from the current month's billing cycle, but a case is not considered unreconciled if only the premium assessed in the current month is owed. A list of the "unreconciled" categories and the instructions for action needed on each is provided at Reconciliation Discrepancy Types.
At any point during the month a lender may obtain its Lender Notification and Portfolio (Audit) report files. The Advance Notices, Billing, and Reconciliation files are generated automatically and remain available for three months on the FHA Connection. The Refund Transactions and Reallocation Transactions report files are cumulative and are updated weekly (available every Monday). On the second day of the month, the complete Refund Transactions and Reallocation Transactions report files for the prior month are available.
File Descriptions/Layouts: The report file layouts show the format of the information that is provided. The "Picture" column shows the COBOL definition of these fields.
X = Alphanumeric
9 = Numeric
V = Decimal Point (these are not transmitted)
For the date fields, the following additional formatting information is included:
YYYY = Year (i.e. 1998)
MM = Month
DD = Day
For the time fields, the following additional formatting information is included:
HH = Hour
MM = Minute
SS = Second
For lenders with a small portfolio, the information can be displayed via the Internet. For lenders with a larger portfolio, it would be impractical to browse through the files on the Internet. These lenders should download the files and format a report as desired or use the file as input to their internal processing.
For lenders utilizing service bureaus or software providers, please check with that organization regarding their planned processing for these files.
Using a Service Bureau