[Federal Register Volume 59, Number 206 (Wednesday, October 26, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26525]


[[Page Unknown]]

[Federal Register: October 26, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner

24 CFR Parts 207, 213, 221, and 236

[Docket No. R-94-1660; FR-3342-N-02]
RIN 2502-AG04

 

Deletion of the 90 Percent-of-Value Criterion in Section 
223(a)(7) Refinancing; Extension of Effectiveness

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

ACTION: Notice of extended effective period.

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SUMMARY: This notice extends the effectiveness of the interim rule, 
published October 26, 1993 (58 FR 57558), which deletes the value 
criterion in section 223(a)(7) refinancing. The rule will remain in 
effect until April 26, 1995. The final rule is currently in the last 
stages of review by HUD and the Office of Management and Budget (OMB) 
and will be published when approved.

EFFECTIVE DATE: As of October 26, 1994, the interim rule published 
October 26, 1993 (58 FR 57558), is effective until April 26, 1995.

FOR FURTHER INFORMATION CONTACT: Jane Luton, Acting Director, Policies 
and Procedures Division, Department of Housing and Urban Development, 
451 Seventh Street, S.W., Room 6142, Washington, D.C. 20410. Telephone 
numbers: (202) 708-2556; and TDD (202) 708-4594. (These are not toll-
free numbers.)

SUPPLEMENTARY INFORMATION: Section 223(a)(7) of the National Housing 
Act (12 U.S.C. 1715n(a)(7)) (the Act) authorizes HUD to insure 
mortgages given to refinance existing HUD-insured mortgages under any 
section or title of the Act. HUD has implemented Section 223(a)(7) in 
each of its regulations authorizing the insurance of mortgage 
refinancing, including 24 CFR parts 207, 213, 220, 221, 231, 232, 236, 
241, and 242.
    Due to requirements of the Act, each of these parts limits the 
principal amount of the refinanced mortgage to the lower of: (a) the 
original principal amount of the existing mortgage, or (b) the unpaid 
balance of the existing mortgage, to which certain HUD-approved items 
may be added. Additionally, each of these parts, except parts 241 
(supplemental loans) and 242 (hospitals), prohibited the refinanced 
mortgage amount from exceeding a stated percentage of the Federal 
Housing Commissioner's estimate of value of the project after 
completion of any repairs, improvements, or additions to the property. 
Unlike the limitation noted above, the value criterion was not a 
statutory requirement.
    The value criterion precluded many troubled projects from 
refinancing their HUD-insured mortgages, thus preventing them from 
lowering their debt service payments and gaining a sounder financial 
footing. Because Section 223(a)(7) mortgages are already limited by the 
amount of the original insured mortgage, HUD felt the public interest 
and HUD's Insurance Fund would be better served by allowing these loans 
to be refinanced to take advantage of lower interest rates. 
Accordingly, on October 26, 1993, HUD published an interim rule (58 FR 
57558) removing the value criterion from those sections of HUD's 
regulations implementing Section 223(a)(7).
    The preamble to the interim rule stated that the rule would cease 
to be effective after October 26, 1994, unless before that date HUD 
published it as a final rule. The final rule is currently in the last 
stages of review by HUD and the Office of Management and Budget (OMB) 
and will be published upon approval.
    To prevent a period during which there is no rule in effect on this 
subject, the Department is extending the effective date of the interim 
rule deleting the value criterion in Section 223(a)(7) refinancing, 
from October 26, 1994, until April 26, 1995. This action extends the 
potential effective period from 11 months to 18 months which is in 
accordance with internal Departmental guidelines on interim rules. 
However, the Department anticipates that a final rule will be published 
well before the expiration of the 18-month period. The final rule would 
supersede the interim rule.
    Consistent with the extension of the interim rule, the Department 
also is extending the Expedited Section 223(a)(7) Processing 
Instructions (issued November 24, 1993 for use by the Department). The 
instructions will now be effective until April 26, 1995, unless 
otherwise superseded.

    Dated: October 20, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-26525 Filed 10-21-94; 3:04 pm]
BILLING CODE 4210-27-P