[Federal Register Volume 66, Number 13 (Friday, January 19, 2001)]
[Rules and Regulations]
[Pages 5912-5913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1534]



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Part III





Department of Housing and Urban Development





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24 CFR Part 221



Discontinuation of the Section 221(d)(2) Mortgage Insurance Program; 
Final Rule

  Federal Register / Vol. 66, No. 13 / Friday, January 19, 2001 / Rules 
and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 221

[Docket No. FR-4588-F-02]
RIN 2502-AH50


Discontinuation of the Section 221(d)(2) Mortgage Insurance 
Program

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

ACTION: Final rule.

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SUMMARY: This final rule discontinues HUD's section 221(d)(2) mortgage 
insurance program. The section 221(d)(2) program is rarely used by 
homebuyers, primarily due to its low mortgage limits. Accordingly, HUD 
will no longer enter into new contracts for mortgage insurance under 
the program. The final rule removes those provisions of the section 
221(d)(2) regulations concerning eligibility for participation in the 
program, and replaces them with a savings clause. The rule, however, 
retains those regulatory provisions regarding the contract rights and 
servicing responsibilities for existing program participants. This 
final rule follows publication of a September 28, 2000 proposed rule. 
There were no public comments on the proposed rule, and HUD is adopting 
the proposed regulatory amendments without change.

DATES: Effective Date: February 20, 2001.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Office of 
Single Family Program Development, Office of Insured Single Family 
Housing, Room 9266, U.S. Department of Housing and Urban Development, 
451 Seventh Street, SW., Washington, DC 20410-8000; telephone (202) 
708-2121 (this is not a toll-free number). Hearing- or speech-impaired 
individuals may access this number via TTY by calling the toll-free 
Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 221(d)(2) of the National Housing Act (12 U.S.C. 
1715l(d)(2)), authorizes HUD to insure private lenders against loss 
from default on mortgage loans made to finance the purchase, 
construction, or rehabilitation of low-cost, one- to four-family homes. 
HUD's regulations implementing the section 221(d)(2) program are 
located in 24 CFR part 221.
    On September 28, 2000 (65 FR 58338), HUD published a proposed rule 
to discontinue the section 221(d)(2) mortgage insurance program. The 
program is rarely used by homebuyers, primarily due to its low mortgage 
limits. Moreover, the section 221(d)(2) program provides few 
homeownership opportunities not already made available by other HUD 
mortgage insurance programs, primarily the single family home mortgage 
insurance programs authorized by section 203 of the National Housing 
Act (12 U.S.C. 1709) (implemented by HUD in 24 CFR part 203), and the 
condominium mortgage insurance program authorized by section 234 of the 
National Housing Act (12 U.S.C. 1715y) (implemented by HUD in 24 CFR 
part 234). For these reasons, HUD has decided to discontinue the 
section 221(d)(2) program.

II. This Final Rule

    This final rule adopts the policies and procedures of the September 
28, 2000 proposed rule. The public comment period for the proposed rule 
closed on November 27, 2000. By close of business on that date, HUD had 
not received any public comments on the proposed rule. Accordingly, 
this final rule adopts the proposed regulatory amendments without 
change.
    The final rule removes HUD's regulations establishing the 
eligibility requirements for section 221(d)(2) mortgage insurance in 
subpart A of 24 CFR part 221. A savings clause is retained in subpart A 
of the part 221 regulations, which provides that the authority to 
insure section 221(d)(2) mortgages is terminated, except that HUD will 
endorse for insurance validly processed mortgages under direct 
endorsement where the credit worksheet was signed by the mortgagee's 
underwriter before the effective date of the final rule. The savings 
clause also provides that subpart A, as it existed immediately before 
the termination date, will continue to govern the rights and 
obligations of insured mortgage lenders, mortgagors, and HUD with 
respect to section 221(d)(2) single family loans insured before the 
effective date of the final rule, and to the aforementioned direct 
endorsement loans.

III. Findings and Certifications

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made at the proposed rule stage, in accordance with HUD regulations 
at 24 CFR part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4223). That finding remains 
applicable to this final rule and is available for public inspection 
between the hours of 7:30 a.m. and 5:30 p.m. weekdays in the Office of 
the Rules Docket Clerk, Office of General Counsel, Room 10276, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Washington, DC.

Regulatory Flexibility Act

    The Secretary has reviewed this final rule before publication, and 
by approving it certifies, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
As noted above, the section 221(d)(2) program is rarely used by 
homebuyers. Mortgage lenders eligible to participate in the section 
221(d)(2) program are also generally eligible to participate in other, 
alternative, FHA single family mortgage insurance programs that are 
preferred by homebuyers (such as the section 203 and section 234(c) 
programs). Accordingly, HUD's decision to discontinue the section 
221(d)(2) program is not anticipated to have a significant economic 
impact on a substantial number of mortgage lenders participating in 
these FHA programs.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule would not have 
federalism implications and would not impose substantial direct 
compliance costs on State and local governments or preempt State law 
within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) 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 would not 
impose any Federal mandates on any State, local, or tribal governments, 
or on the private sector, within the meaning of the Unfunded Mandates 
Reform Act of 1995.

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Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance program number 
applicable to 24 CFR part 221 is 14.120: Mortgage Insurance--Homes for 
Low/Moderate Income Families.

List of Subjects in 24 CFR Part 221

    Low and moderate income housing, Mortgage insurance, Reporting and 
recordkeeping requirements.

    Accordingly, for the reasons described in the preamble, HUD amends 
24 CFR part 221 to read as follows:

PART 221--LOW COST AND MODERATE INCOME MORTGAGE INSURANCE

    1. The authority citation for part 221 is revised to read as 
follows:

    Authority: 12 U.S.C. 1715b, 1715l; 42 U.S.C. 3535(d).


    2. Subpart A is revised to read as follows:

Subpart A--Eligibility Requirements--Low Cost Homes--Savings Clause


Sec. 221.1  Savings clause.

    (a) Effective February 20, 2001, the authority to insure mortgages 
under section 221(d)(2) of the National Housing Act (12 U.S.C. 
1715l(d)(2)) for low cost and moderate income mortgage insurance is 
terminated, except that HUD will endorse for insurance validly 
processed mortgages under direct endorsement where the credit worksheet 
was signed by the mortgagee's underwriter before February 20, 2001.
    (b) Subpart A of this part, as it existed immediately before 
February 20, 2001, will continue to govern the rights and obligations 
of insured mortgage lenders, mortgagors, and HUD with respect to 
section 221(d)(2) single family loans insured before February 20, 2001, 
or in accordance with paragraph (a) of this section, pursuant to the 
applicable provisions of this subpart.

    Dated: January 9, 2001.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 01-1534 Filed 1-18-01; 8:45 am]
BILLING CODE 4210-27-P