I. INTRODUCTION
Effective July 2, 1999, any application for mortgage insurance that the mortgagee receives on or after September 2, 1999, requires an original lender to provide certain information, in the form of a disclosure notice, to prospective borrowers who have applied for a Federal Housing Administration (FHA) insured home mortgage. The disclosure notice is required pursuant to a Department of Housing and Urban Development (HUD) rule in its FHA Single Family Mortgage Insurance Program. Specifically, through the disclosure notice, a lender must provide the prospective FHA borrower with an analysis comparing the mortgage costs of the FHA-insured mortgage with the mortgage costs of other similar conventional mortgage products that the lender offers and that the borrower may qualify for. The disclosure notice must also provide information about when the requirement to pay FHA mortgage insurance premiums terminates.
II. INFORMED CONSUMER CHOICE DISCLOSURE NOTICE
A mortgagee must provide a prospective FHA mortgagor with an informed consumer choice disclosure notice, if, in the mortgagee’s judgment, the prospective FHA mortgagor may qualify for similar conventional mortgage products offered by the mortgagee. The mortgagee should base this judgment on the mortgagee’s initial assessment of the prospective FHA mortgagor’s eligibility for a conventional mortgage product. If a mortgagee is unsure about a prospective FHA mortgagor’s eligibility for a conventional mortgage product, the mortgagee should provide the prospective FHA mortgagor with an informed consumer choice disclosure notice.
A. Contents of Notice
The informed consumer choice disclosure notice must:
1. Provide a one-page generic analysis comparing the mortgage cost of the FHA-insured mortgage with the mortgage costs of similar conventional mortgage products offered by the mortgagee that the prospective FHA mortgagor may qualify for;
2. Provide information about when the requirement to pay FHA mortgage insurance premiums terminates; and
3. Meet the requirements of § 203(b)(2) of the National Housing Act [12 U.S.C. 1709(b)(2) (Disclosure Notice)].
B. Format of Disclosure Notice
HUD issued a model informed consumer choice disclosure notice that meets the requirements of § 203(b)(2) of the National Housing Act. The model informed consumer choice disclosure notice contains the minimum elements of an informed consumer choice disclosure notice. These elements must be included in a mortgagee’s informed consumer choice disclosure notice. A mortgagee, however, may include additional elements in an informed consumer choice disclosure notice to better reflect the mortgagee’s products or to provide information that the mortgagee believes is meaningful and helpful to the mortgagee’s customers.
C. Timing of Notice
When a mortgagee is required to provide the informed consumer choice disclosure notice, it must be provided to a prospective FHA mortgagor not later than three business days after the mortgagee receives the prospective FHA mortgagor's application.
D. Revision of Notice
A mortgagee should revise its informed consumer choice disclosure notice periodically to reflect prevailing market conditions. To ensure that the informed consumer choice disclosure notice reflects prevailing market conditions, a mortgagee must revise its informed consumer choice disclosure notice at least once annually.
III. THE INFORMED CONSUMER CHOICE DISCLOSURE NOTICE-HUD'S MODEL NOTICE
HUD’s model informed consumer choice disclosure notice and instructions follow this article. At the lender’s discretion, the lender may revise the disclosure notice to include additional line items or columns, further define terms or explain additional features that better reflect the lender’s FHA and conventional mortgage products so as to make a meaningful comparison.