[Federal Register Volume 59, Number 7 (Tuesday, January 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-35]


[[Page Unknown]]

[Federal Register: January 11, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner

24 CFR Parts 251, 252 and 255

[Docket No. R-934-1589; FR-2951-F-02]
RIN 2502-AF09

 

GNMA Requests for Full Insurance on Coinsurance Loans

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Final rule.

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SUMMARY: This rule revises currently applicable multifamily and health 
facility coinsurance regulations to eliminate the requirement that the 
Government National Mortgage Association (GNMA), in every case, first 
attempt to assign issuer-servicer responsibility on current coinsured 
mortgages held by a defaulting lender-issuer before requesting full 
insurance endorsement by the Federal Housing Administration (FHA). The 
purpose of the rule is to eliminate a current regulatory requirement 
which has proved to be time-consuming and, in most cases, unnecessary.

EFFECTIVE DATE: February 10, 1994.

FOR FURTHER INFORMATION CONTACT: Albert B. Sullivan, Director, Office 
of Multifamily Housing Management, room 6160, Department of Housing and 
Urban Development, 451 Seventh Street, SW., Washington, DC 20410, voice 
(202) 708-3730, TDD (202) 708-4594. (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: The Department's former regulations 
concerning GNMA's right to assignment of coinsured mortgages were found 
at 24 CFR 251.827 (Multifamily Coinsurance--New Construction and 
Substantial Rehabilitation), Sec. 252.827 (Coinsurance of Nursing Homes 
and Related Facilities), and Sec. 255.827 (Coinsurance of Mortgages 
Covering Existing Multifamily Projects), before their recent removal as 
part of the termination of the Coinsurance program sections on right to 
assignment provided that, for any Coinsured Mortgage that is not in 
default and is held by a defaulting lender-issuer, GNMA will first 
attempt to have the Mortgage assigned to another eligible coinsuring 
lender by soliciting offers to assume the defaulting lender-issuer's 
rights and obligations under the Mortgage from those eligible 
coinsuring lenders that are indicated on a periodically updated listing 
furnished to GNMA by the Commissioner and that are also GNMA issuers. 
If GNMA rejects all offers or no offers are received, GNMA will then 
have the right to perfect an assignment of the Mortgage to itself. The 
Commissioner will endorse any Mortgage assigned to GNMA as provided by 
this section for full insurance effective as of the date of assignment 
in accordance with the appropriate provisions of title 24 of the Code 
of Federal Regulations.
    On October 10, 1990, a final rule was published (55 FR 41312) 
terminating the FHA multifamily coinsurance programs and revising parts 
251, 252 and 255. As a result of the final rule, parts 251, 252 and 255 
each now consist of a single section dealing with the program phase-out 
process. However, while the former rule's provisions are no longer 
included in the Code of Federal Regulations, those regulations in 
effect before November 12, 1990 continue to govern the rights and 
obligations of mortgagors, coinsuring lenders and HUD in existence 
before the termination of the coinsurance programs. The effect of this 
rule is to revise those regulations as they relate to the handling of 
mortgage assignments to GNMA.
    On December 15, 1992 the Department published a proposed rule (57 
FR 59314) identical in text to this final rule. No comments were 
received from the public concerning this proposed rule.
    In lieu of the above-quoted paragraphs (a)(1) and (a)(2), this rule 
provides that ``For any Coinsured Mortgage that is not in default and 
is held by a defaulting lender-issuer, GNMA will have the right to 
perfect an assignment of the mortgage to itself. However, before 
exercising this right, GNMA will attempt to have the Mortgage assigned 
to another eligible coinsuring lender (unless it determines, with the 
agreement of the Commissioner, that the attempt would prove ineffectual 
because of market or other conditions). The assignment will be 
attempted by soliciting offers to assume the defaulting lender-issuer's 
rights and obligations under the Mortgage from those eligible 
coinsuring lenders that are also GNMA issuers and that are indicated on 
a periodically updated listing furnished to GNMA by the Commissioner.''
    Given the facts that (a) the authority to coinsure mortgages has 
been terminated; (b) for the most part, no market exists for the 
purchase of coinsurance servicing rights; and (c) none of the few 
remaining approved coinsuring lenders has shown any interest to date in 
assuming additional coinsuring risk by assignment of loans from GNMA, 
implementation of the regulatory requirement earlier set forth in 
paragraphs (a)(1) and (a)(2) has proved to be a time-consuming, 
burdensome and fruitless process. Therefore, this rule amends parts 
251, 252 and 255 to eliminate the requirement that GNMA, in every case, 
first attempt to assign issuer-servicer responsibility on current 
coinsured mortgages before perfecting assignment of the Coinsured 
Mortgage to itself and requesting full insurance endorsement by FHA.

Procedural Matters

Executive Order 12866

    This final rule was reviewed and approved by the Office of 
Management and Budget as a significant regulatory action under 
Executive Order 12866, Regulatory Planning and Review, which was signed 
by the President on September 30, 1993. Any changes made to the rule as 
a result of that review are a part of the public docket file in the 
office of the Rules Docket Clerk listed at the beginning of this 
preamble.
    In accordance with 5 U.S.C. 605(b) (the Regulatory Flexibility 
Act), the undersigned hereby certifies that this rule does not have a 
significant economic impact on a substantial number of small entities. 
This rule is procedural in nature. It effects no substantive changes in 
HUD programs or policies.
    This rule was listed as item number 1540 in the Department's 
Semiannual Agenda of Regulations published on October 25, 1993 (58 FR 
56402, 56431) under Executive order 12291 and the Regulatory 
Flexibility Act.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive order 12612, Federalism, has determined that the policies 
contained in this rule do not have Federalism implications and, thus, 
are not subject to review under the Order. No programmatic or policy 
changes result from this rule's promulgation which would affect 
existing relationships between the Federal Government and State and 
local governments.

Executive Order 12606, The Family

    The General Counsel, as the Designated Official under Executive 
order 12606, The Family, has determined that this rule does not have 
potential for significant impact on family formation, maintenance, and 
general well-being, and, thus, is not subject to review under the 
Order. The rule is procedural in nature and no significant change in 
existing HUD policies or programs impacting on the family result from 
promulgation of this rule.

Environment

    An environmental assessment is unnecessary, since internal 
administrative procedures whose content does not constitute a 
development decision affecting the physical condition of specific 
project areas or building sites are categorically excluded from the 
Department's National Environmental Policy Act procedures under 24 CFR 
50.20(k).

List of Subjects

24 CFR Part 251

    Low and moderate income housing, Mortgage insurance, Reporting and 
recordkeeping requirements.

24 CFR Part 252

    Health facilities, Loan programs--housing and community 
development, Loan programs--health, Mortgage insurance, Reporting and 
recordkeeping requirements, Nursing homes.

24 CFR Part 255

    Low and moderate income housing, Mortgage insurance, Reporting and 
recordkeeping requirements.

    Accordingly, 24 CFR parts 251, 252 and 255 are amended to read as 
follows:

PART 251--COINSURANCE FOR THE CONSTRUCTION OR SUBSTANTIAL 
REHABILITATION OF MULTIFAMILY HOUSING PROJECTS

    1. The authority citation for 24 CFR part 251 is revised to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715z-9; 42 U.S.C. 3535(d).

    2. Section 251.2 is added to read as follows:


Sec. 251.2  GNMA right to assignment.

    If the lender-issuer defaults on its obligations under the GNMA 
Mortgage-Backed Securities Program, GNMA will have the right to cause 
all Coinsured Mortgages held in GNMA pools by the defaulting coinsuring 
lender-issuer to be assigned to another GNMA-approved coinsuring 
lender-issuer, or to GNMA itself.
    (a) For any Coinsured Mortgage that is not in default and is held 
by a defaulting lender-issuer, GNMA will have the right to perfect an 
assignment of the mortgage to itself. However, before exercising this 
right, GNMA will attempt to have the Mortgage assigned to another 
eligible coinsuring lender (unless GNMA determines, with the agreement 
of the Commissioner, that the attempt would prove ineffectual because 
of market conditions or other factors). This attempt will be undertaken 
by soliciting offers to assume the defaulting lender-issuer's rights 
and obligations under the Mortgage from those eligible coinsuring 
lenders that are also GNMA issuers and that are indicated on a 
periodically updated listing furnished to GNMA by the Commissioner.
    (b) For any Coinsured Mortgage that is in default and held by a 
defaulting lender-issuer, GNMA will have the right to perfect an 
assignment of the Coinsured Mortgage directly to itself before 
extinguishing the Mortgage by completion of foreclosure action or 
acquisition of title by deed-in-lieu of foreclosure.
    (c) GNMA, as assignee, will give the Commissioner written notice, 
within 30 days after taking a Mortgage by assignment in accordance with 
this section, in order to allow an appropriate endorsement and 
necessary changes in the Commissioner's records.
    (d) The Commissioner will endorse any Mortgage assigned to GNMA as 
provided by this section for full insurance, effective as of the date 
of assignment in accordance with the appropriate provisions of 24 CFR 
part 221. Any future claim by GNMA, or any assignment of the fully 
insured Mortgage, will be governed by the appropriate provisions of 24 
CFR part 221, except that any payment will be made in cash instead of 
debentures.

PART 252--COINSURANCE OF MORTGAGES COVERING NURSING HOMES, 
INTERMEDIATE CARE FACILITIES AND BOARD AND CARE HOMES

    3. The authority citation for 24 CFR part 252 is revised to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715z-9; 42 U.S.C. 3535(d).

    4. Section 252.2 is added to read as follows:


Sec. 252.2  GNMA right to assignment.

    If the lender-issuer defaults on its obligations under the GNMA 
Mortgage-Backed Securities Program, GNMA will have the right to cause 
all Coinsured Mortgages held in GNMA pools by the defaulting coinsuring 
lender-issuer to be assigned to another GNMA-approved coinsuring 
lender-issuer, or to GNMA itself.
    (a) For any Coinsured Mortgage that is not in default and is held 
by a defaulting lender-issuer, GNMA will have the right to perfect an 
assignment of the mortgage to itself. However, before exercising this 
right, GNMA will attempt to have the Mortgage assigned to another 
eligible coinsuring lender (unless GNMA determines, with the agreement 
of the Commissioner, that the attempt would prove ineffectual because 
of market conditions or other factors). This attempt will be undertaken 
by soliciting offers to assume the defaulting lender-issuer's rights 
and obligations under the Mortgage from those eligible coinsuring 
lenders that are also GNMA issuers and that are indicated on a 
periodically updated listing furnished to GNMA by the Commissioner.
    (b) For any Coinsured Mortgage that is in default and held by a 
defaulting lender-issuer, GNMA will have the right to perfect an 
assignment of the Coinsured Mortgage directly to itself before 
extinguishing the Mortgage by completion of foreclosure action or 
acquisition of title by deed-in-lieu of foreclosure.
    (c) GNMA, as assignee, will give the Commissioner written notice, 
within 30 days after taking a Mortgage by assignment in accordance with 
this section, in order to allow an appropriate endorsement and 
necessary changes in the Commissioner's records.
    (d) The Commissioner will endorse any Mortgage assigned to GNMA as 
provided by this section for full insurance, effective as of the date 
of assignment in accordance with the appropriate provisions of 24 CFR 
part 232. Any future claim by GNMA, or any assignment of the fully 
insured Mortgage, will be governed by the appropriate provisions of 24 
CFR part 232, except that any payment will be made in cash instead of 
debentures.

PART 255--COINSURANCE FOR THE PURCHASE OR REFINANCING OF EXISTING 
MULTIFAMILY HOUSING PROJECTS

    5. The authority citation for 24 CFR part 255 is revised to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715z-9 (42 U.S.C. 3535(d).

    6. Section 255.2 is added to read as follows:


Sec. 255.2  GNMA right to assignment.

    If the lender-issuer defaults on its obligations under the GNMA 
Mortgage-Backed Securities Program, GNMA will have the right to cause 
all Coinsured Mortgages held in GNMA pools by the defaulting coinsuring 
lender-issuer to be assigned to another GNMA-approved coinsuring 
lender-issuer, or to GNMA itself.
    (a) For any Coinsured Mortgage that is not in default and is held 
by a defaulting lender-issuer, GNMA will have the right to perfect an 
assignment of the mortgage to itself. However, before exercising this 
right, GNMA will attempt to have the Mortgage assigned to another 
eligible coinsuring lender (unless GNMA determines, with the agreement 
of the Commissioner, that the attempt would prove ineffectual because 
of market conditions or other factors). This attempt will be undertaken 
by soliciting offers to assume the defaulting lender-issuer's rights 
and obligations under the Mortgage from those eligible coinsuring 
lenders that are also GNMA issuers and that are indicated on a 
periodically updated listing furnished to GNMA by the Commissioner.
    (b) For any Coinsured Mortgage that is in default and held by a 
defaulting lender-issuer, GNMA will have the right to perfect an 
assignment of the Coinsured Mortgage directly to itself before 
extinguishing the Mortgage by completion of foreclosure action or 
acquisition of title by deed-in-lieu of foreclosure.
    (c) GNMA, as assignee, will give the Commissioner written notice, 
within 30 days after taking a Mortgage by assignment in accordance with 
this section, in order to allow an appropriate endorsement and 
necessary changes in the Commissioner's records.
    (d) The Commissioner will endorse any Mortgage assigned to GNMA as 
provided by this section for full insurance, effective as of the date 
of assignment in accordance with the appropriate provisions of 24 CFR 
part 207. Any future claim by GNMA, or any assignment of the fully 
insured Mortgage, will be governed by the appropriate provisions of 24 
CFR part 207, except that any payment will be made in cash instead of 
debentures.

    Dated: December 16, 1993.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-35 Filed 1-10-94; 8:45 am]
BILLING CODE 4210-27-P