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U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000

JULY 17, 1989
OFFICE OF THE ASSISTANT SECRETARY FOR
HOUSING FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 89-21
           TO:         ALL APPROVED MORTGAGEES
           SUBJECT:    Change in Maximum Interest Rates
 
               The Housing and Urban Recovery Act of 1983 established
           Negotiated Interest Rates for all single-family and
           multifamily programs, except for Section 235 and Section
           232 (loans to finance purchase anD installation of fire
           safety equipment).  However, Section 429(e)(2) of the
           Housing and Community Development Act of 1987 (Public Law
           100-242, approved February 5, 1988) amended the National
           Housing Act to provide that interest on fire safety
           equipment loans under Section 232(i) of the Act will be
           "at such rate as may be agreed upon by the mortgagor and
           the mortgagee."  Accordingly, these loans, like most other
           National Housing Act-authorized insured loans, now have
           their interest rates determined by negotiation.
           Accordingly, this announcement of a change in interest
           rate ceilings for FHA-insured mortgages is limited to the
           Section 235 Program.
 
               HUD regulations have been changed to decrease the
           maximum rate of interest on Section 235 loans from 10.00
           to 9.50 percent.
 
               In Mortgagee Letter 84-21 on the Section 235 program,
           it states that reprocessing will be required by HUD on any
           case in which a mortgagee wishes to close at an interest
           rate higher than the rate shown on the firm commitment.
           To avoid unnecessary processing, HUD will only accept
           requests for reprocessing where a clear final inspection
           has been obtained.  Mortgagees must submit this
           information with their request to have their case
           reprocessed at the higher rate.
 
              This change is effective July 17, 1989.
 
                                   Sincerely,
 
                                   James E. Schoenberger
                                   General Deputy Assistant Secretary
                                      for Housing
 
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