[Federal Register Volume 64, Number 83 (Friday, April 30, 1999)]
[Proposed Rules]
[Pages 23480-23482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10892]
[[Page 23479]]
_______________________________________________________________________
Part IV
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 200, 203 and 234
Single Family Mortgage Insurance; Clarification of Floodplain
Requirements Applicable to New Construction; Proposed Rule
Federal Register / Vol. 64, No. 83 / Friday, April 30, 1999 /
Proposed Rules
[[Page 23480]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 200, 203, and 234
[Docket No. FR-4323-P-01]
RIN 2502-AH16
Single Family Mortgage Insurance; Clarification of Floodplain
Requirements Applicable to New Construction
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend HUD's Single Family Mortgage
Insurance Minimum Property Standards concerning flood hazard exposure.
The rule would clarify that it is the location of the dwelling and any
related structures/equipment that determines whether the flood hazard
exposure and National Flood Insurance purchase requirements apply. If
the property improvements are located within the 100-year floodplain,
the proposed rule would permit mortgagees to submit an Elevation
Certificate in place of a final Letter of Map Amendment or a final
Letter of Map Revision. The proposed rule would also remove obsolete
provisions concerning subdivisions and improved area processing, and
would make a number of clarifying revisions.
DATES: Comments Due Date: June 29, 1999.
ADDRESSES: Submit your comments about this proposed rule to the Office
of the General Counsel, Rules Docket Clerk, Room 10276, Department of
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC
20410-0500. Your comments should refer to the above docket number and
title. We do not accept facsimile (FAX) comments. A copy of each
communication submitted will be available for public inspection and
copying during regular business hours (7:30 a.m. to 5:30 p.m.) at the
above address.
FOR FURTHER INFORMATION CONTACT: Mark Holman, Chief, Mortgage
Underwriting and Insurance Branch, Office of Insured Single Family
Housing, Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410-8000, Room 9270; telephone (202) 708-
2121 (this is not a toll-free number). Hearing or speech-impaired
individuals may access this number by calling the toll-free Federal
Information Relay Service at (800) 877-8399.
SUPPLEMENTARY INFORMATION:
I. Background
a. Flood Hazard Requirements
HUD's Minimum Property Standards (MPS) for the Single Family
Mortgage Insurance Program are set out at 24 CFR Secs. 200.926 to
200.926e. The current regulations at Sec. 200.926d(c)(4) (entitled
``Drainage and flood hazard exposure'') contain construction
requirements covering drainage and flood hazard exposure. The current
regulations at Sec. 200.926d(c)(4)(vii), in particular, require a
Direct Endorsement (DE) or Lender Insurance (LI) mortgagee to determine
whether a property is located within a 100-year floodplain (as
designated on maps issued by the Federal Emergency Management Agency
(FEMA)). The DE or LI mortgagee must make this determination before
seeking to insure a mortgage on a newly constructed one- to four-family
dwelling.
If the DE or LI mortgagee determines that the property is located
within a 100-year floodplain, the mortgagee must obtain, before the
mortgage may be insured, a final Letter of Map Amendment (LOMA) or a
final Letter of Map Revision (LOMR) from FEMA. In addition, HUD's
insurance eligibility regulations (24 CFR 203.16a, entitled ``Mortgagor
and mortgagee requirement for maintaining flood insurance coverage'')
for these programs require the mortgagor and mortgagee to purchase and
maintain insurance under the National Flood Insurance Program (42
U.S.C. 4001-4129).
This proposed rule would revise these provisions in two ways.
First, the proposed rule would clarify that it is the location of the
dwelling and related structures/equipment, and not simply any portion
of the property, that triggers these requirements. To be considered
related, structures/equipment must be essential to the value of the
property and subject to flood damage. This clarification is consistent
with HUD's interpretation of the provisions of the current regulations,
as reflected in HUD's Mortgagee Letter 97-41, issued August 27, 1997.
Second, the proposed rule would amend Sec. 200.926d(c)(4)(vii)
(note: the proposed rule would redesignate this section as
Sec. 200.926d(c)(4)(iv); the current Sec. 200.926d(c)(4)(iv) would be
removed by the proposed rule--see section I.b. of this preamble) to add
an alternative to obtaining a LOMA or LOMR. This amendment would allow
a mortgagee to submit, in place of a LOMA or LOMR, an Elevation
Certificate (EC) documenting that the lowest floor (including basement)
of the property improvement is built at, or above, the 100-year flood
elevation in compliance with National Flood Insurance Program criteria
at 44 CFR 60.3 through 60.6. This alternative would provide more
flexibility and, potentially, would have less impact on the floodplain
than filling to the 100-year floodplain elevation as may be needed for
a LOMA.
b. Obsolete Provisions
The proposed rule would remove obsolete provisions in Sec. 203.12
(entitled ``Mortgage insurance on proposed or new construction in a new
subdivision'') concerning subdivisions and improved areas and would
make conforming amendments to other provisions to reflect the removal
of these terms. The proposed rule would amend Sec. 234.1 (entitled
``Cross-reference'') to reflect the new heading for Sec. 203.12.
The proposed rule would also remove current Sec. 200.926d(c)(4)(iv)
(entitled `` `Critical Actions' ''). The term ``Critical Actions'' is
defined at 24 CFR 55.2(b)(2). The proposed rule would remove this
provision because the Single Family Mortgage Insurance Program does not
involve the type of actions encompassed under the term ``Critical
Action''. In addition, the first sentence in paragraph (c)(4)(iv)
incorrectly provides that the lowest floor of a structure must be at or
above the FEMA-designated ``500-year'' frequency flood elevation. The
current Sec. 200.926d(c)(4)(vii) would be redesignated as
Sec. 200.926d(c)(4)(iv).
c. Clarifications
The proposed rule would make the following revisions to correct
exceptions from coverage that are drawn more broadly than intended in
the current regulations. Section 200.926(a)(1) (entitled ``Residential
building code comparison items'') would be revised to make it clear
that all of the provisions of Sec. 200.926d(c)(4) apply to four-unit
homes. As currently drafted, only the provision on ``Critical Actions''
applies. The proposed rule would make a similar revision to
Sec. 200.926d(c)(1)(ii) so that all of 200.926d(c)(4) would apply to a
community, whether or not the community has adopted criteria for site
development.
Section 200.926d(c)(1)(iii), as currently drafted, appears to
exempt residential structures without basements from the 100-year
elevation requirement, if the dwelling is a single family detached
house situated on an individual lot located on an existing street with
utilities. This is incorrect. HUD intends these structures to be
[[Page 23481]]
subject to the same elevation requirements as are structures with
basements. The proposed rule would correct this error by removing the
reference to Sec. 200.926d(c)(4)(ii) (entitled ``Residential structures
without basements located in FEMA-designated areas of special flood
hazard'') in Sec. 200.926d(c)(1)(iii) (entitled ``Residential
structures located in FEMA-designated `coastal high hazard areas.' '').
II. Findings and Certifications
Environmental Impact
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 (Public Law 91-190, 83 Stat. 852, 853, approved January 1,
1970, codified as amended at 42 U.S.C. 4321-4347, 4332). 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 at
the above address.
Paperwork Reduction Act Statement
The information collection requirement contained at Sec. 203.12 of
this rule has been approved by the Office of Management and Budget
(OMB) in accordance with the Paperwork Reduction Act of 1995 (Pub. L.
104-13, 109 Stat. 163, approved May 22, 1995, codified at 44 U.S.C.
3501-3520), and assigned OMB control number 2502-0496. An agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a valid
control number.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act
(Pub. L. 96-354, 94 Stat. 1164, approved September 19, 1980, codified
as amended at 5 U.S.C. 601-612), has reviewed this proposed rule before
publication, and by approving it certifies that this rule would not
have a significant economic impact on a substantial number of small
entities.
This proposed rule would serve two primary purposes. First, it
would allow mortgagees greater flexibility by allowing them to comply
with floodplain requirements through the submission of an additional
type of document. Second, the proposed rule would remove obsolete
provisions and make clarifying amendments to the regulations. These
changes reflect HUD's current interpretation of its regulations and
would not increase the regulation's burden. These changes are being
proposed in order to make the regulations clearer and more accurate.
While HUD has determined that this proposed rule would not have a
significant economic impact on a substantial number of small entities,
HUD welcomes any comments regarding alternatives to this rule that
would meet HUD's objectives, as described in this preamble, and would
be less burdensome to small entities.
Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612 (entitled ``Federalism''), has determined that
the policies contained in this proposed rule would not have substantial
direct effects on States or their political subdivisions, on the
relationship between the Federal Government and the States, or on the
distribution of power and responsibilities among the various levels of
government.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number for part 203 is
14.117 and for part 234 is 41.112.
List of Subjects
24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Home improvement, Housing standards,
Incorporation by reference, Lead poisoning, Loan programs--housing and
community development, Minimum property standards, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and
recordkeeping requirements, Solar energy.
24 CFR Part 234
Condominiums, Mortgage insurance, Reporting and recordkeeping
requirements.
Accordingly, 24 CFR parts 200, 203, and 234 are amended as follows:
PART 200--INTRODUCTION TO FHA PROGRAMS
1. The authority citation for 24 CFR part 200 continues to read as
follows:
Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).
2. Revise Sec. 200.926(a)(1) to read as follows:
Sec. 200.926 Minimum property standards for one and two family
dwellings.
(a) * * * (1) Applicable structures. The standards identified or
contained in this section, and in Secs. 200.926a-200.926e, apply to
single family detached homes, duplexes, three-unit homes, and to living
units in a structure where the units are located side-by-side in town
house fashion. Section 200.926d(c)(4) also applies to four-unit homes.
* * * * *
3. Amend Sec. 200.926d as follows:
a. Revise paragraph (c)(1)(ii);
b. Revise paragraph (c)(1)(iii);
c. Revise paragraph (c)(4)(iv); and
d. Remove paragraph (c)(4)(vii).
The revisions read as follows:
Sec. 200.926d Construction requirements.
* * * * *
(c) * * *
(1) * * *
(ii) With the exception of paragraph (c)(4) of this section, these
site design standards apply only in communities that have not adopted
criteria for site development applicable to one and two family
dwellings.
(iii) Single family detached houses situated on individual lots
located on existing streets with utilities need not comply with the
requirements of paragraphs (c)(2) and (c)(3) of this section.
* * * * *
(4) * * *
(iv)(A) In all cases in which a Direct Endorsement (DE) mortgagee
or a Lender Insurance (LI) mortgagee seek to insure a mortgage on a
newly constructed one- to four-family dwelling (including a newly
erected manufactured home) that was processed by the DE or LI
mortgagee, the DE or LI mortgagee must determine whether the property
improvements (dwelling and related structures/equipment essential to
the value of the property and subject to flood damage) are located in a
100-year floodplain, as designated on maps of the Federal Emergency
Management Agency. If so, the DE mortgagee, before submitting the
application for insurance to HUD, or the LI mortgagee, before
submitting all the required data regarding the mortgage to HUD, must
obtain:
(1) A final Letter of Map Amendment (LOMA);
(2) A final Letter of Map Revision (LOMR); or
(3) A signed Elevation Certificate documenting that the lowest
floor
[[Page 23482]]
(including basement) of the property improvements is built at or above
the 100-year flood elevation in compliance with National Flood
Insurance program criteria 44 CFR 60.3 through 60.6.
(B) Under the DE program, these mortgages are not eligible for
insurance unless the DE mortgagee submits the LOMA, LOMR, or Elevation
Certificate to HUD with the mortgagee's request for endorsement.
* * * * *
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
4. The authority citation for 24 CFR part 203 continues to read as
follows:
Authority: 12 U.S.C. 1709, 1710, 1715b, and 1715u; 42 U.S.C.
3535(d).
5. Revise Sec. 203.12 to read as follows:
Sec. 203.12 Mortgage insurance on proposed or new construction.
(a) Applicability. This section applies to an application for
insurance of a mortgage on a one- to four-family dwelling, unless the
mortgage will be secured by a dwelling that:
(1) Was completed more than one year before the date of the
application for insurance or, under the Direct Endorsement Program was
completed more than one year before the date of the appraisal; or
(2) Is being sold to a second or subsequent purchaser.
(b) Procedures. (1) Applications for insurance to which this
section applies, will be processed in accordance with procedures
prescribed by the Secretary. These procedures may only provide for
endorsement for insurance of a mortgage covering a dwelling that is:
(i) Approved under the Direct Endorsement Program, or the Lender
Insurance Program; or
(ii) Located in a subdivision approved by the Rural Housing
Service.
(2) The mortgagee must submit a signed Builder's Certification of
Plans, Specifications and Site (Builder's Certification). The Builder's
Certification must be in a form prescribed by the Secretary and must
cover:
(i) Flood hazards;
(ii) Noise;
(iii) Explosive and flammable materials storage hazards;
(iv) Runway clear zones/clear zones;
(v) Toxic waste hazards;
(vi) Other foreseeable hazards or adverse conditions (i.e., rock
formations, unstable soils or slopes, high ground water levels,
inadequate surface drainage, springs, etc.) that may affect the health
and safety of the occupants or the structural soundness of the
improvements. The Builder's Certification must be provided to the
appraiser for reference before the performance of an appraisal on the
property.
(3) If a builder (or developer) intends to sell five or more
properties in a subdivision, an Affirmative Fair Housing Marketing Plan
(AFHMP) that meets the requirements of 24 CFR part 200, subpart M must
be submitted and approved by HUD no later than the date of the first
application for mortgage insurance in that subdivision. Thereafter,
applications for insurance on other properties sold by the same builder
(or developer) in the same subdivision may make reference to the
existing previously approved AFHMP.
6. Revise Sec. 203.16a to read as follows:
Sec. 203.16a Mortgagor and mortgagee requirement for maintaining flood
insurance coverage.
(a) If the mortgage is to cover property improvements (dwelling and
related structures/equipment essential to the value of the property and
subject to flood damage) that:
(1) Are located in an area designated by the Federal Emergency
Management Agency (FEMA) as a floodplain area having special flood
hazards; or
(2) Are otherwise determined by the Commissioner to be subject to a
flood hazard, and if flood insurance under the National Flood Insurance
Program (NFIP) is available with respect to these property
improvements, the mortgagor and mortgagee shall be obligated, by a
special condition to be included in the mortgage commitment, to obtain
and to maintain NFIP flood insurance coverage on the property
improvements during such time as the mortgage is insured.
(b) No mortgage may be insured that covers property improvements
located in an area that has been identified by FEMA as an area having
special flood hazards, unless the community in which the area is
situated is participating in the National Flood Insurance Program and
such insurance is obtained by the mortgagor. Such requirement for flood
insurance shall be effective one year after the date of notification by
FEMA to the chief executive officer of a flood prone community that
such community has been identified as having special flood hazards.
(c) The flood insurance must be maintained during such time as the
mortgage is insured in an amount at least equal to either the
outstanding balance of the mortgage, less estimated land costs, or the
maximum amount of the NFIP insurance available with respect to the
property improvements, whichever is less.
PART 234--CONDOMINIUM OWNER MORTGAGE INSURANCE
7. The authority citation for 24 CFR part 234 continues to read as
follows:
Authority: 12 U.S.C. 1715b and 1715y; 42 U.S.C. 3535(d). Section
234.520(a)(2)(ii) is also issued under 12 U.S.C. 1707(a).
Sec. 234.1 [Amended]
8. In Sec. 234.1(a), remove the words ``Mortgage insurance on
proposed or new construction in a new subdivision'' and add, in their
place, the words ``Mortgage insurance on proposed or new
construction''.
Dated: March 29, 1999.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 99-10892 Filed 4-29-99; 8:45 am]
BILLING CODE 4210-27-P