The regulations containing the requirements which a mortgage must meet for the direct endorsement program are contained in 24 CFR 203.5 and 203.255. Under those sections, mortgages to be insured under section 235(r) must be originated through direct endorsement processing. There are several provisions of 24 CFR 203.5 and 203.255 which do not apply to section 235(r) mortgages and there are several additional requirements which are specific to section 235(r) mortgages which are contained in paragraph (b) of this section. Other than those provisions which have been specified in paragraph (a) of this section, the provisions contained in 24 CFR 203.5 and 203.255 apply to mortgages insured under section 235(r).
(a) Inapplicable Provisions. (1) The properties, which are to be security for the section 235(r) mortgages, are currently security for mortgages insured under section 235, and are existing properties with no requirement for appraisals. The requirements for an appraisal in 24 CFR 203.5(e) and 203.255(b)(1) and for a review of an appraisal in 24 CFR 203.255(b)(5) shall not apply to a mortgage to be insured under section 235(r) of the National Housing Act.
(1) The properties, which are to be security for the section 235(r) mortgages, are currently security for mortgages insured under section 235, and are existing properties with no requirement for appraisals. The requirements for an appraisal in 24 CFR 203.5(e) and 203.255(b)(1) and for a review of an appraisal in 24 CFR 203.255(b)(5) shall not apply to a mortgage to be insured under section 235(r) of the National Housing Act.
(2) There is no requirement that the mortgagee perform the mortgage credit analysis described in 24 CFR 203.5(d) for a mortgage insured under section 235(r) unless the mortgagor's portion of the monthly payments due under the mortgage to be insured increase by more than $50.00 over the amount the mortgagor was paying on the mortgage being refinanced as provided in Sec. 235.1202(b)(6). If the mortgagor's portion of the payment does not increase by more than $50.00, then the mortgagee shall perform the underwriting requirements in accordance with the instructions contained in a handbook or other similar publication which is provided to all mortgagees approved for the direct endorsement procedure.
(3) Since there are special eligibility requirements for mortgages insured under section 235(r), paragraphs (c)(2) and (c)(3) of 24 CFR 203.255 do not apply to such mortgages, and in lieu thereof specific provisions for section 235(r) mortgages have been substituted as contained in paragraph (b) of this section.
(b) Special Provisions. In addition to the review and determinations which must be made of the documents submitted by the mortgagee to the Secretary in accordance with 24 CFR 203.255(c), as revised for mortgages insured under section 235(r) by paragraph (a) of this section, the Secretary shall make the following specific determinations for section 235(r) mortgages:
(1) That the term of the mortgage meets the requirements of 24 CFR 235.120(b)(2).
(2) That the stated mortgage amount does not exceed the maximum dollar limitation under 24 CFR 235.1202(b)(1).
(3) That the interest rate on the mortgage meets the requirements of 24 CFR 235.1202(b)(3).
(c) Authority to sign. The mortgagees that have the authority to originate and close mortgages in accordance with Sec. 235.1218(e) shall have the authority to sign for and on behalf of the Secretary, in accordance with procedures established by the Secretary, without further specific approval, the following documents:
(1) Approval of amount of assistance payments. The Form HUD 93100, ``Application for Homeownership Assistance under section 235 of the National Housing Act,'' which evidences a review of the information obtained from the mortgagor on the application, a determination of eligibility or ineligibility for assistance payments, and the amount of the assistance payments to which the mortgagor is entitled.
(2) Subordination and modification agreement. An agreement, which subordinates a recapture second mortgage or deed of trust (recapture mortgage) held by HUD in accordance with 24 CFR 235.12, to the lien of the mortgage being submitted for insurance so that the recapture mortgage will remain a second lien. If the recapture mortgage is a third lien following a second lien made, held or insured by a Federal, State or local governmental agency, and approved by the Secretary, the direct endorsement mortgagee may sign an agreement subordinating the recapture mortgage to third lien place. The agreement shall also contain a modification of the recapture mortgage to include a new note to be signed by the mortgagor securing repayment of the assistance to be paid under the mortgage to be insured under section 235(r). [57 FR 62453, Dec. 30, 1992. Redesignated and amended at 60 FR 56499, 56501, Nov. 8, 1995]
Contract Rights and Obligations