www.hudclips.org DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT WASHINGTON, D. C. 20410 June 12, 1978 OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER IN REPLY REFER TO: Mortgagee Letter 78-8 TO: ALL APPROVED MORTGAGEES SUBJECT: Amendatory Clause for Sales Contracts The education of homebuyers to the involvement of the Department of Housing and Urban Development in the homebuying transaction represents a continual need which is partially addressed by the Statement of Appraised Value, Form FHA 2800-6, which HUD requires that each homebuyer receive. There are instances, however, where the homebuyer does not receive the Statement prior to the sales contract being signed. In such cases, the information on the Statement relating to the purpose of HUD's appraisal and the limit of the Department's authority when making insured mortgage financing available has not been provided the homebuyer at a point in the homebuying process when such information can be useful. To assure that all homebuyers who plan on utilizing insured mortgage financing have been provided with information in a timely manner which clearly and concisely explains HUD's position on such matters, the Department is expanding the amendatory clause which must be included in the sales contract when the homebuyer has not received the Statement of Appraised Value prior to signing the sales contract. The new amendatory clause is as follows: "It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise unless the seller has delivered to the purchaser a written statement issued by the Federal Housing Commissioner setting forth the appraised value of the property (excluding closing costs) of not less than $ which statement the seller hereby agrees to deliver to the purchaser promptly after such appraised value statement is made available to the seller. The purchaser shall, however, have the privilege and option of proceeding with the consummation of the contract without regard to the amount of the appraised valuation made by the Federal Housing Commissioner. The appraised valuation is arrived at to determine the maximum mortgage the Department of Housing and Urban Development will insure. HUD does not warrant the value or the condition of the _____________________________________________________________________ 2. property. The purchaser should satisfy himself/herself that the price and the condition of the property are acceptable." The underscored language is that which is being added. Because of its importance to homebuyers, the new language must be underscored in sales contracts. In this manner, it should be more noticeable to homebuyers reviewing the contract. Effective June 1, 1978, the language set forth above for the amendatory clause must be included in the sales contract or added as a separate amendment to the contract unless the homebuyer can certify that he/she received the FHA Statement of Appraised Value before signing the sales contract. The Mortgagor's Certificate on Form FHA 2900-4, Firm Commitment for Mortgage Insurance Under the National Housing Act, has a block under item "e" that reflects the present language for the amendatory clause. In those situations where the amendatory clause is necessary after July 1, 1978, as well as the Mortgagor's Certificate on the Form FHA 2900-4 being executed, the mortgagor must execute a copy of the attached certification. That executed certification must accompany the Form FHA 2900-4 and other documentation being submitted with the mortgage for insurance endorsement. As soon as the amendatory clause referenced on the Form FHA 2900-4 is changed to reflect the new language, the separate mortgagor's certification will no longer be necessary. While it is realized that a change of this nature initially may result in some inconvenience, there is no question that homebuyers, as well as approved mortgagees and HUD, will benefit. In this regard, your cooperation in implementing this new language effective July 1, 1978, is appreciated. Sincerely, Lawrence B. Simons Assistant Secretary for Housing-Federal Housing Commissioner _____________________________________________________________________ MORTGAGOR'S CERTIFICATE The undersigned certifies that the FHA Statement of Appraised Value or VA Certificate of Reasonable Value was not received by me prior to my signing the contract to purchase, but the contract to purchase contained the following language: "It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not be obligated to complete the purchase of the property described herein or to incur any penalty by forfeiture of earnest money deposits or otherwise unless the seller has delivered to the purchaser a written statement issued by the Federal Housing Commissioner setting forth the appraised value of the property (excluding closing costs) of not less than $_______ which statement the seller hereby agrees to deliver to the purchaser promptly after such appraised value statement is made available to the seller. The purchaser shall, however, have the privilege and option of proceeding with the consummation of the contract without regard to the amount of the appraised valuation made by the Federal Housing Commissioner. The appraised valuation is arrived at to determine the maximum mortgage the Department of Housing and Urban Development will insure. HUD does not warrant the value or the condition of the property. The purchaser should satisfy himself/herself that the price and condition of the property are acceptable." Signature(s) ______________________________ Date ____________________ 19 ____ (IF THE AMENDMENT PROCEDURE WAS NECESSARY, THE DOLLAR AMOUNT USED IN THE AMENDATORY CLAUSE IS INSERTED IN THE ABOVE BLANK.) _____________________________________________________________________