[Federal Register Volume 61, Number 181 (Tuesday, September 17, 1996)]
[Rules and Regulations]
[Pages 49036-49038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23716]
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Part IV
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 207, et al.
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Conversion From Coinsurance to Full Insurance; Final Rule
Federal Register / Vol. 61, No. 181 / Tuesday, September 17, 1996 /
Rules and Regulations
[[Page 49036]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 207, 251, 252; and 255
[Docket No. FR-3813-F-02]
RIN 2502-AG50
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Conversion From Coinsurance to Full Insurance
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: On September 19, 1995 (60 FR 48596), HUD published an interim
rule which amended its multifamily coinsurance regulations. The
September 19, 1995 interim rule provided coinsuring lenders with two
new options in dealing with defaulted coinsured mortgages.
Specifically, the interim rule permitted certain coinsuring lenders to
request that HUD endorse defaulted mortgages for full insurance.
Additionally, the interim rule established a partial payment of claim
procedure which permitted coinsuring lenders to advance funds to cure
mortgage delinquencies on a coinsured mortgage and to reduce principal
on that mortgage to a level that restored the financial viability of
the project. This rule finalizes the policies and procedures set forth
in the September 19, 1995 interim rule. Further, this final rule makes
several clarifying and streamlining amendments to the September 19,
1995 interim rule.
EFFECTIVE DATE: October 17, 1996.
FOR FURTHER INFORMATION CONTACT:
Steven J. Hans, Housing Policy Officer, Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC 20410-0500, Room
6278, telephone (202) 708-3730 ext. 2682. Hearing or speech-impaired
individuals may access this number via TTY by calling the Federal
Information Relay Service at 1-800-877-8339. (Other than the ``800''
number, these telephone numbers are not toll free.)
SUPPLEMENTARY INFORMATION:
I. The September 19, 1995 Interim Rule
On October 10, 1994 (55 FR 41312), HUD published a final rule
terminating the authority of the FHA Commissioner to insure mortgage
loans under the coinsurance program. The final rule also reduced HUD's
coinsurance regulations at 24 CFR parts 251, 252, and 255 to a single
section concerning the program phase-out process. However, those
regulations removed by the October 10, 1994 final rule continue to
govern the rights and obligations of mortgagors, coinsuring lenders,
and HUD under coinsurance contracts entered into before the termination
of the coinsurance programs.
On September 19, 1995 (60 FR 48596), HUD published an interim rule
amending 24 CFR parts 251, 252, 255. The September 19, 1995 interim
rule, which became effective on October 19, 1995, provided coinsuring
lenders with two new options for dealing with defaulted coinsured
mortgages. The changes made by the rule were designed to reduce
Government costs, benefit coinsuring lenders by minimizing their risk
of default under a GNMA guaranty agreement, and encourage the continued
viability of housing financed with coinsured mortgages. The first
amendment permitted coinsuring lenders to request that HUD endorse
certain coinsured mortgages for full insurance. The second amendment
established a partial payment of claim mechanism for coinsuring
lenders. The September 19, 1995 interim rule described in detail the
amendments to 24 CFR parts 251, 252, and 255.
II. This Final Rule
The public comment period on the September 19, 1995 interim rule
expired on November 20, 1995. No public comments were submitted.
Although no changes are being made as a result of public comment, HUD
has determined that it is necessary to make several revisions to the
September 19, 1995 interim rule.
First, as part of HUD's continuing efforts to implement the
President's regulatory reform initiative, this final rule makes several
streamlining amendments to the interim rule. These changes will
increase flexibility and remove unnecessary regulatory provisions.
Further, this rule requires that a coinsuring lender convert to full
insurance before accepting a partial payment of claim. This final rule
also clarifies that coinsuring lenders must file an insurance claim
upon conversion to full insurance. Finally, the rule amends HUD's
multifamily mortgage insurance regulations at 24 CFR part 207 to
reflect the procedures established by the September 19, 1995 interim
rule.
A. Streamlining Parts 251, 252, and 255
In response to President Clinton's regulatory reform initiative,
HUD conducted a page-by page review of its regulations to determine
which could be eliminated, consolidated, or otherwise improved. As a
result of this review, HUD has made several streamlining amendments to
the September 19, 1995 interim rule.
One of the goals of the President's initiative is to increase
regulatory flexibility. The September 19, 1995 interim rule made
conversion to full insurance available only to coinsured mortgages
which back GNMA guaranteed securities. HUD originally developed the
conversion procedure to assist such lender-issuers. Under the former
regulations, the option to have a mortgage endorsed for full insurance
was available only to GNMA after it had taken over all loans in a
coinsuring lender-issuer's portfolio following the lender-issuer's
default under the GNMA guaranty agreement. In response to the
President's call for increased flexibility, HUD has decided to make
conversion available to all coinsuring lenders. Coinsuring lenders
electing to convert to full insurance will still be required to meet
all the other regulatory requirements for conversion established by the
September 19, 1995 interim rule.
This final rule contains several fees. However, the fee amounts may
change over time. To prevent the necessity for cumbersome rulemaking
procedures each time a fee is revised, HUD has set forth all the
required fees in an appendix to this final rule. The regulatory text
still establishes the requirement for the payment of the fees, and
directs lenders to the appendix. This appendix will not be codified in
title 24 of the Code of Federal Regulations. HUD will update and revise
the appendix as necessary.
The September 19, 1995 interim rule made identical amendments to 24
CFR parts 251, 252, and 255. Another goal of President Clinton's
regulatory reform initiative is the elimination of repetitious
regulatory provisions. Accordingly, this final rule amends 24 CFR parts
252 and 255 to simply cross-reference to the conversion and partial
payment of claim requirements set forth in 24 CFR part 251.
B. Revision to Partial Payment of Claim Procedures
This final rule requires that coinsuring lenders convert to full
insurance prior to accepting a partial payment of claim. Subsequent to
conversion, the full insurance requirements at 24 CFR part 207 will
govern any partial payment of claim. Unlike the September 19, 1995
interim rule, therefore, this final rule does not establish a separate
partial payment of claim mechanism for coinsuring lenders under 24 CFR
parts 251, 252, or 255.
HUD determined that the costs it would incur in administering the
separate partial payment of claim
[[Page 49037]]
procedure might be excessive. HUD's regulation at 24 CFR part 207
already contains a partial payment of claim mechanism which has proven
its effectiveness in, both restoring the financial viability of
troubled projects and in minimizing government costs. Accordingly, this
final rule requires that coinsuring lenders wishing a partial payment
of claim utilize the procedure set forth in 24 CFR part 207.
C. Claim Required Upon Conversion
HUD developed the procedure for conversion to full insurance as a
means of assisting coinsuring lenders who are dealing with defaulted
coinsured mortgages and who are eligible for insurance benefits. HUD
always intended that coinsuring lenders immediately file an insurance
claim upon conversion. This final rule clarifies HUD's intent by
amending Sec. 251.3 to require that lenders file a claim for insurance
benefits upon the Commissioner's endorsement of the mortgage for full
insurance.
D. Amendments to Full Insurance Regulations
The September 19, 1995 interim rule established a fee on coinsuring
lenders converting to full insurance. Further, the rule set forth
additional fees on lenders who, subsequent to converting to full
insurance, receive payment for the full or partial insurance mortgage
amount. The September 19, 1995 interim rule established these
additional fees through amendments to HUD's coinsurance regulations at
24 CFR parts 251, 252, and 255. However, once the FHA Commissioner
endorses a coinsured mortgage for full insurance, the lender is no
longer governed by the coinsurance program regulations. Rather, the
lender must now abide by HUD's multifamily mortgage insurance
regulations at 24 CFR part 207. This final rule amends part 207 to
incorporate the fees. Specifically, the rule revises Sec. 207.259,
which sets forth the requirements for full insurance benefits.
III. Findings and Certifications
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made at the interim rule stage in accordance with HUD regulations
at 24 CFR part 50, which implements section 102(2)(C) of the National
Environmental Policy Act of 1969 (NEPA). This 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 20410-0500.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that he policies
contained in this final 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.
Specifically, the requirements of this final rule are directed toward
participants in the FHA multifamily coinsurance programs. It effects no
changes in the current relationships between the Federal government,
the States and their political subdivisions in connection with this
program.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this final 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 final rule merely amends the regulations governing HUD's
multifamily coinsurance programs. No significant change in existing HUD
policies or programs will result from promulgation of this final rule,
as those policies and programs related to family concerns.
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 his final rule not have a significant economic
impact on a substantial number of small entities. This rule finalizes
the policies and procedures set forth in the September 19, 1995 interim
rule. It permits coinsuring lenders to request that HUD endorse certain
defaulted mortgages for full insurance. Further, the rule makes several
streamlining and clarifying amendments to the interim rule. These
changes will increase flexibility, remove unnecessary regulatory
provisions, and permit the continued viability of housing financed with
coinsured mortgages. This final rule will not have any meaningful
impact on any entity.
Unfunded Mandates Reform Act
The Secretary has reviewed this rule before publication and by
approving it certifies, in accordance with the Unfunded Mandates Reform
Act of 1995 (2 U.S.C. 1532), that this rule does not impose a Federal
mandate that will result in the expenditure by State, local, and tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year.
Executive Order 12866, Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, Regulatory Planning and Review. OMB determined
that this rule is a ``significant regulatory action,'' as defined in
section 3(f) of the Order (although not economically significant, as
provided in section 3(f)(1) of the Order). Any changes made to the
final rule subsequent to its submission to OMB are identified in the
docket file, which is available for public inspection in the office of
the Department's Rules Docket Clerk, Room 10276, 451 Seventh Street,
SW., Washington, DC 20410-0500.
List of Subjects
24 CFR Part 207
Manufactured homes, Mortgages insurance, Reporting and
recordkeeping requirements, Solar energy.
24 CFR Part 251
Low and moderate income housing, Mortgage insurance, Reporting and
recordkeeping requirements.
24 CFR Part 252
Health facilities, Loan programs--health, Loan programs--housing
and community development, Mortgage insurance, Nursing homes, Reporting
and recordkeeping requirements.
24 CFR Part 255
Low and moderate income housing, Mortgage insurance, Reporting and
recordkeeping requirements.
Accordingly, 24 CFR parts 207, 251, 252, and 255 are amended as
follows:
PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE
1. The authority citation for part 207 continues to read as
follows:
Authority: 12 U.S.C. 1701z-11(e), 1713 and 1715b; 42 U.S.C.
3535(d).
2. Section 207.258b is amended by adding a new paragraph (e) to
read as follows:
Sec. 207.258b Partial payment of claim.
* * * * *
(e) Lenders receiving a partial payment of claim following the
Commissioner's endorsement of the
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Mortgage for full insurance under parts 251, 252, or 255 of this
chapter, will pay HUD a fee in an amount set forth through Federal
Register notice. HUD, in its discretion, may collect this fee or deduct
the fee from any payment it makes in the claim process.
3. Section 207.259 is amended by adding a new paragraph (b)(2)(v)
to read as follows:
Sec. 207.259 Insurance benefits.
* * * * *
(b) * * *
(2) * * *
(v) In the case of a lender receiving insurance benefits for the
full Mortgage amount upon the Commissioner's endorsement of the
Mortgage for full insurance pursuant to 24 CFR parts 251, 252, or 255,
the amount of the fee set forth through Federal Register notice. HUD
may, in its discretion, collect this fee rather than deducting the fee
from the total of the items computed under paragraph (b)(1) of this
section.
PART 251--COINSURANCE FOR THE CONSTRUCTION OR SUBSTANTIAL
REHABILITATION OF MULTIFAMILY HOUSING PROJECTS
4. The authority citation for 24 CFR part 251 continues to read as
follows:
Authority: 12 U.S.C. 1715b, 1715z-9; 42 U.S.C. 3535(d).
5. Section 251.3 is revised to read as follows:
Sec. 251.3 Case-by-case conversion to full insurance.
Upon the request of a coinsuring lender, the Commissioner may
endorse a coinsured Mortgage for full insurance, effective as of the
date of such endorsement, if the Commissioner is satisfied that:
(a) Continuing the Mortgage under coinsurance could jeopardize the
lender's viability and ability to service its remaining portfolio of
coinsured Mortgages;
(b) The lender has made reasonable efforts to work out any Mortgage
default consistent under 24 CFR 251.811 (1990), but the remedies
available to the lender have not been adequate to reinstate the
Mortgage;
(c) The conversion would be less costly to HUD than if the Mortgage
remained coinsured;
(d) The lender has paid HUD the fee set forth through Federal
Register notice; and
(e) The lender agrees to give the Commissioner written notice under
24 CFR 207.258 of its intent to file an insurance claim upon the
Commissioner's endorsement of the Mortgage for full insurance.
Secs. 251.4 and 251.5 [Removed]
6. Sections 251.4 and 251.5 are removed.
PART 252--COINSURANCE OF MORTGAGES COVERING NURSING HOMES,
INTERMEDIATE CARE FACILITIES, AND BOARD AND CARE HOMES.
7. The authority citation for 24 CFR part 252 continues to read as
follows:
Authority: 12 U.S.C. 1715b, 1715z-9; 42 U.S.C. 3535(d).
8. Section 252.3 is revised to read as follows:
Sec. 252.3 Case-by-case conversion to full insurance.
Cross-reference. The provisions of 24 CFR 251.3 apply to this part.
Secs. 252.4 and 252.5 [Removed]
PART 255--COINSURANCE FOR THE PURCHASE OR REFINANCING OF EXISTING
MULTIFAMILY HOUSING PROJECTS
10. The authority citation for 24 CFR part 255 continues to read as
follows:
Authority: 12 U.S.C. 1715b, 1715z-9; 42 U.S.C. 3535(d).
11. Section 255.3 revised to read as follows:
Sec. 255.3 Case-by-case conversion to full insurance.
Cross-reference. The provisions of 24 CFR 251.3 apply to this part.
Secs. 255.4 and 255.5 [Removed]
12. Sections 255.4 and 255.5 are removed.
Dated: June 28, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
Note: This appendix will not appear in Title 24 of the CFR.
Appendix--Fees for Conversion to Full Insurance and Partial Payment of
Claim Under 24 CFR Parts 207, 251, 252, and 255
Sections
1. Purpose
2. Fee for conversion to full insurance under 24 CFR parts 251, 252,
and 255.
3. Fees for former coinsuring lenders under 24 CFR part 207.
4. Future revisions to this appendix.
1. Purpose. HUD's regulation at 24 CFR 251.3 permits certain
coinsuring lenders under 24 CFR parts 251, 252, and 255 to request
that HUD endorse the coinsured Mortgage for full insurance. Section
251.3 states that coinsuring lenders who elect to convert to full
insurance must pay HUD a fee in an amount ``set forth through
Federal Register notice.'' One of the purposes of this appendix is
to identify this fee.
HUD's regulations at 24 CFR part 207 govern its multifamily
Mortgage insurance program. Part 207 establishes certain fees on
formerly coinsured lenders who have converted to full insurance and
subsequently receive payment for the full or partial insured
Mortgage amount. Section 207.258b, which governs partial payment of
claims, and Sec. 207.259, which sets forth the requirements for full
insurance benefits, state that these fees will be in an amount ``set
forth through Federal Register notice.'' This appendix sets forth
these fees.
2. Fee for conversion to full insurance under 24 CFR parts 251,
252, or 255. Coinsuring lenders requesting the Commissioner's
endorsement of a coinsured Mortgage for full insurance under 24 CFR
part 251, 252, or 255, will pay HUD a fee in an amount equal to 5
dollars for every 1,000 dollars of the unpaid principal balance. The
coinsuring lender must pay this fee concurrently with submission of
the request for the Commission's endorsement. HUD will not process
requests for conversion to full insurance until this fee is paid.
3. Fees for former coinsuring lenders under 24 CFR part 207.
(a) Lenders receiving payment of insurance benefits for the full
Mortgage amount under 24 CFR part 207, upon the Commissioner's
endorsement of the Mortgage for full insurance pursuant to 24 CFR
part 251, 252, or 255, must pay HUD a fee in an amount equal to 10
percent of the outstanding principal balance on the Mortgage. HUD
may, in its discretion, collect this fee or deduct the fee from any
payment it makes in the claim process.
(b) Lenders receiving a partial payment of claim under 24 CFR
part 207, upon the Commission's endorsement of the Mortgage for full
insurance pursuant to 24 CFR part 251, 252, or 255, must pay HUD a
fee in an amount equal to 10 percent of the reduction in the unpaid
principal balance resulting from the partial payment. HUD may, in
its discretion, collect this fee or deduct the fee from any payment
it makes in the claim process.
(c) The fees described in paragraphs (a) and (b) of this section
are in addition to the fee established by section 2. of this notice.
4. Future revisions to this appendix.
HUD may update or revise this appendix as necessary.
[FR Doc. 96-23716 Filed 9-16-96; 8:45 am]
BILLING CODE 4210-27-M