Premium Pricing

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Lenders are cautioned regarding the use of premium financing on a consistent basis with an actual or implied promise for refinancing at a lower rate. Premium rate financing must be disclosed on the HUD-1 Settlement Statement and the Good Faith Estimate (GFE). The HUD-1 Settlement Statement and GFE must specifically itemize charges being paid on the borrower's behalf; disclosing only a lump sum is not acceptable. Premium pricing is to be used for MORTGAGE FINANCING, closing costs and/or prepaid items only. It cannot to be used for payment of debts, collection accounts, escrow shortages, missed mortgage payments, judgments, etc. It need not be included or considered as part of the 6% seller contribution limit. If there are remaining funds due the borrower from a premium pricing agreement they must be applied to the principal balance of the loan.

Please see: HUD Handbook 4155.1, REV-5, CHG-1, Paragraph 1-9j