By Ed Brock
The federal government owes Rita Horton and her husband more than $800, and they aren't the only ones owed money.
Homeowners who have or had a loan insured by the Department of Housing and Urban Development Federal Housing Administration may be owed a refund and not know it. But not only are those homeowners missing out on money that is rightfully theirs, they, like the Hortons, are being targeted by "tracers," individuals or companies that want them to pay for what they can receive for free.
"It's maybe not quite ethical, but it's legal," said John Chin who oversees the distribution of the FHA refunds from the HUD offices in Washington, D.C.
The FHA insures certain mortgages and in the event the homeowner goes into default on the loan the FHA pays the lender. Chin said that under certain circumstances, such as paying off the FHA-insured loan in five years, the homeowner could be owed a refund on the remaining amount of the up-front premium they pay when they get their loan.
But often the government cannot locate people who are owed a refund because they have moved, and because several years have passed since the people were told about the possibility of a refund they forget that one might be owed to them. Nationwide there are more than 340,000 people who have a refund coming to them but have not been found.
If the FHA can't find the homeowner after two years the person's name becomes public information and is put on a list that is available on the Internet. That list is available at www.hud.gov by going to the "At Your Service" section.
Or, interested parties can call 1-800-697-6967.
"Anybody can call that number, including the tracers," Chin said.
And that's the problem. Tracers obtain the names of people on the list, track them down and offer to obtain the refunds for them but require 15 to 20 percent of the money as a fee.
That business began in the 1980s when the original tracers went to court to win the right to access the information, Chin said. Rita Horton said they found out about the refunds in the 1990s and received a spate of letters from tracers from all over the country seeking to "help" her get the money.
"They really weren't going to do more than we'd already done," Horton said.
The letters stopped for a while but recently started coming again, Horton said. Of course, they tried on their own to collect the $832.78 they are owed, but they encountered another roadblock.
The bureaucracy she encountered when she called the FHA number.
"I don't think that they had a clear understanding of what they needed and they weren't very flexible," Horton said.
They went back and forth for a while, Horton said, but the FHA required paperwork they no longer had immediately available.
"It was like a three to four-month process and we just gave up," Horton said.
The process has recently been streamlined some, said Linda Allen, spokeswoman for the local HUD office in Atlanta. HUD/FHA also recently hired a company to more actively seek out the people on the list to get them started on the process of collecting their refunds.
Horton said she plans to try again.
Refund seekers will need an application that HUD/FHA will send to them once they call the number, a copy from the mortgage lender showing the mortgage to be paid in full and the deed to the house, Allen said.
"Of course if you've had a name change or a death you have to prove you own the house," Allen said.
And as for the letters from tracers, Allen and Chin said to throw those in the trash.
"That's just some private individual trying to make money," Allen said.