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

January 19, 1989
Mortgagee Letter 89-6
TO:  ALL APPROVED MORTGAGEES
SUBJECT:  Revision to Mortgagee Letter 88-2, Assumption Policy
 
     On November 7, 1988, the President signed into law the
Stewart B. McKinney Homeless Assistance Amendments Act of 1988
which, in Section 1063 (the amendment), amends the Housing and
Community Development Act of 1987 by changing, from date of
endorsement to date on which the mortgage is executed (closed),
the beginning date used to determine the period during which
assumption of a mortgage is restricted.
 
     Because of the amendment, HUD is revising Mortgagee Letter 88-2 ,
dated February 5, 1988, Implementation of the Housing and Community
Development Act of 1987 - Single Family Provisions, as follows.
Page 3, paragraph 2, under New Assumption Policy, is changed to read,
"For all mortgages originated pursuant to application signed by
borrowers on or after December 1, 1986, HUD now requires a review
of the creditworthiness of each person that seeks to assume an FHA-
insured mortgage:  (1) during the first 12 months after execution
of the mortgage if the original mortgagor was an owner-occupant, or
(2) during the first 24 months after execution of the mortgage if
the original mortgagor was an investor."
 
     Reference to "date on which the mortgage is endorsed" also
appears in Mortgagee Letter 88-2 , page 4, the "new provision"
paragraph; and on page 5, paragraph 5, under Notice to Homeowners
Considering Sale by Assumption.  All such references must be changed
to "date on which the mortgage is executed."  Also, the last three
sentences of page 4 are deleted.
 
     The assumption provision for the mortgage now must read as
 
follows:
 
          The mortgagee shall, with the prior approval of the Federal
          Housing Commissioner, or his designee, declare all sums
          secured by this mortgage to be immediately due and payable
          if all or a part of the property is sold or otherwise
          transferred (other than by devise, descent or operation of
          law) by the mortgagor, pursuant to a
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          contract of sale executed not later than 12 months after
          the date on which the mortgage is executed, to a purchaser
          whose credit has not been approved in accordance with the
          requirements of the Commissioner.   If the property is not
          the principal or secondary residence of the mortgagor, "24
          months" must be substituted for "12 months."
 
     In a few instances, HUD had already revised its mortgage forms
to include all assumption provisions required by ML 88-2 .  These
forms, which either are now available or should be available in the
near future are:
          Form Number                 State
           92171M-1                Pennsylvania
           92133M-1                Minnesota
           92191M                  West Virginia
           92191M-1                West Virginia
           92101DT                 Arizona
           92127M                  Maryland
           92127M-1                Maryland
 
The printed assumption provision in the above forms must be modified
by replacing the phrase "endorsed for insurance" with "executed."
The modification should be initialed by the mortgagor(s).
 
     The amendment applies to purchasers who take title to property
subject to the mortgage without assuming personal liability for the
debt as well as to those purchasers who assume and agree to pay the
mortgage debt thereby becoming personally liable for it.
 
     Mortgages that contain the assumption provisions required by
Mortgagee Letter 88-2  are adequate to enable this new requirement to
be followed and do not need to be modified since the amendment limits
the ability of HUD to approve acceleration based on violation of the
assumption provisions already in mortgages.
 
     Mortgagees are reminded to submit to HUD Headquarters Form HUD-
92080, Mortgage Record Change, for each assumption.  Instructions on
the form indicate the boxes which must be completed to report a
change of mortgagor.
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     If you have any questions concerning this letter, please contact
your local HUD Office Loan Management Branch.
 
                         Sincerely yours,
                         Thomas T. Demery
                         Assistant Secretary