www.hudclips.org 


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

January 25, 1991
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
MORTGAGEE LETTER 91-5
       TO:  ALL APPROVED MORTGAGEES
       ATTENTION:  Servicing Managers (Single Family)
       SUBJECT:  Clarification of Mortgagee Letter 89-27, Mortgagee
                   Requirements to Process and Execute A Release From
                   Personal Liability on a Mortgage Note for ANY
                   HUD-Insured One-to-Four Family Mortgage
 
            Examination of the statutes and regulations governing
       assumptions reveals that a contract for deed may be considered a
       property purchase transaction in which the purchaser formally
       assumes the mortgage if certain requirements are met.  Therefore,
       the policy outlined in Mortgagee Letter 89-27 must be clarified.
 
            Accordingly,  item (4), Sales Transaction Not Considered A
       Simple Assumption, page 3 of Mortgagee Letter 89-27, under the
       heading of MISCELLANEOUS, is changed to read as follows:  "If the
       Contract for a Deed, Land Contract, Land Sales Agreement or other
       similar agreement provides to the vendee an interest in the land
       as successor or assignee of the vendor's/mortgagor's interest,
       which interest is enforceable either at law or in equity, it is
       considered a suitable basis of ownership satisfying the
       requirements of the Act and the Regulation.  Therefore, if the
       transaction is in fact a property purchase in accordance with the
       above, the assumption regulations are applicable and require the
       mortgagor to have his mortgage credit approved.  This is true
       whether or not the purchaser formally assumes the mortgage.
 
            If the agreement does not provide the vendee with such an
       enforceable interest, the agreement may not be considered a
       property purchase transaction in which the purchaser formally
       assumes the mortgage.  Mortgages executed on or after December 1,
       1986, without terms enforceable at law or equity, must be deemed
       transactions so as to render the due-on-sale clause applicable."
 
            If you have any questions concerning this mortgagee letter,
       please contact the nearest HUD Field Office.
 
                                Sincerely yours,
 
                                Arthur J. Hill
                                Acting Assistant Secretary for
                                  Housing-Federal Housing Commissioner