GENERAL. All FHA insured mortgages are assumable. However, FHA has
placed certain restrictions on the assumability of FHA-insured mortgages
originated since 1986. Depending on the date of loan origination, a
creditworthiness review of the assumptor by the lender may be required.
Mortgages originated before December 1, 1986 generally contain no restrictions
on assumability. To determine what restrictions to assumability have been placed
on the mortgage, the lender must review the legal documents of the mortgage.
Additional details regarding assumability are contained in HUD Handbook 4330.1
REV-5, "Administration of Insured Home Mortgages." Lenders should note that
some mortgages executed in years 1986 through 1989 contain language that is not
enforced due to later Congressional action. Mortgages from that period are now
freely assumable, despite any restrictions stated in the mortgage.
RESTRICTIONS OF THE HUD REFORM ACT OF 1989. Mortgages closed
on or after December 15, 1989 require credit qualification of those borrowers
wishing to assume the mortgage. This policy applies to borrowers who take title
to properties subject to the mortgage, without assuming personal liability for the
debt. It also applies to borrowers who assume and agree to pay the mortgage.
The creditworthiness review requirement spans the life of the mortgage.
Assumptions without credit approval are grounds for acceleration of the
mortgage, if permitted by applicable state law and subject to HUD approval,
unless the seller retains an ownership interest in the property or the transfer is by
devise or descent.
In addition, private investors are prohibited from assuming insured mortgages that are subject to the
restrictions of the 1989 Act. This restriction applies whether or not there is a release of liability by the
lender of the selling mortgagor.
RELEASE FROM LIABILITY. The lender completes a form HUD-92210,
Request for Credit Approval of Sub