[Federal Register Volume 61, Number 43 (Monday, March 4, 1996)]
[Rules and Regulations]
[Pages 8458-8459]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4909]




[[Page 8457]]

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Part IX





Department of Housing and Urban Development





_______________________________________________________________________



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



_______________________________________________________________________



24 CFR Part 202



Approval of Lending Institutions and Mortgagees Streamlining; Final 
Rule

  Federal Register / Vol. 61, No. 43 / Monday, March 4, 1996 / Rules 
and Regulations   

[[Page 8458]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner

24 CFR Part 202

[Docket No. FR-4036-F-01]
RIN 2502-AG68


Approval of Lending Institutions and Mortgagees Streamlining

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

ACTION: Final rule.

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SUMMARY: This final rule amends HUD's regulations at 24 CFR part 202 
relating to Approval of Lending Institutions and Mortgagees. In an 
effort to comply with the President's regulatory reform initiatives, 
this rule will streamline subparts A & B, which relate to approval of 
Title I Lending Institutions and Approval of Mortgagees, respectively, 
because certain provisions are not necessary.

EFFECTIVE DATE: April 3, 1996.

FOR FURTHER INFORMATION CONTACT: Karen Garner-Wing, Director, Lender 
Approval and Recertification Division, Office of Lender Activities and 
Land Sales Registration, Room 9146, Department of Housing and Urban 
Development, 451 Seventh Street SW., Washington, DC 20410. Telephone: 
(202) 708-3976. (This is not a toll-free number.) For hearing- and 
speech-impaired persons, this number may be accessed via TDD by calling 
the Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: On March 4, 1995, President Clinton issued a 
memorandum to all Federal departments and agencies regarding regulatory 
reinvention. In response to this memorandum, the Department of Housing 
and Urban Development conducted a page-by-page review of its 
regulations to determine which can be eliminated, consolidated, or 
otherwise improved. HUD has determined that the regulations for 
Approval of Lending Institutions and Mortgagees can be streamlined to 
remove provisions which are no longer necessary to be codified in the 
Code of Federal Regulations. This rule will not change the substantive 
requirements of the part but will eliminate redundant provisions.

Justification for Final Rulemaking

    HUD generally publishes a rule for public comment before issuing a 
rule for effect, in accordance with its own regulations on rulemaking 
in 24 CFR part 10. However, part 10 provides for exceptions to the 
general rule if the agency 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). HUD finds that good cause exists 
to publish this rule for effect without first soliciting public 
comment. This rule merely removes unnecessary regulatory provisions and 
does not establish or affect substantive policy. Therefore, prior 
public comment is unnecessary.

Other Matters

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this final rule, and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. This rule merely 
streamlines regulations by removing unnecessary provisions. The rule 
will have no adverse or disproportionate economic impact on small 
businesses.

Environmental Impact

    This rulemaking does not have an environmental impact. This 
rulemaking simply amends an existing regulation by eliminating 
administrative provisions and does not alter the environmental effect 
of the regulations being amended. A Finding of No Significant Impact 
with respect to the environment was made in accordance with HUD 
regulations in 24 CFR part 50 that implement section 102(2)(C) of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4332) at the time 
of development of regulations regarding the Approval of Lending 
Institutions and Mortgagees. That finding remains applicable to this 
rule and 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 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street SW., Washington, DC.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that 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 various levels of government. No programmatic or policy changes 
will result from this rule that would affect 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 will not have 
the potential for significant impact on family formation, maintenance, 
or general well-being, and thus is not subject to review under the 
Order. No significant change in existing HUD policies or programs will 
result from promulgation of this rule.

List of Subjects in 24 CFR Part 202

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

    Accordingly, 24 CFR part 202 is amended as follows:

PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGES

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

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

Subpart A--Approval of Title I Lending Institutions

    2. Section 202.3 is amended by:
    a. Removing and reserving paragraph (d); and
    b. Revising paragraph (j) to read as follows:


Sec. 202.3  General approval requirements.

* * * * *
    (d) [Reserved]
* * * * *
    (j) Except for Government Institutions as defined in Sec. 202.2, it 
shall pay an application fee and annual fee, including an additional 
fee for each branch office authorized by the Secretary to originate 
Title I loans. These fees shall be in such amounts as the Secretary may 
require.
* * * * *


Sec. 202.4  [Amended]

    3. Section 202.4 is amended by removing and reserving paragraph 
(b).


Sec. 202.5  [Amended]

    4. Section 202.5 is amended by removing and reserving paragraph 
(b).
    5. Section 202.9 is revised to read as follows: 
    
[[Page 8459]]



Sec. 202.9  Administrative actions.

    (a) General. The provisions of 24 CFR part 25 shall be applicable 
to a lender participating in the Title I program. Administrative 
actions which may be applied are set forth in 24 CFR 25.5. Civil money 
penalties may also be imposed against Title I lenders pursuant to 24 
CFR 25.13 and part 30 of this title. For purposes of this section the 
term ``lender'' shall also include loan correspondents as defined in 
Sec. 202.2(b) of this subpart A.
    (b) Grounds for administrative actions. Administrative actions 
shall be based upon both the grounds set forth in 24 CFR 25.9 and as 
follows:
    (1) Failure to properly supervise and monitor dealers under the 
provisions of 24 CFR part 201;
    (2) Exhaustion of the general insurance reserve established under 
24 CFR part 201;
    (3) Maintenance of a claims/loan ratio representing an unacceptable 
risk to the Department; or
    (4) Transfer of a Title I loan to a party that does not have a 
valid Contract of Insurance.

Subpart B--Approval of Mortgagees

    6. Section 202.11 is amended by:
    a. Revising paragraphs (a)(1) introductory text, (a)(1)(i), and 
(b); and
    b. Removing and reserving paragraphs (a)(3) and (c), to read as 
follows:


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

    (a) Approval. (1) A mortgagee may be approved for participation in 
the mortgage insurance programs authorized by the National Housing Act 
upon filing a request for approval on a form prescribed by the 
Secretary and signed by the applicant. The approval form shall be 
accompanied by such documentation as may be prescribed by the Secretary 
to support the request for approval. Approval of the application shall 
constitute:
    (i) The Secretary's agreement that the mortgagee shall be 
considered an approved mortgagee unless suspended or withdrawn pursuant 
to 24 CFR part 25, or unless the mortgagee voluntarily relinquishes its 
approval;
* * * * *
    (3) [Reserved]
* * * * *
    (b) Recertification of approval. On each anniversary of the 
approval of a mortgagee, the Secretary shall undertake a 
recertification procedure to determine whether continued approval is 
appropriate. The Secretary shall review the yearly verification report 
required by Sec. 202.12(h)(2) and other pertinent documents, determine 
whether all application and annual fees which are due have been paid, 
and request any additional information needed to make a determination 
regarding continuation of approval.
    (c) [Reserved]
* * * * *
    7. Section 202.12 is amended by:
    a. Removing and reserving paragraph (e), and
    b. Redesignating paragraph (o) as paragraph (n)(5) and revising 
newly redesignated paragraph (n)(5); and
    c. Reserving paragraph (o), to read as follows:


Sec. 202.12  General approval requirements.

* * * * *
    (e) [Reserved]
* * * * *
    (n) * * *
    (5) Mortgagees shall have the required net worth upon approval, 
except that supervised and nonsupervised mortgagees may have a net 
worth of $250,000 for the first year of approval.
    (o) [Reserved]
* * * * *
    8. Section 202.18 is revised to read as follows:


Sec. 202.18  Approval for servicing.

    All mortgagees who wish to service FHA-insured mortgages must be 
approved by the Secretary under Sec. 202.13, (supervised mortgagees), 
Sec. 202.14, (nonsupervised mortgagees), or Sec. 202.17 (governmental 
institutions).
    9. Section 202.19 is revised to read as follows:


Sec. 202.19  Report requirements.

    (a) Definitions. For the purpose of this section:
    (1) Normal rate for early serious defaults and early claims means 
the rate set forth in Sec. 202.11(d)(i).
    (2) Early serious defaults or claims higher than the normal rate 
means the rate set forth in Secs. 202.11(d)(ii) and 202.11(d)(iii).
    (3) Endorsement means initial endorsement or initial/final 
endorsement, as applicable, with respect to multifamily mortgages.
    (b) Requirements. If a mortgagee approved for participation in the 
insurance programs under Secs. 202.10 through 202.18 is notified by the 
Secretary that it had a rate of early serious defaults or early claims 
on HUD-insured mortgages during the preceding year, or during recent 
years, which was higher than the normal rate for the geographic area or 
areas in which it does business, it shall submit a report, within 60 
days, containing an explanation for the above-normal rate of early 
serious defaults or early claims and, if required by the Secretary, a 
plan for corrective action with regard to mortgages in default and its 
mortgage processing system in general. In determining whether a plan is 
required, the Secretary may consider relevant information and 
statements from the mortgagee.
    10. Section 202.20 is amended by revising paragraph (i) to read as 
follows:


Sec. 202.20  Tiered Pricing.

* * * * *
    (i) Request for determination of compliance. Pursuant to section 
539(a) of the National Affordable Housing Act, any person may file a 
request that the Secretary determine whether a mortgagee or Title I 
lender is in compliance with this section or with sections implementing 
sections 223(a)(7) and 535 of the National Housing Act (12 U.S.C. 1701 
et seq.) , such as Secs. 201.10(g), 203.18d, and 203.43(c)(5) of this 
chapter (only Section 535 applies to Title I lenders). The request for 
determination shall be made to the following address: Department of 
Housing and Urban Development, Office of Lender Activities and Land 
Sales Registration, 45l Seventh Street, SW, Washington, DC 204l0. The 
Secretary shall inform the requestor of the disposition of the request. 
The Secretary shall publish in the Federal Register the disposition of 
any case referred by the Secretary to the Mortgagee Review Board.

    Dated: February 22, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-4909 Filed 3-1-96; 8:45 am]
BILLING CODE 4210-27-P