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

October 25, 1990
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 90-38
    TO:  ALL APPROVED MORTGAGEES
    SUBJECT:  Single Family Loan Production - Streamline Refinancing
                of FHA-Insured Adjustable Rate Mortgages
                Completion of Form HUD-92800
 
    I    STREAMLINE REFINANCING OF FHA-INSURED ADJUSTABLE RATE MORTGAGES
 
         The purpose of this mortgagee letter is to advise all approved
    mortgagees of a significant change in the Department's requirements for
    "streamlined" refinances of existing FHA-insured adjustable rate
    mortgages (ARMs).  Previously, HUD required that the refinanced
    mortgage result in a reduction in regular monthly payments.  Very
    often, this requirement cannot be met when refinancing from an ARM to a
    fixed-rate mortgage since the fixed-rate mortgage will most likely have
    a higher interest rate than the ARM during its early years.
 
         The regulations have been revised by 55 FR 38032 (September 14,
    1990) to permit for occupant mortgagors a higher monthly mortgage
    payment where the original mortgage is adjustable rate and the
    refinancing mortgage is fixed rate.  However, Departmental policy
    requires that the interest rate of the new fixed-rate mortgage be no
    greater than two percent above the current rate of the ARM and all
    mortgage payments must have been made within the month due for the past
    twelve months.
 
         This change is effective immediately.
 
    II   COMPLETION OF FORM HUD-92800
 
         Outstanding instructions require Direct Endorsement (DE) lenders
    to identify DE cases by typing "Direct Endorsement" in the mortgagee
    address box.  This message alerts the appraiser to send the completed
    appraisal report to the DE lender rather than the HUD Field Office.
 
         Because DE lenders now process all but a very small percentage of
    FHA cases, this procedure is being changed.
 
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     Effective immediately on all prior approval applications, to be
HUD processed, mortgagees are to type in "HUD processed" in the
mortgagee address box.
 
     All appraisers must be instructed to be sure to send these cases
to the HUD Field Office for review and issuance of a conditional
commitment.
 
     If you have any questions, please contact your local HUD Office.
 
                              Very sincerely yours,
 
                              Arthur J. Hill
                              Acting Assistant Secretary for
                                Housing-Federal Housing Commissioner