www.hudclips.org 


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

December 4, 1995
 
Mortgagee Letter 95-57
 
TO:  ALL APPROVED MORTGAGEES
 
SUBJECT:  Single Family Loan Production:  Builder Approval
            Process Eliminated
 
     Approximately 99 percent of all single family loans are now
processed by lenders participating in the Direct Endorsement (DE)
program.  Prior to the implementation of the DE program in 1983,
the Department established policies which guided not only its own
staff but the program participants on how the plan review and
builder approval functions should operate.  Some of these
policies were unchanged with the advent of the DE program which
was intended to relieve the Department of certain tasks in the
mortgage insurance underwriting process while giving the lender
more responsibility and flexibility.  Now, with heightened
attention on paperwork reduction, the Department is ending one of
its long-standing processes.
 
     Paragraph 1-2, of HUD Handbook 4000.4, CHG-2, Single Family
Direct Endorsement Program, defines processes a mortgagee may use
to qualify a proposed dwelling for financing in excess of a 90
percent loan-to-value ratio.  Effective February 1, 1996, lenders
may accept certified plans and specifications from any builder.
The Department will no longer approve builders or maintain lists
of approved builders as described in paragraph 3-3 of HUD
Handbook 4145.1 REV-2, Architectural Processing and Inspections
for Home Mortgage Insurance.  Since HUD will no longer "approve"
builders, and lenders may select appraisers, "Early Start
Letters"  will no longer be issued.  Further, the Computerized
Homes Underwriting Management System (CHUMS) will be changed so
that a builder's identification number is no longer called for on
the Receiving/Assignment screen.
 
     Outstanding instructions to lenders on acquiring and
retaining construction plans, specifications, builder warranties,
etc., remain in effect.  While the mortgagee is expected to
collect and retain certified plans, specifications and other
documents from the builder, it is not expected to review or
"approve" them.
 
     However, if the mortgagee finds something questionable or
suspects a submission is unacceptable, they should contact the
local HUD Office for assistance.  Further, if the fee or
mortgagee staff inspector discovers that the plans, specifica-
tions or other documents are insufficient or otherwise
unacceptable, they should contact the mortgagee and the local HUD
Office to take corrective action.
 
     If you have any questions concerning this letter, please
contact the local HUD Office in your area.
 
Sincerely yours,
 

Nicolas P. Retsinas
Assistant Secretary for Housing-
Federal Housing Commissioner
.