ROW Relocation Assistance Manual: Increased Mortgage Interest Differential Payment (MIPD)

Section 9: Increased Mortgage Interest Differential Payment (MIPD)

Overview

An increased mortgage interest payment is the amount that reduces the mortgage balance on a new mortgage to an amount that is amortized with the same monthly payment for principal and interest as that for the mortgage(s) on the displacement dwelling. Payments will also include other debt service costs, if not paid as incidental costs. The following rules apply:

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Compute the payment based on mortgages that were valid liens on the displacement dwelling for at least 180 days before initiation of negotiations.

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Usually, base the payment on the unpaid mortgage balance(s) on the displacement dwelling. However, if the person obtains a smaller mortgage than the mortgage balance(s) computed in the buy-down determination, prorate and reduce the payment accordingly (see sample estimate computation). For a home equity loan, the unpaid balance is that balance which existed 180 days before initiation of negotiations, or the balance on the date of acquisition, whichever is less.

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Base the payment on the shorter remaining term of the existing mortgage or the new mortgage.

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The interest charge on the new mortgage used in determining the amount of the payment shall not exceed the prevailing fixed interest rate for conventional mortgages currently charged by mortgage lending institutions near the replacement dwelling.

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Pay purchaser’s points and loan origination or assumption fees, but not seller’s points, to the extent:
- they are not paid as incidental expenses;
- they do not exceed rates normal to similar real estate transactions in the area; and
- TxDOT determines them to be necessary.

Base the computation of such points and fees on the lesser of the unpaid mortgage balance on the displacement dwelling or the new mortgage amount, whichever is less.

Advise the displaced person of the approximate amount of this payment and the conditions required to receive the payment once the facts about the person’s current (existing) mortgage(s) are known. Make the payment available at or near the time of closing on the replacement dwelling.

NOTE: When the existing mortgage(s) data is available, promptly compute an estimated increased interest payment and offer it to the displacee. Base the estimate on the fixed rate for conventional mortgages, assuming a new mortgage balance is higher than the remaining principal balance on the displacement dwelling.

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-	Old Mortgage	New Mortgage Estimate
Amount	$50,000.00	$50,000.00 plus assumed
Monthly Principal & Interest	$458.22	Unknown
Interest Rate	7% Fixed Rate	Conventional 10%
Remaining Term	174 months	174 months - plus months assumed

A monthly payment of $458.22 at 10% for a period of 174 months will pay off a mortgage of $42,010.50. $50,000.00 minus $42,010.50 equals $7,989.50. $7,989.50 is the estimated increased interest payment.

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Notice of Mortgage Payment Limitations

Explain the following conditions to the displacee:

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the principal balance of the new mortgage must exceed the $50,000.00 remaining principal balance on the displacement;

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the new interest rate must equal or exceed the 10% fixed rate on conventional mortgages used in the estimate; and

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the remaining term of the new mortgage must equal or exceed the 174 months of the existing term left on the displacement dwelling.

If the principal balance of the new mortgage is less than the computed new balance of $42,010.50, reduce and prorate the interest payment as follows:

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$35,000.00 = New mortgage principal balance

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$35,000.00 ($42,010.50 = 0.8331 (prorate factor))

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$7,989.50 (estimated) x 0.8331 = $6,656.05

Also, prorate points and/or origination fees based on the computed new mortgage balance of $42,010.50 by the same 0.8331 factor.

If the new interest rate is actually less than the fixed rate upon which the estimate was based, the payment amount may be reduced. If the remaining term on the new mortgage is less than the remaining term used to compute the estimate, the payment may be reduced.