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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410

August 4, 1982
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING - FEDERAL HOUSING COMMISSIONER             IN REPLY REFER TO:
Mortgagee Letter 82-13
TO:  ALL APPROVED MORTGAGEES
SUBJECT:  Surplus Escrow Payments for Multifamily Project Mortgages
 
     The purpose of this letter is to bring to the attention of all
approved mortgagees the Department's requirements for handling
surplus escrow payments for multifamily project mortgages.
 
     HUD Regulations, 24 CFR 207.12, require that the Mortgage or
Deed of Trust shall provide for equal monthly payments by the
mortgagor to the mortgagee which will amortize the principal and
interest on the loan.  The estimated amount of all taxes, water
rates, special assessments, and fire and hazard insurance premiums
are also included in the monthly payments, and placed in escrow
accounts until needed.  The Regulations state that the mortgagee must
make provision for adjustments in case the estimated amount for the
escrowed items shall prove to be more or less than the actual amount
paid by the mortgagor.
 
     Any excess payments shall normally be handled in accordance with
the standard Deed of Trust or Mortgage, which provides that surplus
escrow accumulations shall be credited by the mortgagee to subsequent
payments of the same nature to be made by the mortgagor.  For
example, a surplus in the tax escrow shall be credited to ensuing tax
payments.  However, if the mortgagee and mortgagor agree, a large
surplus can be either paid to other required accruals, or placed in
the replacement reserve account or residual receipts account.  If the
mortgage is in default, a surplus in any of the escrow accounts shall
be applied to the balance then due.  In addition, if the balance in a
particular escrow is not sufficient to cover a payment due from that
escrow, a surplus in another escrow account shall be applied to that
deficiency.  With HUD's approval, the excess monies may be placed in
the project account for the general use of the project.  In no case,
however, shall the excess monies be returned directly to the
mortgagor for distribution.  Project funds can only be distributed in
accordance with the terms of the Regulatory Agreement.
 
     If you have any questions, please contact the Office of
Multifamily Housing Management, Management Operations Division,
(202) 755-5866.
 
                       Philip Abrams
                       General Deputy Assistant
                         Secretary-Deputy Federal Housing
                         Commissoner