U. S. Department of Housing and Urban Development
                    Washington, D.C. 20410-8000
                         April 3, 1997

OFFICE OF THE ASSISTANT SECRETARY
FOR HOUSING-FEDERAL HOUSING COMMISSIONER

                                                       TI-447

TO:  ALL TITLE I LENDING INSTITUTIONS

SUBJECT:  REPORTING NONCOMPLIANCE ACTIVITIES

     Lenders are required to promptly report to HUD the discovery of
any material misstatements of fact, borrower misuse of loan proceeds,
dealer noncompliance or other significant violations in the Title I
Program.  This letter provides a simple format for reporting program
violations and provides guidance for reporting incidents of
noncompliance.

     Some of the most common noncompliance activities involve the
following:

     o    Misstatements of fact on the credit application and falsified
          documentation.

     o    Borrower use of the loan proceeds for debt consolidation,
          automobiles, downpayment requirements and other personal items.

     o    Failure of the borrower to permit the required on-site inspection.

     o    Borrowers, dealers or inspection companies falsely certifying that
          the improvements are completed.

     o    Borrower failure to submit an executed Completion Certificate.

     o    Dealers not complying with their contractual obligations with the
          borrowers (e.g. failure to complete all work as specified or
          inferior workmanship).

     o    Dealers kicking back a portion of the proceeds to the borrower.

     In addition, lenders are encouraged to report advertising and
marketing by dealers or others that is inaccurate or deceptive.
                                -2-

     Attached is a suggested format, that is not mandatory, for lenders to
use to send to HUD when program violations are suspected.  It is not necessary
to submit inspection reports, or other supporting documentation, unless it is
requested by HUD.  The reporting format should be prepared on company
letterhead, or attached to company letterhead, and addressed as follows:

          J. Parker Deal
          Director, Quality Assurance Division
          Department of Housing and Urban Development
          c/o 451 7th Street, S.W., Room B-133/P3214
          Washington, D.C. 20410

     If you have any questions about this letter, please write to J. Parker
Deal, Director, Quality Assurance Division, at the above address or call Mr.
Deal at (202) 708-2830, extension 105.

                              Sincerely,

                              Nicolas Retsinas
                              Assistant Secretary for Housing
                                Federal Housing Commissioner

Attachment
                                                  Date:

                      REPORT OF NONCOMPLIANCE

Name of Borrower:________________________ Phone No.:_____________

Property Address:__________________________________

Loan Amt: _________  Loan Date:_________  Inspection Date: ______

Lender Loan No.:__________         Loan Officer: ________________

Correspondent/Originating Lender Name, Location and Lender Approval Number:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

INDIRECT LOAN (Dealer Loan):

Name of Dealer:__________________________   Phone No.:___________

Dealer Address:__________________________________________________

Dealer Tax I.D.#:__________________________

Noncompliance Activities:________________________________________
_________________________________________________________________
_________________________________________________________________

DIRECT LOAN:

Noncompliance Activities:________________________________________
_________________________________________________________________

INSPECTION RESULTS

_____% of improvements not completed as listed on the application

_____% of loan amount used for purposes other than eligible improvements.
       Ineligible improvements include:__________________________
_________________________________________________________________

The incomplete work consists of:_________________________________
_________________________________________________________________

Borrower and/or Dealer reason for incomplete improvements/misuse:
_________________________________________________________________
_________________________________________________________________

Unable to complete inspection due to ____________________________
_________________________________________________________________

                                                       HUD--56005