www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 September 26, 1986 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 86-19 TO: ALL APPROVED MORTGAGEES SUBJECT: Automatic assignment of mortgages pursuant to Section 221(g)(4) of the National Housing Act Single Family Pursuant to Section 221(g)(4) of the National Housing Act, as amended, mortgagees have the option of assigning FHA Section 221 mortgages to HUD when such mortgages are not in default at the expiration of twenty years from the date the mortgage was endorsed for insurance. Mortgages which are ineligible for this option are 1) those where a commitment was issued on or after December 1, 1983; and 2) where GNMA was or is the holding mortgagee on or after April 1, 1984. (See 24CFR 221.255 Federal Register, Vol 49, No. 98, May 18, 1984, Rules and Regulations, page 21047) This Mortgagee Letter supplements Mortgagee Letter 84-5 dated March 16, 1984. 1. Extension to assign. No extension of time will be granted for exercising the option to assign. 2. Notifying the local HUD Office of the assignment The notification must be mailed no earlier than 30 days in advance of the date on which the assignment is expected to be filed for record. 3. Notifying the mortgagor. Mortgagees must notify the mortgagor on the same day that the assignment is filed for record. Inform the mortgagor that HUD will provide further payment instructions. a. Payments received from mortgagor after the assignment has been filed for record. If the mortgagee receives additional payments from the mortgagor after the date the assignment is filed for record, the mortgagee must transfer the funds to HUD through our lock box in Atlanta at the following address: Payment Processing Center P. O. Box 105652 Atlanta, GA 30348 Insure that the appropriate FHA Case Number accompanies the transfer of funds. _____________________________________________________________________ 2 b. Do not apply to the account payments received after the assignment has been filed for record, as this will only cause delays in processing your claim for insurance benefits. Funds as described in paragraph 8 must not be sent to the lock box. 4. Notify the taxing authority and hazard insurance carrier of the change in mortgagee. a. Instruct the taxing authority to send tax bills to the local HUD Office having jurisdiction. b. Instruct the insurance carrier to: (1) Substitute "Secretary of Housing and Urban Development, his successors and assigns in care of insert name and address of local HUD Office " a' beneficiary in the mortgagee clause. (2) Mail the original insurance policy, and a copy of the Notice to the insurance carrier requesting that HUD be named as beneficiary, or proof thereof to the local HUD Office having jurisdiction. Copies of these notifications must also be sent to the local HUD Office. 5. Do not cancel the hazard insurance under any circumstances. 6. Be sure that the hazard insurance policy will be in effect for a period of at least 30 days beyond the date the assignment is filed for record unless the mortgagee has been unable to obtain a renewal bill from the insurance carrier. 7. If there are funds accrued in escrow for hazard insurance, mail to the mortgagor a check payable to the mortgagor for the accrued premium only (See step 8 for tax escrows.). In addition, since lenders will not be reimbursed for any monies advanced for escrow on their claim for insurance benefits, lenders should be sure that sufficient monies are in escrow accounts to pay taxes; or, if the lender has advanced monies, lenders should collect those advances from the mortgagor. Any tax bills received after the mortgage was filed for record should be sent to the local HUD Office. _____________________________________________________________________ 3 8. Remit a check payable to the Department of Housing and Urban Development for the balance of the tax escrow monies and attach it to Part A of the claim Form HUD-27011, which comes to Headquarters, Washington, DC. The Escrow balance is for taxes and assessments as of the date of assignment and must not include hazard insurance. Include on the check: (1) the FHA case number, (2) add the words "Tax Escrow Check," and (3) add the words "Section 221(g)(4)." Lenders may also contact the local HUD Office prior to submission of their claim and add the mortgagor's Thrift Account number. This will even further assure that escrow monies are applied to the proper mortgagor's account. 9. The mortgagee will include in the escrow check to be sent to HUD, all advanced payments which are being held for future application to the account. The mortgagee shall indicate the following in the mortgagee comments section of Part A of the claim form: - amount of each mortgage payment including principal, interest and escrow - the number of advanced payments including partial payments. 10. Distribute your claim in accordance with the Form HUD-27011 claim instructions (Section III, Automatic Assigned Hone Mortgages). In addition, the same documents as set forth in Section II, Assigned Home Mortgages, page 30, Number 5, should be sent to the local HUD Office with respect to automatic assignment. Also, please advise staff who are responsible for preparing claim forms to make the following changes to the new claim instructions dated December 1984. Turn to page 42, (Section III, Automatic Assigned Home Mortgages). Under TIME REQUIREMENTS, second paragraph, first sentence, delete the tenth and eleventh words "at least"; and, third paragraph, first sentence, delete the words "at least 10" calendar days and insert "30" calendar days. If mortgagees have any questions regarding this letter they should contact the Single Family Loan Management Branch of the local HUD Office. Sincerely, Silvio J. DeBartolomeis General Deputy Assistant Secretary for for Housing-Federal Housing Commissioner _____________________________________________________________________