www.hudclips.org U. S. Department of Housing and Urban Development Washington, D.C. 20410-8000 August 19, 1993 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 93-25 TO: ALL APPROVED MORTGAGEES SUBJECT: Single Family Loan Production - Extension of time for Disaster Victims of Hurricane Iniki and Hurricane Andrew to apply for Section 203(h) Mortgage Insurance. This Mortgagee Letter is to advise you of actions taken by the Department to assist victims of the hurricanes in Florida (which include the counties of Broward, Dade, Monroe, and Collier), Louisiana (which includes Terrebonne Parish), and Hawaii (which includes all of the Islands). Currently, 24 CFR 203.18(e)(3) requires the application for mortgage insurance under Section 203(h) to be filed within one year after the Presidential declaration of the disaster. The President's declaration of a major disaster in the State of Florida was signed on August 24, 1992, in Louisiana on August 26, 1992 and in Hawaii on September 12, 1992. Because of the extent of destruction, the Department has determined that the one year period is insufficient to meet the housing needs of the hurricanes' victims. Accordingly, the Department has waived the one-year requirement in the regulations and extended the period for filing an application until August 31, 1994. I. MORTGAGE INSURANCE FOR DISASTER VICTIMS - HUD has a special mortgage insurance program under Section 203(h) of the National Housing Act to assist disaster victims. Under this program, individuals or families, whose residences were destroyed or damaged to such an extent that reconstruction or replacement is necessary, are eligible for 100 percent financing under Section 203(h). The requirements for the program are as follows: o The borrower's previous residence must have been in the disaster area, and the residence was destroyed or damaged to such an extent that reconstruction or replacement is necessary. The borrower must certify that he lived in _____________________________________________________________________ 2 the disaster area and that his residence was destroyed or damaged to the extent that reconstruction or replacement is necessary. This certification must be included as part of the borrower's loan application. The borrower may have been the owner of the property or a renter of the property destroyed. o The mortgage insurance premium amount is the same as Section 203(b); the upfront premium can be financed in the mortgage; and the borrower will also pay the annual premium. o Mortgage limits are the same as Section 203(b). o The borrower must purchase a one-family unit. Two, three, and four unit properties may not be purchased under this program. o These mortgages are eligible for processing under the Direct Endorsement program. o Condominium units are not eligible for purchase under Section 203(h). II. SECTION 203(k). The requirement that a dwelling be completed more than one year preceding the date of the application for mortgage insurance under Section 203(k) has been waived and will not apply to properties located in the disaster areas. Damaged residences will be eligible for Section 203(k) mortgage insurance regardless of the age of the property. The residence need only to have been completed and occupied for eligibility under Section 203(k). III. UNDERWRITING. The Department recognizes that victims of the hurricanes may have recently incurred debts to replace personal property. Victims of the disasters will be allowed to have a total fixed payment to gross income ratio of 43 percent without compensating factors. The 43 percent ratio can be exceeded with appropriate compensating factors. This provision will apply to all FHA-insured mortgages regardless of the insurance program. Disaster victims with Secretary-held mortgages are eligible for new FHA-insured mortgages provided the borrower was current with the forbearance agreement at the time of the disaster, and all payments for the preceding twelve months were made within the month due. _____________________________________________________________________ 3 IV. SUBMISSION OF CLOSED LOANS. For lenders located in the disaster areas, the Department has extended the time for submission of closed loans for insurance endorsement from 60 days to 90 days after the date of closing. This will provide lenders additional time to locate and reconstruct loan packages where documents may have been destroyed by the hurricanes. V. ENDORSEMENT OF DELINQUENT MORTGAGES. The Coral Gables, New Orleans and Honolulu Offices have been given the authority, on a case by case basis, to endorse mortgages that are delinquent, provided the delinquency is due to hurricane-related circumstances. Documentation requirements will be established by the Field Offices. Primarily, this policy will apply to cases where the loan was closed prior to the hurricane, and the homeowner may have become delinquent in his payments because of temporary disruptions in employment. If you have any question regarding these issues, please contact your local HUD office. Very sincerely yours, Nicolas P. Retsinas Assistant Secretary for Housing - Federal Housing Commissioner *U.S. G.P.O.:1993-342-362:80180