www.hudclips.org 


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

March 12, 1996
 
Mortgagee Letter  96-13
 
TO:  ALL APPROVED MORTGAGEES
 
ATTENTION:  Originating and Servicing Lenders
 
SUBJECT:  Amending Provisions to Mortgagee Letter 95-53,
                 Refinancing Section 235 Mortgages
 
LIMITATIONS ON DISCOUNT POINTS PAID BY THE DEPARTMENT
 
     Mortgagee Letter 95-53 provides that the borrowers'
refinancing costs and financial incentive are reimbursable by the
Department to a lender, which originates a Section 235(r)
mortgage and which pays these expenses respective to refinancing
a Section 235 mortgage to a Section 235(r) mortgage.
 
     One part of the reimbursement is an amount for discount
points.  To clarify the Department's position on this part, it is
the intent of the Department to only reimburse actual (reasonable
and customary) discount points associated with the Section 235(r)
interest rates as computed in accordance with the provisions
found in the mortgagee letter.
 
     Discount points associated with below market Section 235(r)
interest rates, "teaser" rates, or "buydown" rates, which are
lower than the rate that is authorized for use in the mortgage
instruments per the mortgagee letter, will not be reimbursed by
the Department.
 
SUPERSEDING ATTACHMENTS
 
     Attachment 2, Section 235(r) Mortgages - Initial and Annual
Mortgage Insurance Premium Factor Table, found in Mortgagee
Letter 95-53 is superseded by Attachment 2-A (attached).  This
new attachment is the same as the old factor table except that
the new table includes premium factors beginning with a six
percent Section 235(r) interest rate.
 
     Attachment 8, Section 235 Mortgages Directory-Written
Request, found in Mortgagee letter 95-53 has an inoperable post
office box number.  This old attachment is superseded by
Attachment 8-A (attached).  Please use the new attachment when
requesting Section 235 mortgage data.
 
REMINDER - REFINANCING SECTION 235 MORTGAGES TO SECTION 203(b)
STREAMLINE MORTGAGES (WITH OR WITHOUT AN APPRAISAL)
 
     Lenders can refinance Section 235 mortgages to Section
203(b) mortgages using the streamline underwriting procedures
contained in HUD Handbook 4155.1, REV-4.  Any overpaid subsidy
that has been paid by the lender to the Department and is part of
the borrowers' mortgage account can be included in the Section
203(b) mortgage amount, provided the mortgage amount does not
exceed the maximum mortgage amount calculated in accordance with
the handbook.
 
     Furthermore, if the Department has a junior lien that was
part of the original Section 235 financing, the Department will
subordinate the junior lien to the Section 203(b) mortgage that
refinances the Section 235 mortgage.
 
     Where practical, the Department encourages borrowers to
refinance their Section 235 mortgages.  Lenders are at liberty to
pay the borrowers' refinancing costs or to incorporate these
costs in the mortgage amount where applicable.  The Department,
however, cannot pay or reimburse these refinancing cost except as
allowed under the Section 235(r) Refinancing procedures.
 
Very sincerely yours,

 
Nicolas P. Retsinas
Assistant Secretary for Housing-
Federal Housing Commissioner
 
Attachments
 
                                                  ATTACHMENT 2
 
ATTACHMENT 2 CONTAINS LEGAL SIZED TABLES WHICH CANNOT BE VIEWED
IN HUDCLIPS AT THIS TIME.
                              ATTACHMENT 8-A
 
                      SECTION 235 MORTGAGES DIRECTORY
                            REQUEST PROCEDURES
 
INSTRUCTIONS TO COMPLETE THIS ATTACHMENT:
 
    1.   DETERMINE THE AMOUNT OF THE REMITTANCE.
 
    2.   ATTACH A MONEY ORDER OR CERTIFIED CHECK FOR THE AMOUNT
         OF THE REMITTANCE TO THIS ATTACHMENT.
 
    3.   THE MONEY ORDER OR CERTIFIED CHECK IS PAYABLE TO:  U.S.
         DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT.
 
    4.   CLEARLY PRINT OR TYPE ON THE MONEY ORDER OR CERTIFIED
         CHECK AND THE ENVELOPE ADDRESSED TO HUD:  "235 MORTGAGES
         DIRECTORY".
 
    5.   MAIL TO:
 
             U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                        ATTN:  SECTION 235 REQUESTS
                              P.O. BOX 198762
                             ATLANTA, GA 30384
 
MORTGAGEE'S NAME:
 
ADDRESS:
 
ADDRESS:
 
CITY:
 
STATE:
 
ZIP CODE:
 
CONTACT PERSON:
 
AREA CODE &
 
TELEPHONE #:
 
    QUANTITY DESIRED:
 
         HARD COPIES (@ $50.00 PER COPY)
         FLOPPY DISKS (@ $150.00 PER SET)
         MAGNETIC TAPES (@ $250.00 PER TAPE)
 
    TOTAL REMITTANCE:                       $