HUD has revised the regulations under the single family mortgage insurance program with respect to the payment of interest at the debenture rate for mortgage insurance claims. The revisions implement a recent statutory amendment to the National Housing Act that provides for a mandatory change in the calculation of all debenture interest on mortgage insurance claims paid in cash.

Section 224 of the National Housing Act (NHA) provides for the debenture interest rate to be used in the payment of FHA single family mortgage insurance claims upon default of the mortgage. Before the recent amendment to the NHA, section 224 provided that debentures issued under any section of the NHA were to bear interest at the rate in effect on the date the mortgage was endorsed for insurance (or the rate that was in effect on the issue date of the commitment to insure the loan or mortgage.

As amended, section 224 of the NHA now provides that the debenture interest rate for purposes of calculating an insurance claim paid in cash on a mortgage insured under section 203 or 234 of the NHA and endorsed after Jan. 23, 2004, "shall be the monthly average yield, for the month in which the default on the mortgage occurred, on United States Treasury Securities adjusted to a constant maturity of 10 years.''

The effective date for this revision is July 24, 2006.

To view the full release please click on the following link.

HUD 24 CFR Part 203