Submitting FHA Section 203 (h) Loans Impacted by Hurricane Katrina in Loan Prospector

[October 4, 2005]

The Federal Housing Administration (FHA) recently reminded mortgagees about their policy regarding Section 203(h) loans for Presidentially Declared Disaster Areas in the wake of Hurricane Katrina. These loans are permitted to have loan-to-values (LTV) up to 100 percent and do not require a three percent Statutory Down Payment by the borrower. When submitting these loans to Loan Prospector, you will receive the following feedback message:

"FB – Review FHA Statutory Investment Requirement for eligibility."

If you receive this feedback message, please validate that the loan is exempt from this requirement, based on HUD Mortgagee Letter #2005-33 under FHA's Section 203(h) mortgage insurance program. Once you've validated that the loan is exempt, you can then submit the loan to FHA for endorsement with the representations and warranties associated with the risk class received for that loan.