Cx1566, which is a duplicate of the “Notice to Homeowner: Release of Personal Liability for Assumptions” form published by the Department of Housing and Urban Development on their website (https://www.hud.gov/program_offices/housing/sfh/model_documents), is provided pursuant to the provisions of 24 C.F.R. § 203.258 and FHA Single Family Handbook 4000.1 III.A.3.a(i) & III.A.3.b(ii), the latter of which requires the following:
“The Mortgagee must send the applicable Notice to Homeowner: Release of Personal Liability to:
- all applicants for FHA-insured Mortgages, before settlement; and
- sellers or buyers who request information on HUD’s creditworthiness review criteria or procedures for assumptions or releases from personal liability.”
This “Notice to Homeowner” consists of two forms, one of which is given for assumptions of mortgages closed on or after December 15, 1989 and the other for assumptions of mortgages closed before such date, per the following reasons:
“As a result of the passage of the Department of Housing and Urban Development Reform Act of 1989, lenders must insert a new provision into security instruments that pertains to acceleration of the loan if the subject property is sold or otherwise transferred to an investor and/or a purchaser not determined to be creditworthy. . . . It is therefore necessary to modify the Notice to Homeowner to make it reflect the new provision now being included in security instruments governing FHA-insured mortgage loans.
Because (a) all would-be purchasers covered by the 1989 Act must be determined creditworthy in order to avoid acceleration of the loan, and (b) in a previous Mortgagee Letter, 89-27, a release of the original mortgagor from personal liability was made mandatory when the loan obligation was assumed by a creditworthy buyer who agreed to become the substitute mortgagor, and the original mortgagor requested the release in writing, a new, mandatory release policy is being activated for mortgages covered by the 1989 Act. . . .” (FHA ML 90-9)
To switch between the two forms embedded within the same document (Cx1566), we will be triggering the new pre-December 15, 1989 language to print when there is a value sent for “Assumed Loan – Original Note Date” (FI 109195) and the date of that value is before 12/15/1989. If these conditions are not met, the on-or-after December 15, 1989 language will continue to print.
Please note that while the instructions within the “Notice of Homeowner” refer to providing the notices in connection with assumptions of mortgages, we will continue to take a conservative approach and provide this document by default for all FHA loans, per the language in FHA Single Family Handbook 4000.1 III.A.3.b(ii) and obsolete FHA Single Family Handbook 4330.1 REV-5 ch. 6-7 (which the former is based on), both of which state that the appropriate notice must be given to “all applicants for HUD-insured mortgages prior to the settlement transaction”.
These changes will be in effect on July 2, 2019. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.