[Federal Register Volume 59, Number 54 (Monday, March 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6483]


[[Page Unknown]]

[Federal Register: March 21, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner

24 CFR Part 291

[Docket No. R-94-1693; FR-3531-P-01]
RIN 2502-AG15

 

Single Family Property Disposition Program; Closing Agent Escrow 
Accounts

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the regulations at 24 CFR 291 
governing the Single Family Property Disposition program to require HUD 
contract closing agents, notwithstanding any State or local law to the 
contrary, to establish separate escrow accounts for all proceeds of the 
sale of HUD-acquired homes in the name of the contractor as ``Trustee 
for the Department of Housing and Urban Development.'' The proposed 
rule would also prohibit the commingling of proceeds from the sale with 
non-HUD funds. The proposed rule would codify a contractual provision 
in current contracts between HUD and its closing agents.

DATES: Comments due date: May 20, 1994.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Office of the General Counsel, Rules Docket 
Clerk, room 10276, Department of Housing and Urban Development, 451 
Seventh Street SW., Washington, DC 20410-0500. Communications should 
refer to the above docket number and title. Facsimile (FAX) comments 
are not acceptable. A copy of each communication submitted will be 
available for public inspection and copying during regular business 
hours (7:30 a.m. to 5:30 p.m. Eastern Time) at the above address.

FOR FURTHER INFORMATION CONTACT: Courtland Wilson, Acting Director, 
Single Family Property Disposition, room 9172, Department of Housing 
and Urban Development, 451 Seventh Street SW., Washington, DC 20410-
0500; telephone (202) 708-0740; TDD for hearing- and speech-impaired 
(202) 708-4594. (These are not toll-free numbers.)

SUPPLEMENTARY INFORMATION: The disposition of single family properties 
that are acquired by HUD or are otherwise in HUD's custody is governed 
under 24 CFR part 291. Under Sec. 291.130(c) of those regulations, HUD 
contracts with qualified firms or persons to administer the closings 
for the sale of the properties. These ``closing agents'' are paid by 
HUD to conduct the closings at no cost to purchasers of the properties. 
The functions of the closing agents, which are specified in 
Sec. 291.130(c)(3), include ``collecting and disbursing funds related 
to the sale, including wiring the net proceeds to HUD's account * * 
*.''
    Under HUD's contracts with the closing agents, the agents are 
obligated to establish a separate non-interest bearing escrow account, 
as trustee for the Department of Housing and Urban Development, for 
deposit of the proceeds and to facilitate the wire transfer of the 
funds to the U. S. Treasury. As a result of the requirement for a 
separate escrow account, closing agents are prohibited from commingling 
any funds collected for HUD with funds they may collect in the conduct 
of any other non-HUD closings.
    It has come to the attention of the Department that some States or 
local governments may have laws that conflict with the contract 
requirements, such as requiring closing agents to deposit all proceeds 
of sales closings conducted by the agents in a single interest-bearing 
account, and to remit the interest to the State or local government for 
use in housing or other government programs. This proposed rule would 
amend Sec. 291.130(c) to require by regulation what has heretofore been 
contractually required. The amendment, which explicitly preempts any 
State or local law to the contrary, would prohibit the commingling of 
proceeds collected by the closing agent for HUD with any non-HUD funds. 
The proposed rule also would require the closing agent to establish a 
separate non-interest bearing account for the deposit of funds 
collected for HUD in the name of the agent as Trustee for HUD.
    The Department believes this requirement is fundamental to the 
protection and integrity of government funds, and therefore should be 
codified as regulation. This would also remedy a situation that places 
many of its closing agents in the position of not being able to 
reconcile their duties under their contracts with HUD, and under State 
or local law.

Other Matters

Paperwork Reduction Act

    The changes in this proposed rule would not affect the information 
collection requirements for the Single Family Property Disposition 
program previously approved by the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act.

Executive Order 12866, Regulatory Planning and Review

    This proposed rule was approved by the OMB as a significant rule 
under Executive Order 12866, which was signed by the President on 
September 30, 1993.

National Environmental Policy Act

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969. The Finding is available for public inspection between 
7:30 a.m. and 5.30 p.m. weekdays in the Office of the Rules Docket 
Clerk, Office of the General Counsel, Department of Housing and Urban 
Development, room 10276, 451 Seventh Street SW., Washington, DC 20410.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the 
preemption of State or local law in Sec. 291.130(c), with regard to 
proceeds of sales collected by closing agents, is subject to review 
under Section 4 of the Order, which prescribes special requirements for 
the preemption of State law by Federal statutes and regulations. (On 
August 22, 1988, HUD, by Federal Register Notice (53 FR 31926), 
implemented Executive Order 12612 for the policy formulation and 
implementation functions of HUD.)
    When determining whether grounds for regulatory preemption exist 
under the Order, the Department considers whether there is firm and 
palpable evidence that compliance with State law stands as an obstacle 
to the accomplishment and execution of the full Federal purposes and 
objectives. The Department's objective in preventing the commingling of 
HUD sale proceeds with non-HUD proceeds is protection of the integrity 
of funds belonging to the Mutual Mortgage Insurance Fund. The 
requirements concerning separate accounts for HUD sales proceeds were 
established in 1990 as a result of very large losses to the insurance 
fund because of embezzlement of funds by closing agents. These losses 
were very detrimental to the accomplishment of the goals of the 
Department. The Department believes it has sufficient grounds for 
preemption under the Order since compliance with State laws requiring 
commingling would impose an obstacle to the Federal objective of 
protecting the insurance fund from loss.

Executive Order 12606, the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this proposed rule would 
not have a significant impact on family formation, maintenance, and 
general well-being, and thus is not subject to review under the Order. 
The proposed rule governs the procedures under which the Department 
sells acquired single family property. Any effect on the family would 
be indirect and insignificant.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this proposed rule before publication and 
by approving it certifies that the proposed rule would not have a 
significant economic impact on a substantial number of small entities. 
The proposed rule governs the procedures under which the Department 
sells acquired single family property.

Semiannual Agenda of Regulations

    This proposed rule was listed as item number 1509 in the 
Department's Semiannual Agenda of Regulations published at 58 FR 56402, 
56424 on October 25, 1993, under Executive Order 12291 and the 
Regulatory Flexibility Act.

List of Subjects in 24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    For the reasons set forth in the preamble, part 291 of title 24 of 
the Code of Federal Regulations would be amended to read as follows:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

    1. The authority citation for part 291 would be revised to read as 
follows:

    Authority: 12 U.S.C. 1709 and 1715(b); 42 U.S.C. 1441, 1551a, 
and 3535(d).

    2. Section 291.130 would be amended by adding a new paragraph 
(c)(4) to read as follows:


Sec. 291.130  Closing.

* * * * *
    (c) * * *
    (4) Notwithstanding any State or local law to the contrary, the 
closing agent must establish a separate non-interest bearing escrow 
account for the proceeds of all HUD sales in the name of the closing 
agent with the restriction ``As Trustee for the U.S. Department of 
Housing and Urban Development.'' Sale proceeds collected for HUD must 
not be commingled with any other funds not designated for HUD. On the 
day of closing or the next banking day, the closing agent must deposit 
the sales proceeds and initiate the request for wire transfer of the 
proceeds due HUD via FEDWIRE. If the bank does not immediately wire the 
deposited sales proceeds, the closing agent must obtain an official 
dated receipt for the deposit and wire transfer request. At the time of 
the actual wire transfer, the closing agent must obtain a properly 
dated confirmation of the wire transfer, to verify proper and timely 
transfer of funds.
* * * * *
    Dated: March 15, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 94-6483 Filed 3-18-94; 8:45 am]
BILLING CODE 4210-27-M