[Federal Register Volume 65, Number 235 (Wednesday, December 6, 2000)]
[Proposed Rules]
[Pages 76520-76521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30989]
[[Page 76519]]
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Part VI
Department of Housing and Urban Development
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24 CFR Part 30
Treble Damages for Failure to Engage in Loss Mitigation; Advance Notice
of Proposed Rulemaking
Federal Register / Vol. 65, No. 235 / Wednesday, December 6, 2000 /
Proposed Rules
[[Page 76520]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 30
[Docket No. FR 4553-A-01]
RIN 2501-AC66
Treble Damages for Failure To Engage in Loss Mitigation; Advance
Notice of Proposed Rulemaking
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: This notice announces HUD's intention to issue a proposed rule
to amend HUD's Civil Money Penalty regulations to provide for damages
of three times the amount of any mortgage insurance benefit claimed by
the mortgagee for any mortgage as to which the mortgagee failed to
engage in loss mitigation actions. Current regulations provide that HUD
may initiate a civil money penalty action against mortgagees and
lenders for certain prohibited conduct, including failure to service
FHA insured mortgages in accordance with FHA regulations. However, in
1998, Congress amended the National Housing Act, as more particularly
described below, to add a triple penalty to the existing civil money
penalty system for a mortgagee's failure to engage in loss mitigation.
Specifically, HUD seeks comments regarding the best regulatory
procedures and structures for implementing this Congressional mandate.
This notice therefore solicits public comment on the subject prior to
publication of a proposed rule.
DATES: Comment Due Date: February 5, 2001.
ADDRESSES: Interested persons are invited to submit comments and
responses to the Rules Docket Clerk, Office of the General Counsel,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street SW., Washington DC 20410-0500. Communications should refer to
the above docket number and title. Facsimile (FAX) responses are not
acceptable. A copy of each response will be available for public
inspection and copying during regular business hours (7:30 a.m. to 5:30
p.m. Eastern Time at the above address).
FOR FURTHER INFORMATION CONTACT: Jack Tautges, Office of The Deputy
Assistant Secretary for Single Family Housing, Room 9184, Department of
Housing and Urban Development, 451 Seventh Street SW., Washington,
D.C., 20410, telephone (202) 708-1672 (this is not a toll-free number).
Hearing or speech-impaired individuals may access these numbers via TTY
by calling the Federal Information Relay Service at 1-800-877-8339
(this is a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
Section 601(f), (g) and (h) of the Department of Veteran's Affairs
and Housing and Urban Development and Independent Agencies
Appropriations Act (1999) (Pub. L. 105-276, approved October 21, 1998)
amended sections 230, 536(a), and 536(b)(1) of the National Housing Act
(``NHA'')(12 U.S.C. 1715u, 12 U.S.C. 1735f-14(a)(2) and 12 U.S.C.
1735f-14(b)(1), respectively) to add a triple penalty for failure to
engage in loss mitigation to the existing civil money penalty system.
Among other things, the statute now requires that, upon the default of
a single family mortgage insured under Title II of the National Housing
Act, it is mandatory for the mortgagee to engage in loss mitigation
actions (including, but not limited to, special forbearance, loan
modification, and deeds in lieu of foreclosure) for the purpose of
providing alternatives to foreclosure. Also, added to the actions in
section 536(b) for which the Secretary ``may impose a civil money
penalty on the mortgagee or lender'' is ``failure to engage in loss
mitigation actions as provided in section 230(a) of this Act [i.e., the
NHA].'' See section 536(b)(1)(I), 12 U.S.C. 1735f-14(b)(1)(I). In the
case of such failure, ``the penalty shall be in the amount of three
times the amount of any insurance benefits claimed by the mortgagee
with respect to any mortgage'' as to which such failure occurred. See
section 536(a)(2), 12 U.S.C. 1735f-14(a)(2).
The regulation relating to civil money penalties for mortgagees who
engage in prohibited acts is found at 24 CFR 30.35. This regulation was
promulgated in its current form on September 24, 1996 (61 FR 50215) and
technically amended on February 26, 1998 (63 FR 9742). The regulation
currently provides for a maximum penalty of $5,500 for each violation,
up to a maximum of $1,100,000 for all violations committed within any
one-year period. A variety of prohibited acts are covered, including,
generally, a failure to service a mortgage in accordance with 24 CFR
part 203. See 24 CFR 30.35(a)(10). The requirement to engage in loss
mitigation is set forth primarily at 24 CFR 203.501, which cross-
references actions including, but not limited to, deeds in lieu of
foreclosure (24 CFR 203.357); special forbearance (24 CFR 203.471,
203.614); partial claims (24 CFR 203.414); assumptions (24 CFR
203.512); and recasting of mortgages (24 CFR 203.616). In addition,
regulations require lenders to engage in a loss mitigation evaluation
to determine which loss mitigation options are appropriate (24 CFR
203.605).
Ordinary civil penalties will remain in effect for failure to
engage in a variety of required servicing functions, including, but not
limited to: pre-foreclosure review to ensure that all servicing
requirements have been met (24 CFR 203.606); giving each mortgagor in
default the notice of default (24 CFR 203.602); and monthly reporting
concerning all properties that are 90 days or more delinquent (24 CFR
203.332).
This Advance Notice of Proposed Rulemaking
HUD plans to issue a proposed rule implementing the new requirement
to assess treble damages when a mortgagee fails to engage in any loss
mitigation activities with cooperative and qualified mortgagors. HUD's
goals are to foster an increase in loss mitigation efforts by lenders,
to decrease losses to FHA's insurance fund, to help borrowers retain
their homes, to integrate the pre-existing civil money penalty system
with the new requirement of treble damages, and to avoid punishing
lenders who have overall good records.
To that end, HUD plans to propose a rule that would assess treble
damages considering both single-loan performance and overall portfolio
performance. As to a single loan that goes into default, HUD proposes
to regard a lender as having failed to engage in loss mitigation if the
lender has failed to perform the loss mitigation evaluation under 24
CFR 203.605 and then take the appropriate loss mitigation action(s). In
that case, the lender would be potentially subject to treble damages.
As a further step, HUD proposes to establish a system of analyzing a
mortgagee's loss mitigation efforts portfolio-wide by using a tiered
scoring system based on performance ratios of loss mitigation actions
divided by Real Estate Owned (``REO''). Based on the loss mitigation/
REO ratio established, HUD plans to propose to group lenders in four
tiers in relation to the mean or some other identified score. HUD plans
to propose a system in which lenders in the top three tiers, i.e.,
those who have relatively good records of making loss mitigation
efforts, would not be subject to treble damages, and those in the
bottom tier who violate the regulation would be subject to treble
damages.
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HUD specifically invites comments on this proposed tiering system,
including comments regarding the specific tier structure based on
performance ratios of loss mitigation actions to REO. HUD also welcomes
suggestions regarding other factors, if any, that commenters believe
should be included in the ratio.
In addition, HUD welcomes general comments regarding the proposed
rule. HUD will review all public comments submitted in connection with
preparing the proposed rule on this subject. HUD will promulgate a
proposed rule that implements a system for assessing treble damages
against mortgagees who fail to engage in loss mitigation with
cooperative and qualified borrowers.
Executive Order 12866
The Office of Management and Budget (OMB) reviewed this advance
notice of proposed rulemaking (ANPR) under Executive Order 12866,
Regulatory Planning and Review, issued by the President on September
30, 1993. Any changes made in this ANPR subsequent to its submission to
OMB are identified in the docket file, which is available for public
inspection during regular business hours in the Office of the Rules
Docket Clerk, Office of the General Counsel, Department of Housing and
Urban Development, Room 10276, 451 Seventh Street, S.W., Washington, DC
20410.
Dated: November 29, 2000.
William C. Apgar,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 00-30989 Filed 12-5-00; 8:45 am]
BILLING CODE 4210-27-P