U.S. Department of Housing and Urban Development Washington, D.C 20410-8000 January 29, 1991 OFFICE OF THE ASSISTANT SECRETARY FOR TI-406 HOUSING-FEDERAL HOUSING COMMISSIONER MEMORANDUM FOR: ALL TITLE I LENDING INSTITUTIONS Attn: Installment Loan Department SUBJECT: Proposed Reform of the Title I Program The Department is proposing major changes to reform the Title I property improvement and manufactured home loan programs. Enclosed is a copy of a proposed rule describing these changes that was published in today's FEDERAL REGISTER. We urge you to read the entire rule for those changes that may affect your lending institution, and to furnish written comments on these proposals to the address on the next page. The changes that are proposed in this rule are the most significant since the recodification of the program regulations that became effective on January 15, 1986. They are the result of extensive review and analysis by HUD staff over the past year; in addition, they incorporate a number of suggestions made by lenders and others in response to Title I letter TI-402 , issued November 3, 1989, and a FEDERAL REGISTER Notice published in January 1990. Reform of the Title I program is being proposed because the Department has concluded that changes in the regulations are needed to preserve the actuarial soundness of both the property improvement and manufactured home loan programs, to reduce the potential for fraud and misrepresentation, and to make these programs more accessible to borrowers in areas of the nation that are presently unserved. The proposed changes are directed towards the following major areas of reform: 1. Broadening participation by qualified lending institutions through the use of loan correspondents, while eliminating any role in the program by loan brokers and other unregulated or unsupervised third parties. 2. Establishing higher qualification standards for lenders and dealers, and more objective criteria for lenders and loan correspondents to use in approving loans. 3. Requiring greater oversight of dealers through more personal contact between lenders and borrowers, and through site inspection of dealers' work prior to disbursement of the loan proceeds. _____________________________________________________________________ 2 4. Requiring more secure collateral for both property improvement and manufactured home loans. 5. Encouraging on-site repossession and resale of manufactured homes to reduce claim losses for lenders and HUD. 6. Adding debt collection provisions for the Title I program. Lenders and other interested persons are invited to submit written comments on the Title I reform proposals. Comments should contain the docket number and title of the proposed rule, and should be sent to the following address for receipt by not later than 60 days from the publication date of the rule: Office of the General Counsel Rules Docket Clerk, Room 10276 Department of Housing and Urban Development 451 Seventh Street, S.W. Washington, DC 20410 The Rules Docket Clerk will also accept public comments by facsimile (FAX) transmission, provided that they are not longer than six pages. The telephone number of the FAX receiver is (202) 708-4337. If you have questions about this letter, please write to Robert J. Coyle, Director, Title I Insurance Division, Room 9158, 451 Seventh Street, S.W., Washington, DC 20410, or call the Division on (202) 708-2880. Sincerely yours, Arthur J. Hill Acting Assistant Secretary for Housing-Federal Housing Commissioner Enclosure _____________________________________________________________________ _____________________________________________________________________ Federal Register Tuesday January 29, 1991 ******************************************************************** * * * * * * * * * * * * * * * * * * * GRAPHICS MATERIAL IN ORIGINAL DOCUMENT OMITTED * * * * * * * * * * * * * * * * * * * ******************************************************************** ___________________________________________________________________________ _____________________________________________________________________ ATTACHMENT THE ATTACHMENT TO THIS TITLE I LETTER IS A FEDERAL REGISTER DOCUMENT FROM 1991 A HARD COPY WILL HAVE TO BE OBTAINED.