FHA Loan Expert Blog

U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 89-14
TO:  ALL APPROVED MORTGAGEES
ATTENTION:  Servicing Managers (Single Family)
SUBJECT:  Implementation of Deficiency Judgment Activities
 
     The Department of Housing and Urban Development (HUD) published
its Final Rule on deficiency judgments in the Federal Register on
February 16, 1988 (at 53 FR 4384).  The Rule, which appears in the
Code of Federal Regulations at 24 CFR 203.369, went into effect on
March 28, 1988.  It makes it possible for HUD to require that lenders
pursue deficiency judgments, but only in cases where foreclosures
involve mortgages insured pursuant to firm commitments (or direct
endorsement credit worksheets) issued on or after March 28, 1988.
For those mortgages insured pursuant to firm commitments (or direct
endorsement credit worksheets) issued prior to March 28, 1988, the
Department can continue to request that mortgagees diligently pursue
deficiency judgments against selected mortgagors.  Until recently,
HUD was not authorized to reimburse lenders for the full expense of
obtaining deficiency judgments.  That situation has been rectified by
new regulation 24 CFR 203.402(o), which makes the added costs (which
must be reasonable and customary) of pursuing the judgments 100
percent reimbursable.  HUD strongly encourages mortgagees to
cooperate with requests from Field Offices regarding deficiency
judgments.
 
     The Department has already begun requesting or requiring
mortgagees to obtain deficiency judgments in instances where the
mortgagors are non-occupant owners; have previously defaulted on one
or more FHA-insured mortgages resulting in the payment of claim(s);
or are “walkaways,” having abandoned their mortgage payment
obligations despite their apparent continued ability to pay.  This
will continue to occur where the pursuit of deficiency judgments is
consistent with State law.
 
     HUD will be using data collected by the Department that
identifies mortgagors with two or more FHA-insured mortgages, as
well as information from the single family default monitoring
system.  When these reports are combined, they yield listings of FHA
mortgagors who are by definition non-occupant owners and are also in
a default or pending-foreclosure status (or have already experienced
foreclosure) on one or more FHA-insured mortgage loans.  In addition,
mortgagee monitoring staff outstationed from HUD Headquarters, and
loan management staff in many Field Offices around the country, will
pass along information about prospective subjects for deficiency
_____________________________________________________________________
 
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judgments to the staffer responsible for determining which mortgagors
to pursue.  He or she in turn will contact the mortgagees (first by
telephone, then by follow-up letter) to advise them that HUD is
requesting or requiring them to seek deficiency judgments against those
mortgagors who have been selected for such treatment.
 
     Mortgagees, if requested or required by HUD Field Offices to
pursue deficiency judgments against particular mortgagors, will be
instructed to assign all the judgments they obtain to HUD.  (Model
forms facilitating this action will soon be made available by Field
Offices to mortgagees, along with additional instructions.)
Mortgagees are specifically directed not to engage in collection of
deficiency judgments obtained in connection with any FHA-insured
mortgage, effective immediately.  The Department will utilize various
methods to collect once the judgments are assigned, including
conventional means of pursuing the judgment debtors by HUD personnel,
use of private collection agencies and/or judicial proceedings
initiated by the U.S. Department of Justice, salary or administrative
offset (for active or retired Federal and military personnel), and
Internal Revenue Service (IRS) offset of tax refunds.  Some of these
measures may result in additional fees that are chargeable to the
debtor.
 
     If the judgment debt is declared uncollectible, in whole or in
part, by the Federal Government, the amount of the uncollectible
debt will be reported by HUD to the IRS on Form 1099-G.  Mortgagors
who successfully negotiate compromise settlements will also be the
subject of an IRS information return on Form 1099-G for any
indebtedness “forgiven” by the Government under the terms of the
settlement.  Before the Form 1099-G can be filed, however, the debt
amount must be compromised or declared uncollectible by Federal
administrative procedure, or else the applicable Statute of
Limitations on enforcement of the deficiency judgment must have run.
The Department now anticipates that it will have the necessary
procedures in place for Form 1099-G reporting by the second half of
1989.
 
     The procedure of pursuing a specific mortgagor for a deficiency
judgment can begin in two different ways.  As discussed above, HUD
may request or require the mortgagee to take this action based on
data gathered “in-house.”  Alternatively, the mortgagee can initiate
the process by bringing information to the attention of the local HUD
Office indicating that a mortgagor meets the criteria for pursuit of
a deficiency judgment.  The Department encourages lenders to
communicate the details of serious abuses of which they are aware to
the Loan Management Branch Chief at the appropriate HUD Office.
_____________________________________________________________________
 
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Please note that only where pursuit of the deficiency judgment was
requested or required by the Department, or where HUD has approved a
mortgagee’s request for permission to pursue a judgment, will the
expenses connected with this action be reimbursable when the claim is
filed.
 
     Another noteworthy aspect of HUD’s deficiency judgment
initiative is the Department’s use of the Claims Without Conveyance
of Title (CWCOT) procedure to establish the Commissioner’s Adjusted
Fair Market Value (CAFMV), which is the amount the mortgagee will bid
at the foreclosure sale.  It is the CAFMV, or, if a third party bids
higher, the consummated third-party purchase price, that is used to
establish the deficiency judgment amount when it is subtracted from
the mortgagor’s outstanding indebtedness at the time of foreclosure.
(Refer to Mortgagee Letter 87-20 , dated June 23, 1987, for a full
explanation of CWCOT.)
 
     The Department will be widely publicizing its efforts to counter
abuse of the FHA Single Family insurance programs through the
prosecution of deficiency judgments and by the reporting of
uncollectible and/or compromised amounts to the IRS.  It is hoped
that these initiatives, directed toward investors, repeat defaulters
and “walkaways” will act as deterrents against abuse.
 
     HUD will be issuing a separate Mortgagee Letter in the near
future, which provides instructions on how to include deficiency
judgment-related expenses in claims for insurance benefits.
 
     The cooperation of participating mortgagees is crucial to our
success, and the Department appreciates your commitment to help us
accomplish this objective.  Please feel free to call the Single
Family Servicing Division at Headquarters if you have any questions
on this matter, at (202) 755-7330.
 
                                   Sincerely yours,
 
                                   James E. Schoenberger
                                   General Deputy Assistant Secretary
                                     for Housing
_____________________________________________________________________

Skyrocketing growth in loans from the Federal Housing Administration and Ginnie Mae have helped support the mortgage market — but could leave taxpayers on the hook for massive new losses.

FHA-insured loans have more than tripled from 530,000 in fiscal year 2007 to 1.7 million thus far in 2009. The Government National Mortgage Association, which securitizes FHA loans, has boosted its mortgage-related issuance to $287 billion from $85 billion.

Yet during that same period, the FHA’s loan delinquency rate has climbed to 14.4% in Q2 from 12.6% two years earlier.

Adding to the concern, the FHA’s fund to cover losses has dropped to a projected 3% of insured loans. That’s a leverage ratio of 33-to-1, the level banking giant Bear Stearns was at before it failed.

The government’s own watchdogs have rung the alarm that the FHA is increasingly vulnerable to fraud.

“One of the ways to read the FHA growth is that they are coming back to a more historically ordinary presence in the market,” said Alex Pollock, a resident scholar at the American Enterprise Institute and former president of the Federal Home Loan Bank of Chicago. “But they’re having very rapid growth and they have high loan-to-value ratios and one can certainly imagine scenarios where the delinquencies and losses get serious.”

FHA-backed loans have down payments as low as 3.5% — even as many private lenders have returned to 10% or 20%. Higher loan-to-home value ratios tend to have more risk. FHA borrowers often have poor credit ratings.

But FHA’s delinquencies are still far lower than subprime loans, which have nearly doubled in the past two years to 25.4%.

Traditionally, FHA loans have been safer than subprime. Getting an FHA loan has been more cumbersome. Such loans also had various size limits — now loosened — that kept them out of many overheated housing markets that later crashed.

Also, the FHA encourages the banks it works with to help borrowers stay in their homes.

“Historically, a significant number of FHA mortgages cured themselves — borrowers start making the payments down the road,” added Guy Cecala, CEO and publisher of Inside Mortgage Finance Publications.

But Cecala also noted that those tend to reflect better economic conditions than today. Unemployment, a big factor in delinquencies, now stands at 9.4%.

The collapse of the private mortgage market has meant more business for FHA.

Congress has also pushed the FHA to get more involved by authorizing the $300 billion “Hope for Homeowners” program, intended to help struggling homeowners to refinance — even when they are up to 25% underwater on their homes. Such reworked mortgages have an extremely high failure rate. However, FHA says it has not made many “Hope” loans.

Lawmakers also expanded the FHA loan limit from $625,500 to $729,750.

All that may be leading the FHA into riskier territory. And since the agency enjoys the full faith and credit of the U.S. government, the taxpayer would end picking up yet another tab for any future losses.

Also, the torrid growth may be masking the size of FHA’s current delinquencies.

“Those numbers look lower than they would otherwise because the portfolio is growing fast,” warned Pollock. “As a loan portfolio grows fast, the delinquency numbers look better because you’re adding all these new loans that haven’t had time to go bad yet into the denominator.”

Without those new loans, FHA’s Q2 new foreclosure rate of 1.15% would be nearly 1.5%, according to the Mortgage Bankers Association.

Meanwhile, the “surge in FHA loans is likely to overtax the oversight resources of the FHA, making careful and comprehensive lender monitoring more difficult,” said Kenneth Donohue, Inspector General for the Department of Housing and Urban Development, in testimony before Congress in June.

Donohue noted that heavy loan volume makes the FHA “vulnerable to exploitation by fraud schemes.”

The FHA recently suspended Taylor, Bean & Whitaker Mortgage for suspected fraud. The No. 12 U.S. mortgage lender in the first half of 2009, Taylor recently filed for bankruptcy.

The agency itself, in an e-mail response to IBD questions, acknowledged “some pressure on FHA’s operational environment,” but said “system enhancements and process changes” are agency priorities.

FHA also stressed that it historically has been less prone to fraud than similar private lenders, citing its insistence on full documentation from borrowers.

Donohue also worried that surging FHA volume has “collateral implications for (Ginnie Mae’s) integrity.”

That could have serious policy implications for reform of the secondary mortgage market after the collapse of Fannie Mae (FNM) and Freddie Mac (FRE), which will cost taxpayers hundreds of billions of dollars.

The MBA on Wednesday proposed breaking up Freddie and Fannie into smaller, private entities that would issue a government-backed, mortgage-backed security.

This “CG” security “would be conceptually similar to the Ginnie Mae model,” the MBA’s report said. Indeed, it suggested “Ginnie Mae could potentially take on the responsibilities of the CG.”

Cecala notes that defaults on FHA loans can create headaches for Ginnie Mae investors, even though the FHA covers any losses. A default means a Ginnie Mae MBS gets paid early, causing difficulty for those investors who expected the payments to continue for a number of years.

But Cecala added that he was “not aware of Ginnie Mae investors being concerned” so far.

Many FHA but not all FHA lenders, skittish as foreclosure and default rates rise, have discontinued FHA mortgages for borrowers with less-than-perfect credit or little saved for a down payment.

Credit standards for FHA loans, by contrast, are more relaxed. And while many loans now require that borrowers put 20 percent down, FHA loans mandate just 3.5 percent.

Wells Fargo Bank, which has also toughened requirements for government-insured loans that it buys from other lenders, is “continuously reviewing our real estate lending product mix and underwriting practices to ensure they prudently align with marketplace risk,” spokesman Florida mortgages wrote in an e-mail.

The bank is also requiring that brokers provide evidence that borrowers seeking “streamline” FHA refinancings haven’t missed any mortgage payments in the past 12 months, according to its notice.

The default rate for FHA mortgages has spiked to its highest-ever level as government lending continues to see its share of the mortgage market explode. Some experts think the trend will soon force the Department of Housing and Urban Development to tighten up its underwriting standards

The default rate for mortgages recently insured by the Federal Housing Administration has been climbing, an alarming trend for an agency that is playing a vastly expanded role in the mortgage market and backing roughly a quarter of all the loans made last year.

About 4.31 percent of the FHA-insured loans made in the two years ending December 31 were at least 90 days late, according to the most recent update of an FHA database designed to help the agency detect problems with its lenders and programmes. That’s the highest in any two-year period since at least 2005.

On a monthly basis, FHA defaults have been rising since summer, according to the Department of Housing and Urban Development, which includes the FHA. Not all defaults result in foreclosure.

The lacklustre performance comes at a time of increased scrutiny of the FHA by federal policy-makers, some of whom question whether the agency can handle its soaring volume of loans and properly vet the lenders who are making them.

Although the FHA is a government agency, it has been self-sustaining since its creation in 1934, meaning no public money has been used to cover its losses. The mortgage insurance paid by the home owners goes into a fund that provides backing on mortgages made by FHA-approved lenders.

Key Features of the PFS Program

• Establishing Market Value –Mortgagees are reminded to ensure that properties in the PFS program are sold at or near fair market value as established by an independent appraisal, prepared by an appraiser on the FHA Appraisal Roster. 

• Minimum List Price Requirements – Properties offered for sale under the PFS program are to be listed for sale at no less than the “as-is” appraised value as determined by a current FHA appraisal, obtained and reviewed by the mortgagee.

• Negative Equity – The ratio of 63% for the fair market value (FMV) to the outstanding mortgage balance (including unpaid principal and accrued interest) has been updated to address events in the current housing market, and replaced with tiered net sales proceeds.
 
• Tiered Net Proceeds Requirement – This ML incorporates guidelines for varying minimum net sales proceeds based on the length of time a property has been competitively marketed for sale.

• Marketing Documentation – Prior to accepting a discounted offer, evidence of competitive marketing from the selling broker is to be presented and mortgagees are to retain this documentation in the claim review file. 

• Non-owner Occupant Exceptions – Mortgagees are authorized to grant reasonable exceptions to non-occupant mortgagors when documentation indicates a property was not purchased as a rental or used as a rental for more than 18 months, immediately preceding the approval into the PFS program.

• Removal of Repair Limitations –With prior approval from HUD, properties with surchargeable damage (i.e., damage caused by fire, flood, earthquake, hurricane, boiler explosion or mortgagee neglect) may be eligible for the PFS program if funds - sufficient to cover the government’s estimated repair costs - are applied to reduce the outstanding debt when a claim is filed.

• Increase in Funds Available for Discharge of Subordinate Liens – In instances where a mortgagor has made an initial contribution/incentive of $750 or $1,000, the amount that can be used from sales proceeds for the discharge of liens or encumbrances (which represent an impediment to conveyance of marketable title) has been raised from $2,000 to $2,500. 

• Change in Allowable Closing Costs – Subject to the stated ratios, HUD allows up to 1% of the buyer’s mortgage amount for closing costs to be included in the “Seller’s Costs” on the HUD-1 for all transactions that involve a new FHA-insured mortgage. 

FHA has permitted streamline refinances on insured mortgages since the early 1980’s. The “streamline” refers only to the amount of documentation and underwriting that needs to be performed by the lender, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:

• The mortgage to be refinanced must already be FHA insured. 
• The mortgage to be refinanced should be current (not delinquent). 
• The refinance is to result in a lowering of the borrower’s monthly principal and interest payments. 
• No cash may be taken out on mortgages refinanced using the streamline refinance process.

It is important to stress that although loan servicers have delegated authority to execute individual loss mitigation actions, participation in the FHA Loss Mitigation Program is not optional.

• Within 45 days of default, every delinquent borrower must be provided comprehensive written information about workout options, including contact information for HUD-approved housing counseling agencies.
• Each borrower must be evaluated for loss mitigation by the 90th day of default.
• No servicer may initiate foreclosure until their senior management committee has reviewed the loss mitigation analysis and determined that the borrower does not qualify for any option.
• Servicers must offer loss mitigation throughout the foreclosure process any time the borrower requests such consideration or the servicer becomes aware that the borrower’s financial situation may have improved and assistance is now an option.
• And finally, these activities must be reported to FHA monthly and documented in the loan file.

To ensure compliance, FHA has developed a sophisticated tiered ranking system to both monitor and rate each servicer’s commitment to loss mitigation. Top ranked servicers – those who reported some type of loan work action for at least 80 percent of their seriously delinquent loans – are eligible to earn increased incentives. In the most recent round of tier ranking published in January 2008, 89 servicers ranked in Tier One and only five servicers ranked in Tier Four. Servicing lenders that do not take loss mitigation seriously are in jeopardy of paying to FHA a fine equal to triple the cost of their foreclosure claim and can also be held accountable with other sanctions.

Source - HUD Testimony, Laurie Maggiano Deputy Director, Office of Single Family Asset Management, Federal Housing Administration U.S. Department of Housing and Urban Development on April 16, 2008

October 20, 2008
MORTGAGEE LETTER 2008-33
TO:    ALL APPROVED MORTGAGEES
          ALL HUD-APPROVED HOUSING COUNSELING AGENCIES
SUBJECT: Home Equity Conversion Mortgage (HECM) for Purchase Program
 The Housing and Economic Recovery Act of 2008 (HERA) provides HECM mortgagors with the opportunity to purchase a new principal residence with HECM loan proceeds.  Section 2122(a)(9) of HERA amends section 255 of the National Housing Act to authorize the Department of Housing and Urban Development (HUD) to insure HECMs used for the purchase of a 1- to 4-family dwelling unit.   Accordingly, eligible mortgagors now have the opportunity to purchase a principal residence with HECM loan proceeds.  HECM for purchase transactions, for which the FHA case number is assigned on or after January 1, 2009, must satisfy existing program requirements and the provisions of this Mortgagee Letter.

 The Federal Housing Administration (FHA) defines “HECM for Purchase” as a real estate purchase where title to the property is transferred to the HECM mortgagor, which the mortgagor will occupy as a principal residence, and, at the time of closing, the HECM first and second liens will be the only liens against the property.  HECM mortgagors must occupy the property within 60 days from the date of closing.  Lenders are required to ensure all outstanding or unpaid obligations incurred by the prospective mortgagor, in connection with the HECM transaction, are satisfied at closing. 

Eligible Property Types

 Only properties where construction is completed, as defined in Mortgagee Letter 2007-06, are eligible for FHA insurance under the HECM for Purchase program.  Loan proceeds may be used to satisfy outstanding payment obligations associated with a land contract, contract for deed or other similar purchasing arrangements that will ensure the property, which will be used as collateral for the HECM, meets FHA’s title requirements.  Those requirements, as provided in section 255(b)(4) of the National Housing Act and implemented in the HECM regulations at 24 CFR 206.45, provide, in part, that the HECM must be on real estate held in fee simple, or on a leasehold under a lease for not less than 99 years which is renewable, or under a lease having a remaining period of not less than 50 years beyond the date of the 100th birthday of the youngest mortgagor.  
Ineligible Property Types

 The following property types are ineligible for FHA insurance under the HECM for Purchase program:

• Cooperative units; 
• Newly constructed principal residence where a Certificate of Occupancy or its equivalent has not been issued by the appropriate local authority;
• Boarding houses;
• Bed and breakfast establishments;
• Existing manufactured homes built before June 15, 1976; and
• Existing manufactured homes built after June 15, 1976 that fail to conform to the Manufactured Home Construction Safety Standards, as evidenced by affixed certification labels (e.g. data plate and HUD certification label) and/or lack a permanent foundation as required in HUD’s Permanent Foundations for Manufactured Housing Guide.

Property Flipping

Prospective mortgagors should be alert to efforts to coerce them into obtaining a reverse mortgage as part of a purchase contractual obligation, or purchasing a distressed home in need of substantial repairs but being sold at or above market rate.

 As such, HECM lenders must take steps to ensure that: a) only current owners of record may sell properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and c) for resales that occur between 91 and 180 days where the new sales price exceeds 100% of the previous sales price, FHA will require additional documentation validating the property’s value.  Lenders providing HECM financing for purchase transactions must comply with guidance provided in Mortgagee Letter 2006-14.
 
Refinancing and Existing Upfront Mortgage Insurance Premium (MIP)

 The HECM refinance authority is only applicable when the property that serves as collateral for FHA-insurance remains the same.  Therefore, existing HECM mortgagors who participate in a HECM for Purchase transaction are ineligible for a reduction of the upfront MIP and lenders must enter the transaction into FHA Connection as a new HECM.

Monetary Investment

 Consistent with existing policy, the maximum claim amount and principal limit will continue to be calculated in accordance HECM regulations at 24 CFR 206.3, HUD Handbook 4235.1 REV-1, and applicable MLs.  At closing, HECM mortgagors must provide a monetary investment which will be applied to satisfy the difference between the HECM principal limit and the sales price for the property, plus any HECM loan related fees that are not financed or offset by other allowable FHA funding sources.
HECM mortgagors may choose to provide a larger investment amount in order to retain a portion of the available HECM proceeds for future draws.
Required Investment Examples

Example #1 Example #2 Example #3
Appraised Value/MCA*$300,000
Sales price                      $300,000 Appraised Value/MCA*$300,000
Sales price                     $325,000 Appraised Value/MCA*$300,000
Sales price                      $280,000
Principal Limit**           $199,500 Principal Limit**          $199,500 Principal Limit**           $199,500
Minus Loan Fees             $ 15,500 Minus Loan Fees            $  15,500 Minus Loan Fees             $  15,500
Avail. HECM proceeds  $184,000 Avail. HECM proceeds  $184,000 Avail. HECM proceeds   $184,000
Req. Investment              $116,000 Req. Investment              $141,000 Req. Investment                $ 96,000
* Appraised Value/MCA is defined as the maximum claim amount and is used to determine the principal limit which is the lesser of the appraised value or the FHA national mortgage limit.  The principal limit is the maximum amount available to the HECM mortgagor.
** Assumes the age of the youngest HECM mortgagor is 67 and a principal limit factor of .665 for a 5% expected average mortgage interest rate. 

In each example above, loan fees are deducted from the principal limit of the HECM.  However, it is not required that loan fees be deducted from HECM proceeds.  The mortgagor may pay loan fees as part of the required monetary investment and use all HECM proceeds toward the purchase transaction.

Funding Sources

HECM mortgagors must use cash on hand or cash from the sale or liquidation of the mortgagor’s assets for the required monetary investment.
  
Verification of Funding Sources

Lenders will be required to verify the source of all funds prior to closing.  A verification of deposit, along with the most recent bank statement, may be used to verify savings and checking accounts.  If there is a large increase in an account, or the account was opened recently, the lender must obtain a credible explanation of the source of those funds.  Such documentation must be provided in the FHA case binder.  Failure to provide the necessary documentation may result in a notice of rejection and delay of endorsement. 

Gap Financing

 Consistent with existing regulatory requirements at 24 CFR 206.32(a), HECM mortgagors may not obtain a bridge loan (also known as “gap financing”) or engage in other interim financing methods to meet the monetary investment requirement or payment of closing costs needed to complete the purchase transaction.  This restriction includes subordinate liens, personal loans, cash withdrawals from credit cards, seller financing and any other lending commitment that cannot be satisfied at closing. 
 

Gap Financing Example

A prospective HECM mortgagor completes the required reverse mortgage counseling and receives an estimate stating the required monetary investment could be $25,000.  The prospective HECM mortgagor has $20,000 in liquid assets but is short the remaining $5,000.  The prospective HECM mortgagor cannot take $5,000 from a credit card or obtain interim financing in order to deposit the money into their banking account in anticipation of being required to bring this amount to closing.  However, the prospective HECM mortgagor may obtain the $5,000 from an allowable FHA funding source. 

Enhanced Counseling

 HUD-approved housing counseling agencies that have been approved to provide reverse mortgage counseling, must counsel those who anticipate using the HECM for Purchase option on all topics covered in this Mortgagee Letter and other HUD requirements and issuances.

Right of Rescission

 The three-day right of rescission period is not applicable to HECM for Purchase transactions.  Therefore, all initial advances may be disbursed on the day of closing by the settlement agent.  However, FHA encourages lenders to seek their counsel’s opinion to assure compliance with Federal or State laws.

Closing Guidance

 Lenders are required to ensure the property, when used as collateral for the HECM, meets the following property requirements:

• Will serve as the principal residence of the HECM mortgagor.
• Construction is complete and a certificate of occupancy or its equivalent has been issued.
• Any construction loan financing for the property, which will serve as the collateral for the HECM loan, is satisfied and the HECM liens will be in a first and second lien position and, at the time of closing, no other liens against the property exist.

 Consistent with existing lending practices, lenders are responsible for determining whether a particular HECM loan is open or closed-end credit.  In accordance with 24 CFR 206.43, lenders must comply with the regulatory disclosure requirements.

Data Entry

 Instructions on how to enter HECM for Purchase transactions into FHA Connection and Insurance Accounting Collection System will be provided in a separate instruction.
 

Information Collection Requirements

The information collection requirements contained in this Mortgagee Letter were approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).  Approval of HECM Program is covered by OMB control number
2502-0524, with disclosures requirements being covered by OMB control numbers 2502-0265 and 2502-0059.  An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a valid control number.

 If you have questions regarding this Mortgagee Letter, please call FHA’s Resource Center at
1-800-CALL-FHA (1-800-225-5342).  Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

       Sincerely,
       Brian D. Montgomery
       Assistant Secretary for Housing-
          Federal Housing Commissioner