www.hudclips.org 


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

July 24, 1991
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING-FEDERAL HOUSING COMMISSIONER
MORTGAGEE LETTER 91-32
     TO:  ALL APPROVED MORTGAGEES
     ATTENTION:  SINGLE FAMILY SERVICING MANAGERS
     SUBJECT:  Prepayment Disclosure Statements
 
          Section 329 of the Cranston-Gonzalez National Affordable
     Housing Act requires that mortgagees shall provide to the mortgagor
     at closing, and annually thereafter, a written Disclosure
     Statement which describes the requirements that the mortgagor
     must fulfill upon prepayment of the mortgage to prevent accrual
     of any interest on the mortgage after the date of prepayment (24
     CFR 2039 and 203.558(f)).
 
          These requirements are effective August 22, 1991, and apply
     to any mortgage executed and any insured mortgage outstanding
     after this date.  A special mailing of the "annual" Disclosure
     Statement is not required.  The annual Disclosure Statement can
     be provided to all mortgagors along with the next end of year
     statement (24 CFR 203.508(c)), subject to any IRS prohibitions.
 
          The amount indicated on the disclosure statement as
     outstanding for prepayment of the indebtedness under the mortgage
     must be the actual total amount which would be accepted as full
     payment.  This amount must include all fees and charges due under
     the mortgage.  Of course, any payment received or advances made
     to the account before the stated expiration date will change the
     prepayment amount as indicated in the statement.
 
          Attached are formats in which these Disclosure Statements
     must be written.  The mortgagee must insert the appropriate
     mortgagee option language and the appropriate language for
     mortgages insured before and after August 2, 1985.
 
          Any questions regarding this matter should be directed to
     the local HUD Office Single Family Loan Management Branch.
 
                              Very sincerely yours,
 
                              Arthur J. Hill
                              Assistant Secretary for
                                Housing-Federal Housing Commissioner
 
     Attachments
 
_____________________________________________________________________
                                             Attachment 1
 
                       DISCLOSURE STATEMENT
 
               Notice to Mortgagor at Loan Closing
                       Regarding Prepayment
 
Mortgagor:  ______________________      Date:  __________________
Address:  ________________________      Loan #:  ________________
          ________________________      FHA #:  _________________
 
     This notice is to advise you of the requirements that must
be followed to accomplish a prepayment of your mortgage, and to
prevent accrual of any interest after the date of prepayment.
 
     You may prepay any or all of the outstanding indebtedness
due under your mortgage at any time, without penalty.  However,
to avoid the accrual of interest on any prepayment after the date
of the prepayment, the prepayment must be received on or before
the installment due date (the first day of the month).
 
      INSTRUCTIONS:  Lender may use either of these options in
     its notice.
 
     (1)  Otherwise, your payment will be refused until the next
          installment due date.
 
     (2)  Otherwise, you may be required to pay interest on the
          amount prepaid through the end of the month.
 
                                   ______________________________
                                   Mortgagee
 
                               1
 
_____________________________________________________________________
                                                  Attachment 2
 
                       DISCLOSURE STATEMENT
 
              Annual Disclosure Notice to Mortgagor
                       Regarding Prepayment
 
Mortgagor:  ______________________      Date:  __________________
Address:  ________________________      Loan #:  ________________
          ________________________      FHA #:  _________________
 
     This notice is to advise you of requirements that must be
followed to accomplish a prepayment of your mortgage, and to
advise you of requirements you must fulfill upon prepayment to
prevent accrual of any interest after the date of prepayment.
 
     The amount indicated below is the amount outstanding for
prepayment of the indebtedness due under your mortgage.  This
amount is good through ____(date)___.  (Any payments received or
advances made by us before the stated expiration date will change
the prepayment amount.)
 
$ ___(amount)____
 
      For Mortgage Insured Before August 2, 1985, Insert:
 
     You may prepay your mortgage at any time without penalty.
However, you are required to provide a written 30-day advance
notice of prepayment.  In order to avoid the accrual of interest
on the principal amount after the date of prepayment, you must
arrange for the prepayment to reach your mortgagee on or before
the installment due date (the first day of the month).
 
      For Mortgage Insured On or After August 2, 1985, Insert:
 
     You may prepay your mortgage at any time without penalty.
However, in order to avoid the accrual of interest on the
principal amount after the date of prepayment, you must arrange
for the prepayment to reach your mortgagee on or before the
installment due date (the first of the month).
 
                                1
 
_____________________________________________________________________
                                                  Attachment 2
 
      Instructions:  Lender may use either of these options in
     its notice.
 
     (1)  Otherwise, your prepayment will be refused until the
          next installment due date.
 
     (2)  Otherwise, you may be required to pay interest on the
          amount prepaid through the end of the month.
 
     If you have any questions regarding this notice, please
contact __(name and/or department)__ at ___(telephone number)__.
 
                                   _________________________
                                   Mortgagee
 
                                 2