> September 30, 2005
>
> MORTGAGEE LETTER 2005-38

TO: ALL APPROVED MORTGAGEES

SUBJECT: Up-Front Mortgage Insurance Premiums (MIP) for Loans Insured
Under Sections

> 234(c) Condominium and 203(k) Home Rehabilitation Programs

This Mortgagee Letter notifies mortgagees that HUD will charge an
up-front premium for mortgages to be insured under Sections 234(c) and
203(k) of the National Housing Act. Section 203(c) of the National
Housing Act was amended by Section 207 of the Departments of Veterans
Affairs and Housing and Urban Development and Independent Agencies
Appropriations Act, 2002, to include mortgages insured under Section
203(k) (rehabilitation loans) and Section 234(c) (condominium loans)
among those mortgages for which HUD may charge an Up-Front Mortgage
Insurance Premium (UFMIP). The final rule implementing this change was
published in the Federal Register on June 28, 2005. As with other
programs in which an up-front premium is charged, periodic premiums also
will be charged on a monthly basis.

At this time, the same 1.5 percent UFMIP rate that is charged on
mortgages insured in the Mutual Mortgage Insurance Fund will be charged
on mortgages insured under Sections 234(c) and 203(k). The monthly
premium charge and termination schedule, and the FHA-to-FHA refinance
UFMIP refund schedule announced in ML 2000-46 and ML 2005-03,
respectively, also apply to Sections 234(c) and 203(k) loans, i.e., the
premium structure for these loans is now identical to that of Section
203(b) mortgages. The procedure for remittance of UFMIP on Sections
234(c) and 203(k) loans is also the same as Section 203(b). Program ADP
codes affected by this change are shown as an attachment.

The effective date of the final rule is December 28, 2005. FHA
recognizes the normal loan closing business cycle and will take this
into account in its enforcement of the final rule. However, all
mortgagees are expected to be in full compliance with the final rule by
January 1, 2006, i.e., mortgages to be insured under these sections of
the act that are closed on or after this date are subject to the
up-front premium.

If you have any questions about this Mortgagee Letter, please contact
your local Homeownership Center in Atlanta (888) 696-4687, Philadelphia
(800) 440-8647, Santa Ana

\(888\) 827-5605, or Denver (800) 543-9378 (these are all toll free
numbers).

Sincerely,

Brian D. Montgomery

Assistant Secretary for Housing-

> Federal Housing Commissioner

Attachment

Attachment 1

Home Mortgage ADP Code Chart

**234(c) Condominium and 203(k) Rehabilitation Loans**

  ---------------------- ------------------------------- --------- ---------- ---------- -----------
  **Section of the Act** **Description**                 **ADP     **ADP Code **ADP Code **ADP Code
                                                         Code for  for        if         for HUD
                                                         DE**      VA-CRV**   pursuant   Process**
                                                                              to         
                                                                              223(e)**   

  **234(c)**             **Condominium**                 **734**   **534**    **334**    **234**

  234(c)                 Adjustable Rate Mortgage (ARM)  731       531        \--        231

  234(c)/238(c)/245(a)   Military Impact Area/Grad       777       577        \--        277
                         Payment Mtg (MIA/GPM)                                           

  234(c)/245(a)          Graduated Payment Mortgage      771       571        \--        271
                         (GPM)                                                           

  234(c)/245(a)          Grad Payment Mtg/Growing Equity 742       542        342        242
                         Mtg (GPM/GEM)                                                   

                                                                                         

  **203(k)**             **Rehabilitation                **702**   **502**    **302**    **202**
                         /Improvements/Streamline(k)**                                   

  203(k)                 223(e)/Direct Endorsement       802       \--        \--        \--

  203(k)                 Adjustable Rate Mortgage (ARM)  730       530        \--        230

  203(k)/245(a)          Grad Payment Mtg/Growing Equity 754       554        \--        254
                         Mtg (GPM/GEM)                                                   

  203(k)                 Energy Efficiency Mortgage      807       507        307        \--
                         (EEM)                                                           

  203(k)                 Hawaiian Homelands (HHL)        808       \--        \--        408

  203(k)                 Hawaiian Homelands/Interest     805       \--        \--        405
                         Buy-down (HHL/IBD)                                              

  203(k)                 Indian Lands (IL)               801       \--        \--        401

  203(k)                 Condominium                     804       \--        \--        404

  203(k)                 Condominium/Adjustable Rate     815       \--        \--        415
                         Mortgage (ARM)                                                  

  203(k)                 Condominium/Interest Buy-down   812       \--        \--        412
                         (IBD)                                                           

  203(k)                 Interest Buy-down (IBD)         813       \--        \--        413
  ---------------------- ------------------------------- --------- ---------- ---------- -----------

**Note: 203(k) Streamline --** The ADP codes for a Streamline(k) are the
same as the regular 203(k) program. In processing these loans in the FHA
Connection lenders must enter 203KS in the 203(k) consultant ID field
and the Case Number Assignment Screen. In the event that the loan was
originally begun as a purchase mortgage without repairs, the lender must
revise the case data in the Case Number Assignment Screen, changing the
ADP Code to a valid 203(k) ADP code and the construction code to
substantial rehabilitation.