www.hudclips.org 


U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

May 10, 1985
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 85-10
TO:  ALL APPROVED MORTGAGEES
SUBJECT:  Single Family Origination:  Lower Down Payment for
            Properties Under $50,000
 
      HUD is pleased to announce the publication of a new regulation
in the Federal Register which permits homebuyers to obtain mortgages
for 97 percent of the property's value as long as the appraised
value does not exceed $50,000.  With this change, FHA will possess
another valuable tool to assist lower income families.  First time
homebuyers, in particular, should benefit greatly from the
implementation of this program.
 
      We have prepared the attached fact sheet to outline program
requirements.  If you have any technical questions on these
instructions, please contact the Single Family Development Division
at (202) 426-7212.  Your local field office will answer any general
processing inquiries.
 
      Thank you for your interest and support for our programs.
 
                             Sincerely,
 
                             Shirley McVay Wiseman
                             General Deputy Assistant Secretary for
                               Housing-Federal Housing Commissioner
 
Attachment
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                                                      ATTACHMENT
                   97 PERCENT LOAN-TO-VALUE
               PROVISION FOR MODESTLY PRICED HOMES
 
FEDERAL REGISTER PUBLICATION:  50 FR 19924 - 19927, May 13, 1985.
 
EFFECTIVE DATE:  June 24, 1985.
 
ELIGIBLE BORROWERS:  Owner Occupant Purchasers Only.
 
ELIGIBLE PROPERTIES:  Modestly priced dwellings (homes, manufactured
  homes, or condominiums) approved by HUD or VA prior to the start of
  construction, properties covered by an acceptable consumer
  protection or warranty plan, and properties that were completed
  more than one year before the application for mortgage insurance.
 
  This change applies only to properties with an appraised value of
  $50,000 or less.  Appraised value is defined as the lesser of:
  (1) the estimated value of the property plus the estimated closing
  costs or (2) the total acquisition cost.
 
LOAN-TO-VALUE LIMITATION
 
  If the appraised value of the property does not exceed $50,000,
  the loan-to-value limitation for an owner occupant is 97 percent of
  the appraised value as of the date the mortgage is accepted for
  insurance.
 
  If the appraised value exceeds $50,000, the loan-to-value
  limitation is 97 percent of the first $25,000 and 95 percent of the
  excess.
 
ELIGIBLE PROGRAMS:
  Section 203(b)  Home Mortgage Insurance
  Section 203(k)  Rehabilitation Mortgage Insurance
  Section 223(e)  Homes in older, declining areas (HUD
                  determination.)
  Section 234(c)  Condominium units
  Section 245(a)  Graduated Payment Mortgages (GPM) and
                  Growing Equity Mortgages (GEM)
  Section 245(b)  Modified Graduated Payment Mortgages
  Section 251     Adjustable Rate Mortgages (ARM)
 
  Applications using this higher loan-to-value limitation may be
  processed under either the Coinsurance Program or the Direct
  Endorsement Program by mortgagees approved for those programs.
 
NEW SECTION OF THE ACT ADP SUFFIX CODES:  (Suffix to the FHA
  Case Number for the Mortgage Insurance Certificate, Form HUD-
  59100, submitted at the time of insurance endorsement)
 
       HUD-Processed HUD-Processed HUD-Processed Direct
          Cases         Cases in    Cases with   Endorse-
                     223(e) Areas     VA-CRV     ment Cases
 
    MMI      248          348           548          748
 
    GI       249          349           549          749
 
    MMI = Mutual Mortgage Insurance Programs (203(b), 245(a), 245(b),
          251)
    GI = General Insurance Programs (203(k), 234(c))
         Cases processed under Coinsurance should reflect the appropriate
         Coinsurance Section of the Act ADP code.
 
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