HUD FHA HOC Reference Guide Hawaiian Home Lands

A. General Eligibility: A mortgage on a homestead lease granted by the Department of Hawaiian Home Lands (DHHL) covering a one- to four-family residence located on Hawaiian home lands is eligible for insurance pursuant to Sec. 247 of the National Housing Act (search GPO Access for 12 U.S.C. 1715z-12) if the mortgagor is a native Hawaiian who will occupy it as a principal residence. Mortgage insurance on cooperative shares under Sec. 203.43c on homes in federally impacted areas under Sec. 203.43e is not authorized under this section.” See 24CFR Sec. 203.43i for more information.

B. Native Hawaiian Eligibility: The mortgagor must be an adult meeting the blood quantum requirement established by the Sec. 247 statute and 24CFR 203.43i(c)(3). A mortgagor who is an original lessee of a homestead lease (also called a residential lot lease) must have 50% Hawaiian blood. A mortgagor who is a successor lessee or an assignee of an original lessee must have 25% Hawaiian blood. Determination of native Hawaiian eligibility is made by DHHL. Lenders may obtain the “Request for Certification of Eligibility” from HUD Mortgagee Letter 2004-43 or Department of Hawaiian Homelands's website.

C. Principal Residence Requirement: The native Hawaiian mortgagor must occupy as his/her principal residence a one-unit home located on the Hawaiian Home Lands leasehold estate being insured.

D. Eligible Leases: Lender must obtain and keep a copy of the Residential Lot Lease issued by DHHL which identifies the proposed mortgagor as the lessee; this will be EITHER an original lease issued to the proposed mortgagor OR an original lease, along with documentation showing succession or assignment of the lease to the mortgagor and DHHL’s consent to each and every transfer of the lease. Any amendments to the original lease must be included as part of the documentation. The Lease must be in the form approved by HUD and must include DHHL’s Mortgage Insurance Rider (refer to HUD Mortgagee Letter 2004-43) as part of the Lease. See 24CFR 203.43i(h). All lease documents must bear evidence of having been recorded at the DHHL.

E. Recordation: Upon loan closing, the mortgage must be recorded in DHHL’s own recording system. The documents should NOT be recorded at the State of Hawaii Bureau of Conveyances or filed with the Office of Assistant Registrar of the Land Court. Recordation at either of these offices does not effectuate a lien on the Hawaiian Home Lands lease.

F. DHHL Consent to Mortgage: A Consent to Mortgage executed by the Chairman of the Hawaiian Homes Commission and recorded in the DHHL must be obtained for the loan file. Lenders can obtain this form by writing to: Department of Hawaiian Home Lands, Attn: Loan Services Branch, P.O. Box 1879, Honolulu, HI 96805.

G. Appraisals: Licensed appraisers are required to conform to Uniform Standards of Professional Appraisal Practices (USPAP) which identifies Market Value as “…the most reasonable price which a property should bring in a competitive and open market”. Since sales of DHHL are neither freely transferable nor subject to an open market, neither the Market Approach nor Sales Comparison Approach are required when appraised for FHA insurance purposes. Thus, appraisals on DHHL properties (existing and proposed construction) require only the use of the Cost Approach. (This change was brought about because appraisers felt that performing the Sales Approach on DHHL violated USPAP.)

1. In the Reconciliation Section of the URAR:

2. References: 24CFR Sec. 203.43i Eligibility of mortgages on Hawaiian Home Lands insured pursuant to section 247 of the National Housing Act.

H. Mortgage Insurance Premium: Section 247 loans are subject only to the Up Front Mortgage Insurance Premium (UFMIP); they are not subject to the annual risk-based premium. The following "UFMIP Repayment Term in Years" factor table is to be used:

Portion Financed	Less than 18	18-22	23-25	Over 25
100%	.02400	.03000	.03600	.03800
0%	.02344	.02913	.03475	.03661

I. Automated Data Processing (ADP) Codes: Mortgages on DHHL properties are identified by the following Section of the Act ADP suffix codes:

Section of the Act	Section of the Act ADP Code	Sec. of the Act ADP Code for Direct Endorsement
203(b)/247	259	759
203(b)/247/251	280	780 (ARM)
203(b)/247	411	811 (Buydown)
203(b)/245(a)	293	793 (GPM)
203(k)/247	408	808 (Rehab)
203(b)/247	405	805 (Rehab/Buydown)

J. Title Evidence: Because there is no first lien requirement for Sec. 247 loans, no title policy or certificate of title need be obtained.

K. Real Property Taxes: By statute, real property taxes are not assessed for the first seven years of the lease.

L. Life Estate: If the lease is encumbered by the interest of a life tenant (life estate), the life tenant must be a signatory to the mortgage but is NOT required to be a signatory to the note.

M. Refinance: Loan-to-value ratios for refinance loans under this program shall not exceed 75%. A loan to value ratio not to exceed 85% may be considered if the loan proceeds exceeding the amount required for payoff of the existing mortgage are for home renovations/improvements, as shown by accompanying proper documentation. Cash-out refinancing for debt consolidation shall not be allowed.