huddoc 126 (DOC)

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

April 24, 1992
OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 92-14
    TO: ALL APPROVED MORTGAGEES
    SUBJECT: Single Family Loan Production - Exemption from Annual
               MIP for Streamline Refinance Mortgages

        In Mortgagee Letter 91-26 , dated May 30, 1991, HUD explained
    the implementation of its interim rule on the risk based mortgage
    insurance premium, which requires the payment of both an upfront
    premium (3.8 percent of mortgage amount) and an annual premium
    (0.5 percent) on all mortgages insured under the Mutual Mortgage
    Insurance Fund. The Department published its final rule on the
    risk based premium in the Federal Register on April 24, 1992.
    The final rule exempts certain mortgages insured under our
    Streamline Refinance program from the payment of the 0.5 percent
    annual premium and only charges the 3.8 percent upfront premium.

        A statute applicable to HUD provides that no rule or
    regulation may become effective until after the expiration of the
    30-day calendar period beginning on the day on which such rule or
    regulation is published as final in the Federal Register. Thus,
    the final rule will be effective on May 25, 1992. However, the
    final rule will apply the change in premium to Streamline
    Refinance mortgages executed on or after April 24, 1992.

        Accordingly a mortgage originated under the Streamline
    Program (with or without an appraisal) and closed on or after
    April 24, 1992, will be exempt from the 0.5 annual premium if the
    mortgage being refinanced was closed before July 1, 1991. The
    borrower's monthly payment amount should not include any annual
    premium. The lender must provide documentation in the case file
    that the mortgage being refinanced closed before July 1, 1991.
    This documentation may be in the form of a photocopy of the HUD-1
    Settlement Statement, Mortgage Insurance Certificate or other
    credible evidence that shows that the mortgage being refinanced
    was closed before July 1, 1991.

_____________________________________________________________________

                                                          2

      Please be reminded that this exemption from payment of the
0.5 percent annual premium only applies to loans closed before
July 1, 1991 and subsequently refinanced under the streamline
refinance program. In addition, this exemption applies to just
the first refinance; should the mortgagor refinance again, the
risk based premium in effect at the time of the second refinance
will apply.

      The Department believes that this exemption from the 0.5
percent annual premium for streamline refinance mortgages will
benefit borrowers as well as HUD. If you have any questions
concerning this letter please contact your local HUD office.

                             Very sincerely yours,

                             Arthur J. Hill
                             Assistant Secretary for Housing
                               - Federal Housing Commissioner