[Federal Register Volume 63, Number 159 (Tuesday, August 18, 1998)]
[Rules and Regulations]
[Pages 44360-44361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22158]



[[Page 44359]]

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Part V





Department of Housing and Urban Development





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24 CFR Parts 201, 202, and 203



Termination of an Approved Mortgagee's Origination Approval Agreement; 
Final Rule

  Federal Register / Vol. 63, No. 159 / Tuesday, August 18, 1998 / 
Rules and Regulations  

[[Page 44360]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 201, 202 and 203

[Docket No. FR-4239-F-02]
RIN 2502-AG99


Termination of an Approved Mortgagee's Origination Approval 
Agreement

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

ACTION: Final rule.

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SUMMARY: On December 10, 1997 (62 FR 65180), the Department issued an 
interim rule to clarify and make minor changes to 24 CFR parts 202 and 
203. The rule improved the provisions regarding termination of a single 
family mortgagee's origination approval agreement with FHA, and 
corrected errors in 24 CFR parts 201 and 202. The Department is now 
issuing a final rule without change from the interim rule. The 
Department is also making a correction to a previous amendment of part 
202.

EFFECTIVE DATE: September 17, 1998.

FOR FURTHER INFORMATION CONTACT: Phillip Murray, Director, Office of 
Lender Activities and Program Compliance, Department of Housing and 
Urban Development, Room B-133-P3214, 451 Seventh Street, SW, 
Washington, DC 20410, telephone number (202) 708-1515 (this is not a 
toll-free number). A telecommunications device for hearing-and speech-
impaired persons (TTY) is available at (800) 877-8339 (Federal 
Information Relay Service).

SUPPLEMENTARY INFORMATION:
    Part 202 of title 24 contains the Department's requirements for 
approval of lenders and mortgagees for FHA insurance programs. An 
interim rule issued on December 10, 1997 (62 FR 65180) amended part 202 
to state more clearly the provisions regarding termination of an FHA-
approved single family mortgagee's origination approval agreement 
(OAA). The following matters were clarified or changed in 
Sec. 202.3(c):
     When a mortgagee has a default and claim rate sufficient 
to support termination of the OAA under the standards of part 202, 
termination is at the discretion of the Secretary even if the 
Department in a previous time period could have, but did not, place the 
mortgagee on credit watch. This was a clarification of the Department's 
existing interpretation.
     A mortgagee will not be permitted to apply for a new OAA 
for 6 months after termination of an OAA. Previously, there was no 
delay required for an application for a new OAA.
     Claims and defaults will be measured for 24 months after a 
mortgage is insured, instead of the current 18 months for claims and 1 
year for defaults.
    Language was added to 24 CFR 203.3 and 203.4 that clarified HUD's 
existing position that a mortgagee with a terminated OAA also has its 
approval under the Direct Endorsement and Lender Insurance programs 
terminated without further procedures. The interim rule also corrected 
certain errors in parts 201 and 202.

Discussion of Public Comments

    The Department received one comment from the public. The commenter 
disagreed with the aspect of part 202 that allows HUD to terminate an 
OAA based on certain default and claims levels. The commenter argued 
that there was an underlying fallacy in the assumption that high 
default and claims ratios are evidence of defective lending or 
servicing practices by the lender. In addition, the commenter disagreed 
with HUD's finding under the Regulatory Flexibility Act that the 
interim rule will not have a significant economic impact on a 
substantial number of small entities. HUD had invited small servicers 
to comment on whether the rule will significantly affect them but no 
such comments were received (the commenter is a large bank.)
    These comments are not directed to the clarifications and technical 
changes to part 202 made by the interim rule, but to provisions added 
to part 202 in 1991 after proposed rulemaking. Furthermore, the 
commenter wrongly concludes that HUD will terminate an OAA on the basis 
of servicing obligations. As part of that proposed rulemaking, the 
Department thoroughly considered the basic concept of termination based 
on particularly high default and claims rates for originating lenders, 
and finds no arguments or information that cause the Department to 
reconsider at this time the policy reflected in part 202.

Technical Correction

    On April 24, 1997, 62 FR 20080, HUD issued a final rule that 
streamlined 24 CFR part 202 and made related changes to other parts of 
title 24. As published, the final rule that streamlined 24 CFR part 202 
contained some technical errors. These errors were discussed in the 
Supplementary Information section of a corrective rule published on 
February 26, 1998. However, HUD inadvertently failed to correct one of 
the errors discussed in that section, by failing to include the words 
``loans or'' in the corrected third sentence of 24 CFR 202.7(a). HUD is 
now making that correction.

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 final rule will not have a significant 
economic impact on a substantial number of small entities. This final 
rule merely clarifies and makes minor changes and corrections to the 
existing regulations. The final rule will have no adverse or 
disproportionate economic impact on small businesses.

Environmental Impact

    This final rulemaking is exempt from the environmental review 
procedures under 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) because of the exemption under Sec. 50.19(c)(1). This 
final rulemaking simply adopts without change an interim rule that 
itself amended existing regulations regarding termination of a 
mortgagee's approval to originate insured mortgages and did not alter 
the environmental effect of the regulations being amended.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that 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. No 
programmatic or policy changes will result from this final rule that 
would affect the relationship between the Federal Government and State 
and local governments.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal 
agencies to assess the effects of their regulatory actions on State, 
local, and tribal governments, and on the private sector. This final 
rule does not impose any Federal mandates on any State, local, or 
tribal governments, or on the private sector, within the meaning of the 
UMRA.

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Executive Order 13045, Protection of Children From Environmental Health 
Risks and Safety Risks

    This rule will not pose an environmental health risk or safety risk 
on children.

Catalog

    The Catalog of Federal Domestic Assistance numbers for the programs 
affected by this final rule are 14.117 and 14.142.

List of Subjects

24 CFR Part 201

    Health facilities, Historic preservation, Home improvement, Loan 
programs--housing and community development, Manufactured homes, 
Mortgage insurance, Reporting and recordkeeping requirements.

24 CFR Part 202

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

24 CFR Part 203

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

    Accordingly, the interim rule published at 62 FR 65180, December 
10, 1997, amending 24 CFR parts 201, 202 and 203 is adopted as final 
without change, and part 202 is further amended to read as follows:

PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES

    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(b).

    2. Section 202.7 is amended by revising the final sentence of 
paragraph (a) to read as follows:


Sec. 202.7  Nonsupervised lenders and mortgagees.

    (a) * * * A nonsupervised lender or mortgagee may originate, 
purchase, hold, service or sell insured loans or mortgages, 
respectively.
* * * * *
    Dated: July 29, 1998.
Ira Peppercorn,
General Deputy Assistant Secretary for Housing--Federal Housing 
Commissioner.
[FR Doc. 98-22158 Filed 8-17-98; 8:45 am]
BILLING CODE 4210-27-P