U.S.DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
                            WASHINGTON,D.C. 20410-8000
  
                           November 3, 1989
 
OFFICE OF THE ASSISTANT SECRETARY FOR
 HOUSING-FEDERAL HOUSING COMMISSIONER
                                                                    TI-402
MEMORANDUM FOR:  ALL TITLE I LENDING INSTITUTIONS
                 Attn:  Installment Loan Department
SUBJECT:  Request for Comments and Suggestions for Possible Changes
          to the Title I Program
 
     On October 3, 1989, HUD Secretary Jack Kemp announced a series of
reforms designed to reinvigorate the Federal Housing Administration,
strengthen its finances, and recommit the agency to the mission of
increased homeownership opportunities for low- and moderate-income families
and first-time homebuyers.  Two of the Secretary's reform proposals affect
the Title I loan insurance program:
 
     1.  The Department is requesting that Congress amend Title I of
         the National Housing Act to prohibit property improvement
         dealer/contractors and loan brokers from assisting borrowers in
         obtaining Title I property improvement loans.  The Department
         has concluded that the involvement of dealers and brokers in the
         origination of these loans has been subject to fraud and
         misrepresentation.  The effect of this legislation would be to
         require that borrowers apply directly to approved Title I lenders
         for these loans.
 
     2.  The Department is planning further changes to the Title I
         regulations that would revise the process by which manufactured
         home loans are originated, in order to minimize the opportunities
         for fraud or misrepresentation by manufactured home dealers and
         borrowers.
 
    While reducing the potential for fraud and other program abuses, this
reform effort also provides the Department with an opportunity to broaden
the appeal of the Title I program to lending institutions and borrowers
across the nation.  At the present time, there are many areas of the
country where borrowers do not have access to the program, either because
lenders are not aware of the program or feel that it is too complex for
them to participate.
 
    The Department is requesting your comments on possible changes to the
program that would encourage broader participation by lenders and
borrowers, while preserving the program's actuarial soundness and avoiding
the pitfalls and problems of third-party involvement in the loan
origination process.  All comments and suggestions are welcome, whether
they are for legislation, regulatory revisions, or changes in
administrative procedure.
 
_____________________________________________________________________
2.
 
        Comments should be provided in writing as soon as possible, but
   in any case not later than 45 days from the date of this letter.
   Please send your comments to the following address:
 
                   Robert J. Coyle, Director
                   Title I Insurance Division
                   HUD Building, Room 9160
                   451 Seventh Street, S.W.
                   Washington, DC 20410
 
        If you have questions about this letter, please call the Title
   I Insurance Division on (202) 755-6880.  We look forward to
   receiving your thoughts on how reform the Title I program for the
   1990's.
 
                                           Sincerely yours,
 
                                           C. Austin Fitts
                                           Assistant Secretary