Mortgage Insurance

Mortgage Insurance for Older, Declining Areas (Section 223(e))
Section 223 (e) insures loans to finance the rehabilitation or purchase and rehabilitation of one-to-four family properties to economically declining urban areas.  The program can be used only to supplement other HUD mortgage insurance programs.  The property must be in a feasible neighborhood and there is an acceptable risk under mortgage insurance.
HUD’s Federal Housing Administration insures rehabilitation loans up to approximately 98 percent of the lesser of appraised value before rehabilitation plus rehabilitation costs or 110 percent of appraised value after rehabilitation.  The loan can be used to finance rehabilitation and refinancing of the outstanding indebtedness of a property; finance rehabilitating of an existing property; and finance purchase and rehabilitation of a property.  It provides mortgage insurance for a home that may be otherwise difficult to finance because it is located in an economically declining, older urban Area.
The terms of the loans vary according to the HUD/FHA program under which the mortgages are insured. HUD determines if the loan should be insured pursuant to Section 223(e) and become an obligation of the Special Risk Insurance Fund.  This allows HUD to more effectively manage the greater expected risk in these loans.  The insurance premium is 0.5 percent per year on the outstanding loan balance.

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