www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410 February 2, 1984 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 84-2 TO: All Approved Mortgagees SUBJECT: Termination of Assignment Option Under Section 221(g)(4) of the National Housing Act Section 221 of the National Housing Act (NHA) established a program of HUD mortgage insurance for low-and moderate-income families and displaced families. Section 221(g)(4) of the NHA authorized the Department to accept assignment of any mortgage insured under this section which is not in default at the expiration of twenty years from the date the mortgage was endorsed for insurance. Section 409 of the Housing and Urban-Rural Recovery Act of 1983 (1983 Act) removes the authority of the Department to accept such assignments under Section 221(g)(4). Regulatory provisions contained in 24 CFR 221.255 and 221.770 are superseded to the extent they are inconsistent with this new law. These provisions will be amended by the Department to conform to the new law's requirements as soon as practicable. A notice was published in the Federal Register on December 5, 1983 to inform the public of the effective date of this statutory change. The President approved the 1983 Act on November 30, 1983. However, the actual signing occurred after the close of business for HUD offices in a significant portion of the United States. Because Section 409 has the effect of prospectively revoking a privilege, the Department determined that commitments entered into on November 30, 1983 before the bill was approved should continue to provide for the assignment option permitted under previous law. Therefore, this change applies to any mortgage for which a commitment to insure was issued before December 1, 1983. In other words, the Department assumes, for purposes of implementation of Section 409, that all commitments issued on November 30, 1983 during ordinary business hours in any HUD field office were issued before the bill was approved by the President. Therefore, any mortgagee who has received either a conditional or firm commitment for insurance of a mortgage dated before December 1, 1983 will have the Section 221(g)(4) assignment option. A subsequent mortgagee letter will be issued shortly to clarify procedures for handling monies escrowed for taxes and insurance premiums on single family mortgages remaining eligible for the assignment option. _____________________________________________________________________ 2 The December 5, 1983 notice in the Federal Register also clarified the applicability of the term "commitment" as used in Section 409 of the 1983 Act. The term "commitment" does not include a Site Appraisal and Market Analysis (SAMA) letter or a Feasibility letter in the case of a substantial rehabilitation application. Therefore, even if a SAMA or Feasibility letter has been issued for a project before December 1, 1983, the mortgagee will not be entitled to the Section 221(g)(4) option unless a conditional or firm commitment has also been issued for the project before this date. Applicability of this amendment to the Direct Endorsement program in the Single Family insurance programs also requires clarification. HUD does not issue commitments for mortgages insured under this new Direct Endorsement program. An event analogous to conditional commitment in the Direct Endorsement program is the day the property appraisal report is signed by the mortgagee's approved underwriter. For this reason, the Department interprets Section 409 as terminating the Section 221(g)(4) assignment option for any mortgage processed under the Direct Endorsement program whose property appraisal report has not been signed before December 1, 1983. If you have any questions regarding this change, please contact Mr. James Hamernick, Director, Office of Multifamily Housing Development, (202) 755-5720 or Mr. Alan Kappeler, Director, Office of Single Family Housing, (202) 755-3046. Sincerely, Maurice L. Barksdale Assistant Secretary