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 2003 HUD insured 4,720 Title I loans with
a value of $59 million. HUD estimates that Title I loans made in FY 2004 may reach
$73 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.
For More Information:
Lenders may contact FHA's Home Mortgage
Insurance Division at (202) 708-2121 for information about how to obtain Title
I loan insurance. Consumers can register complaints about Title I lenders or contractors
by contacting the Home Mortgage Insurance Division or State or local consumer
protection agencies.