www.hudclips.org 


U. S. Department of Housing and Urban Development
Washington, D.C. 20410-8000

June 3, 1993
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 93-12
     TO:  ALL APPROVED MORTGAGEES
     SUBJECT:  Recordkeeping Requirements for Reserve Fund for
               Replacements Activities and Forms HUD-9250
 
     Background.  The majority of lending institutions in the Mortgage
     Banking Industry have automated.  Business transactions are made
     electronically.  Many records of mortgage transactions are kept
     by "paperless" methods.  This automation has resulted in the
     storage of less paper.
 
     o    Mortgagees routinely provide written confirmation of Reserve
          Fund balances to mortgagors or their auditors for their
          preparation of the audited annual financial statements
          required of projects with HUD-insured mortgages.
 
     o    HUD also relies on the certifications of project owners and
          their auditors as to the accuracy of Reserve Fund for
          Replacements account balances that are reported in the
          annual audited financial statements, so HUD believes that
          previously existing record retention requirements can be
          modified.
 
     Based on these developments, the Department has been asked to
     publish guidance the Industry must follow concerning retention of
     paper copies of Forms HUD-9250, "Reserve Fund for Replacements
     Authorizations," for projects with insured mortgages.
 
     Revised Record Retention Requirements:  Effective with the date
     of this Mortgagee Letter, mortgagees must retain paper copies of
     Forms HUD-9250 for only the current calendar year's activities
     and the three calendar years prior to the current year.
 
     o    For example, in calendar year 1993, all Forms HUD-9250 must
          be retained for calendar years 1990, 1991, 1992, and 1993.
 
     o    In this example, on January 2, 1994, paper copies of Forms
          HUD-9250 pertaining to calendar year 1990 do not, as far as
          HUD is concerned, need to be retained and may be discarded.
 
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     Providing Forms HUD-9250 to HUD When Assigning Defaulted
     Mortgages:  Forms HUD-9250 for the three calendar years prior to
     the assignment of the mortgage plus those approved in the
     calendar year of assignment are to be submitted to HUD when
     mortgages are assigned to HUD as part of a Default Election.
 
     Providing Forms HUD-9250 to HUD or a Purchasing Mortgagee as a
     Result of a Section 221(g)(4) Election.  Prior to the issuance of
     this Mortgagee Letter, HUD made provisions for purchasing
     mortgagees acquiring these mortgages in a Section 221(g)(4)
     project mortgage auction to receive the most recent audited
     annual financial statements of the project mortgagor.  These
     statements show the balances held in the project's Reserve Funds.
     The purchasing mortgagee and HUD relied on and can continue to
     rely on these financial statements as evidence that the stated
     Reserve Fund balances were proper.  Selling mortgagees were
     expected to furnish acquiring mortgagees with copies of Forms
     HUD-9250 from the date of the audited financial statement to the
     date of the mortgage transfer.
 
     o    For example, if a mortgage were transferred on February 2,
          1993, for a project whose fiscal year ended December 31,
          1992, the purchasing mortgagee need have on hand only Forms
          HUD-9250 from January 1, 1993, forward plus the mortgagor's
          audit for the period ended December 31, 1992.  In this
          manner, HUD established "hold harmless" provisions for cases
          where the purchasing mortgagee did not have or receive older
          Forms HUD-9250.  These purchasing mortgagees will be
          expected to comply with the requirements of this Mortgagee
          Letter from the date of the audited financial statements
          forward and do not need to retain Forms HUD-9250 for the
          period before that date.
 
     Selling and purchasing mortgagees participating in future Section
     221(g)(4) project mortgage auctions will be expected to comply
     with the requirements of this Mortgagee Letter.  The date of the
     most recent audited financial statements will no longer be used
     to determine retention requirements for Forms HUD-9250.
 
     Providing Forms HUD-9250 to Other Lenders:  Forms HUD-9250 are to
     be provided to mortgagees that purchase mortgages as routine
     mortgage banking transactions.  All Forms HUD-9250 for the three
     calendar years prior to the transfer of the mortgage plus those
     approved in the calendar year of the transfer are to be given to
     the acquiring mortgagee.
 
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     Applicability:  These requirements are effective for all mortgage
     sales/assignments/transfers that occur on/after the date of this
     Mortgagee Letter.  They also are effective for all mortgage
     insurance claims where HUD has not made a final settlement.
 
     NOTE:  Since other agencies, such as the Internal Revenue
     Service, the Federal Deposit Insurance Corporation, the
     Comptroller of the Currency, etc., may have more stringent
     recordkeeping requirements than those established in this
     Mortgagee Letter, mortgagees are reminded that any such other
     requirements are not superseded or modified by this Mortgagee
     Letter.
 
     Effective Date:  Upon Issuance.
 
     Filing Instructions:  File in Appendix 7 of HUD Handbook 4350.4.
 
Very sincerely yours,
 

________________________________
Nicolas P. Retsinas
Assistant Secretary for Housing
- Federal Housing Commissioner
 
*U.S. G.P.O.:1993-342-362:80117