Summary:
Under Title I, HUD insures lenders against
most losses on home improvement loans.
Purpose:
The Federal Housing Administration (FHA)
makes it easier for consumers to obtain affordable home improvement
loans by insuring loans made by private lenders to improve properties
that meet certain requirements. "Lending institutions make loans
from their own funds to eligible borrowers to finance these improvements."
Type of Assistance:
The Title I program insures
loans to finance the light or moderate rehabilitation of properties,
as well as the construction of nonresidential buildings on the property.
This program may be used to insure such loans for up to 20 years
on either single- or multifamily properties. The maximum loan amount
is $25,000 for improving a single-family home or for improving or
building a nonresidential structure.
For improving a multifamily structure, the maximum loan amount
is $12,000 per family unit, not to exceed a total of $60,000 for
the structure. These are fixed-rate loans, for which lenders charge
interest at market rates. The interest rates are not subsidized
by HUD, although some communities participate in local housing rehabilitation
programs that provide reduced-rate property improvement loans through
Title I lenders.
FHA insures private lenders against the risk of default for up
to 90 percent of any single loan. The annual premium for this insurance
is $1 per $100 of the amount advanced; although this fee may be
charged to the borrower separately, it is sometimes covered by a
higher interest charge.
Eligible Lenders:
Only lenders approved by HUD
specifically for this program can make loans covered by Title I
insurance. Title I loans can be disbursed directly to the borrower
or, if the loan is made through a dealer, the disbursement will
be made jointly to the dealer and the borrower. While most lenders
and dealers/contractors use this program responsibly, HUD urges
consumers to use caution in choosing and supervising home repair
dealers/contractors conducting Title I repair/renovation work. Previously
HUD had reviewed some Title I dealer loans and discovered several
instances of unscrupulous dealers/contractors performing shoddy
work, falsifying documents, overcharging homeowners and use of deceptive
advertising. HUD has taken new measures in an attempt to prevent
further occurrences in dealer originated loans.
Eligible Customers:
Eligible borrowers include
the owner of the property to be improved, the person leasing the
property (provided that the lease will extend at least 6 months
beyond the date when the loan must be repaid), or someone purchasing
the property under a land installment contract.
Eligible Activities:
Title I loans may be used
to finance permanent property improvements that protect or improve
the basic livability or utility of the property--including manufactured
homes, single-family and multifamily homes, nonresidential structures,
and the preservation of historic homes. The loans can also be used
for fire safety equipment.
Application:
Applications must be submitted to
a Title I-approved lender. Our web site offers a searchable list
of approved lenders.
Funding Status:
In FY 2006 HUD insured 4,711 Title I loans with a value of $101
million. HUD estimates that Title I loans made in FY 2007 may reach
$105 million.
Technical Guidance:
This program is authorized
under Title I, Section 2, of the National Housing Act (12 U.S.C.
1703). Program regulations are in 24 CFR Part 201. The program is
administered by the Home Mortgage Insurance Division of HUD's Office
of Housing-Federal Housing Administration (FHA).
For More Information:
Lenders may contact FHA's
Home Mortgage Insurance Division at (202) 708-2121 for information
about how to participate in the Title I loan insurance program.
Consumers can register complaints about Title I lenders or contractors
by contacting the Home Mortgage Insurance Division or State or local
consumer protection agencies.