www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 THE SECRETARY April 16, 1990 Mortgagee Letter 90-12 TO ALL HUD MORTGAGEES: SUBJECT: Reform Act of 1989 As most of you are aware by now President Bush signed the HUD Reform Act of 1989 into law on December 15, 1989. This legislation is the culmination of a major effort on the part of the Bush Administration and Congress to restore taxpayer confidence in HUD programs, and represents the beginning of a new era for HUD employees, agents, and private industry participants. There will be no more "business as usual." Embodied within this legislation are provisions affecting mortgagees. Mortgagees are key players and critically important partners in the Department's programs. I feel very strongly that the mortgage industry will respond positively to the directives contained in the attached Mortgagee Letter that addresses stricter HUD program enforcement and quality assurance methods. Now that the legislation has been signed into law we can work together as partners to ensure that no abuses of the public trust take place in this area. With regard to your monitoring and oversight responsibilities, I ask you to increase your diligence in conducting quality physical inspections and monitoring the financial conditions of the properties insured by the Department. We must assure that the tenants are the recipients of well-maintained housing. All mortgagees must take steps to tighten monitoring of their own servicing as well as the mortgage servicing of contractors. I can assure you of my personal commitment, and that of the Department, to work with you in maintaining decent, safe and sanitary conditions for the people living in HUD-assisted housing. I know I can count on you in this effort. Very sincerely yours, Jack Kemp _____________________________________________________________________ U.S.DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON,D.C. 20410-8000 April 16, 1990 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER 90-12 MEMORANDUM TO: All Approved Mortgagees ATTENTION: Multifamily Mortgagees SUBJECT: Emphasis on Enforcement of Servicing Requirements HUD's regulations place obligations upon the mortgagee to service the multifamily insured mortgage in accordance with HUD's requirements. It has come to the attention of the Department that some mortgagees have not been following these requirements. In addition, the Department is specifically aware that some multifamily mortgagees have failed to perform the annual inspection of each insured housing project which is required under 24 CFR Section 207.260(a), the Mortgagee Certificate, and Mortgagee Letter 88-22 (dated July 11, 1988). This letter is to emphasize to all multifamily mortgagees that the servicing requirements for multifamily insured mortgages will be aggressively enforced by the Department. In that regard, mortgagees should be alerted that the Department of Housing and Urban Development Reform Act of 1989 (Act), establishes civil money penalties, for "knowing and material" violations of HUD/FHA requirements. Under the Act, HUD will determine the amount of the penalty up to $5000 for each violation. Each mortgagee may be penalized up to $1,000,000 per year. In the case of a continuing violation, as determined by HUD, each day constitutes a separate violation. The Act also statutorily authorizes the Mortgagee Review Board (Board) to impose sanctions upon mortgagees that fail to follow HUD/FHA requirements. We wish to specifically stress to multifamily mortgagees the importance of meeting all of the Department's multifamily insured mortgage servicing requirements, especially the annual inspection requirements. The Department is preparing proposed exiles setting forth standards and procedures for implementing the civil money penalties authorized under the Act. Mortgagees are on notice that the Department will impose administrative penalties for knowing and material violations of HUD requirements, including violations of HUD/FHA servicing requirements for multifamily mortgages, that are committed on or after the effective date of the regulations. _____________________________________________________________________ 2 Mortgagees violating HUD requirements are subject to the imposition of sanctions by the Mortgagee Review Board under existing regulations (24 C.F.R. Part 25) as well as under the Act. Sincerely yours, C. Austin Fitts Assistant Secretary for Housing, Federal Housing Commissioner