www.hudclips.org U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410-8000 February 11 1991 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER Mortgagee Letter 91-8 TO: ALL APPROVED MORTGAGEES SUBJECT: Single Family Loan Production - Updated Requirements for Single Family Mortgage Instruments This Mortgagee Letter announces an update to the Requirements for Single Family Mortgage Instruments announced in Mortgagee Letter 89-23, as modified in Mortgagee Letter 89-31. Unless otherwise stated, the updated requirements set forth in the attachment to this Mortgagee Letter will become mandatory for loans closed on or after July 1, 1991. Until then, they may be adopted at the discretion of mortgagees. HUD has concluded that it is no longer necessary to publish its requirements for mortgage instruments in the Federal Register since mortgagee Letters are widely circulated to the affected parties. In the future, HUD expects to issue changes to its requirements exclusively through Mortgagee Letters, Notices and Handbooks. Effect of Changes to FNMA/FHLMC Forms On December 31, 1990, FNMA and FHLMC announced changes to their approved single family mortgage instruments. Because the HUD requirements reference the FNMA/FHLMC instruments, questions have arisen regarding the effect of the FNMA/FHLMC changes on HUD requirements. The FNMA/FHLMC instruments are now 6 letter-sized pages rather than 4 legal-sized pages. HUD does not restrict the size or number of pages and any approach which will be accepted by recording offices and is legible continues to be acceptable. The uniform covenants in FNMA/FHLMC mortgages have also changed. This change has no immediate impact on mortgages used for HUD programs since HUD has its own separate set of uniform covenants. Because of the many similarities between the FNMA/FHLMC and HUD approaches, we will examine the FNMA/FHLMC uniform covenants for ideas regarding future changes to the HUD language. Until further notice, however, the only changes in the language required by HUD for all mortgages are explained in the attachment. HUD has included new language in paragraph 5 of the Model Mortgage Form, regarding owner-occupancy and false loan applications, that is adapted from the FNMA/FHLMC forms. Changes have also been made in the non-uniform covenants of the FNMA/FHLMC forms for many jurisdictions. HUD's current instructions for preparing the state-specific provisions of a _____________________________________________________________________ 2 mortgage direct mortgagees to use language from "the most recent approved FNMA/FHLMC mortgage form for the appropriate jurisdiction." Thus, mortgagees will be required to work from the newly-issued versions of the FNMA/FHLMC forms (dated 9/90). To provide an orderly transition, however, HUD will not object to continued use of language based on the non-uniform covenants in the old FNMA/FHLMC forms until July 1, 1991. Adjustable Rate Mortgages Among other changes, the documentation for adjustable rate mortgages (ARMs) is changed by the attachment to this Mortgagee Letter. The Adjustable Rate Allonge Amending Note (Exhibit D to the original requirements) will no longer be used to convert the standard fixed-rate Model Note Form to an adjustable rate note. Instead, a new Model Adjustable Rate Note Form is prescribed as a replacement Exhibit D. The Adjustable Rate Rider (Exhibit C to the original requirements) is withdrawn. The attachment explains several ways in which the standard fixed-rate Model Mortgage Form can be adapted for ARMs if adaptation is required to meet state or local law requirements. These changes for ARMs require some changes to Mortgagee Letter 89-24. For ARMs following the updated requirements, Mortgagee Letter 89-24 is modified as follows: 1. Paragraph a. under the heading "Method of Calculating Interest Rate Adjustments" on page 5 should read: a. Determine the correct index. The proper date to be used for indexing an interest rate adjustment is stated in Paragraph 5(B) of the Model Adjustable Rate Note Form prescribed by HUD, which states that the "Current Index" means the most recent Index figure available 30 days before the Change Date. 2. The parenthetical phrase beginning in the second line of page 7 should be changed to "(the number of basis points identified as the margin in Paragraph 5(C) of the Model Adjustable Rate Note Form prescribed by HUD)". 3. In the fifth line of the second paragraph on page 7, "item 3 of Attachment I" should be changed to "Footnote 3 of the Model Adjustable Rate Note Form prescribed by HUD". _____________________________________________________________________ 3 4. The parenthetical phrase beginning in the second line from the bottom of page 11 should be changed to "(to be found in Paragraph 5(G) of the Model Adjustable Rate Note Form prescribed by HUD)". 5. Attachment I to Mortgagee Letter 89-24 is no longer applicable for any new cases. It was superseded in its entirety when the new requirements announced in Mortgagee Letter 89-23 became mandatory. Changes Required by New Legislation The attachment reflects two changes required because of new legislation affecting the single family mortgage insurance programs. That legislation is discussed in detail in Mortgagee Letter 91-1. As stated in that Mortgagee Letter, the words "or secondary residence" in Paragraph 9(b)(ii) of the Model Mortgage Form must be deleted or struck out in all cases subject to the new restriction on assumptions as second homes. Thus, unlike most of the changes in the attachment notice which are not mandatory for any cases closed before July 1, 1990, the reference to secondary residence must be handled on a case-by-case basis depending on the date of the conditional commitment or other factors explained in Mortgagee Letter 91-1. The fourth subparagraph of Paragraph 2 of the Model Mortgage Form will also become outdated as legislative changes to the mortgage insurance premium (MIP) structure are implemented. Although the current approved language is legally sufficient to enable the mortgagee to collect the appropriate MIP amounts for mortgagors in all cases, the language states that in most programs the entire MIP is paid in advance. This will be inaccurate when the new MIP structure takes effect. Therefore, mortgagees must modify the fourth subparagraph of Paragraph 2 and the first item under Paragraph 3 of their mortgage forms as indicated in the attachment, for cases closed on or after July 1, 1991. Very sincerely yours, Arthur J. Hill Acting Assistant Secretary for Housing-Federal Housing Commissioner Attachment _____________________________________________________________________ ATTACHMENT The purpose of this attachment is to update and revise the Requirements for Single Family Mortgage Instruments published in the June 29, 1989 issue of the Federal Register. In that issue, HUD announced a new approach for creating mortgage instruments for HUD single family mortgage insurance programs. The changes announced in this attachment are effective on December 1, 1990 but compliance is optional until July 1, 1991. The HUD Requirements for Single Family Mortgage Instruments were published as Appendix A to the Notice of Policy on June 29, 1989 in the Federal Register. Although some revisions have been made previously through mortgagee letters, this publication serves as an update of all the changes in the previous year regarding the single family mortgage instruments, notes, riders, and interim mortgagee letters. The notice, when originally published, did not have an effective date. On October 2, 1989, the notice was corrected and an effective date of March 1, 1990 was announced in the Federal Register. Both the June 29, 1989 and October 2, 1989 Federal Register publications were distributed to mortgagees through Mortgagee Letter 89-23, which also contained one change regarding the acceleration language. On December 15, 1989, Congress _____________________________________________________________________ 2 approved the HUD Reform Act which affected the assumption policy on FHA mortgages. Mortgagee Letter 89-31 was issued on December 26, 1989 to announce new mortgage language needed to carry out the changed assumption policy. The new requirements for FHA Single Family Mortgage Instruments became mandatory in the U.S. Virgin Islands and Guam on June 1, 1990. The mandatory compliance date for Single Family Mortgage Instruments in Puerto Rico was extended to September 1, 1990. The majority of changes have been made based on consideration of suggestions, comments, questions received, and minor errors pointed out from the mortgage industry, mandatory changes dictated by Acts of Congress, or need for clarifying conflicting instructions. One important general clarification, however, focuses on the use of the FNMA/FHLMC mortgage forms as a guideline for development of state specific language. HUD does not intend to require use of FNMA/FHLMC language verbatim when the language would not be adequate under state or local law, but HUD intends to give the lender a basis for developing a valid and enforceable form. The FNMA/FHLMC language may be modified to accommodate subsequent state law changes after the development of the FNMA/FHLMC forms, or if FNMA/FHLMC has approved changes for _____________________________________________________________________ 3 general use, as opposed to state specific use. HUD recognizes that new editions of the approved FNMA/FHLMC mortgage instruments have recently been issued for all states, and guidance is provided in this attachment regarding use of the new editions in preparing instruments under HUD's revised requirements. The lender, however, is required to use verbatim the model mortgage paragraphs 1-16 (not 1-10 as originally stated) since those paragraphs are basic to the HUD program. (See page 27601 of the June 29, 1990 notice.) The following will describe revisions identified by page number of the original Federal Register Notice to Appendix A and Exhibit designation where relevant. It includes all revisions to the original notice including the correction previously announced in the October 2, 1989 notice. CHANGES TO APPENDIX A OF JUNE 29, 1989 NOTICE A. Changes to Part I-D -- General Instructions, page 27600. Add the following: The Department is recommending that the lenders include the last revision date on each form in order to clarify the versions being distributed. _____________________________________________________________________ 4 B. Changes to Part II-E -- Mortgage Provisions, page 27601. Lenders are not to insert "Lender in possession" paragraphs from the non-uniform covenants sections of the FNMA/FHLMC forms. Paragraph 17 is intended to address foreclosure procedures only. The intention of the model forms is not to use the FNMA/FHLMC language verbatim, but to give the lender a basis for developing a valid form given the limitations of state and local requirements. (These instructions should also be used in context with footnote 6 of Exhibit A.) Until July 1, 1991, material added by the lender may be based on either the new edition of the FNMA/FHLMC forms marked "9/90" or the previous forms. Cases closed on July 1, 1991, or later must use language based on the revised edition. C. Changes to Part IV-A -- Other Requirements; Special Situations, Pages 27601 - 27602. 1. Introductory Paragraph: In the list of prescribed riders and allonge, add "Rehabilitation Loan Rider" immediately before "Condominium Rider" so that the list, as completed, will read as follows: _____________________________________________________________________ 5 Model Mortgage Form Model Note Form Adjustable Rate Note Graduated Rate Allonge Amending Note Graduated Payment Rider Growing Equity Allonge Amending Note Rehabilitation Loan Rider Condominium Rider Planned Unit Development Rider Tax-Exempt Financing Rider Rider for Section 248 Mortgage 2. Paragraph 4, Rehabilitation Rider, page 27601. Delete the first and third sentences. In line 7, change "model note form" to "model mortgage form." Handbook 4240.4 was replaced by Handbook 4240.4 REV-1. after the Rehabilitation Loan Rider (Exhibit H) was published. However, mortgagees should continue to use Exhibit H (as revised by this notice) instead of Appendix 3 to Handbook 4240.4 REV-1. The special mortgage requirements in Paragraph 1-15.B. of that handbook apply as stated in the handbook except that "Rehabilitation Loan Rider" and "security instrument" should be used instead of "Rehabilitation Rider" and "mortgage." _____________________________________________________________________ 6 3. Paragraph 8, Tax-Exempt Financing, page 27601. The July 8, 1987, memorandum to HUD Field Offices has been replaced by an October 12, 1990 Notice to HUD Field Offices designated as H 90-76. The Notice provides details on the use of the Tax-Exempt Financing Rider (Exhibit K), instruction for requesting changes to the Rider, and other instructions including a notice to be provided to the mortgagor. Any mortgagee involved in tax-exempt financing using qualified mortgage bonds should consult both those issuances and information in this notice which updates the Rider. This Rider does not apply to financing through qualified veterans mortgage bonds. There have been no requests for a Veterans Bond Rider. 4. Paragraph 11, Junior Mortgages to HUD, page 27602. Delete any references to Temporary Mortgage Assistance Payments (TMAP) due to the unavailability of the program. _____________________________________________________________________ 7 5. Paragraph 12, Home Equity Conversion mortgage, page 27602. The Home Equity Conversion Mortgage program has been implemented; any references to the program may be located in HUD Handbook 4235.1. and Mortgagee Letter 90-17. 6. Paragraph 13, Price Level Adjusted Mortgage, page 27603. Delete this paragraph which refers to the Price Level Adjusted Mortgage insurance program, since there is no projected implementation date for the program. D. Changes to Part IV-B -- Special Requirements for Particular States and Localities, page 27602. 1. Paragraph 2, page 27602. The Georgia Security Deed may include the address of the borrower if so desired. 2. Add the following state specific-instructions to page 27602 as paragraphs 9, 10 and 11 respectively: _____________________________________________________________________ 8 #9: For Pennsylvania, a "Certificate of Residence" is required at the end of the mortgage. It should read as follows: CERTIFICATE OF RESIDENCE I, _______________________________ do hereby certify that the correct address of the within-named lender is_____________________________________, witness my hand this _____ day of 19_____. ________________________________ Agent of Lender. #10: For Texas, delete FNMA/FHLMC paragraph 22 entitled "Waiver of Notice of Intent to Accelerate," or if used, the paragraph should be adapted since the paragraph reference is incorrect and omits HUD notice language. #11: For Kansas, delete reference to Attorney's Fees in the deed of trust, per KSA 58-2312 (1976). E. Changes to Model mortgage Form (Exhibit A), page 27603. _____________________________________________________________________ 9 1. General Instructions: a. In all cases, the word "property" should be capitalized in the numbered paragraphs. As published, Exhibit A is inconsistent in its capitalization. b. Delete the witness lines located at the end of the model mortgage form. Witness lines are needed only if required by applicable state or local laws. 2. Paragraph in the Mortgage Form entitled "Riders to this Security Instrument," page 27607: Add " specify " to the box designated "other." The box labelled "Adjustable Rate Rider" may be deleted in all cases. If it is deleted but an Adjustable Rate Rider is used, the "Other" box should be checked with a notation describing the rider. 3. Paragraph 2 entitled "Monthly Payments of Taxes, Insurance and Other Charges," page 26704. Amend the fourth subparagraph by deleting "Most Security Instruments issued by the Secretary are insured under programs which require advance payment of the entire mortgage insurance premium. If this Security Instrument is or was insured under a program which did not require advance payment of the entire mortgage insurance premium, then" so that _____________________________________________________________________ 10 the second sentence of the fourth subparagraph will begin: "In any year in which the Lender must pay a mortgage insurance premium to the Secretary, each monthly payment shall also include". 4. Paragraph 5 entitled "Application of Payments," page 27604. Amend the first item listed by deleting ", unless Borrower paid the entire mortgage insurance premium when this Security Instrument was signed;" so that the first item ends with "monthly mortgage insurance premium;". 5. Paragraph 5 entitled "Preservation and Maintenance of the Property, Leaseholds," page 27605. The paragraph should be changed to read as follows: 5. Occupancy, Preservation, Maintenance and Protection of the Property; Borrower's Loan Application; Leaseholds. Borrower shall occupy, establish, and use the Property as Borrower's principal residence within sixty days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the _____________________________________________________________________ 11 date of occupancy, unless the Secretary determines this requirement will cause undue hardship for Borrower, or unless extenuating circumstances exist which are beyond Borrower's control. Borrower shall notify Lenders of any extenuating circumstances. Borrower shall not commit waste or destroy, damage or substantially change the Property or allow the Property to deteriorate, reasonable wear and tear excepted. Lender may inspect the property if the property is vacant or abandoned or the loan is in default. Lender may take reasonable action to protect and preserve such vacant or abandoned property. Borrower shall also be in default if Borrower, during the loan application process, gave materially false or inaccurate information or statements to Lender (or failed to provide Lender with any material information) in connection with the loan evidenced by the Note, including, but not limited to, representations concerning Borrower's occupancy of the Property as a principal residence. If this Security Instrument is on a leasehold, Borrower shall comply with the provisions of the _____________________________________________________________________ 12 lease. If Borrower acquires fee title to the Property, the leasehold and fee title shall not be merged unless Lender agrees to the merger in writing. 6. Paragraph 9(b) entitled "Sale Without Credit Approval," page 27605. Amend to read as follows: 9(b) Sale Without Credit Approval. Lender shall, if permitted by applicable law and with the prior approval of the Secretary, require immediate payment in full of all sums secured by this Security Instrument if: (i) All or part of the Property, or a beneficial interest in a trust owning all or part of the Property, is sold or otherwise transferred (other than by devise or descent) by the Borrower, and (ii) The property is not occupied by the purchaser or grantee as his or her principal or secondary residence, or the purchaser or grantee-does so occupy the _____________________________________________________________________ 13 Property, but his or her credit has not been approved in accordance with the requirements of the Secretary. The words in brackets should be used only for cases not subject to the restriction on secondary residences described in Mortgagee Letter 91-1. The rest of the language contains a correction to the version of this paragraph as printed in Mortgagee Letter 89-31, as well as new language covering transfer of beneficial interests in trusts. The new paragraph 9(b) is required if one of the following three conditions has been met: i. A conditional commitment or master conditional commitment has been issued by HUD on or after December 15, 1989; or ii. An appraisal report or master appraisal report has been signed by a Direct Endorsement underwriter on or after December 15, 1989; or iii. A certificate of reasonable value or master certificate of reasonable value has been issued by the Department of Veterans Affairs on or after December 15, 1989. _____________________________________________________________________ 14 7. Paragraph 12 entitled "Successors and Assigns Bound; Joint and Several Liability; Co-Signers", page 27606. The word "term" in subsection (c) should be made plural so the subsection will read as follows: (c) agrees that Lender and any other Borrower may agree to extend, modify, forbear or make any accommodations with regard to the terms of this Security Instrument or the Notice without that Borrower's consent. 8. Acceleration Language: Mortgagees are authorized, but not required, to add the following provision to the mortgage/deed of trust as paragraph 9(e): (e) Mortgage Not Insured. Borrower agrees that should this Security Instrument and the note secured thereby not be eligible for insurance under the National Housing Act within _________ from the date hereof, Lender may, at its option and notwithstanding anything in Paragraph 9, require _____________________________________________________________________ 15 immediate payment in full of all sums secured by this Security Instruments. A written statement of any authorized agent of the Secretary dated subsequent to _________________ from the date hereof, declining to insure this Security Instrument and the note secured thereby, shall be deemed conclusive proof of such ineligibility. Notwithstanding the foregoing, this option may not be exercised by Lender when the unavailability of insurance is solely due to Lender's failure to remit a mortgage insurance premium to the secretary. These instructions modify Mortgagee Letter 89-23 by specifying where this optional language should be inserted if it is used and making minor wording changes. Any period may be inserted in the blanks, expressed either in numbers of days or months, which is not shorter than 60 days and not longer than eight months. Lenders are cautioned that this clause should not be used to abuse innocent borrowers. _____________________________________________________________________ 16 9. Paragraph 17 entitled "Foreclosure Procedure," page 27607. Remove the first sentence, following the bracketed material, and substitute the following: If lender requires immediate payment in full under paragraph 9, Lender may invoke the power of sale and any other remedies permitted by applicable law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this paragraph 17, including, but not limited to, reasonable attorney's fees and costs of title evidence. 10. Footnotes for Model Mortgage Form, page 27608. a. Footnote #2, page 27608: Inclusion of Borrower's and Trustee's addresses is acceptable. Also, note that the special deed of trust language would replace the first three sentences of Exhibit A, not the first two sentences. b. Footnote #5, page 27608. Capitalize the initial word in "To have and ..." _____________________________________________________________________ 17 c. Footnote #5a, page 27608. Add "Lenders need not follow the FNMA/FHLMC form verbatim if the FNMA/FHLMC language would conflict with state or local laws and requirements." d. Footnote #6, page 27608. (1) Substitute "Property" for "mortgage" in the third sentence beginning, "Paragraph 17 must include the mortgagee's right to a public sale if the property, including a power of sale is legally permissible." (2) Add: "In New York, lender may leave out the 30 day notice part of the FNMA/FHLMC foreclosure provision." (3) Lenders are not to insert "Lender in Possession" paragraphs from the non-uniform covenant sections of the FNMA/FHLMC forms. _____________________________________________________________________ 18 F. Changes to Model Note Form (Exhibit B) page 27609. 1. Paragraph 4(B) entitled "Manner of Payment-Place", page 27609. Add the phrase "by notice to borrower" to read as follows: "Payment shall be made at ___________________ or at such other place as lender may designate in writing by notice to Borrower." 2. Paragraph 4(D), entitled "Allonge to this note for payment adjustments", page 27609. Add " specify " to the box designated "other." The box designated "Adjustable Rate Allonge" should be deleted. 3. Paragraph 9 entitled "Obligations of Persons Under this Note", page 27610. The last sentence beginning with "Any one person" should insert lowed" after "amounts" and before "under" to read as follows: " Any one person signing this Note may be required to pay all the amounts owed under this Note." 4. Footnote 1, page 27611. Add "Use 'Commonwealth of' or 'Territory of' if appropriate." _____________________________________________________________________ 19 G. Deletion of Adjustable Rate Rider (Exhibit C), page 27612: Revised Instructions for Adjustable Rate Mortgages. 1. Because of the change to an Adjustable Rate Note with a simplified description of the interest adjustment procedures, as described in the next section, the Adjustable Rate Rider (Exhibit C) cannot be used without redrafting to match the Adjustable Rate Note. HUD has chosen to delete Exhibit C from the requirements instead of requiring use of a revised Exhibit C. HUD's legal research indicates that in most states there is no apparent need to record a document such as Exhibit C, which contains the details of the interest adjustment procedures. The description of the Note contained on the first page of the Model Mortgage form sufficiently describes the debt for recordation purposes. Mortgagees now have three options for drafting an adjustable rate mortgage. (a) Option 1: Use a mortgage meeting the regular requirements as published at 54 Federal Register 27596, June 29, 1989 (as updated by this notice) with _____________________________________________________________________ 20 no special adaption for adjustable rate loans, if such a mortgage would be fully enforceable under state or local law. (b) Option 2: Use a mortgage meeting the regular requirements with one or more of the following adaptations to the form: change the title to "Adjustable Rate Mortgage," change the first use of the word "note" on the first page to "adjustable rate note," change the first use of the word "interest" on the first page to "interest at a rate subject to adjustment," and/or add additional language (either to Paragraph 1 or as an additional numbered paragraph at the end of the mortgage) which references, describes or summarizes the adjustable rate feature of the Note to the extent desired by the mortgagee or as required for enforceability under state or local law. Any mortgagees desiring to describe the entire interest rate adjustment procedure in the mortgage should follow Option 3. (c) Option 3: Use a rider following the format of the former Exhibit C, but substitute Paragraph 5 of _____________________________________________________________________ 21 the new Adjustable Rate Note in place of paragraphs 1 through 5 in the former Exhibit C. Some minor changes to paragraph references will be needed in the language taken from the Adjustable Rate Note. Note: None of these instructions on the Adjustable Rate Rider apply to Adjustable Rate Home Equity Conversion Mortgages. 2. Do not use the ARM rider/allonge form in Mortgagee Letter 89-24. The only acceptable documents for Adjustable Rate Mortgages are described in this notice. Mortgagee Letter 89-24 addressed changes to the HUD-distributed Adjustable Rate Mortgage rider/allonge form which became obsolete on March 1, 1990. H. Changes to Adjustable Rate Allonge Amending Note (Exhibit D), page 27615. The Allonge formerly designated as Exhibit D was used to convert the fixed-rate Model Note form (Exhibit B) to an Adjustable Rate Note. HUD is now prescribing a Model Adjustable Rate Note as a replacement Exhibit D to eliminate the need for an Allonge. This will improve clarity and reduce the required number of pages. _____________________________________________________________________ 22 Replacement Exhibit D appears at the end of this notice. It should be used in the same manner as the fixed-rate Model Note form, with any appropriate modifications required by the footnotes and such other adaption as may be necessary to conform to state or local requirements. I. Changes to Graduated Payment Allonge Amending Note (Exhibit F), page 27619. Begin: "THIS GRADUATED PAYMENT ALLONGE is an AMENDMENT made this..." J. Changes to Rehabilitation Loan Rider (Exhibit H), page 27621. Paragraph A, page 27621: Add a reference to Direct Endorsement so that the last sentence reads as follows: "No advances shall be made unless approved by the Secretary of Housing and Urban Development or a Direct Endorsement Underwriter." K. Changes to Condominium Rider (Exhibit I), page 27622. 1. The sentence beginning with "The Property Address includes a unit in ...," page 27622: "Individual" should _____________________________________________________________________ 23 be deleted and "undivided" added in its place. The sentence should read as follows: "The Property Address includes a unit in, together with an undivided interest in the common elements of, a condominium project known as:" 2. Paragraph A, eighth line, page 27622. Delete "this" and add "of this Security Instrument" after "Paragraph 4" and before "to maintain...." L. Changes to Planned Unit Development Rider (Exhibit J), page 27623. 1. Paragraph A, eighth line, page 27623: Delete "this" and add "of this Security Instrument" after "Paragraph 4" and before "to maintain..." M. Changes to Tax-Exempt Financing Rider (Exhibit K), page 27624. 1. Paragraph beginning with "In addition to the covenants," page 27624. Amend paragraph to reflect acceleration language in the model mortgage form so that the paragraph reads as follows: In addition to the _____________________________________________________________________ 24 covenants and agreements made in the Security Instrument, Borrower and Lender further covenant and agree to amend Paragraph 9 of the Model Mortgage Form, entitled 'Grounds for Acceleration of Debt' as by adding additional grounds for acceleration follows:" 2. Line beginning "Lender, or such of...," page 27624. change "be" to "by". 3. Paragraph (a), beginning with " a ll or part of the property...," page 27624. Delete "(other than by devise, descent, or operation of law)." 4. Paragraph (a)(i), page 27624. Change "resident" to "residence." 5. Paragraph (a)(iv), page 27624. This paragraph should be altered to read as follows if the bonds involved are subject to the 1988 amendments to Section 143(f) of the Internal Revenue Code. _____________________________________________________________________ 25 (iv) who has a gross family income in excess of the applicable percentage of applicable median family income as provided in Section 143(f) and (i)(2) of the Internal Revenue Code; or 6. Next-to-last sentence, page 27624. Change the sentence to read "References are to the Internal Revenue Code as amended and in effect on the date of issuance of bonds, the proceeds of which will be used to finance the purchase of the Security Instrument and are deemed to include the implementing regulations." If bond proceeds are used for purposes other than mortgage purchase, such as for direct loans to homeowners or as loans to mortgagees who lend to homebuyers, the description of the bonds should be amended as needed. 7. General, page 27624. The word "Tax-Exempt" should always have a hyphen. As published, Exhibit K is inconsistent on this point.