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

February 6, 1992
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
MORTGAGEE LETTER 92-4
    TO:  ALL APPROVED MORTGAGEES
    ATTENTION:  SERVICING MANAGERS (Single Family)
    SUBJECT:  Effect of Agent Orange Compensation Exclusion Act on
                Section 235 Mortgages
 
         The purpose of this Mortgagee Letter is to apprise lenders
    of the provisions of the above Act which affects Section 235
    Mortgages.
 
         The Agent Orange Compensation Exclusion Act (Public Law 101-201)
    requires that none of the payments made to Vietnam veterans
    from the Agent Orange Settlement Fund, be considered income for
    the purpose of determining eligibility for or the amount of
    benefits under any Federal or federally assisted program.
 
         Lenders must adhere to this requirement when processing
    Section 235 annual or other required Recertifications of Family
    Income and Composition.  For the purpose of determining income,
    payments received by mortgagors from the Agent Orange Settlement
    Fund must be excluded from family gross annual income.  Those
    payments are considered unusual income.  The Code of Federal
    Regulations (CFR) 235.5 (2) and Paragraph 10-9A2g (HUD Handbook
    4330.1 REV-2), Administration of Insured Home Mortgages states
    that, "any unusual or temporary income must be excluded from
    gross annual income."
 
         Questions pertaining to this Mortgagee Letter should be
    directed to the Single Family Loan Management Branch of the local
    HUD Office.
 
                             Very sincerely yours,
 
                             Arthur J. Hill
                             Assistant Secretary for
                               Housing-Federal Housing Commissioner