Questions and Answers for THDA Borrowers
Can I drop the escrow from my monthly payment and pay my own tax and insurance bills?
If I pay off my THDA loan early, do I have to pay a prepayment penalty?
The name on my THDA loan account is not accurate. How can I get it changed?
I am going to sell my home. Can the buyer take over my THDA loan payments?
I am selling my home. How can I find out how much recapture tax I owe? Do I pay that tax at closing?
Can I cancel the PMI insurance on my THDA conventional loan?
Can I cancel the monthly FHA insurance premium on my FHA loan?
1. The day after I purchased my home, the plumbing began making a funny sound when the water was turned on. Should I call the seller or the real estate agent?
Soon after you buy a car, the dealer may agree to certain repairs. After you buy an item of clothing, the store may agree to refund your money or exchange the garment. Buying a home is not the same. When you sign the closing papers, your new home’s care and maintenance becomes your responsibility. If you buy a new home from a builder, check to see if you have a one-year builder’s warranty. It may cover certain items.
The best way to minimize problems of this type is to obtain a professional home inspection and have all identified problems resolved with the seller before you schedule your loan closing. Recommend to your home-shopping friends that the best money they can spend is for a professional home inspection before they buy.
2. Can I drop the escrow from my monthly payment and pay my own tax and insurance bills?
No. All THDA monthly loan payments must include escrow funds for property taxes, homeowners insurance, and other necessary amounts, such as flood insurance, FHA insurance or PMI insurance, as applicable. There are no exceptions.
3. Where should I send my monthly house payments?
The authorized company to which you send your monthly THDA loan payment is referred to as your "servicer." THDA only services a very small number of loans, therefore, chances are best that your THDA loan is serviced by one of seven authorized private companies. THDA servicers accept payments from borrowers and forward the money to THDA. Servicers also maintain escrow accounts for borrowers' taxes, hazard insurance and other items as necessary. THDA borrowers are informed of where to send their monthly payments when they purchase their home and sign their new loan documents. Occasionally, it is necessary for loan servicing to be transferred from one THDA servicer to another THDA servicer. In that case, borrowers will be provided with instructions in ample time.
4. If I pay off my THDA loan early, do I have to pay a prepayment penalty?
You may pay extra amounts toward your THDA loan balance or pay your loan in full at any time without penalty. If you intend to pay an extra amount to reduce your loan balance, contact your loan servicer for instructions. You will need to clearly indicate your intentions when you send the additional money to them. Some loan types, like FHA or VA, may have rules concerning the timing of prepayments or a minimum amount the loan servicer may accept.
5. The name on my THDA loan account is not accurate. How can I get it changed?
There are certain circumstances under which the name(s) on a THDA loan record may be changed. The most typical reasons are changes related to divorce, death of a borrower, marriage of a borrower or inheritance of the home. The following information lists what you must provide to change a loan record. In all cases, provide copies of documentation, not originals, to your servicer.
Divorce. Provide a copy of the Divorce Decree and a copy of the Final Decree to the servicer. Both documents must be copied after the presiding judge has signed them.
Death of a borrower. Provide a copy of the death certificate to the servicer. If the death involves one of two or more original borrowers, the deceased person’s name may be removed and the surviving borrower’s name(s) will remain.
In the case of only one original borrower, if the home passes to one or more persons by virtue of a will, provide a copy of the will. If there is no will, we may change the name on the account to "The Estate of [the deceased]". One or more of the persons who inherit the property must occupy the home as their principal residence and must make application through the loan servicer to assume the loan.
Marriage. If you have married and wish to change your surname on your loan record, provide a written request and a copy of your marriage license to your servicer. If a new spouse wishes to have their name added to the loan record, they must make application through the servicer and be approved by THDA.
6. I am going to sell my home. Can the buyer take over my THDA loan payments?
Taking over ("assuming") a person’s monthly THDA loan payments may be allowed under certain circumstances. The buyer must contact the servicer of the loan and make application to assume the loan. The buyer’s application must be approved before you finalize ("close") the sale of your home. If a THDA borrower sells their home and allows the buyer to take over the monthly payments, and the buyer was not approved to assume the loan, in most cases THDA may require the loan to be paid in full.
The buyer’s application must be approved according to the rules of the loan insurer or guarantor (FHA, VA, PMI or RD). In addition, the buyer must qualify under THDA household income and acquisition cost limits. In addition, a first-time homebuyer rule applies, except in targeted areas.
If your loan was originally closed after January 1, 1991, see the section regarding federal recapture tax.
7. I am selling my home. How can I find out how much recapture tax I owe? Do I pay that tax at closing?
Whether or not you owe a recapture tax cannot be determined prior to selling your home. You do not pay recapture tax when your sale is closed. You must file IRS Form 8828 with your next federal income tax return and pay any recapture tax you owe at that time. Use the recapture disclosure provided to you at or soon after closing (when you bought your home) to determine if you owe a recapture tax. See additional information concerning federal recapture elsewhere on this web site.
8. I cannot find my recapture disclosure that I was given when I bought my house. How can I get another one?
Send us a request. Please be sure to clearly indicate your name and property address. We will check to see if your loan is subject to federal recapture tax. If it is not, we will inform you. If it is, we will send a new disclosure to you within 24 hours (excluding weekends and holidays). If you want the disclosure faxed to you, please indicate the fax telephone number in your message.
9. My homeowners insurance company sent a storm damage claim check to me. The check is made payable to THDA and me. How can I cash this check so I can pay for repairs to my home? Am I supposed to send the check to THDA?
Do not send the check to THDA. Contact your servicer for instructions. THDA servicers are authorized to endorse checks on behalf of THDA. If the damage to your home is minor, the servicer may be able to endorse the check and return it to you. If the damage to your home is significant, the servicer will deposit the check into a temporary holding account and disburse the funds as repairs are completed.
10. The State of Tennessee is offering to pay for a portion of my yard in order to widen the highway in front of my house. Can they do this? If I take the money, do I have to pay my loan in full? Can I keep the money?
There are laws concerning the rights of states and local governments to acquire land for improvements for the public good. Consult an attorney for details. When the state, a county or a city needs to acquire land to widen a road, install utilities or improve drainage, they will offer a sum of money as compensation to the property owner. The government entity will send a Partial Release of Lien through the servicer to THDA. You do not have to pay your loan in full. The government will issue a check made payable to you and THDA. Endorse the check and send it to your servicer. The funds will be applied to delinquent payments, if any, and then according to the language contained in your deed of trust.
11. Can I sell or give a 10-foot strip of land from the side of my yard to my neighbor? Is this OK? What happens to the money he will pay me?
Before you invest time and money, check with your local planning and zoning authorities. You may have to provide a new plat of your property for approval and recording. Also, check with your loan servicer. An appraisal may be required. After you have taken those steps, provide the following items to your servicer:
- A written explanation of the proposed transaction.
- A survey of the property from a licensed surveyor or civil engineer, showing the property on which we have a lien, and the portion of the property you propose to sell or give. The property to be released must be described in metes and bounds, as well as in a fraction of an acre.
- A copy of the contract for sale of the land. If the land will be a gift, include this fact in your written explanation.
- A Partial Release of Lien which describes the land to be released, ready for our execution and notarization. You may want your attorney to prepare this document.
Depending on the type of loan you have, the servicer will submit your request to FHA, VA, PMI or RD. If approved by your loan insurer or guarantor, the servicer will forward the information to THDA for final consideration. THDA has the option to approve or reject your request at their sole discretion.
If your request is approved by THDA, and it is a monetary transaction, the money will be applied to delinquent payments, if any, and then according to the language contained in your deed of trust.
12. Can I rent or vacate my house?
The earliest THDA loans did not have rental or vacancy restrictions; however, the vast majority of THDA loans require borrowers to occupy their home as their primary residence until the THDA loan is paid in full. If you refinance or otherwise pay your THDA loan in full, THDA will then have no interest in whether or not you rent or vacate your home.
IRS regulations permit THDA to grant permission for a home to be temporarily rented or vacated in the case of job transfer or military reassignment, in order to allow time for the home to be sold. Situations such as a short-term stay in a nursing home or rehabilitation facility, or temporary military assignment, may also be considered. IRS regulations provide that THDA borrowers who rent their home for more than 12 months cannot deduct mortgage interest paid on their federal income tax return. This rule is retroactive to the date rental began.
If any of these circumstances apply to you, ask your servicer to send you a Request for Temporary Permission to Rent or Vacate Residence form. Complete the borrower portion of the form and return it to your servicer. The servicer will forward the form to THDA for a decision. THDA is under no obligation to approve rental requests. If approved, the maximum period of time you may be allowed to rent your home is 12 months.
13. Can I cancel the PMI insurance on my THDA conventional loan?
This answer is condensed, and may not contain all details regarding PMI cancellation.
For conventional loans, Private Mortgage Insurance (PMI) protects the lender against loss in the event a loan must be foreclosed. PMI makes it possible for persons to buy homes with small down payments. The rules for PMI cancellation depend on when your loan was originally closed.
If your loan closed before July 29, 1999, PMI coverage must remain in place either until you pay your loan balance down to 75% of the original purchase price or original appraised value (which ever one is smaller), or until a new appraisal is provided that indicates your loan balance is less than 75% of the new appraised value. If you elect to obtain a new appraisal, contact your servicer for names of acceptable licensed appraisers in your area and instructions on how to proceed. You must pay for the appraisal. Regardless of the new appraised value, we are not obligated to cancel your PMI coverage if you have a slow payment history.
If your loan closed on or after July 29, 1999, current law provides that you may request PMI cancellation when you pay your loan balance down to 80% of the original purchase price or original appraised value (whichever one is less); however, THDA is not permitted to cancel PMI coverage if the loan-to-value is more than 78%.
When you pay your loan balance down to 78% of the original purchase price or appraisal, whichever is less, your PMI may be cancelled automatically if your payments are current. If your PMI is not otherwise cancelled by the time you reach the midpoint in your amortization schedule (i.e., 15th year of a 30 year loan), it will be automatically cancelled.
Contact your servicer or send a message to THDA if you have additional questions. Since 1999, loan servicers have been sending PMI cancellation information to each conventional PMI borrower annually.
14. Can I cancel the monthly FHA insurance premium on my FHA loan?
It cannot be cancelled.
15. I recently sold my home and paid off my THDA/FHA loan. Am I due a refund of the Mortgage Insurance Premium I paid to FHA when I closed my loan?
Information regarding FHA Mortgage Insurance Premium refunds is available on the web at http://www.hud.gov/faqs/faqrefund.cfm.
16. Does THDA have foreclosed houses for sale, or do you have a list of foreclosed properties you can send to me?
No. When THDA becomes the owner of a property through foreclosure, the company that serviced the loan arranges for the sale of the property with a local real estate firm. Unlike FHA and other entities, THDA does not keep or provide a list of properties for sale. If you find a home for sale, and discover that THDA is the seller, contact the real estate agent who has the property listed.
17. How do I obtain a Mortgage Credit Certificate (MCC)?
If MCCs were issued in Tennessee, THDA would be the agency charged with that responsibility. THDA has never issued MCCs and does not plan to do so in the future. Many people encounter this subject for the first time when reading their Federal income tax filing instructions. If you are a citizen of Tennessee, this topic does not apply when filling out your return.
