[Federal Register Volume 60, Number 128 (Wednesday, July 5, 1995)]
[Notices]
[Page 35040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16335]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner
[Docket No. N-95-3785; FR-3724-N-03]
Interest Rate for the Section 235(r) Mortgage Insurance Program
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Notice of decrease in interest rate.
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SUMMARY: This notice announces a change in the maximum interest rate
for mortgages to be insured under section 235(r) of the National
Housing Act. The section 235(r) maximum interest rate is to be
determined by the Secretary of HUD and published in the Federal
Register. Mortgage market conditions now dictate that the Secretary
decrease the section 235(r) maximum rate from 9.00 percent to 8.50
percent. There is no change being made in the maximum margin of
additional percentage points that may be added to the maximum rate if
the established conditions are met. Therefore, the maximum for the
premium section 235(r) interest rate will be 10.00 percent (8.50
percent for the rate of interest and 1.50 percent for the margin of
additional percentage points).
EFFECTIVE DATE: July 5, 1995.
FOR FURTHER INFORMATION CONTACT: John N. Dickie, Director, Program
Evaluation Division, Room B-133, Department of Housing and Urban
Development, 451 Seventh Street, SW., Washington, DC 20410; telephone
(202) 755-7470, Ext. 117; (TDD) (202) 708-4594. (These are not toll-
free numbers.)
SUPPLEMENTARY INFORMATION: Section 235(r) of the National Housing Act
(12 U.S.C. 1715z) authorizes the Secretary to insure mortgages that
refinance existing mortgages insured under section 235. The purpose of
the program is to reduce the interest rate insured and assisted under
section 235 in order that the assistance payments the Department pays
on behalf of mortgagors may be reduced. The regulations implementing
the program are contained in subpart H of 24 CFR part 235--refinancing
of mortgages under section 235(r).
The interest rate for these loans is set by the Secretary and
published in the Federal Register as authorized by 24 CFR
235.1202(b)(3). The previous section 235(r) interest rate of 9.00
percent was published in the Federal Register on February 16, 1995 (60
FR 9043). The Department has determined that market conditions dictate
a change in the section 235(r) interest rate. The change will take
effect on the date of publication of this notice.
The most recent HUD survey of Mortgage Market conditions (i.e.,
Secondary Market Prices and Yields), an OMB-designated Principal
Federal Indicator, found that the dominant national FHA rate being
quoted to potential homebuyers for ``lock-in'' commitments of 60 days
or more was 8.50 percent on April 1, 1995, with an average of .62
points, and an effective interest rate of 8.59 percent.
Most FHA mortgages are funded in the GNMA mortgage-backed
securities market. There is a 50 basis point spread between FHA
contract interest rates and GNMA coupon rates (this covers the GNMA
guarantee fee and servicing cost). On May 3, 1995, the GNMA 7.50
percent coupon securities (8.00 percent FHA loans) were priced at about
2 points discount. On the other hand, the GNMA 8.00 percent security
(8.50 percent FHA loans) was trading in the two-month forward market at
around par, while the 8.50 percent GNMA coupons (9.00 percent FHA
mortgages) traded at about 2 points over par (i. e., premium).
Adjusting the section 235(r) rate to 8.50 percent will bring this
rate back into line with the rest of the FHA current production loans.
Therefore, the maximum rate for section 235(r) mortgages is 8.50
percent beginning with the publication date of this notice. The maximum
margin of additional percentage points that may be added to the maximum
rate under 24 CFR 235.1202(b)(3)(i)(B) will remain at 1.50 percent.
The subject matter of this notice is categorically excluded from
HUD's environmental clearance procedures, in accordance with 24 CFR
50.20(l). For that reason, no environmental finding has been prepared
for this notice.
Dated: May 22, 1995.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 95-16335 Filed 7-3-95; 8:45 am]
BILLING CODE 4210-27-P
