www.hudclips.org 


U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

July 14, 1997
 
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
 
MORTGAGEE LETTER 97-27
 
TO:  ALL APPROVED MORTGAGEES
 
SUBJECT:  Single Family Loan Production - Condominiums Added to
          Disaster Relief and Other Policy Issues
 
     This Mortgagee Letter provides information of expansion of
relief for victims of Presidentially-declared disasters, and
addresses several other credit policy issues.  Unless otherwise
indicated, its provisions become effective upon publication.
 
CONDOMINIUM UNITS UNDER SECTION 203(h).  The Emergency
Supplemental Appropriations Act of 1997 added condominium
mortgages insured under Section 234(c) of the National Housing
Act as eligible for homebuyers qualifying under Section 203(h),
housing for disaster victims.  Subject to the requirements of
Sections 203(h), disaster victims may purchase units in approved
condominium projects using FHA mortgage insurance.  "Spot units"
in condominiums are also eligible, subject to the instructions
outlined in Mortgagee Letter 96-41 .
 
SECONDARY FINANCING BY FAMILY MEMBERS.  Mortgagee Letter 96-58 
set forth the terms and conditions by which family members could
provide secondary financing.  At that time, we stated that the
funds lent by the family member could be secured against the
property or remain unsecured; this policy has not changed.
However, if the money lent by the family member is secured
against the subject property, whether borrowed from an acceptable
source or from the family member's own savings, only the family
member provider(s) may be the note holder.  FHA will not approve
any form of securitization of the note that results in any entity
other than the family member being the note holder, whether at
loan settlement or arranged to occur at any time during the
mortgage life cycle.
 
     Further, if the funds that are lent by the family member are
borrowed from an acceptable source, the homebuyer may not be a
co-obligor on that note, e.g, the son and daughter-in-law may not
be co-obligors on the note used to secure money borrowed by the
parents that in turn was lent for the downpayment.
     Please also note that the definition of family member as
stated in the mortgagee letter was set forth in the law itself
and cannot be waived by FHA or by mortgage lenders.
 
"IMPORTANT NOTICE TO HOMEBUYERS."  Form HUD-92900-B has been
revised to reflect current FHA policies and to provide additional
information to borrowers using FHA mortgage insurance.  The
updated form, which must be provided to the homebuyer, is dated
May 1997.  Mandatory use of the revised form is September 1,
1997.
 
     A copy of the revised form is attached.  Please note that
FHA posts existing and revised forms on the Internet at
"http://www.hud.gov/forms/formwrhs.html".
 
     If you have any questions regarding these issues, please
contact your local FHA office.
 
Sincerely yours,
 

Nicolas P. Retsinas
Assistant Secretary for Housing-
Federal Housing Commissioner
 
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