FHA requires the security instrument for loans submitted for insurance to be formatted according to requirements set forth in FHA Single Family Handbook 4155.2 ch. 6.B & 12.A. To summarize and generalize these requirements, the instruments must be based on the FHA Model Mortgage Form (see Ibid. ch. 12.A.1) and must be formatted as follows:
1. Language Preceding Uniform Covenants: This language should be based upon the approved Fannie Mae/Freddie Mac security instrument used for the jurisdiction in which the secured property is located. With the exception of New Mexico, “the approved” FNMA/FHLMC instrument is the 1990 version, rather than the current 2001 version (see FHA ML 2009-23 & 2002-03 for details). In addition, the FHA Case Number and box should also appear on the instrument, as shown in the FHA Model Mortgage Form.
2. Uniform Covenants: The Uniform Covenants must be verbatim to the Uniform Covenants set forth in the FHA Model Mortgage Form, despite the fact that such Covenants contain typographical errors. Unlike other parts of the instrument, which may be modified to reflect HUD regulations and state and/or local laws and practices, the Uniform Covenants may not be modified for such reasons without the prior, written approval of HUD. However, there are three cases where we will be deviating from the verbiage of the Model form. In the last sentence of Uniform Covenant 4, we will be using the word “extinguishes,” rather than the enigmatic “distinguishes” on the Model form. In both Uniform Covenant 5 and Uniform Covenant 10, “Borrowed” will be replaced with “Borrower’s” so each will read in part, “…and shall continue to occupy the Property as Borrower’s principal residence…” and “…all amounts required to bring Borrower’s account current…”. The other typographical errors were deemed insignificant in nature.
3. Non-Uniform Covenant 17: The language of this Covenant must be the same as set forth in the FHA Model Mortgage Form, though it may be adapted if an assignment of rents is prohibited by state law. If adapted, it should be done in such a way as to allow “the lender to collect the maximum interest in rents permitted by law.”
4. Non-Uniform Covenant 18: Perhaps the most complicated Covenant in the instrument, Covenant 18 should mostly follow the covenant concerning foreclosures in the 1990 version of the FNMA/FHLMC uniform security instrument, with adaptations as necessary to conform to state and/or local practices (yet language concerning notice and acceleration should not be included). FHA does require a specific paragraph to print in the Covenant (concerning nonjudicial powers of sale under the Single Family Mortgage Foreclosure Act of 1994), as well as specific language for the first clause in the Covenant.
5. Additional Non-Uniform Covenants: Remaining Covenants should closely following those of the 1990 version of the FNMA/FHLMC instruments, with any necessary adaptations to conform to state and/or local laws and practices. The one exception is the “Riders to this Security Instrument” paragraph, which should match the language set forth in the FHA Model Mortgage Form.
6. Signatures: Signatures should be formatted to match the FNMA/FHLMC instruments. Witness lines may be removed, if not required by state law.
Pursuant to an audit of our FHA Security Instruments, we will be adjusting all of the instruments to make sure that they conform more closely to these FHA requirements. The Uniform Covenants will be verbatim to those in the FHA Model Mortgage Form and all other provisions will more closely match the language of the 1990 FNMA/FHLMC uniform security instruments, except in cases where state law or enforceability of the instrument come into conflict, in which case we will modify the language to mitigate such an issue (mostly by utilizing the language used in the 2001 versions of the instruments, where possible). In addition, the formatting of the Uniform and Non-Uniform Covenants has been modified to better reflect the FHA Model Mortgage Form. Under some circumstances, the Model format edits may result in a larger page count.
One universal change that will be made, which is not explicitly required by FHA, is printing Covenant 18 in bold, so that the foreclosure language is in prominent type, which is favored in most states.
These updates to the standard assignments will be put into production as soon as they become available. The first edits will take effect June 25, 2013. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
June 17, 2013
Update: In addition, the FHA Notes and Riders will be audited for content, including placement of the FHA Case Number and box, as shown in the FHA Model Note Form. These changes will also start to take effect June 25, 2013.
June 20, 2013
DR 134977 and others