www.hudclips.org DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410 July 19, 1982 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING - FEDERAL HOUSING COMMISSIONER Mortgage Letter 82-6 (Revised) TO: ALL APPROVED MORTGAGEES SUBJECT: Revision to Mortgagee Remittance Requirements for Single Family Mortgage Insurance Premiums This Letter is a revised version of Mortgagee Letter 82-6 dated April 22, 1982 to further clarify the changes in the method of payment of single family (S/F) mortgage insurance Premiums (MIP) to HUD, and related Procedures, required to comply with Section 530 of the National Housing Act. The Final Rule implementing Section 530 was published in the Federal Register of July 15, 1982, and will become effective 30 Congressional session days after that date. The changed methods and procedures described in this Letter are based on that rule. This Letter is applicable to all single family (S/F) HUD/FHA-insured mortgages presently insured and those insured in the future. The revised regulations will require, in part, that mortgagees pay the annual MIP on single family mortgages in monthly installments due to HUD on or before the 10th of month following the month in which payments where received from the mortgagors; and further, that mortgagees will not be relieved of the obligation to pay the annual MIP in the month it is due should the borrower fail to make sufficient MIP payments into the escrow account. Additionally, at initiation of Section 530, mortgagees shall remit all escrowed S/F MIP immediately, plus any other MIP due HUD regardless of the availability of escrow funds or billings from HUD. The remaining text of this Letter outlines the procedural changes necessary to implement the revised regulations. Major items discussed are listed here: 1) Annual MIP billing ceases for single family HUD-insured mortgages 2) Centralized correspondence for MIP and portfolio matters 3) Advance Notice of S/F Annual Premiums report to mortgagees, both initially at startup of Section 530, and monthly (Attachment 2) 4) Single Family Mortgage Insurance Premium Remittance Summary, Form HUD-2748 (Attachment 1) 5) Initiation of Section 530: Mortgages remit the total of all escrowed single family (S/F) mortgage insurance premiums immediately and any other unpaid annual MIP _____________________________________________________________________ 6) Monthly Remittance: Mortgagees remit all S/F MIP collected from mortgagors plus any annual premiums due a) Basic monthly payment method b) Option to pay 1/12th of total S/F portfolio's annual MIP each month 7) Late Charges and Interest 8) Terminations 9) Mortgage-level activity reports to HUD 10) Records maintained by mortgagees 11) Portfolio reconciliations with HUD 12) Surrendering debentures for purchase by HUD 13) Schedule for Section 530 Implementation 1. Annual MIP Billing Ceases. The billing of annual S/F MIP each month will cease after the billing for the premium anniversary month of August 1982. Paragraph 13 presents a schedule of implementation. Billings for reconcilement MIP will occur on an as-required basis. 2. Centralized Correspondence for MIP and Portfolio Reconciliation Matters. In Mortgagee Letter 80-2 , dated January 9, 1980 HUD notified all approved mortgagees that it intended to institute a centralized billing and collection system for Mortgage Insurance Premiums, effective January 1, 1983. Under this system, branch billing for MIP would no longer be a mortgagee option. HUD would provide only one bill, to a single office identified by the mortgagee, and would accept remittance only from that office, for all insured mortgages for which the mortgagee is responsible. Because of the requirement for implementation of Section 530 before the end of Fiscal Year 1982, it has been decided to implement the centralized MIP system earlier than had been originally intended. Implementation of centralized addresses concurrent with the implementation of the revised procedures provided for in this letter will avoid, for both mortgagees and HUD, the need to make two significant changes in the system for accounting for MIP within a short time period. The Office of Lender Certification is in the process of purging its MIP mailing lists of addresses in excess of one per approved mortgagee. Each approved mortgagee should by this time have received a letter, identifying the MIP billing address of record 2 _____________________________________________________________________ for its home office, advising the mortgagee that correspondence relating to MIP and portfolio reconciliations beginning August 1, 1982 will be mailed to that address unless HUD has been notified of a different address before July 1. Any mortgagee which has not received such a letter should immediately advise the Director, Office of Lender Certification, of that fact, and of the correct address for correspondence related to MIP. A failure to do so could result in misdirected notices and penalties, since the mortgagee's obligation to remit MIP to HUD in accordance with the following procedures is not conditioned on receiving specific notice from HUD of amounts due. 3. Advance Notice of S/F Annual Premiums Report: a. Initial Advance Notice of Premiums. In early August 1982 HUD will provide servicing mortgagees with a report of their mortgages, listed by amortization anniversary month according to HUD records. Each will be listed along with other identifying information and the annual MIP amount due for the mortgage at its next anniversary. This report will be mailed to the address described in paragraph 2 above. A sample report is provided in Attachment 2 to this Letter. Mortgagees who prefer to receive this information on magnetic computer tape should request this service from HUD as soon as possible. Detail specifications will be provided upon such request. This report is not a billing document, but is intended to assist the mortgagees with a basis for determining the total of all portions of annual MIP held in escrow for HUD/FHA-insured S/F cases at the startup of Section 530 (see item 5 below). Mortgagees shall notify HUD of all mortgages serviced by them, which are not included on the report by completing the S/F Mortgage Insurance Premium Questionnaire Form HUD-2753, shown in Attachment 3. Computer printed facsimiles will be accepted in lieu of these forms if all information for each mortgage is presented in the same sequence and format as required by Form HUD-2753. The form(s) shall be mailed immediately to DHUD, Office of Finance and Accounting, Attention: AFMO, Washington, D.C. 20410. b. Monthly Advance Notice of Premiums. Each month following startup of Section 530, HUD will provide servicing mortgagees with a listing of their mortgages which have an anniversary date 13 months hence. This list will also be mailed to the single address discussed in paragraph 2 above. Each mortgage for that anniversary month, will be listed along with the annual MIP amount which will become due on its anniversary one year hence. Other identification information will also appear. A revised sample report is provided in Attachment 2 to this Letter. Mortgagees may request magnetic tape as discussed 3 _____________________________________________________________________ in 3a. above. This report is not a billing document, but is provided to assist the mortgagee with information needed to establish the exact MIP amount to collect from mortgagors each month for the next 12 months. Mortgagees shall notify HUD of all single-family mortgages for which they have responsibility for payment of MIP, which are not included on the report by completing the S/F Mortgage Insurance Premium Questionnaire Form HUD-2753, shown in Attachment 3. Computer printed facsimiles may be submitted as described in 3a. above. The form(s) shall be mailed to HUD immediately at the mailing address in 3a. above. After receipt, HUD will forward the next year's annual MIP collection requirement for these mortgages to the mortgagee, along with the next scheduled monthly Advance Notice of Premiums. 4. S/F MIP Remittance Summary Form Number HUD-2748. A new remittance form (Attachment 1) shall be used by mortgagees to submit the initial, startup remittance of total escrowed S/F MIP to HUD and will be used by the mortgagees each subsequent month to remit all collected S/F MIP collected by them in the preceding month and/or report mortgage activity summary data. The form requires allocating the total remitted MIP to premium anniversary months, reporting of summary totals of mortgage activity for the preceding month, and certification of the completeness of the remittance. Detail instructions are provided on the reverse side of the form. Only one form (with continuation sheets where necessary) will be accepted from each mortgagee for each monthly remittance, in accordance with the centralized billing and collection rules. a. Allocation of MIP to Anniversary Periods. The remittance form provides for allocating the total remitted MIP amount to the next 12 annual amortization anniversary months/years, and provides three blank lines for allocating to prior anniversary months and years specified by the mortgagee. b. Mortgage Activity Summary Reporting. The mortgagee shall submit a remittance form with mortgage activity summary data completed, initially and for each subsequent month thereafter, regardless of whether any MIP amounts are remitted. Computer-printed facsimiles of the HUD-2748 Remittance Summary form may be submitted in lieu of an actual form. It is important that an actual form control number be referred to on the facsimile. Attachment 4 provides the layout for an approved facsimile. 4 _____________________________________________________________________ 5. Initiation of Section 530 Program: Mortgagees Remit All Escrowed Premiums Immediately, Plus Any Other Unpaid Annual MIP. a. Upon implementation of Section 530, mortgagees shall remit to HUD the total of all single family mortgage insurance premium amounts which they hold in escrow at that time plus any annual premiums due HUD whether escrowed or not, plus any MIP remaining uncollected which are due to HUD in the month of implementation. This remittance and its accompanying remittance form shall be submitted to HUD on or before September 10, 1982. Only one remittance form should be submitted by each mortgagee. Mortgagees who intend to elect the optional monthly payment method described in paragraph 6b. below, should not include escrowed MIP which has been pre-paid, as part of future monthly mortgage payments by mortgagors, in this initial remittance. Mortgagees electing the basic monthly payment method, described in 6a. below, shall remit all escrows, including prepayments from mortgagors. b. The remittance of these escrowed MIPs shall be accompanied by the new MIP remittance form, (Attachment 1) fully completed and certified per the instructions provided on the form. A discussion of the form is provided in paragraph 4 above. c. Allocation to prior anniversary months/years on remittance form: In addition to allocating that portion of the remittance of MIP escrowed for the next 12 amortization anniversary months, mortgagees must allocate the remaining remittance amount of MIP escrow for prior anniversary periods (month and year); three lines are available for this purpose on the remittance form. Mortgagees shall provide a continuation sheet instead of using the 3 lines in situations where MIPs for prior anniversary periods (months and years) exceed three such periods. Subtotals of continuation sheets used must be carried forward and summed on line o) on the first page HUD-2748 form for the remittance month being reported. Examples of required prior MIP-anniversary period reporting include: mortgages serviced for which no billing was provided by HUD at their MIP anniversary; mortgages transferred to the mortgagee between MIP billing periods and therefore billed to the previous mortgagee of record; and, MIP held awaiting reconciliation with HUD. 6. Monthly Remittance: Mortgagees Remit All Premiums Collected Plus any Premiums Due. There are two methods of remitting monthly MIP payments; the mortgagee may choose either, but once selected the chosen method cannot be changed without the prior approval of HUD. 5 _____________________________________________________________________ a. Basic Monthly Payment Method: On a monthly basis, mortgagees shall remit to HUD, on or before the 10th of each month a payment equal to the total of all S/F MIP amounts collected from mortgagors during the preceding month, plus any portion of annual MIP remaining due for the current anniversary month whether collected or not. Such remittance shall be accompanied by a fully completed and certified MIP remittance form. Only one remittance form should be submitted by each mortgagee. b. Optional Monthly Payment Method: Optionally, mortgagees may elect to remit a monthly payment equal to 1/12th of the total of all annual S/F MIP for all mortgages in the mortgagee's servicing portfolio for the month, plus any annual premiums remaining due, without regard to MIP amounts collected from mortgagors, and certify on the remittance form to the completeness of the payment under this option. Once selected the mortgagee shall continue remitting each month under the provisions of this option until granted specific permission by HUD to change to the basic method. 7. Late Charge and Interest Charge. a. Late Charge: A late charge amounting to 4% of the total S/F MIP remitted shall be included in the total remittance amount whenever the payment is expected to be postmarked after the 10th of the payment month. If there is no postmark, the late charge will be due if the payment is received by HUD after the 13th of the payment month. b. Interest Charge: Payments postmarked (or, if there is no postmark, received by HUD) after the last day of the payment month shall include an interest charge at an annual percentage rate set in conformity with the Treasury Fiscal Requirements Manual, and announced periodically by the Secretary of HUD. The initial interest charge is set at the annual percentage rate of 14.26% This interest charge will be in addition to the 4% late charge, but the late charge is not included in the amount on which interest is computed. It is assessed for the initial 30 day period which begins on the first day of the month (based on MIP 'due-date' of the first day of each month), and for each additional 30 calendar day period or fraction thereof that a specific amount remains unpaid. Mortgagees shall include the interest charge payment in their total monthly remittance and specify the amount on the remittance form in the space provided (see instructions in Attachment 1). 6 _____________________________________________________________________ 8. Terminations After the provisions of Section 530 are initiated, pro rata MIP for termination of insurance on S/F mortgages shall no longer be submitted with or billed from, the individual termination requests, Form HUD-2344, Lender's Request for Termination of Home Mortgage Insurance. Instead, the mortgagee shall compute the amount of MIP adjustment involved by determining the type of termination (prepayment, voluntary, or nonconveyance), calculating the pro rata MIP due, if any, and subtracting any monthly amounts previously remitted. The results of this computation shall be recorded in item 10 of the Form HUD-2344 and included in the next monthly remittance amount for the applicable amortization anniversary month of the mortgage. Procedures for the reporting of claim terminations remain unchanged. 9. Mortgage-Level Activity Reports to HUD Mortgagees shall continue to report individual mortgage actions, e.g., endorsements, terminations and transfers. All forms currently in use for this purpose and the rules governing their timing, preparation and submission to HUD, remain unchanged with the exception of the changes for insurance terminations via Form HUD-2344 as stated in paragraph 8 above. Mortgage action report forms shall continue to be mailed to HUD Headquarters in Washington, D.C., separate from all remittance mailings. Preparation of Form HUD-92080, Mortgage Record Change, to report the transfer of mortgages between holding and/or servicing mortgagees: It is imperative that block #8, "Date of Transfer" always contain the actual effective date of the sale of mortgage or change of servicer. 10. Records Maintained By Mortgagees Mortgagees shall maintain: precise records of each S/F mortgage in their portfolio, and MIP payments made from the time Section 530 is initiated. Records for new mortgages added, transferred in and out, paid-in-full, voluntarily terminated, and submitted for insurance benefits shall be maintained for at least 3 years. Annual MIP records shall be maintained by mortgagees for the preceding 3 years. At the end of each year, an outside professional accountant shall, as a part of the annual audit, certify that the mortgagee's procedures for payment of MIP to HUD are adequate to ensure compliance with HUD regulations and rules per the revised HUD Audit Guide. 11. Portfolio Reconciliations Each mortgagee shall provide current mortgage-level data upon request to HUD for the purpose of reconciling portfolios for a 7 _____________________________________________________________________ specific point in time. Such data shall include: identification of mortgages, the amount of MIP paid for each to HUD for the specified time period, the date the mortgage was terminated or servicing was transferred, and, for mortgages acquired after startup of Section 530, the date servicing of the mortgage became the responsibility of the mortgagee. Such reconciliation can be required at either of two levels: for a specific amortization anniversary month, or all single family mortgages within the mortgagee's portfolio at the end of a specific calender month. HUD recommends the exchange of automated records whenever possible for this purpose and is currently developing methods to facilitate such exchange where volume considerations make it feasible. 12. Surrendering Debentures for Purchase By HUD Rules governing surrender of debentures remain unchanged with the following exceptions: a) Mortgagees may continue to surrender debentures for purchase by HUD relative to annual MIP payments made by the mortgagee to HUD for the current premium anniversary date (MIP which has been paid for mortgages with an amortization anniversary in the current month and year). The deadline for such surrender for purchase is 5 calendar days after the annual MIP for the mortgages is payable to HUD; if the fifth day falls on a Saturday, Sunday or holiday HUD will accept debentures on the next working day thereafter. b) In addition to information presently required when transmitting debentures, mortgagees shall provide HUD with a statement of the amount of annual MIP which was paid for mortgages having a current month/year amortization anniversary, for each section-of-the act or insurance fund; this statement shall bear a certification by an authorized official of the mortgagee's organization of the correctness of the amount. 13. Schedule for Section 530 Implementation Startup month of Section 530: September 1982 Date a. HUD mails last S/F annual MIP bill to mortgagees for mortgages with premium due date of August 1, 1982. 6/22/82 Mortgagees pay last S/F Annual MIP bill 8/1/82 b. Mortgagees begin new approach to mortgage-level 8/1/82 case activity reporting to HUD (refer to paragraph 8 and 9 above) for transactions with an effective date of August 1, 1982 or later. c. Advance Notice of Premiums mailed to mortgagees 8/1/82 for the 13 annual premium anniversary months of September 1982 through September 1983. 8 _____________________________________________________________________ d. Mortgagees remit all MIP held in escrow, any 9/10/82 MIP due HUD whether escrowed or not, and any (on or annual premiums due for September 1982 remaining before) uncollected from mortgagors, along with a completed remittance form. e. First recurring Advance Notice of Annual S/F 9/11/82 Premiums mailed to mortgagees (October 1983 anniversary) f. Mortgagees remit first monthly MIP collections: 10/10/82 all MIP collected from mortgagors during the (on or preceding month plus any annual premiums due before) which remain uncollected; or optionally 1/12th of all annual MIP for all S/F HUD mortgages in their portfolio at the end of the preceding month, plus any annual premiums remaining due, along with a completed remittance form. g. (Items e and f recur monthly) A supply of the Single Family Mortgage Insurance Premium Remittance Summary, Form HUD-2748 (Attachment 1) is being printed and will be distributed to all servicing mortgagees. The S/F MIP Questionnaire Form, HUD-2753 (Attachment 3) is currently being finalized for printing; a supply of these will also be distributed. If you have any questions concerning these procedures, please contact Neil Haynes, Director, Systems Oversight Staff, Mortgage Insurance Accounting and Servicing, (202) 426-6595. Sincerely, Philip Abrams General Deputy Assistant Secretary Attachments 9 _____________________________________________________________________