www.hudclips.org 


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

March 7, 1994
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 94-10
     TO:  ALL APPROVED MORTGAGEES
     SPECIAL ATTENTION:  Mortgage Lenders Serving Southern California
     SUBJECT:  Single Family Loan Production - Additional Aid to Assist
                 Victims of the Los Angeles Area Earthquake
 
         This Mortgagee Letter is to advise you of additional actions taken
     by the Department to assist victims of the Los Angeles area
     earthquake.  On February 12, 1994, President Clinton signed into law
     H.R. 3759, the Emergency Supplemental Appropriations Act of 1994 (the
     "Act") that adds the measures described below to further assist
     victims of the earthquake to obtain housing.  These additional
     measures apply only to those individuals whose principal residence was
     damaged or destroyed to the extent that reconstruction or replacement
     is necessary and the property being purchased or repaired is located
     in one of the three counties mentioned below.  The Act includes the
     following provisions:
 
     Increase in Mortgage Limits for Section 203(h):  The Act increases the
     HUD maximum mortgage limit in the counties of Los Angeles, Orange, and
     Ventura to the Federal Home Loan Mortgage Corporation (Freddie Mac)
     limit of $203,150 for mortgages to be insured under the Section 203(h)
     program.  This increase applies to one-unit properties with mortgages
     insured under the Section 203(h) program and the property being
     purchased under Section 203(h) must be located in one of those three
     counties.
 
     Condominiums Eligible for 100 Percent Financing:  The Act permits
     disaster victims to purchase condominium units with mortgages insured
     under Section 234(c) with 100 percent financing as under Section
     203(h).  The maximum mortgage limit is also $203,150 for a condominium
     unit that is being purchased in one of the three counties in the
     disaster area.
 
     Section 203(k) Program:  The Act permits earthquake disaster victims
     to rehabilitate a property under the Section 203(k) program, either
     through a purchase or a refinance, and also raises the maximum
     insurable mortgage amount to the Freddie Mac limits.  The maximum
     mortgage amounts under the Section 203(k) program for Los Angeles,
     Orange, and Ventura counties are:
 
                         1-unit         $203,150
                         2-units        $259,850
 
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                                                                      2
 
                         3-units        $314,100
                         4-units        $390,400
 
These higher limits apply only to owner-occupied principal residences.
All loan-to-value, cash investment, and other underwriting requirements of
the Section 203(k) program remain in effect.  There is no need to determine
that the property being rehabilitated was damaged by the earthquake;
however, the borrower's principal residence must have been damaged or
destroyed by the disaster.
 
Expiration of Program:  The legislation provides that these higher mortgage
limits and eligibility criteria will be effective for 18 months from the
date of the President's declaration of the disaster.  For Los Angeles,
this authority will expire July 17, 1995, and July 19, 1995 for Orange
and Ventura Counties.  Mortgage insurance applications (HUD-92900-A,
Addendum to URLA) must be signed by the borrower on or before these dates
to be eligible.
 
     All other underwriting and servicing policies to aid victims of the
Los Angeles earthquake described in Mortgagee Letter 94-4 (January 19,
1994) remain in effect.  In addition, please note that adjustable rate
mortgages (ARMs) may be used on condominiums insured under Section 234(c)
and on Section 203(k) rehabilitation mortgages but may not be used with
mortgages insured under Section 203(h).  Premium rate mortgages, as
described in Mortgagee Letter 94-7, may be used to pay the borrower's
prepaid expenses and/or remaining closing costs on mortgages insured
under the Section 203(h) program.
 
     The Department is monitoring the extent of assistance given to
earthquake victims.  Therefore, lenders must enter "02" as the program
identification code in box 3 of form HUD-54111, Request for Insurance
Endorsement, for all mortgages originated for earthquake victims under
Sections 203(h), 203(k) and 234(c).  Leave the program identification box
blank on the form HUD-54111 for mortgages originated for non-earthquake
victims under Sections 203(k) and 234(c).
 
     If you have any questions regarding these issues, please contact your
local HUD Office.
 
Sincerely yours,
 

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