www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING- FEDERAL HOUSING COMMISSIONER October 31, 1988 Mortgagee Letter 88-33 TO: ALL APPROVED MORTGAGEES SUBJECT: Change in Maximum Interest Rates The Housing and Urban Recovery Act of 1983 established Negotiated Interest Rates for all single-family and multifamily programs, except for Section 235 and Section 232 (loans to finance purchase and installation of fire safety equipment). However, Section 429(e)(2) of the Housing and Community Development Act of 1987 (Public Law 100-242, approved February 5, 1988) amended the National Housing Act to provide that interest on fire safety equipment loans under Section 232(i) of the Act will be "at such rate as may be agreed upon by the mortgagor and the mortgagee." Accordingly, these loans, like most other National Housing Act- authorized insured loans, now have their interest rates determined by negotiation. Accordingly, this announcement of a change in interest rate ceilings for FHA-insured mortgages is limited to the Section 235 Program. HUD regulations have been changed to decrease the maximum rate of interest on Section 235 loans frcm 10.50 to 10.00 percent. In Mortgagee Letter 84-21 on the Section 235 program, it states that reprocessing will be required by HUD on any case in which a mortgagee wishes to close at an interest rate higher than the rate shown on the firm commitment. To avoid unnecessary processing, HUD will only accept requests for reprocessing where a clear final inspection has been obtained. Mortgagees must submit this information with their request to have their case reprocessed at the higher rate. This change is effective November 1, 1988. Sincerely, Thomas T. Demery Assistant Secretary for Housing- Federal Housing Commissioner