As announced, and more thoroughly detailed, in 79 FR 60492 (2014), the Office of the Assistant Secretary for Public and Indian Housing is imposing an annual premium of 0.15% on the remaining loan balance of Section 184 loans, effective for loans with case number assignments on or after November 15, 2014. This annual premium will be imposed on these loans until its unpaid principal balance, excluding the upfront loan guarantee fee, reaches 78% of the lower of the initial sales price or appraised value based on the initial amortization schedule.
Calculating the Premium and Global Warning
Unfortunately, the Office did not provide a method for calculating the annual premium. Questions such as whether it should be based on the actual unpaid principal balance on the anniversary date of Closing, or whether it should be based on the average balance over the previous year (similar to what was done for FHA loans under their last annual premium rules) remain.
DocuTech has been in contact with the Office concerning this matter and they have assured us that they will be publishing more details on this matter “soon.” In the meantime, the following warning will globally appear for any clients attempting to draw documents for Section 184 loans:
“WARNING: An annual premium of 0.15% must be collected for Section 184 Indian Housing loans with case number assignment dates on or after 11/15/2014 [see 79 FR 60492 (2014)]. HUD has not yet announced the exact method for calculating these premiums. Please contact Client Support at 1.800.497.3584.”
Once the Office issues their exact method of calculation, we will proceed to update our software to handle these calculations. Once our updates are complete, we will discontinue providing this warning.
Currently, form HUD 92900-B (our Cx40) prints for Section 184 loans. However, the section entitled “Monthly Insurance Premiums” on this official HUD form indicates that the annual premiums will be cancelled at different dates than what is specified by the Office.
Since we cannot modify an official HUD form – yet it is essential that borrowers correctly understand the ramifications of the annual premium – we will be printing a new “Important Notice to Homebuyers Supplemental Notice” (Cx19126) which will inform borrowers that, notwithstanding the disclosures in form HUD 92900-B, their annual premium will cancel in accordance with the rules prescribed by the Office.
This document will print under the following conditions:
•Loan Type = FHA
•Document Package Type = Initial Disclosure or Closing
•FHA Case Number Assignment Date On or After 11/15/14 = Yes
These changes will take effect on November 15, 2014. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
November 13, 2014