© HUD Single Family Housing Policy Handbook 4000.1
Authority for Mortgages insured under Section 222 of the National Housing Act was repealed on July 30, 2008. The following policies apply for existing Section 222 Mortgages, for which Mortgage Insurance Premiums (MIP) are paid by the servicemember-Borrower’s branch of the military service until the servicemember’s eligibility is terminated.
Included in this section are:
i. Requirements for Section 222 Mortgages
ii. Transfers to Section 222
iii. Sale of a Property Covered by a Section 222 Mortgage
iv. MIP Payments upon Notice of Termination
v. Continued Payment of MIP by Service Branch When Servicemember Dies on Active Duty
vi. Loss Mitigation for Section 222 Mortgages
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- Origination and Underwriting Reviews
- Servicing Reviews
i. Origination and Underwriting Reviews
(A) Military Branch ResponsibilityThe military branch is responsible for payment of MIP on a Section 222 Mortgage when the Borrower is:
- a certified servicemember at the time of application; and
- the owner of the Property at the time of FHA endorsement.
(B) Establishing EligibilityThe servicemember-Borrower must submit the original and two copies of a written certification of a servicemember’s eligibility, issued by the servicemember’s commanding or personnel officer, with their application for mortgage insurance under Section 222. The respective service branch determines benefits eligibility.
ii. Transfers to Section 222
If the original Mortgage is insured under another section of the National Housing Act, the servicemember may request to transfer the insured Mortgage to Section 222.
(A) Transfer RequestsA servicemember requesting transfer of an insured Mortgage to Section 222 must provide the Mortgagee with the original and two copies of a written certification of a servicemember’s eligibility, issued by the servicemember’s commanding or personnel officer.
(B) Forwarding DocumentsIf in agreement with the transfer, the Mortgagee must forward these copies with a letter requesting transfer of the Mortgage to the following address:U.S. Department of Housing and Urban Development
Insurance Operations Division
Attention: Systems Management Branch
Washington, DC 20410The Mortgagee must pay MIP until notified by the FHA Comptroller that the request to transfer has been completed.
iii. Sale of a Property Covered by a Section 222 Mortgage
When a servicemember-Borrower sells the mortgaged Property, the Mortgagee must complete a Mortgage Record Change in FHAC.
(A) Sale of Mortgaged Property to Another Eligible ServicememberIf a mortgaged Property is sold to another eligible servicemember who assumes the Section 222 Mortgage, the Mortgagee must request from the assumptor written certification from their service branch of their eligibility for a Section 222 Mortgage.If the Mortgagee fails to provide this certification to HUD when requesting insurance, HUD will hold the Mortgagee, and not the service branch, responsible for payment of MIP. The Mortgagee should continue to collect premiums from the servicemember-Borrower and pay the premiums to FHA.
(B) Collection of MIP from Servicemember AssumptorWhen a mortgaged Property is sold to another eligible servicemember who will assume the Section 222 Mortgage, the Mortgagee must continue to collect premiums from the assumptor until advised by FHA that the service branch will be responsible for future premiums.If the Mortgagee has been paying the MIP as a result of prior termination of the service branch’s responsibility for payment of premiums, the Mortgagee must continue to collect premiums from the servicemember-Borrower and pay the premiums to FHA.
iv. MIP Payments upon Notice of Termination
Under Section 222, HUD does not require the Mortgagee to collect MIP from the Borrower or to remit premiums to FHA until advised by FHA that the service branch will no longer pay the premiums.
When FHA is notified that the mortgaged Property has been sold or that the servicemember has been discharged, retired, or has died, FHA will:
- request confirmation from the service branch of the termination of MIP; and
- notify the Mortgagee to begin collecting MIP from the servicemember-Borrower.
v. Continued Payment of MIP by Service Branch When Servicemember Dies on Active Duty
The service branch is responsible for determining continued eligibility of servicemember-Borrowers. If a servicemember-Borrower dies while on Active Duty and is survived by a spouse, the service branch will be responsible for the following:
- continuing to pay MIP on the Mortgage until two years after the servicemember’s death or until the spouse disposes of the Property, whichever occurs first;
- notifying FHA when eligibility terminates; and
- paying MIP until confirmation of the termination is received by the FHA Comptroller. FHA will notify the Mortgagee of its responsibility for payment of the MIP.
vi. Loss Mitigation for Section 222 Mortgages
The Mortgagee must evaluate all applicable Loss Mitigation Options for Section 222 MortgagesStandardThe Mortgagee must verify that none of the participants in the mortgage transactions reviewed were debarred, suspended, under an LDP for the FHA program and jurisdiction, or otherwise ineligible to participate in an FHA transaction. This includes participants in an assumption transaction.Participants in a mortgage transaction may include, but are not limited to, the:
- seller (excluding the seller of a Principal Residence)
- listing and selling real estate agent
- loan officer
- loan processor
- underwriter
- Appraiser
- 203(k) Consultant
- Closing Agent
- title company
The Mortgagee must verify participant eligibility using the SAM Excluded Parties List, the LDP list, and NMLS, as applicable.
(B) Required DocumentationThe Mortgagee must maintain documentation that supports each participant’s eligibility.
ii. Servicing Reviews
(A) StandardThe Mortgagee must verify that none of the participants in the servicing transactions reviewed were debarred, suspended, under an LDP for the FHA program and jurisdiction, or otherwise ineligible to participate in an FHA transaction. This includes participants in a loss mitigation transaction.Participants in a servicing transaction may include, but are not limited to:
- Borrowers applying for an FHA-HAMP Loss Mitigation Option
- underwriters
- real estate brokers
- Closing Agent
- title company
- employees of the Mortgagee, or Affiliates participating in HUD programs for or on behalf of the Mortgagee, who have influence or control over the evaluation, approval, or outcome of the servicing loss mitigation, or claims transaction.
The Mortgagee must verify participant eligibility using the SAM Excluded Parties List and the LDP list, as applicable.
(B) Required DocumentationThe Mortgagee must maintain copies of each participant’s eligibility verification print-outs.