4110.1 REV-1

CHAPTER 4. ELECTRONIC DEPOSITS

4-1. BACKGROUND. The electronic collection of funds has been

utilized by the Department routinely since 1982. This

collection method allows for the automatic transfer of

funds between a debtor\'s account and an account established

in the Treasury\'s account in the Federal Reserve Bank of

New York or a commercial bank in the name of the

Department. The electronic collection methods used by the

Department are:

a\. Wire Transfers

b\. Fixed and recurring Pre-Authorized Debits

c\. Customer Initiated Pre-Authorized Debits

4-2. WIRE TRANSFERS. The Federal Deposit System (FDS) offers

individual and corporate remitters the ability to move

funds electronically from their bank account to the

Treasury. The remitter identifies the payment and the

government agency to which funds will be credited on the

funds transfer message.

a\. Deposit Message Format. The message format and a

description of each field in the message is included in

Appendix 5. Field 10, Third Party Information (the

last in the message format), is used to identify the

reason for the transfer.

b\. Wiring Large Payments. In several instances, because

of the large amount of the money due the Department,

remitters are instructed to wire their payments rather

than submit a check. The benefits of this process are

the faster and safer receipt of funds and the

elimination of the manual deposit function. Therefore,

when instructing a remitter to make a payment to the

Department for any collection that is over \$2,000 and

is not designated to come in by lockbox or another

electronic method, the preferred collection method is

wire transfer. Some of the payments submitted by wire

are:

\(1\) Proceeds from the sale of Single Family and

Multifamily notes and properties;

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4110.1 REV-1

\(2\) Payoffs of Single Family and Multifamily

mortgages;

\(3\) Wage Restitution and Liquidated damages in

connection with Labor Standards Enforcement.

4-3. FIXED AND RECURRING PRE-AUTHORIZED DEBITS (PADS). Now

Title I debtors have the option of paying their loans by

volunteering for PADS. This payment method results when

the debtor gives HUD permission (Appendix 6) to take money

from or debit his/her bank account on a specific day each

month for a pre-arranged amount of money. This method

saves the remitter from: writing and mailing checks; late

payments resulting in increased interest costs; and a bad

credit rating.

a\. How It Works. This is a totally automated process.

Each month a tape is generated from the Title I System

identifying remitters who have agreed to PADS. The

tape contains the case number and the banking data for

that case. The tape is processed through the Automated

Clearing-house by our lockbox contractor who collects

all the funds represented on the tape, pools them and

wire transfers the total amount to the Treasury for

credit to HUD\'s Title I program. The accounts are

credited on the system at the time the tape is created.

If there are insufficient funds in the debtor\'s bank

account, the lockbox bank notifies HUD and the payment

credit is removed from the debtor\'s account in the

system.

b\. Future Expansion. This collection process will be

included for other programs when the appropriate

systems are enhanced.

4-4. CUSTOMER INITIATED PRE-AUTHORIZED DEBITS. This payment

method is designed for the collection of premium payments

and the related data from mortgagees on behalf of

mortgagors who have FHA insurance. The first application

was implemented in 1985 for the One-Time Mortgage Insurance

Premium Program.

a\. This automated system coexists with the paper lockbox

process whereby mortgagees mail checks and a remittance

advice, giving the information on the newly insured

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4110.1 REV-1

(4-4) loan. With the paper process, the remitter runs the

risk of incurring a late charge if the payment is not

received within 15 days of the closing of the loan.

The risk exists because the mailing of the forms by the

mortgagee, must be done in sufficient time for the

lockbox to receive and record the payment before the 15

days are up.

b\. To utilize this system, mortgagees must provide banking

data, including their account number and the 9-digit

ABA (American Banker\'s Association) number of their

bank. They must have access to: a personal computer

or dumb terminal; data communications modem; and

communications software which is provided by the

Department. When the mortgagee is ready to submit a

payment electronically, he uses the software to access

the system, inputs the data on the case to be insured,

and activates a message instructing our lockbox bank to

effect a PAD for the amount of the insurance premium

indicated. The lockbox bank retrieves this payment and

any others initiated through this process each day,

pools them and wire transfers the total to Treasury to

be credited to HUD\'s One-Time Premium Program.

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