[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]]

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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

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(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