www.hudclips.org 


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

September 28, 1990
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 90-35
      TO:  ALL APPROVED MORTGAGEES
      ATTENTION:  Servicing Managers (Single Family)
      SUBJECT:  Acceleration of Mortgages Subject to the Housing and
                Community Development Act of 1987 and the Department
                of Housing and Urban Development Reform Act of 1989
 
           This letter establishes HUD's procedures concerning the
      acceleration of assumed mortgages as the result of non-compliance
      with assumption requirements set forth in the subject housing
      acts.  These procedures are effective for mortgages subject to
      the 1987 and 1989 Acts assumed on or after 30 days from the date
      of this Mortgagee Letter.
 
           The 1987 Act requires a review of the credit of each person
      who seeks to assume a mortgage within the first 12 months
      (owner-occupant originated) or 24 months (investor originated) only.
      (Mortgagee Letter 88-2, dated February 5, 1988).  The 1989 Act,
      besides eliminating investor assumptions, requires that prior to
      each assumption of a mortgage which is subject to the Act, for
      the life of the loan, the person(s) who seeks to assume ownership
      must be determined to be creditworthy.  (Mortgagee Letter 89-31,
      dated December 26, 1989).
 
           If a credit review was not performed prior to the
      assumption, the lender must require the purchaser to submit to a
      credit review after the fact.  If the purchaser's credit is not
      acceptable according to HUD's underwriting policies or the
      purchaser refuses to cooperate with the review process, the
      lender must contact the local Field Office for guidance with
      respect to acceleration of the mortgage.
 
           With respect to assumption by investors of mortgages closed
      from February 5, 1988 to December 15, 1989, those mortgages must
      be paid down to the appropriate loan-to-value (LTV) ratio.  (See
      ML 89-5).  If investors refuse to comply, mortgagees must seek
      approval for acceleration of the mortgage from the local Field
      Office.
 
_____________________________________________________________________
 
           Effective December 15, 1989, with the exception of 203(K)
      mortgages and HUD-owned properties, investor assumptions are
      prohibited.  Therefore, mortgagees must contact the local Field
      Office for approval to accelerate the mortgage when unauthorized
      investor assumptions are discovered.
 
           Field Offices and Headquarters staff will monitor
      mortgagee's compliance with these requirements.
 
                                Sincerely yours,
 
                                ____________________________________
                                Arthur J. Hill
                                Acting Assistant Secretary for
                                Housing-Federal Housing Commissioner