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

                              November 18, 1991

OFFICE OF THE ASSISTANT SECRETARY                         TI-413
FOR HOUSING-FEDERAL HOUSING COMMISSIONER

   MEMORANDUM FOR:  ALL TITLE I LENDING INSTITUTIONS
                    Attn:  Installment Loan Department
   SUBJECT:  Notice to the Borrower of HUD's Role in Title I Loans
 
        On October 18, 1991, the Department published a final rule
   in the FEDERAL REGISTER (56 FR 52414), implementing major changes
   to reform the Title I property improvement and manufactured home
   loan programs.  The final rule added new § 201.26(a)(6) and
   (b)(7) to require that, prior to loan disbursement, the lender
   must provide the borrower with a written notice of HUD's role in
   the loan transaction.  The rule also added a new § 201.19(c)(3)
   to require that the lender provide a similar notice to an
   assumptor prior to execution of an assumption agreement.
 
        This letter provides lenders with the language to be used in
   these notices.  The appropriate notice on the lender's letterhead
   shall be furnished to each borrower, co-maker or co-signer.  The
   notice is to be signed by each borrower, co-maker or co-signer,
   and the original copy is to be retained in the loan file.  A copy
   of the signed notice shall also be furnished to each person
   signing the notice.
 
        These requirements apply to any new loan for which a credit
   application is approved by the lender on or after December 16,
   1991, and to any refinancing or assumption of an existing loan
   approved by the lender on or after December 16, 1991.  On loans
   originated by a loan correspondent, compliance with these
   requirements is the responsibility of the loan correspondent.
 
        This letter supersedes TI-360  dated May 7, 1985.
 
   Property Improvement Loans
 
        On any newly originated dealer property improvement loan,
   and on any refinanced or assumed property improvement loan, the
   text of the notice shall read as follows:
 
        You have applied for a property improvement loan
        insured by the U.S. Department of Housing and Urban
        Development (HUD).  If you fail to repay this loan as
 
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     agreed, we may assign the loan and any mortgage to HUD for
     collection.
 
     Failure to pay this debt to HUD may result in seizure
     of your Federal income tax refunds, offset from your
     wages if you are a Federal employee, and referral of
     the debt to the U.S. Department of Justice for
     collection.  In addition to principal and interest on
     the debt, you will be liable for the payment of any
     penalties or administrative costs that may be imposed
     by HUD.
 
     Your signature below indicates that you have read and
     understand this notice.
 
     On any newly originated direct property improvement loan,
the text of the notice shall read as follows:
 
     You have applied for a property improvement loan
     insured by the U.S. Department of Housing and Urban
     Development (HUD).  As one of the conditions of loan
     approval, you have agreed to furnish us with a
     completion certificate after the work is completed, and
     to permit us or our agent to inspect the completed
     improvements.
 
     If you fail to repay this loan as agreed, we may assign
     the loan and any mortgage to HUD for collection.
     Failure to pay this debt to HUD may result in seizure
     of your Federal income tax refunds, offset from your
     wages if you are a Federal employee, and referral of
     the debt to the U.S. Department of Justice for
     collection.  In addition to principal and interest on
     the debt, you will be liable for the payment of any
     penalties or administrative costs that may be imposed
     by HUD.
 
     Your signature below indicates that you have read and
     understand this notice.
 
Manufactured Home Loans
 
     On any new, refinanced or assumed manufactured home loan,
the text of the notice shall read as follows:
 
     You have applied for a manufactured home loan insured
     by the U.S. Department of Housing and Urban Development
     (HUD).  If you fail to repay this loan as agreed, we may
 
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                                3
 
     foreclose on the home or other property securing this loan
     and sell it.  It is important for you to understand that the
     value of your property at the time of foreclosure may be
     less than the unpaid balance on your loan, leaving you
     liable for the difference.
 
     After your property is sold, we may assign the
     remaining debt to HUD for collection.  Failure to pay
     this debt to HUD may result in seizure of your Federal
     income tax refunds, offset from your wages if you are a
     Federal employee, and referral of the debt to the U.S.
     Department of Justice for collection.  In addition to
     principal and interest on the debt, you will be liable
     for the payment of any penalties or administrative
     costs that may be imposed by HUD.
 
     Your signature below indicates that you have read and
     understand this notice.
 
For Further Information
 
     If you have any questions about this letter, please write to
Robert J. Coyle, Director, Title I Insurance Division, Room 9158,
451 Seventh Street, S.W., Washington, D.C. 20410, or call the
Department toll-free at 1-800-733-HOME (1-800-733-4663).
 
                           Sincerely yours,
 
                           Arthur J. Hill
                           Assistant Secretary for
                           Housing-Federal Housing Commissioner