November 1, 2004

> MORTGAGEE LETTER 2004-43

TO: ALL APPROVED MORTGAGEES

SUBJECT: Eligibility of Mortgages on Hawaiian Home Lands Insured Under
Section 247

On June 15, 2004, the Department of Housing and Urban Development
published an interim rule in the [Federal Register]{.underline} to
implement a revised definition of the term "native Hawaiian." This was
in response to Section 215 of the Department of Veteran Affairs (VA),
HUD, and Independent Agencies Appropriations Act of 2002 that amended
Section 247 of the National Housing Act (12 USC 1715z-12) and HUD's rule
at 24 CFR 203.43i, "Single-Family Mortgage Insurance on Hawaiian Home
Lands."

Effective July 15, 2004, the term native Hawaiian, as used for mortgages
to be insured under Section 247, is defined as "...any descendant of not
less than one-half part of the blood of the races inhabiting the
Hawaiian islands before January 1, 1778, or, in the case of an
individual who is awarded an interest in a lease of Hawaiian home lands
through transfer or succession, such lower percentage as may be
established under section 208 or section 209 of the Hawaiian Homes
Commission Act of 1920 (42 Stat. 111), or under the corresponding
provision of the Constitution of the State of Hawaii..."

Section 215 of the Department of Veteran Affairs (VA), HUD, and
Independent Agencies Appropriations Act of 2002 also added subsection
(e) to section 247, which provides that possession of a lease issued
under section 207(a) of the Hawaiian Homes Commission Act of 1920 shall
be sufficient to certify eligibility for a mortgage to be insured under
section 247. DHHL has prepared a form, entitled "Request for
Certification of Eligibility," on which DHHL will certify that the
native Hawaiian possesses a homestead lease in good standing (not
cancelled or in default). (See Attachment 1.) The lender or processing
agency will complete the DHHL form and submit it directly to DHHL for
completion. DHHL will issue the completed form to the lender or the
local processing agency, which shall keep it in the case file. If
mortgagees or applicants for a mortgage on a property in the Hawaiian
Home Lands have a question with respect to the eligibility requirements,
they may go to the website at
[www.capitol.hawaii.gov/hrscurrent/vol01_ch0001-0042f/06-Hhca/HHCA_0208.htm](http://www.capitol.hawaii.gov/hrscurrent/vol01_ch0001-0042f/06-Hhca/HHCA_0208.htm)
or call the Department of Hawaiian Home Lands (DHHL) at 808-586-3802.
DHHL is solely responsible for determining eligibility for a
"Certificate of Eligibility" and its subsequent issuance.

2

The lender must obtain a copy of the homestead lease issued by DHHL that
identifies the proposed mortgagor as the lessee. This will be either an
original homestead lease issued to the proposed mortgagor or an original
homestead lease, along with documentation showing succession or
assignment of the homestead lease to the mortgagor and DHHL's consent to
each and every transfer of the homestead lease. Any amendments to the
original homestead lease must be included as part of the documentation.
All homestead lease documents must bear evidence of having been recorded
at the DHHL.

The homestead lease must be in a form approved by HUD and must include
DHHL's Mortgage Insurance Rider as part of the homestead lease.
Attachment II is a revision to the rider that must be used for all new
mortgage applications for eligible native Hawaiians taken on or after

the date of this Mortgagee Letter*.* Paragraph (3) has been revised to
read "The Lessor..." rather than "The Lessee..." to be in compliance
with the regulations requiring that DHHL not cancel the homestead lease
without HUD's permission.

The following is a summary of the loan documents unique to the Section
247 program that must be collected by the lender to establish the
mortgagor's eligibility and included in the insurance binder submitted
to FHA:

1.  DHHL Certification of native Hawaiian eligibility and status of the
    homestead lease used as security.

2.  Homestead lease issued by DHHL and any amendments and assignments of
    the homestead lease, with DHHL's Consent to each amendment or
    assignment.

3.  DHHL Mortgage Insurance Program Rider.

4.  Department of Hawaiian Home Land Mortgage form.

5.  DHHL Consent to Mortgage.

The information collection requirements contained in this document have
been approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB
control number 2502-0538. In accordance with the

Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is
not required to respond to, a collection of information unless the
collection displays a currently valid OMB control number. 3

If you have any questions regarding this Mortgagee Letter, please
contact Gayle Ota in the Department's Honolulu Office at (808) 522-8190
or call the Homeownership Center (HOC) in Santa Ana (888) 827-5605.

> Sincerely,
>
> John C. Weicher
>
> Assistant Secretary for Housing-
>
> Federal Housing Commissioner

Attachments

Attachment II

> RIDER

HAWAIIAN HOME LANDS

MORTGAGE INSURANCE PROGRAM

IT IS HEREBY agreed that the lease to which this rider is attached is
hereby amended and supplemented as follows:

Notwithstanding any provisions to the contrary, this lease may serve as
security for any leasehold mortgage insured or held by the Secretary of
the Department of Housing and Urban Development, and the following shall
apply during such time as the lease serves as such security:

(1) Any condemnation compensation due the Lessee shall be paid to the
    mortgagee to be applied in the same manner as condemnation proceeds
    under the terms of the mortgage.

(2) Assignment of this lease is restricted to those persons who have
    received certificates issued by the Department of Hawaiian Home
    Lands certifying that the assignee or assignees are native Hawaiians
    as defined in Section 247 of the National Housing Act.

(3) The Lessor will not cancel this lease without the consent of the
    Department of Housing and Urban Development.

(4) Any casualty insurance proceeds are to be applied in accordance with
    the provisions of the leasehold mortgage.

IN WITNESS WHEREOF, the parties have executed this rider to acknowledge
the attachment hereof to said lease and the annotation of said lease
with the following statement:

Additional provisions pertaining to the lease when the lease serves as
security for a mortgage insured or held by the Secretary of Housing and
Urban Development are contained in the Department of Hawaiian Home Lands
Mortgage Insurance Program Rider, which is attached to this lease and
made a part thereof.

Dated: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_, 20\_\_\_\_\_ STATE OF HAWAII

DEPARTMENT OF HAWAIIAN HOME LANDS

By: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ By:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

LESSEE CHAIRMAN COMMISSIONER

HAWAIIAN HOMES COMMISSION

LESSOR

LEASE NO.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

LOT NO.
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

HOMESTEADER \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_