U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                                    WASHINGTON, D.C. 20410-8000


OFFICE OF THE ASSISTANT SECRETARY FOR             May 7, 1985
HOUSING-FEDERAL HOUSING COMMISSIONER
                                                                   TI-360
 MEMORANDUM FOR:  ALL APPROVED TITLE I LENDING INSTITUTIONS
                  Attention Installment Loan Department
 SUBJECT:  Notice to Borrower of HUD's Role in Title I Loans
 
      In our efforts to educate consumers and provide lending institutions
 with a tool which can be used to deter delinquencies and defaults,
 effective June 10, 1985 , one of the following notices must be provided
 all borrowers prior to granting any Title I loan.  We suggest that the
 notice be incorporated in the advance notice to borrowers when such notice
 is required (dealer property improvement and all manufactured home loans).
 We suggest that for direct property improvement loans, the notice be given
 to the borrower at the time of application for the loan.
 
                                 IMPORTANT
 
             (TO BE USED IN PROPERTY IMPROVEMENT TRANSACTIONS)
 
      You have applied for a property improvement loan under a program made
possible through Title I of the National Housing Act.  This program is
administered by the Department of Housing and Urban Development (HUD).
 
     HUD's role in this program is to provide credit insurance to lending
institutions making Title I loans.  The credit insurance helps you qualify
for the loan and protects the lender against major loss if you do not repay
the debt.
 
     Although the loan will be obtained through the lending institution, it
is a Federal offense for any party to the loan to provide false or
misleading information in connection with this loan-such offense may be
punishable by a fine, imprisonment or both.
 
     If you do not repay the loan as agreed, the lending institution may
declare all unpaid amounts immediately due and payable, with interest, and
may then assign the loan to HUD in exchange for Title I insurance benefits.
When the loan is assigned to HUD, you will be subject to HUD collection
activities, which include (1) notifying the Internal Revenue Service (the
amount due HUD under the assigned note can be treated as income to you if
you do not pay it), (2) offsetting against moneys owed to you by Federal
agencies, including salary if you are a Federal employee, (3) reporting of
the default to credit reporting agencies, (4) possible foreclosure and loss
of your home, and (5) referring the defaulted loan to the Department of
Justice for legal action.
 
_____________________________________________________________________
                (TO BE USED IN MANUFACTURED HOME TRANSACTIONS)
 
     You have applied for a manufactured Housing loan under a program made
possible through Title I of the National Housing Act.  This program is
administered by the Department of Housing and Urban Development.
 
     HUD's role in this program is to provide credit insurance to lending
institutions making Title I loans.  The credit insurance helps you qualify
for the loan and protects the lender against major loss if you do not repay
the debt.
 
     Although the loan will be obtained through the lending institution, it
is a Federal offense for any party to the loan to provide false or
misleading information in connection with this loan-such offense may be
punishable by a fine, imprisonment or both.
 
       If you do not repay the loan as agreed, the lending institution
may declare all unpaid amounts immediately due and payable, with interest,
and may repossess and sell the home.  It is important for you to understand
that the sales price of a repossessed manufactured home may be lower than
the outstanding loan balance, and therefore the lending institution may
assign its interest in the remaining balance of the loan to HUD in exchange
for Title I insurance benefits.  When the loan is assigned to HUD, you will
be subject to HUD collection activities, which include (1) notifying the
Internal Revenue Service (the amount due HUD under the assigned note can be
treated as income to you if you do not pay it), (2) offsetting against
moneys owed to you by Federal agencies, including salary if you are a
Federal employee, (3) reporting of the default to credit reporting
agencies, and (4) referring the defaulted loan to the Department of Justice
for legal action.
 
     If you have any questions, please contact Christopher Peterson,
Director, Title I Insurance Division, Washington, D.C. 20410, telephone
(202) 755-6880.
 
                              Sincerely,
 
                              Shirley McVay Wiseman
                              General Deputy Assistant Secretary
                                for Housing-Federal Housing Commissioner