www.hudclips.org 


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

 
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
 
August 8, 1997
 
MORTGAGEE LETTER 97-35
 
TO: ALL APPROVED MORTGAGEES
 
SUBJECT: Single Family Loan Production - Insurance of Adjustable Rate
Mortgages on Single Family Properties, Section 251 of the National Housing
Act
 
This Mortgagee Letter is to advise you that effective immediately, the
Department must suspend the insurance of Adjustable Rate Mortgages (ARMs).
This action is due to the limitation on ARMs set by Section 251(c) of the
National Housing Act (Act).
 
In accordance with Section 251(c), HUD can only insure ARMs equal to 30
percent of the total number of mortgages insured under Title II of the Act
during the previous fiscal year. For Fiscal Year 1996, HUD endorsed 795,325
mortgages. This means that we can insure 238,597 ARMs for fiscal year 1997.
To date, we have endorsed approximately 90 percent of our total allowable
number of ARMs.
 
When an ARM is submitted to HUD for insurance, Home Ownership Centers and
Field Offices will log the mortgage in the Computerized Homes Underwriting
Management System (CHUMS) and perform a pre-insurance review, but will not
begin insuring the mortgages until October 1, 1997. Lenders will be advised
of any problems identified during the review. Payment histories on ARMs
that are submitted for insurance, but not insured, will be treated as
current, and the lender will not have to follow "late request for
insurance" procedures unless the mortgage has been closed for more than 60
days when received by HUD.
 
Once the Lender Insurance (LI) program is operational, lenders
participating will be authorized to enter the data into the system, but
will not be able to issue insurance until October 1, 1997.
 
All questions relating to the FHA aspects of these loans should be
addressed to the local FHA Office.
 
Sincerely yours,

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