Adjustable Rate Mortgages

Published on AidPage by IDILOGIC on Jun 24, 2005

Purpose of this program:

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.

Possible 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.

Who is eligible to apply...

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

Eligible Applicant Categories:
Eligible Functional Categories:
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.

Note:This is a brief description of the credentials or documentation required prior to, or along with, an application for assistance.

About this section:

This section indicates who can apply to the Federal government for assistance and the criteria the potential applicant must satisfy. For example, individuals may be eligible for research grants, and the criteria to be satisfied may be that they have a professional or scientific degree, 3 years of research experience, and be a citizen of the United States. Universities, medical schools, hospitals, or State and local governments may also be eligible. Where State governments are eligible, the type of State agency will be indicated (State welfare agency or State agency on aging) and the criteria that they must satisfy.

Certain federal programs (e.g., the Pell Grant program which provides grants to students) involve intermediate levels of application processing, i.e., applications are transmitted through colleges or universities that are neither the direct applicant nor the ultimate beneficiary. For these programs, the criteria that the intermediaries must satisfy are also indicated, along with intermediaries who are not eligible.

How to apply...

Application Procedure:

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.

Note: Each program will indicate whether applications are to be submitted to the Federal headquarters, regional or local office, or to a State or local government office.

Award Procedure:

See Application Procedure.

Note: Grant payments may be made by a letter of credit, advance by Treasury check, or reimbursement by Treasury check. Awards may be made by the headquarters office directly to the applicant, an agency field office, a regional office, or by an authorized county office. The assistance may pass through the initial applicant for further distribution by intermediate level applicants to groups or individuals in the private sector.

Deadlines and process...

Deadlines

None.

Note: When available, this section indicates the deadlines for applications to the funding agency which will be stated in terms of the date(s) or between what dates the application should be received. When not available, applicants should contact the funding agency for deadline information.

Range of Approval/Disapproval Time

Varies.

Preapplication Coordination

None. This program is excluded from coverage under E.O. 12372.

Note: This section indicates whether any prior coordination or approval is required with governmental or nongovernmental units prior to the submission of a formal application to the federal funding agency.

Appeals

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

Note: In some cases, there are no provisions for appeal. Where applicable, this section discusses appeal procedures or allowable rework time for resubmission of applications to be processed by the funding agency. Appeal procedures vary with individual programs and are either listed in this section or applicants are referred to appeal procedures documented in the relevant Code of Federal Regulations (CFR).

Renewals

Not applicable.

Note: In some instances, renewal procedures may be the same as for the application procedure, e.g., for projects of a non-continuing nature renewals will be treated as new, competing applications; for projects of an ongoing nature, renewals may be given annually.

Who can benefit...

Individuals/families.

Beneficiaries
About this section:

This section lists the ultimate beneficiaries of a program, the criteria they must satisfy and who specifically is not eligible. The applicant and beneficiary will generally be the same for programs that provide assistance directly from a Federal agency. However, financial assistance that passes through State or local governments will have different applicants and beneficiaries since the assistance is transmitted to private sector beneficiaries who are not obligated to request or apply for the assistance.

What types of assistance...

Guaranteed/Insured Loans

Programs in which the Federal government makes an arrangement to identify a lender against part or all of any defaults by those responsible for repayment of loans.

How much financial aid...

Range and Average of Financial Assistance

See Uses and Use Restrictions.

Note: This section lists the representative range (smallest to largest) of the amount of financial assistance available. These figures are based upon funds awarded in the past fiscal year and the current fiscal year to date. Also indicated is an approximate average amount of awards which were made in the past and current fiscal years.

Obligations

(Mortgages insured) Reported under program 14.117.

Note: The dollar amounts listed in this section represent obligations for the past fiscal year (PY), estimates for the current fiscal year (CY), and estimates for the budget fiscal year (BY) as reported by the Federal agencies. Obligations for non-financial assistance programs indicate the administrative expenses involved in the operation of a program.

Account Identification

86-4587-0-3-371.

Note: Note: This 11-digit budget account identification code represents the account which funds a particular program. This code should be consistent with the code given for the program area as specified in Appendix III of the Budget of the United States Government.

Examples of funded projects...

Not applicable.

About this section

This section indicates the different types of projects which have been funded in the past. Only projects funded under Project Grants or Direct Payments for Specified Use should be listed here. The examples give potential applicants an idea of the types of projects that may be accepted for funding. The agency should list at least five examples of the most recently funded projects.

Program accomplishments...

HUD insured 100,000 in 2003 and projects insuring 103,000 loans in FY 2004.

Criteria for selecting proposals...

Not applicable.

Assistance considerations...

Length and Time Phasing of Assistance

The mortgage term may extend for 30 years.

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.

Note:
A formula may be based on population, per capita income, and other statistical factors. Applicants are informed whether there are any matching requirements to be met when participating in the cost of a project. In general, the matching share represents that portion of the project costs not borne by the Federal government. Attachment F of OMB Circular No. A-102 (Office of Management and Budget) sets forth the criteria and procedures for the evaluation of matching share requirements which may be cash or in-kind contributions made by State and local governments or other agencies, institutions, private organizations, or individuals to satisfy matching requirements of Federal grants or loans.

Cash contributions represent the grantees' cash outlay, including the outlay of money contributed to the grantee by other public agencies, institutions, private organizations, or individuals. When authorized by Federal regulation, Federal funds received from other grants may be considered as the grantees' cash contribution.

In-kind contributions represent the value of noncash contributions provided by the grantee, other public agencies and institutions, private organizations or individuals. In-kind contributions may consist of charges for real property and equipment, and value of goods and services directly benefiting and specifically identifiable to the grant program. When authorized by Federal legislation, property purchased with Federal funds may be considered as grantees' in-kind contribution.

Maintenance of effort (MOE) is a requirement contained in certain legislation, regulations, or administrative policies stating that a grantee must maintain a specified level of financial effort in a specific area in order to receive Federal grant funds, and that the Federal grant funds may be used only to supplement, not supplant, the level of grantee funds.

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.

Note: This section indicates whether program reports, expenditure reports, cash reports or performance monitoring are required by the Federal funding agency, and specifies at what time intervals (monthly, annually, etc.) this must be accomplished.

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.

Note: This section discusses audits required by the Federal agency. The procedures and requirements for State and local governments and nonprofit entities are set forth in OMB Circular No. A-133. These requirements pertain to awards made within the respective State's fiscal year - not the Federal fiscal year, as some State and local governments may use the calendar year or other variation of time span designated as the fiscal year period, rather than that commonly known as the Federal fiscal year (from October 1st through September 30th).

Records

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

Note: This section indicates the record retention requirements and the type of records the Federal agency may require. Not included are the normally imposed requirements of the General Accounting Office. For programs falling under the purview of OMB Circular No. A-102, record retention is set forth in Attachment C. For other programs, record retention is governed by the funding agency's requirements.

Regulations...

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.

Note: This section lists the legal authority upon which a program is based (acts, amendments to acts, Public Law numbers, titles, sections, Statute Codes, citations to the U.S. Code, Executive Orders, Presidential Reorganization Plans, and Memoranda from an agency head).

Regulations, Guidelines, And Literature

24 CFR 203.49; 234.79.

Contact information...

Web Sites
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 Additional Contact Information - FMR Help for a list of Offices.

Note: This section lists the agency contact person, address and telephone number of the Federal Regional or Local Office(s) to be contacted for detailed information regarding a program such as: (1) current availability of funds and the likelihood of receiving assistance within a given period; (2) pre-application and application forms required; (3) whether a pre-application conference is recommended; (4) assistance available in preparation of applications; (5) whether funding decisions are made at the headquarters, regional or local level; (6) application renewal procedures (including continuations and supplementals) or appeal procedures for rejected applications; and (7) recently published program guidelines and material. However, for most federal programs, this section will instruct the reader to consult the so-called Appendix IV of the Catalog due to the large volume of Regional and Local Office Contacts for most agencies. This information is provided in Additional Contact Information (see below).

Headquarters Office

None.

Note: This section lists names and addresses of the office at the headquarters level with direct operational responsibility for managing a program. A telephone number is provided in cases where a Regional or Local Office is not normally able to answer detailed inquiries concerning a program. Also listed are the name(s) and telephone number(s) of the information contact person(s) who can provide additional program information to applicants.

Additional Contact Information (Appendix IV)

Due to the large volume of regional and local office contacts for most agencies, full contact information is also provided separately here in a PDF format: