Did you know that assistance payments made to homebuyers under the HUD 235 program must be repaid when the borrower either pays off the loan or sells the property to someone who does not qualify for assistance? According to the Housing Management Division of the U.S. Department of Housing and Urban Development, this "recapture" provision affects all mortgages insured by HUD since May 27, 1981.

However, borrowers may not be required to repay the entire amount of subsidy. They must pay either the amount of assistance received or 50% of the "net appreciation of the property", whichever is less. The term "net appreciation" is defined as any increase in the value of the property over the original purchase price less reasonable costs of sale (broker's commission, discount points, attorney fees, etc.) and reasonable costs of improvements to the property (room additions and other permanent improvements).

To determine the amount of "recapture" (i.e. repayment), complete documentation must be submitted to the HUD office including a statement of the total subsidy received, a copy of the settlement statement and mortgage instruments when the property was purchased, receipts for improvements, and a copy of the settlement statement and transaction documents for the sale of the property.

Persons who desire further information should contact: HUD, 415 North Edgeworth Street, Greensboro, N.C. 27405, Attention: Loan Management Staff.