www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 January 10, 1991 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 91-1 TO: APPROVED MORTGAGEES SUBJECT: Single Family Loan Production - Implementation of Certain Provisions of the 1990 Housing Legislation The purpose of this mortgagee letter is to inform you of significant changes to HUD's Single Family Mortgage Insurance programs. These changes are a result of the recent passage of the Cranston- Gonzalez National Affordable Housing Act (1990 Act) and the Omnibus Budget Reconciliation Act of 1990 (OBRA), which both amend portions of the National Housing Act. These changes are effective immediately, unless otherwise indicated. I. INCREASE IN MORTGAGE LIMITS The basic statutory limit of $67,500 remains unchanged. The 1990 Act provides permanent authority to insure mortgages in high cost areas up to 185 percent of the basic limit. The maximum high cost area limits are: 1 family - $124,875 3 family - $170,200 2 family - $140,600 4 family - $197,950 The maximum mortgage amount for a condominium unit is $124,850. Mortgage amounts for condominiums and other cases with no financed MIP, by regulation, must he in multiples of $50. II. MORTGAGOR EQUITY/LIMITATION ON AMOUNT OF CLOSING COSTS THAT CAN BE FINANCED The OBRA establishes maximum loan-to-value ratios that cannot be exceeded and defines appraised value for such purposes as the appraiser's estimate of value excluding closing costs. Under OBRA, the principal mortgage amount may not exceed: A. For properties with an appraised value (excluding closing costs) of $50,000 or less, 98.75 percent of the lesser of the appraised value (excluding closing costs) or the sales price (excluding closing costs). _____________________________________________________________________ 2 B. For properties with an appraised value (excluding closing costs) of more than $50,000, 97.75 percent of the lesser of the appraised value (excluding closing costs) or the sales price (excluding closing costs). C. The method for determining the maximum mortgage will now require two calculations: 1. Calculate 97* percent of the first $25,000 of the lesser of sales price or value plus closing costs and 95 percent of the remaining amount. For modestly priced homes of $50,000 or less, calculate 97 percent of the lesser of sales price or value plus closing costs. 2. Perform a second calculation to determine if the mortgage amount must be further reduced to meet the 98.75 percent or 97.75 percent loan-to-value limits of OBRA. Multiply the lesser of sales price or appraiser's estimate of value (do not include the closing costs) by 98.75 percent if the Value is $50,000 or less or 97.75 percent if the value is in excess of $50,000. NOTE: If the seller or any third party is paying all or a portion of the borrower's allowable closing costs, the amount paid by the seller must be subtracted from the value or sales price before applying the 98.75 percent or 97.75 percent ratios. The maximum mortgage amount will be the lesser of calculations 1 or 2. See examples in Exhibit I attached. The 98.75 percent or 97.75 percent maximum loan-to-value ratios apply to mortgages insured pursuant to firm commitments issued by HUD or borrower approvals issued by Direct Endorsement lenders (underwriter signs Mortgage Credit Worksheet - Form HUD 9290OWS) on or after February 17, 1991. The maximum 98.75 percent or 97.75 percent loan-to-value ratios must be applied to mortgages insured under Sections 203(b), 203(i) (Outlying Areas), 203(n) (Cooperative Units), 222 (Service members), 223(e) (Miscellaneous Housing Insurance), 234(c) (Condominiums), 238(c) (Military Impact Areas), 240 (Fee Simple purchase), 244 (Coinsurance), 245 (GPM/GEM), 251 (Adjustable Rate), and 809 (Armed Services Housing-Civilian Employees). *For mortgages involving eligible veterans, 100 percent of the first $25,000. _____________________________________________________________________ 3 Lenders are advised that in the coming months the Department will publish Regulations to further limit the amount of closing costs that can be financed in the mortgage. The Department anticipates that it will impose a maximum limit of 57 percent of allowable closing costs that can be financed in the mortgage. When the Regulations are published, the public will have an opportunity to comment on these changes. III. REVISED WORKSHEET (HUD-9290OWS) AND ATTACHMENT "A" The HUD Mortgage Credit Analysis Worksheet, Form HUD 9290OWS and Attachment "A" (See Exhibit III and Exhibit IV of this letter) have been revised so that lenders can calculate the changes described in paragraph II, above. The requirements for the use of Attachment "A" remain unchanged. (See Handbook 4155.1 Rev-3, Mortgagee Letters 88-35, 88-15, 87-35 and 86-15 for current guidelines.) The revised documents must be used effective February 17, 1991. IV. RESTRUCTURING OF MORTGAGE INSURANCE PREMIUMS The OBRA makes several changes in the structure of the mortgage insurance premium (MIP). To aid you in understanding these changes, the following information is provided. Most mortgages will be subject to an upfront MIP (UFMIP) and an annual premium. The UFMIP may be added to the mortgage amount and financed as has been the practice. The annual premium will be calculated on the unpaid principal balance (without UFMIP and without taking into account delinquent payments or prepayments). The annual premium must be included in the proposed monthly housing expense for underwriting purposes and calculating borrower qualifying ratios. The fiscal year the mortgage is executed (closed) will determine the amount of the UFMIP. The law requires that the amount of the UFMIP will be the same, regardless of the term of the mortgage or whether the UFMIP is financed or paid in cash, which is different from the current MIP structure. The fiscal year and the loan-to-value ratio determine the amount and term of the annual premium. The loan-to-value (LTV) for the purpose of determining the amount and term of the annual premium is calculated as follows: base loan amount (without UFMIP) divided by value excluding closing costs (see line 18a of form HUD-9290OWS). _____________________________________________________________________ 4 Annual premiums are non-refundable, and upon prepayment or termination of the mortgage, the final annual premium payment must be prorated to the date of prepayment or termination. The existing option to apply a premium credit from the unearned portion of the upfront premium paid on the original loan to a refinanced loan (netting) will remain in effect. The Department is reviewing factors used to calculate the rate of earnings for the upfront premium. Any revised factors will be provided to mortgagees as soon as they become available. Please refer to the chart (Exhibit II) attached to this Mortgagee Letter for a summary of the UFMIP and annual premium changes. These changes to the MIP, including the additional annual MIP, will be described in Regulations to be published by HUD in early February, 1991. These changes will be effective for mortgages executed (closed) 30 days after the date HUD publishes its Regulations. Therefore, lenders should inform prospective borrowers that mortgages closed in early March, 1991 and thereafter, will require the payment of a UFMIP as well as an annual premium. These MIP changes are applicable to mortgages insured under the Mutual Mortgage Insurance Fund, i.e. Sections 203(b), 203(h), 203(i), 203(n), 244 coinsurance, 245 (excluding condominiums),and 251 (excluding condominiums). Because mortgages insured under the Section 244 coinsurance program do not presently have an UFMIP, HUD's Regulations will be changed to require the UFMIP. Non-condominium Section 223(e), 238(c), 247 (Hawaiian Homelands) or 248 (Indian Reservation) mortgages are not covered, even though the underlying insurance authority is Section 203(b), since they do not involve the Mutual Mortgage Insurance Fund. Mortgages closed (executed) prior to implementation of this new premium structure that are subsequently refinanced under our Streamline Refinance program (with or without an appraisal) will not be subject to the annual premium established by OBRA. The upfront premium will be netted out as is done now, but no annual premium will be collected. This exemption is appropriate because mortgages refinanced under the Streamline Refinance program significantly reduce HUD's risk, and we do not want to discourage borrowers from refinancing to a lower interest rate by applying the annual premium to loans that did not have an annual premium when they were originated. Mortgages closed after the implementation of the new premium structure and therefore, already subject to the annual premium, will continue to be subject to the annual premium if subsequently refinanced under the Streamline Refinance program. For mortgages subject to the new premium structure that are streamline refinanced without an appraisal, HUD will use the _____________________________________________________________________ 5 loan-to-value ratio of the original mortgage to determine the amount and term of the annual premium on the new loan. When the lender calls the Single Family Insurance Phone Center at (703) 235-8117 to ask for the UFMIP netting amount, the lender should also ask for the original loan-to-value percentage. V. HOME EQUITY CONVERSION 14ORTGAGE (HECM) INSURANCE DEMONSTRATION The OBRA increases the number of HECMs, or "reverse mortgages," that the Department can insure to 25,000 and extends the expiration date for the HECM Demonstration program to September 30, 1995. The increase in insurance authority is sufficient to accommodate the foreseeable demand for reverse mortgage insurance; accordingly, we will be publishing a final rule soon to terminate the reservation system which distributed insurance authority to mortgagees. Outstanding reservations of insurance authority for which no case numbers have been assigned will no longer need to be used when the rule change takes effect. Any mortgagee will be permitted to request case numbers and originate reverse mortgages. The Department plans to conduct training sessions for lenders after January 1, 1991. These sessions will be announced in a mortgagee letter. However, such training is not a prerequisite for participation in the program. Lenders interested in originating reverse mortgages should obtain a copy of 24 CFR 206, HUD Handbook 4235.1, and Mortgagee Letter 90-17 from their nearest HUD field office. The 1990 Act allows borrowers to reserve a portion of equity in their homes which will not be subject to the reverse mortgage lien. Regulations will be drafted in order to implement this provision. The 1990 Act requires lenders to provide reverse mortgage borrowers with two additional disclosures prior to closing: 1. The lender must disclose to the borrower that his or her liability under the mortgage is limited. The borrower shall have no personal liability for payment of the debt; the lender may enforce the debt only through sale of the property. 2. The lender must disclose the total cost of the mortgage to the homeowner expressed as a single average annual interest rate based on projected future loan balances for at least two loan terms and two different appreciation rates. To fulfill this requirement, the _____________________________________________________________________ 6 Department is modifying the HECM software package used to calculate payments to borrowers so that it can automatically produce this disclosure for a given payment plan. The new version, HECM V5.0A, should be used after February 1, 1991. It is expected that lenders will be able to secure a copy of the modified software after January 15, 1991, by using a modem to call the Office of Housing's computer bulletin board (202-708-3102). For technical assistance in using the bulletin board, call 202-708-3026. Copies of the software may also be obtained from the nearest HUD field office. The first disclosure must be made at least 10 days prior to closing to comply with the law. Lenders are encouraged to provide both disclosures as early as possible. VI. LIMITATION ON SECONDARY RESIDENCES The 1990 Act prohibits HUD from insuring a mortgage for a secondary residence unless HUD determines that it is necessary to do so to avoid undue hardship to the mortgagor, or unless the mortgage is a type exempt from the investor prohibitions announced in Mortgagee Letter 89-31. Until HUD amends its regulations to describe the hardship exceptions, HUD will not be granting hardship exceptions. Direct Endorsement lenders are not authorized to grant hardship exceptions. In no event may a secondary residence be a vacation home. This limitation on secondary residences is effective for mortgages insured: 1. pursuant to a conditional commitment issued on or after January 27, 1991; or 2. pursuant to an appraisal report or master appraisal report signed by a Direct Endorsement underwriter on or after January 27, 1991; or 3. pursuant to a Certificate of Reasonable Value or Master Certificate of Reasonable Value issued by the Department of Veterans Affairs on or after January 27, 1991. These limitations also apply to the approval of substitute mortgagors (assumptors). Except for hardship exceptions approved by HUD, FHA mortgages on properties may not be assumed if the original mortgage was subject to the limitation on secondary residences and it is the intent of the assumptor to use the property as a secondary residence. _____________________________________________________________________ 7 For mortgages covered by this limitation on assumption, the mortgagee must delete or strike out the words "or secondary residence" which appear in Paragraph 9.(b)(ii) of the current HUD-approved mortgage language contained in the mortgage instrument. (See Mortgagee Letter 89-31). A mortgage on a secondary residence involving proposed construction cannot be insured under a conditional commitment or DE appraisal (including a master conditional commitment, DE master appraisal, VA/CRV or MCRV) that is extended on or after January 27, 1991, unless a sales contract was signed and construction started prior to that date. HUD-owned properties sold under our Single Family Property Disposition program may be purchased as secondary residences, but the loan-to-value ratio is limited to 85 percent. VII. ACCOUNTABILITY OF MORTGAGE LENDERS A. Limitation on Tiered Pricing Practices The 1990 Act prohibits lenders from originating insured mortgages if it is the customary lending practice of the lender to provide for a variation in "mortgage charge rates" (discount points, origination fee and other such fees) of more than two percent in an area (metropolitan statistical area or county, in rural areas). The 1990 Act further requires HUD to ensure that any variations in mortgage charge rates be based only on the actual variations in costs to the lender to make the loan. The two percent limitation on variation in "mortgage charge rates" shall be applied to all Section 203 mortgages by loan type. For example, Section 203(k) mortgages or non-condominium Section 223(e) mortgages could be treated as distinct loan types because of different levels of risk or other factors that differentiate them from ordinary Section 203(b) mortgages for purposes of pricing. All Section 203 mortgages of the same mortgage type would be subject to a two percent limitation on variation. Any variation within the two percent limit must be based upon the lender's actual costs to process the mortgage. Mortgages on condominium units and other mortgages not involving Section 203 insurance are not covered by this limitation on tiered _____________________________________________________________________ 8 pricing. The provision is now in effect, but HUD expects to provide clarification through a proposed rule. Lenders that are presently engaging in tiered pricing practices should cease these practices immediately and consult with legal counsel to establish pricing practices that comply with the law. B. Examinations and Sanctions for Certain Violations The 1990 Act directs HUD to examine lenders for violations of the tiered pricing limitations, as well as the prohibition against lenders requiring that the loan exceed a certain minimum amount before they will accept the loan application. (See Mortgagee Letter 88-2 about the prohibition on minimum loan amounts.) Where HUD determines that a lender is not in compliance with these requirements, HUD will refer the matter to the Mortgagee Review Board for further investigation and action. The 1990 Act also requires HUD to establish procedures by which a person may file a request with HUD and have HUD determine whether a lender is complying with the limitation on tiered pricing and the prohibition on minimum loan amounts. HUD will be issuing a Federal Register Notice (within approximately six months) to implement the procedures to follow for persons who want to make these requests, with a later regulation based on the notice. VIII. DISTRIBUTION OF INFORMATION REGARDING EARLY DEFAULTS The 1990 Act requires HUD to collect and maintain information about early defaults and foreclosures on all single family insured mortgages and to make this information available for public inspection. This statistical information must include, by lender and census tract, the following: 1) the name of the lender and the census tracts in which the lender originated one or more mortgages; 2) the total number of mortgages originated in each census tract; 3)the total number of defaults and foreclosures in each census tract; and 4) the percentages of mortgages in default and foreclosure in each census tract and overall. The 1990 Act requires that HUD make this information available by census tract within six months. Requests for this information by census tract should be sent to: Director, Housing Information and Statistics Division, Office of Management, U.S. _____________________________________________________________________ 9 Department of Housing and Urban Development, Room 9241, 451 7th Street, SW, Washington, DC 20410. Until this information is available by census tract, the 1990 Act requires that HUD make available immediately early default and claim data for Fiscal Year 1990 for its Field Offices. This Field Office information is now available from HUD Headquarters upon written request. Send these requests to: Director, Single Family Development Division, Office of Insured Single Family Housing, U.S. Department of Housing and Urban Development, Room 9272, 451 7th Street, SW, Washington, DC 20410. IX. EXTENSION OF RECIPROCITY IN APPROVAL OF SUBDIVISIONS The 1990 Act has extended the reciprocity of acceptance by HUD of a Certificate of Reasonable Value or Master Certificate of Reasonable Value issued by the Department of Veterans Affair's as evidence of subdivision approval. The provisions of Mortgagee Letters 89-1 and 89-9 remain in effect. X. APPRAISAL SERVICES The 1990 Act authorizes Direct Endorsement approved lenders to contract with appraisers chosen at the discretion of the lender to perform appraisals in connection with insured mortgages and defines appraisers to include appraisal companies and partnerships, as well as individuals. HUD will prepare proposed Regulations in the near future to implement this new appraisal procedure. XI. DISCLOSURE REGARDING INTEREST DUE UPON MORTGAGE PREPAYMENT The 1990 Act requires the lender to provide to the mortgagor at or before closing, a Disclosure Statement which describes the requirements that the mortgagor must fulfill upon prepayment of the mortgage to prevent the accrual of any interest on the mortgage after the date of prepayment. This Disclosure Statement must be given to the mortgagors in all cases that close on or after 90 days after the implementing regulation takes effect. _____________________________________________________________________ 10 In addition, the new law requires each mortgage servicer to provide annual written notice to mortgagors that includes: 1) the amount of outstanding principal balance of the loan and 2) any requirements the mortgagor must fulfill to prevent the accrual of any interest on the mortgage after the date of prepayment. This requirement for annual disclosure is effective 90 days after the implementing regulation takes effect. HUD will be drafting the implementing Regulations for the Disclosure Statement and the Annual Notice in the near future. XII. MUTUAL MORTGAGE INSURANCE FUND DISTRIBUTIONS (DISTRIBUTIVE SHARES) Under the new legislation the Secretary is required to take the actuarial soundness of the entire Mutual Mortgage Insurance (MMI) Fund and other operational goals into consideration before determining if surplus funds exist for distribution to mortgagors. A June, 1990 independent actuarial study found that the MMI fund is not currently sound. Consequently, the Department will not establish additional obligations for payment of Distributive Shares until further notice. Homeowners should be advised to direct any questions regarding this change to the single Family Insurance Operations Division, P.O. Box 23699, Washington, DC, 20026-3699. Very sincerely yours, Arthur J. Hill Acting Assistant Secretary for Housing-Federal Housing Commissioner Attachments _____________________________________________________________________ EXHIBIT I (Assume none of the examples exceed the maximum mortgage limit for the area.) A. Examples for a property with a value exceeding $50,000: EXAMPLE NO. 1 First Calculation $90,000 Lesser of sales price or appraised value + 2,000 Add allowable closing costs from GFE* _______ $92,000 -25.000 x 97% = $24,250 _______ $67.000 x 95% = 63,650 _______ $87,900 Second Calculation $90,000 Lesser of sales price or appraised value x97.75% Do not add closing costs _______ $87,975 In this example, the maximum mortgage is $87,900 because it is the lesser of the two calculations. Note that the borrower is able to finance all allowable closing costs. EXAMPLE NO. 2 First Calculation $90,000 Lesser of sales price or appraised value + 3,000 Add allowable closing costs from GFE* _______ $93,000 -25,000 x 97% = $24,250 _______ $68,000 x 95% = $64,600 _______ $88,850 Second Calculation $90,000 Lesser of sales price or appraised value x97.75% Do not add closing costs _______ $87,975 In this example, the maximum mortgage is $87,975 ($87,950 if condominium). Note that the borrower, is able to finance only a portion (71%) of the closing costs. *Good Faith Estimate _____________________________________________________________________ B. Examples for a property with a value less than $50,000: EXAMPLE NO. 1 First Calculation $48,000 Lesser of sales price or appraised value + 800 Add allowable closing costs _______ 48,800 x 97% _______ $47,336 Second Calculation $48,000 Lesser of sales price or appraised value x 98.75% Do not add closing costs _______ $47,400 In this example, the maximum mortgage is $47,336 ($47,300 if a condominium) because it is the lesser of the two calculations. Note that the borrower is able to finance all allowable closing costs. EXAMPLE NO. 2 First Calculation $48,000 Lesser of sales price or appraised value + 1,000 Add allowable closing costs from GFE* _______ 49,000 x 97% _______ $47,530 Second Calculation $48,000 Lesser of sales price or appraised value x98.75% Do not add closing costs _______ $47,400 In this example the maximum mortgage is $47,400. Note that the borrower is able to finance only a portion (87% of the closing costs). *Good Faith Estimate _____________________________________________________________________ C. Examples for a property with a value exceeding $50,000 and the seller or any third party is paying a portion of allowable closing costs. In these examples, sales price and value are both $80,000, and total allowable closing costs are $3,750, in the first example, the seller is paying $1,000 of the borrower's allowable costs. Also shown is the borrower's required downpayment (cash investment). In the second example, the borrower pays all of the closing costs. These examples show that seller payment of borrower's closing costs does not reduce the amount of the borrower's cash investment in the property. EXAMPLE NO. 1 First Calculation $80,000 Sales price - 1,000 Subtract seller or third party paid portion of _______ closing costs 79,000 + 3,750 Add allowable closing costs _______ 82,750 Adjusted acquisition cost -25,000 x 97% = 24,250 _______ $57,750 x 95% = 54,862 _______ $79,112 The adjustment is made to sales price only. The first calculation for the mortgage amount is based on the lesser of the acquisition cost or value plus closing costs. Second Calculation $80,000 Lesser of sales price or appraised value - do not - 1,000 add closing costs. Subtract seller or third party _______ paid portion of closing costs. 79,000 x97.75% _______ $77,222 In this example, the maximum mortgage is $77,222 ($77,200 for a condominium) because it is the lesser of the two calculations. Required Investment: $82,750 Adjusted acquisition cost -77,222 Maximum mortgage amount _______ $ 5,528 Required cash investment The same process applies to modestly priced properties of $50,000 or less when the seller or any third party pays a portion or all of the closing costs. _____________________________________________________________________ EXAMPLE NO. 2 In this example, the buyer is financing all allowable closing costs. First Calculation $80,000 Lesser of sales price or appraised value + 3,750 Add allowable closing costs from GFE* _______ 83,750 Total acquisition cost -25,000 x 97% = 24,250 _______ $58,750 x 95% = +55,812 80,062 Second Calculation $80,000 Lesser of sales price or appraised value x97.75% Do not add closing costs _______ $78,200 In this example, the maximum mortgage is $78,200 because it is the lesser of the two calculations. Required Investment: $83,750 Acquisition cost -78,200 Maximum mortgage amount _______ $ 5,550 Required cash investment Seller paying a portion of closing costs (Example No. 1) shows the required cash investment is $22 less than if the borrower financed all allowable closing costs (Example No.2). *Good Faith Estimate _____________________________________________________________________ EXHIBIT II MORTGAGE INSURANCE PREMIUM CHART ____________________ _________________________ _________ FISCAL UP FRONT ANNUAL TERM OF YEAR MIP LTV PREMIUM ANNUAL PREMIUM _________ __________ _______________ _________ _________ 3.8% 89.99 + UNDER .50 5 YEARS 1991 + 1992 90.00 - 95.00 .50 8 YEARS 95.01 + OVER .50 10 YEARS ____________________________________________________________ __________ __________ _________________________ __________ FISCAL UP FRONT ANNUAL TERM OF YEAR MIP LTV PREMIUM ANNUAL PREMIUM _________ __________ _______________ _________ _________ 3.00% 89.99 + UNDER .50 7 YEARS 1993 + 1994 90.00 - 95.00 .50 12 YEARS 95.01 + OVER .50 30 YEARS ____________________________________________________________ FISCAL UP FRONT ANNUAL TERM OF YEAR MIP LTV PREMIUM ANNUAL PREMIUM _________ __________ _______________ _________ _________ 2.25% 89.99 + UNDER .50 11 YEARS 1995 + 90.00 - 95.00 .50 30 YEARS 95.01 + OVER .55 30 YEARS ____________________________________________________________ APPLICABLE TO THE FOLLOWING SECTIONS, REGARDLESS OF TERM OF LOAN: Section 203(b) Section 244 (coinsurance) (subject to change in regs) Section 203(h) Section 245 (excluding condominiums) Section 203(i) Section 251 (excluding condominiums) Section 203(n) 11/90 _____________________________________________________________________ EXHIBIT IV ATTACHMENT "A" TO HUD 92900-WS FHA Case Number: ______________________ PART I. (Numbers in ( ) in Part I correspond to HUD 92900-WS) A1. Total Acquisition Cost (14e) $_______ B1. Adjusted Price (14b) $______ A2. Appraised Value Plus CC (8) $_______ B2. Value W/O CC (7) Minus $_________ seller-paid closing costs A3. Mortgage Based on lesser of A1 or A2 B3. Mortgage Based on lesser of X 97/95% (or 97% if either is $50,000 B1 or B2 X 97.75% (or 98.75% or less) if either is $50,000 or less) $_______________(Should = 14f(l)) $___________(Should = 14f(2)) PART II. C1. $__________ Maximum base Mortgage (lesser of A3 or B3 (check which)) C2. $__________ Total UFMIP (C1 X 3.8%) C3. $__________ Total Mortgage including UFMIP (C1 + C2) C4. $__________ Total Seller or other third party contribution toward buydown (discount points, interest payments, etc.) or closing costs normally paid by mortgagor, inc. orig. fee. Show amount in each category based on mortgage on line C3. $___________ CCs $__________ Pts $__________ Buydown $___________ Other Fees (explain) C5. $ Six percent (6%) of Line C3 C6. $ Amount C4 exceeds C5 (if 0, no further computation needed.) PART III. If maximum mortgage (Cl) based on A3, compute adjusted mortgage in Section D: D1. Total Acquisition Cost minus excessive contribution (Al-C6) $________ D2. Appraised Value plus Closing Costs (A2) $________ D3. Compute adjusted maximum base mortgage (multiply lesser of D1 or D2 using same factors as in A3, above) $___________* *Line 14g of HUD 92900-WS may not exceed this amount If maximum mortgage (C1) based on B3, compute adjusted mortgage in Section E: E1. Adjusted Price minus excessive contribution (B1-C6) $_________ E2. Line B-2 minus excessive contribution (B2 - C6) $_________ E3. Compute adjusted maximum base mortgage (multiply lesser of E1 or E2 using same factors as in B3 above) $_________* *Line 14g of HUD 92900-WS may not exceed this amount 1/91