Adjustable Rate Mortgages

To provide mortgage insurance for an adjustable rate mortgage which offers lenders more assurance of long term profitability than a fixed rate mortgage, while offering consumer protection features.



Agency - Department of Housing and Urban Development

The Department of Housing and Urban Development's mission is to increase homeownership, support community development and increase access to affordable housing free from discrimination. HUD fulfills this mission through high ethical standards, management and accountability, and by forming partnerships with community organizations.

Office - Persons are encouraged to contact the Homeownership Center serving their State (see http://www.hud.gov/offices/hsg/sfh/hoc/hsghocs.cfm) or the nearest local HUD Office.

See Catalog Address Appendix IV for a list of Offices.


Program Accomplishments

HUD insured 5,204 ARMs in FY 2007 (excludes ARMs reported under 14.183).

Uses and Use Restrictions

HUD insures lenders against loss on mortgage loans.

These loans may be used to finance the purchase of proposed, under construction, or existing one- to four-family housing as well as to refinance indebtedness on existing housing.

The maximum insurable mortgage loan for an occupant mortgagor is the same as prescribed for Section 203(b) - program 14.117.

Eligibility Requirements

Applicant Eligibility

All persons intending to occupy the property are eligible to apply.

Beneficiary Eligibility

Individuals/families.

Credentials/Documentation

Documentation regarding the characteristics of the property and the qualifications of the mortgagor are assembled by the mortgagee and submitted with the application. This program is excluded from coverage under OMB Circular No. A-87.

Aplication and Award Process

Preapplication Coordination

None.

This program is excluded from coverage under E.O.

12372.

Application Procedures

Application is submitted for review and approval or disapproval to the local HUD Field Office through a HUD-approved lending institution. This program is excluded from coverage under OMB Circular Nos. A-102 and A-110.

Award Procedures

See Application Procedure.

Deadlines

None.

Authorization

National Housing Act, as amended; Housing and Urban-Rural Recovery Act of 1983, Section 251, Public Law 98-181, 12 U.S.C. 1715z-16.

Range of Approval/Disapproval Time

Varies.

Appeals

HUD will state the reasons for refusing an application. The applicant may reapply subject to concurrence of the lender.

Renewals

Not applicable.

Assistance Considerations

Formula and Matching Requirements

The maximum amount of the loan is the same as under Section 203(b) - Program 14.117. The down payment is the difference between the maximum loan amount and the purchase price of the home. In addition to the down payment, the purchaser must pay all items of prepaid expense. As of July 1, 1991, risk-based mortgage insurance premiums will be collected including 1) an up-front mortgage insurance premium which may be financed; and 2) a periodic premium which is paid monthly. If the property is a condominium, the mortgage insurance premium is one-half percent paid monthly. The loan origination charge by the mortgagee varies, but may not exceed one percent of the total mortgage (minus the mortgage insurance premium, if financed). Mortgagors may be charged appraisal and inspection fees in accordance with fee schedules established by HUD. The interest rate adjustments of the mortgage may not increase more than one percent per year or five percent over the term of the mortgage. There is no negative amortization. The mortgagor must receive a disclosure statement explaining the adjustable rate features of their mortgage.

Length and Time Phasing of Assistance

The mortgage term may extend for 30 years.

Post Assistance Requirements

Reports

Defaults in meeting the mortgage terms must be reported.

All approved mortgagees at any time upon request by HUD must furnish a copy of their latest financial statement.

Audits

The Department of Housing and Urban Development reserves the right to audit the account of the mortgagee to determine its compliance and conformance with HUD regulations and standards.

Records

Mortgagees are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions and the HUD regulations.

Financial Information

Account Identification

86-4587-0-3-371.

Obigations

(Mortgages insured) Reported under program 14.117.

Range and Average of Financial Assistance

See Uses and Use Restrictions.

Regulations, Guidelines, and Literature

24 CFR 203.49; 234.79.

Information Contacts

Regional or Local Office

Persons are encouraged to contact the Homeownership Center serving their State (see http://www.hud.gov/offices/hsg/sfh/hoc/hsghocs.cfm) or the nearest local HUD Office. See Catalog Address Appendix IV for a list of Offices.

Headquarters Office

None.

Criteria for Selecting Proposals

Not applicable.



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