[Federal Register Volume 61, Number 18 (Friday, January 26, 1996)]
[Rules and Regulations]
[Pages 2650-2651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1304]




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Part VI





Department of Housing and Urban Development





_______________________________________________________________________



Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner



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24 CFR Parts 202 and 203



Streamlining Mortgagee Requirements; Interim Rule

  Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules 
and Regulations   

[[Page 2650]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner

24 CFR Parts 202 and 203

[Docket No. FR-3957-I-01]
RIN 2502-AG57


Streamlining Mortgagee Requirements

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

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: This rule revises FHA's mortgagee requirements to streamline 
and make the FHA process more flexible for mortgagees and FHA's 
customers and clients.

DATES: Effective date: February 26, 1996.
    Comment due date: March 26, 1996.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Office of General Counsel, 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 between 7:30 a.m. and 5:30 p.m. weekdays at the 
above address.

FOR FURTHER INFORMATION CONTACT: William M. Heyman, Director, Office of 
Lender Activities and Land Sales Registration, Room 9156, Department of 
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC 
20410, telephone (voice) (202) 708-1515, (TDD) (202) 708-4594. (These 
are not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Background

    Earlier this year an FHA Single Family Business Practices Working 
Group was established to develop recommendations to streamline the FHA 
process, reduce or eliminate unnecessary requirements, promote greater 
opportunities for first-time homebuyers and minorities, and maintain a 
responsible risk management program. The Working Group was comprised of 
representatives of mortgage lenders, State and local governments, trade 
associations, realtors, government-sponsored enterprises, and other 
interested parties.
    The revisions made by this rule result from the efforts and 
recommendations made by the Working Group. They will make the FHA 
process more flexible for mortgagees, and for State and local 
governments and nonprofit associations, and also expand homeownership 
opportunities. They will also assist in making the FHA a more effective 
organization to serve the needs of our customers and clients. The 
revisions should also minimize the differences between FHA and 
conventional loan processing and place greater reliance and 
accountability on mortgagees.
    A number of recommended changes did not require rulemaking and, 
therefore, were made effective immediately with the issuance of 
Mortgagee Letter 95-36, dated August 2, 1995. However, some of the 
recommended changes require either rulemaking or modification of 
existing data systems. This rule sets forth the changes that require 
rulemaking for implementation. Changes effected as a result of 
modifications of existing data systems will be announced later.

This Interim Rule

    This interim rule makes the following changes:

--Section 202.11(a)(5) is revised to establish uniform requirements on 
the use of authorized agents by supervised and nonsupervised 
mortgagees. For conforming reasons, Secs. 202.13(e) and 202.17(d) are 
removed.
--Section 202.12(m) is revised to eliminate the requirement that a 
branch office of a mortgagee must be approved by FHA to originate FHA 
mortgages. A branch registry process is permitted. However, a 
nonsupervised loan correspondent will be required to provide evidence 
that it complies with the net worth requirements for itself and all of 
its branches, as set forth in Sec. 202.12(n)(3).
--Section 202.15(c)(1) is revised to eliminate the requirement that 
loans must be closed in the name of the Loan Correspondent, and to 
permit such mortgages to be closed in either the name of the Loan 
Correspondent or its Sponsor(s).
--Section 202.15(c)(5) is revised to eliminate the compliance report 
and the report on internal control from Loan Correspondents' annual 
audited financial statements.
--Section 203.3(b)(2) is revised to eliminate the requirement that FHA 
individually approve mortgagees' Direct Endorsement underwriters and to 
establish a registry process for the underwriter. Also, The requirement 
that the technical staff utilized by the mortgagee be approved by the 
Secretary is removed. For conforming reasons, Secs. 203.3(b)(3) and (c) 
are eliminated.

Other Matters

Justification for Interim Rule

    In general, the Department publishes a rule for public comment 
before issuing a rule for effect, in accordance with its own 
regulations on rulemaking, 24 CFR part 10. However, part 10 does 
provide for exceptions from that general rule where the Department 
finds good cause to omit advance notice and public participation. The 
good cause requirement is satisfied when prior public procedure is 
``impracticable, unnecessary, or contrary to the public interest.'' (24 
CFR 10.1) The Department finds that good cause exists to publish this 
rule for effect without first soliciting public comment, in that public 
procedure is contrary to the public interest and unnecessary.
    No mortgagees or potential mortgagors will be adversely affected by 
the revisions made by this rule without prior public comment. To the 
contrary, the revisions will streamline and make the FHA processes more 
flexible for mortgagees and FHA's customers and clients.
    For these reasons, HUD has concluded that the public interest would 
not be served by the delay that issuance of a proposed rule would 
involve.

Environmental Finding

    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 of No Significant Impact 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 policies 
contained in this rule will not have substantial direct effects on 
States or their political subdivisions, or the relationship between the 
Federal government and the States, or on the distribution of power and 
responsibilities among the 

[[Page 2651]]
various levels of government. As a result, the rule is not subject to 
review under the Order. Specifically, the requirements of this rule are 
directed to insuring mortgages and do not impinge upon the relationship 
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 
because it revises mortgagee requirements.

The Regulatory Flexibility Act

    In accordance with 5 U.S.C. 605(b) (the Regulatory Flexibility 
Act), the Secretary by his approval of this rule hereby certifies that 
this rule does not have a significant economic impact on a substantial 
number of small entities because the changes made by this rule are 
primarily procedural and will not have a significant economic impact.

List of Subjects in Part 202

    Administrative practice and procedure, Home improvement, 
Manufactured homes, Mortgage insurance, Reporting and recordkeeping 
requirements.

List of Subjects in Part 203

    Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and 
recordkeeping requirements, Solar energy.

    Accordingly, Subchapter B of Chapter II of title 24 of the Code of 
Federal Regulations is amended as follows:
CHAPTER II--OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING--FEDERAL 
HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Subchapter B--Mortgage and Loan Insurance Programs Under National 
Housing Act and Other Authorities

PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES

    1. The authority for part 202 continues to read as follows:

    Authority: 12 U.S.C. 1703, 1709, and 1715b; 42 U.S.C. 3535(d).

    2. Part 202 is amended by revising--
    a. In Sec. 202.11, paragraph (a)(5) to read as follows:


Sec. 202.11  Approval, recertification, withdrawal of approval and 
termination of approval agreement.

    (a) * * *
    (5) A mortgagee approved under Secs. 202.13, 202.14, or 202.17 may, 
with the approval of the Secretary, designate another mortgagee 
approved under Secs. 202.13 or 202.14 as authorized agent for the 
purpose of submitting applications for mortgage insurance in its name 
and on its behalf.
* * * * *
    b. In Sec. 202.12, paragraph (m) to read as follows:


Sec. 202.12  General approval requirements.

* * * * *
    (m) Branch offices. A mortgagee approved under Secs. 202.13 or 
202.14, or a mortgagee that meets the definition of a supervised 
mortgagee under Sec. 202.13 and applies for approval as a loan 
correspondent under Sec. 202.15, may maintain branch offices for the 
submission of applications for mortgage insurance, provided that 
registration of such branches is maintained with the Secretary. A 
nonsupervised loan correspondent approved under Sec. 202.15 will be 
required to provide evidence that it complies with net worth 
requirements for itself and all of its branches, as set forth in 
Sec. 202.12(n)(3). The mortgagee shall remain fully responsible to the 
Secretary for the actions of its branch offices.
* * * * *


Sec. 202.13  [Removed]

    c. In Sec. 202.13, paragraph (e) is removed.
    d. In Sec. 202.15, the first sentence of paragraph (c)(1) and 
paragraph (c)(5) are revised, to read as follows:


Sec. 202.15  Loan correspondents.

* * * * *
    (c) * * *
    (1) A loan correspondent shall close all mortgages in its own name 
or the name of its sponsor(s). * * *
* * * * *
    (5) It shall file an audit report with the Secretary within 90 days 
of the close of its fiscal year (or within an extended time if, at the 
discretion of the Secretary, an extension is granted), and at such 
other times as may be requested, unless it meets the definition of a 
supervised mortgagee in Sec. 202.13(a). Audit reports shall be based on 
audits performed by a Certified Public Accountant, or by an Independent 
Public Accountant licensed by a regulatory authority of a State or 
other political subdivision of the United States on or before December 
31, 1970. The audit report shall include:
    (i) A financial statement in a form acceptable to the Secretary, 
including a balance sheet and a statement of operations and retained 
earnings and analysis of the loan correspondent's net worth adjusted to 
reflect only assets acceptable to the Secretary, and an analysis of 
escrow funds; and
    (ii) Such other financial information as the Secretary may require.
* * * * *
    e. In Sec. 202.17, paragraph (d) is removed.

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

    3. The authority for part 203 continues to read as follows:

    Authority: 12 U.S.C. 1709, 1715b; 42 U.S.C. 3535(d). Subpart C 
also, is issued under 12 U.S.C. 1715u.

    4. In Sec. 203.3, paragraph (b)(2) is revised, and paragraphs 
(b)(3) and (c) are removed and reserved, to read as follows:


Sec. 203.3  Approval of mortgagees for Direct Endorsement.

* * * * *
    (b) * * *
    (2) The mortgagee has on its permanent staff an underwriter that is 
authorized by the mortgagee to bind the mortgagee on matters involving 
the origination of mortgages through the Direct Endorsement procedure 
and that is registered with the Secretary and such registration is 
maintained with the Secretary. The technical staff may be employees of 
the mortgagee or may be hired on a fee basis from a roster maintained 
by the Secretary. The mortgagee shall use appraisers permitted by 
Sec. 203.5(e).
    (3) [Reserved].
* * * * *
    (c) [Reserved].
* * * * *
    Dated: November 29, 1995.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 96-1304 Filed 1-25-96; 8:45 am]
BILLING CODE 4210-27-P