First, be wary of mailers saying things like that. They can often be scams. Please use our HUD refund search tool to see if you are owed a refund. If so, you should be able to contact HUD directly by calling or writing them. Then you will not have to pay the fee on any of the money.
The HUD was created to help lower-income families and tenants afford housing. You send in the same application that everyone does when applying for an FHA Loan, however the underwriter sees that the income circumstances are different. It is not always the amount of money that you make that is important, rather, it is whether that income is a steady source of financial support. If you show that you do not have any outstanding debts to pay and that you are able to pay your mortgage based on your income, you should be approved for a loan.
Following your completion of paying off your FHA Loan, your mortgage company must notify HUD of the termination of the FHA mortgage insurance for your loan. Within 45 days, you should receive a check or an application called an HUD-27050-B to ensure that HUD received proof of the termination of the FHA insurance. If you do not receive either in the mail, you need further contact information on closing your FHA Loan.
This is a new program offered by HUD. Please check here for more information on the kiddie condo program.