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Catalog of Federal Domestic Assistance

Program Descriptions

14.159:  Section 245 Graduated Payment Mortgage Program

Objectives:  To facilitate early home ownership for households that expect their incomes to rise. Program allows homeowners to make smaller monthly payments initially and to increase their size gradually over time.

PROGRAM AND AWARD	FINANCIAL AND INFORMATION CONTACTS
ELIGIBILITY REQUIREMENTS	FINANCIAL AND ADMINISTRATIVE INFO.
APPLICATION AND AWARD PROCESS	INFORMATION CONTACTS
RELATED PROGRAMS	ASSISTANCE CONSIDERATIONS
PROGRAM ACCOMPLISHMENTS	POST ASSISTANCE REQUIREMENTS

14.159 ELIGIBILITY REQUIREMENTS:

Applicant Eligibility:  All persons intending to occupy the property are eligible to apply for Section 245(a).

Beneficiary Eligibility:  Individuals/families.

Credentials/Documentation:  Documentation regarding the characteristics of the property and the qualifications of the applicant are assembled by the mortgagee and submitted with the application. This program is excluded from coverage under OMB Circular No. A-87.

14.159 APPLICATION AND AWARD PROCESS:

Preapplication Coordination:  Application conference with the mortgage lender submitting the application is suggested. This program is excluded from coverage under OMB Circular No. A-102. This program is excluded from coverage under E.O. 12372.

Application Procedure:  Applications are submitted for review and approval or disapproval to the local HUD field office through a HUD-approved lending institution. This program is excluded from coverage under OMB Circular No. A-110.

Award Procedure:  See Application Procedure.

Deadlines:  None.

Range of Approval/Disapproval Time:  Varies.

Appeals:  HUD will state the reasons for refusing an application. The applicant may reapply subject to concurrence of the lender.

Renewals:  Not applicable.

Criteria for Selecting Proposals:  Not applicable.

Examples of Funded Projects:  Not applicable.

Range and Average of Financial Assistance:  See Uses and Use Restrictions.

14.159 RELATED PROGRAMS:

• 14.117 Mortgage Insurance: Homes;
• 14.120 Mortgage Insurance: Homes for Low and Moderate Income Families;
• 14.121 Mortgage Insurance: Homes in Outlying Areas;
• 14.122 Mortgage Insurance: Homes in Urban Renewal Areas;
• 14.172 Mortgage Insurance: Growing Equity Mortgages.

14.159 PROGRAM ACCOMPLISHMENTS:

In fiscal year 1999, HUD insured 108 loans and expects to insure an equal number of loans in fiscal year 2000.

14.159 FINANCIAL AND ADMINISTRATIVE INFO:

Federal Agency:  HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Type of Assistance:  Guaranteed/Insured Loans.

Obligations:  (Mortgages insured) Reported under program 14.117.

Budget Account Number:  86-4077-0-3-371.

Authorization:  National Housing Act of 1934, Section 245, Public Law 73-479; Housing and Community Development Act of 1974, Section 308, Public Law 93-383, as amended; Housing and Community Development Amendments of 1979, Section 245(b).

Regulations, Guidelines, and Literature:  "Move in...With A Graduated Payment Mortgage", no charge; "Lending and Selling With A Graduated Payment Mortgage", no charge; 24 CFR 203.45; Hud Handbook 4240.2, no charge.

14.159 INFO CONTACTS:

Regional or Local Office:  Persons are encouraged to contact the Homeownership Center serving their State, or the nearest local HUD Office. See Catalog Address Appendix IV for a list of Offices.

Headquarters Office:  None.

(See Appendix IV for more contact info.)

14.159 ASSISTANCE CONSIDERATIONS:

Formula and Matching Requirements:  For most families, the maximum amount of the loan is the property's sales price (or appraised value, if less) exclusive of any borrower paid closing cost multiplied by a percent that is determined by the sales price or value, if less and the average closing cost for the State. This determines the maximum mortgage that FHA will insure, provided the mortgagor makes a cash investment of at least 3% into the property, which may include closing costs. The downpayment is the difference between the maximum loan amount and the purchase price of the home. In addition to the downpayment, the purchaser must pay for all items of prepaid expense. Either a one-time mortgage insurance premium or a monthly premium is required based on the program under which a GPM mortgage is insured. The loan origination charge by the mortgagee varies, but may not exceed one percent of the total mortgage (minus the mortgage insurance premium, if being financed). Mortgagors may be charged appraisal and inspection fees in accordance with fee schedules established by HUD.

Length and Time Phasing of Assistance:  The term of the mortgage is limited to 30 years.

Uses and Use Restrictions:  HUD insures lenders against loss on mortgage loans. These mortgage loans may be used by owner-occupant mortgagors to finance the purchase of proposed, under construction, or existing single family housing, and condominiums. Maximum insurable mortgage is the property's sales price (or appraised value, if less) exclusive of any borrower paid closing cost multiplied by a percent that is determined by the sales price or value if less and the average closing cost for the State or 97 percent of the appraised value and closing costs of the property, minus all of the deferred interest which would accrue during the graduated term. This determines the maximum mortgage that FHA will insure, provided the mortgagor makes a cash investment of at least 3% into the property which may include closing costs.

14.159 POST ASSISTANCE REQUIREMENTS:

Reports:  Defaults in meeting the mortgage terms must be reported. All approved mortgagees at any time upon request by HUD must furnish a copy of their latest financial statement.

Audits:  HUD reserves the right to audit the account of the mortgagee to determine its compliance and conformance with HUD regulations and standards.

Records:  Mortgagees are required to service and maintain records in accordance with acceptable mortgage practices of prudent lending institutions and the HUD regulations.