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

OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING - FEDERAL HOUSING COMMISSIONER
APR 14 1983
Mortgagee Letter 83-9
     TO:  ALL APPROVED MORTGAGEES
     SUBJECT:  Computorized Processing of Mortgage Credit
               Data - Reimbursement of Real Estate Brokers
 
          The Department has received inquiries regarding the extent
     to which HUD-approved mortgagees may compensate real estate
     brokers and other third parties that provide computerized
     credit data which is used to originate insured mortgages.
 
          We are aware that approved mortgagees and real estate
     brokers increasingly have available to them centralized
     computer systems to generate and provide loan application
     data for conventional and HUD-FHA insured mortgages.  In some
     instances approved mortgagees and brokers may be part of the
     same computer system and potentially have access to the same
     basic data on prospective mortgagors that each could generate
     independently.  A question has arisen as to the degree
     HUD-approved mortgagees may share the costs with real estate
     brokers or other third parties in generating the computer loan
     application data on the mortgagor when it is used by approved
     mortgagees in originating an insured mortgage.
 
          Outstanding HUD requirements governing "prohibited
     payments" as set forth in the regulations at 24 CFR 203.1(b)
     and paragraph 1-4 of Mortgagee Approval Handbook 4060.1 do not
     permit approved mortgagees to pay any person or entity anything
     of value, directly or indirectly, in connection with a HUD-FHA
     insured transaction if they have received other compensation in
     that transaction.  The requirements also prohibit the payment
     of referral fees by mortgagees.  However, compensation may be
     paid for the actual performance of services as may be approved
     by the Department.
 
          The purpose of this mortgagee letter is to advise all
     approved mortgagees that HUD is modifying its requirements in
     order to give recognition to the increased use of computer
     technology in the market place and its potential for improved
     efficiency and cost savings in loan origination.  Effective
     immediately, the Department's requirements as set forth in
     Handbook 4060.1, paragraph 1-4, are revised to exclude as a
 
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     prohibited payment any arrangement between an approved mortgagee,
     real estate broker or other third party and any provider of computer
     services where the mortgagee directly pays the provider of computer
     services for the full value of services received without reimbursing
     the broker in any way, and the provider of computer services shares
     with the broker the costs of initially entering loan application data
     into the computer system.  However, there can be no identity of
     interest between the broker and the computer services provider.  The
     charge to the mortgagee for the computer service must be absorbed in
     the loan origination fee and may not be passed on to the buyer as a
     separate charge.  Approved mortgagees shall remain subject to all of
     the other provisions of 24 CFR 203.1(b) and Handbook 4060.1.  The
     foregoing change will be incorporated into Handbook 4060.1 in the
     near future.
 
                              Sincerely,
 
                              Philip Abrams
                              Assistant Secretary for
                              Housing - Federal Housing Commissioner
 
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