[Federal Register Volume 67, Number 158 (Thursday, August 15, 2002)]
[Rules and Regulations]
[Pages 53450-53452]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20678]



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Part III





Department of Housing and Urban Development





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12 CFR Parts 5 and 202



Uniform Financial Reporting Standards for HUD Housing Programs, 
Additional Entity Filing Requirements; Final Rule

  Federal Register / Vol. 67, No. 158 / Thursday, August 15, 2002 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5 and 202

[Docket No. FR-4681-F-03]
RIN 2501-AC80


Uniform Financial Reporting Standards for HUD Housing Programs, 
Additional Entity Filing Requirements

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

ACTION: Final rule.

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SUMMARY: This final rule amends HUD's regulation on Uniform Financial 
Reporting Standards by adding HUD-approved Title I and Title II 
nonsupervised lenders, nonsupervised mortgagees, and nonsupervised loan 
correspondents to the covered entities required to electronically 
submit annual financial information to HUD prepared in accordance with 
Generally Accepted Accounting Principles (GAAP). Under long-standing 
regulatory and contractual requirements, these entities already submit 
financial information to HUD on an annual basis. This final rule 
follows publication of a November 30, 2001, proposed rule. HUD is 
adopting the proposed regulatory amendments without change, except that 
the fiscal year effective dates are being delayed to accommodate the 
later than expected publication of the final rule.

EFFECTIVE DATE: September 16, 2002.

FOR FURTHER INFORMATION CONTACT: For further information about the 
entities covered by this rule, you may contact Lynn Herbert, Office of 
Lender Activities and Program Compliance, Office of Housing, U.S. 
Department of Housing and Urban Development, 490 L'Enfant Plaza East, 
SW., Suite 3214, Washington, DC 20024, telephone 202-708-3976 (this is 
not a toll-free number). For general information about this rule, 
contact Stacey Shindelar, Office of Lender Activities and Program 
Compliance, Office of Housing, U.S. Department of Housing and Urban 
Development, 490 L'Enfant Plaza East, SW., Suite 3214, Washington, DC 
20024; telephone 202-708-1515 (this is not a toll-free number). Persons 
with hearing-or speech-impairments may access that number via TTY by 
calling the Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    HUD's Uniform Financial Reporting Standards (UFRS) regulations, 
codified at 24 CFR part 5, subpart H, establish uniform annual 
financial reporting standards for the following entities: public 
housing agencies (PHAs) administering traditional public housing; PHAs 
administering section 8 project-based housing assistance payments 
programs and section 8 project-based certificate programs; owners of 
housing assisted under any section 8 project-based program (except for 
the Moderate Rehabilitation and project-based certificates programs, 
for which the reporting requirement applies to the administering PHAs); 
and multifamily housing programs receiving assistance or mortgage 
insurance from HUD. The regulations provide that the financial 
information required to be submitted to HUD on an annual basis under 
these programs generally must be submitted electronically and must be 
prepared in accordance with GAAP.
    On November 30, 2001, HUD published a proposed rule (66 FR 60133) 
to add participants under another program to the programs covered under 
the UFRS rule. HUD also published a correction amending a portion of 
the rule preamble, on December 18, 2001 (66 FR 65162). The new covered 
participants are the Title I and Title II nonsupervised lenders, 
nonsupervised mortgagees, and nonsupervised loan correspondents, who 
are approved by HUD under 24 CFR part 202 to originate, purchase, hold, 
service, and/or sell loans. In addition to the revisions to 24 CFR 
5.801 to add these participants, the proposed rule made conforming 
changes to 24 CFR 202.5, 202.7, and 202.8.

II. This Final Rule

    This final rule adopts the proposed change made to 24 CFR 5.801 and 
the conforming changes to 24 CFR 202.5, 202.7, and 202.8. The public 
comment period for the proposed rule closed on January 29, 2002. By 
close of business on that date, HUD had not received any public 
comments on the proposed rule. One comment addressed to the estimate of 
paperwork burden was received; however, HUD believes that its estimate 
of paperwork was accurate and made no changes. The only change made to 
the proposed rule is that the fiscal year-end effective date in 24 CFR 
5.801(d)(3) is changed to accommodate the actual publication date of 
this final rule. This final rule is effective for the covered Title I 
and Title II nonsupervised lenders, nonsupervised mortgagees, and loan 
correspondents with fiscal years ending on or after September 30, 2002. 
Audited financial statements submitted by lenders with fiscal years 
ending on or after September 30, 2002, must be submitted 
electronically. Audited financial statements submitted by lenders with 
fiscal years ending before September 30, 2002, may either be submitted 
in paper or electronically at the lenders' option.

Findings and Certifications

Paperwork Reduction Act

    The information collection requirements in this rule have been 
approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB 
Control Number 2507-0004. In accordance with the Paperwork Reduction 
Act, HUD may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless the collection displays 
a currently valid OMB control number.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 establishes 
requirements for Federal agencies to assess the effects of their 
regulatory actions on State, local, and tribal governments, and the 
private sector. This final rule would not impose any Federal mandates 
on any State, local, or tribal governments, or the private sector 
within the meaning of the Unfunded Mandates Reform Act of 1995.

Environmental Impact

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
final rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (24 U.S.C. 4321).

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this final rule before publication and by 
approving it certifies that this rule is not anticipated to have a 
significant economic impact on a substantial number of small entities. 
This rule does not create a new reporting requirement. The annual 
reporting of certain financial information is a preexisting HUD program 
requirement. This rule adds HUD approved Title I and Title II 
nonsupervised lenders, nonsupervised mortgagees, and loan 
correspondents to the covered entities that must submit

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financial data electronically. The rule standardizes, to the extent 
possible, the content of the information and the preparation of the 
information (in accordance with GAAP). HUD anticipates that these 
changes will bring consistency, simplicity, and reduced administrative 
burden to the reporting process. With respect to costs, the audit costs 
paid by Title I and Title II nonsupervised lenders, nonsupervised 
mortgagees, and loan correspondents are a recognized part of operating 
and administrative expenses. HUD anticipates no or very little monetary 
impact. The Federal Housing Commissioner has required GAAP-based 
accounting for a number of years and the majority of these lenders 
already adhere to its tenets.

Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on State and local governments and 
is not required by statute, or preempts State law, unless the relevant 
requirements of section 6 of the Executive Order are met. This final 
rule does 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.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance program numbers 
applicable to 24 CFR part 202 are:
    14.110  Manufactured Home Loan Insurance--Financing Purchase of 
Manufactured Homes as Principal Residences of Borrowers;
    14.142  Structures and Building of New Nonresidential Structures; 
and
    14.162  Mortgage Insurance--Combination and Manufactured Home Lot 
Loans.

List of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Drug abuse, 
Drug traffic control, Grant programs--housing and community 
development, Grant programs--Indians, Individuals with disabilities, 
Loan programs--housing and community development, Low- and moderate-
income housing, Mortgage insurance, Pets, Public housing, Rent 
subsidies, Reporting and recordkeeping requirements.

24 CFR Part 202

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

    Accordingly, for the reasons stated in the preamble, HUD amends 
title 24 of the Code of Federal Regulations to read as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENT; WAIVERS

    1. The authority citation for 24 CFR part 5 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d), unless otherwise noted.

    2. Amend Sec. 5.801 by adding paragraphs (a)(5), (c)(3), and (d)(3) 
to read as follows:


Sec. 5.801  Uniform financial reporting standards.

    (a) * * *
    (5) HUD-approved Title I and Title II nonsupervised lenders, 
nonsupervised mortgagees, and loan correspondents.
* * * * *
    (c) * * *
    (3) For those entities listed in paragraph (a)(5) of this section, 
the financial information to be submitted to HUD in accordance with 
paragraph (b) of this section must be submitted to HUD annually, no 
later than 90 days after the end of the fiscal year (or within an 
extended time if an extension is granted at the sole discretion of the 
Secretary). An extension request must be received no earlier than 45 
days and no later than 15 days prior to the submission deadline.
    (d) * * *
    (3) The requirements of this section apply to the entities listed 
in paragraph (a)(5) of this section with fiscal years ending on or 
after September 30, 2002. Audited financial statements submitted by 
lenders with fiscal years ending before September 30, 2002, may either 
be submitted in paper or electronically at the lenders' option. Audited 
financial statements submitted by lenders with fiscal years ending on 
or after September 30, 2002, must be submitted electronically.
* * * * *

PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES

    3. The authority citation for 24 CFR part 202 continues to read as 
follows:

    Authority: 12 U.S.C. 1703, 1709, and 1715b; 42 U.S.C. 3535(d).

    4. In Sec. 202.5, revise paragraph (n)(1) introductory text to read 
as follows:


Sec. 202.5  General approval standards.

* * * * *
    (n) Net Worth. (1) Each supervised or nonsupervised lender or 
mortgagee approved under Secs. 202.6 and 202.7 shall have a net worth 
of not less than $250,000 in assets acceptable to the Secretary. Each 
Title II supervised or nonsupervised mortgagee, except a multifamily 
mortgagee, shall have additional net worth in excess of $250,000 of not 
less than one percent of the mortgage volume exceeding $25,000,000 in 
value, but total net worth is not required to exceed $1,000,000. 
Mortgage volume is calculated as of the end of the fiscal year being 
audited and equals the sum of:
* * * * *

    5. In Sec. 202.7, revise paragraphs (b)(4)(i) introductory text and 
(b)(4)(i)(A) to read as follows:


Sec. 202.7  Nonsupervised lenders and mortgagees.

* * * * *
    (b) * * *
    (4) Audit report. (i) A lender or mortgagee must comply with the 
financial reporting requirements in 24 CFR part 5, subpart H. Audit 
reports shall be based on audits performed by a certified public 
accountant, or by an independent public accountant licensed by a 
regulatory authority of a State or other political subdivision of the 
United States on or before December 31, 1970, and shall include:
    (A) A financial statement in a form acceptable to the Secretary, 
including a balance sheet and a statement of operations and retained 
earnings, a statement of cash flows, an analysis of the mortgagee's net 
worth adjusted to reflect only assets acceptable to the Secretary, and 
an analysis of escrow funds; and
* * * * *

    6. In Sec. 202.8, revise paragraphs (b)(3) introductory text and 
(b)(3)(i) to read as follows:


Sec. 202.8  Loan correspondent lenders and mortgagees.

* * * * *
    (b) * * *
    (3) Audit report. A loan correspondent lender or mortgagee must 
comply with the financial reporting requirements in 24 CFR part 5, 
subpart H except that a loan correspondent mortgagee meeting the 
definition of a supervised lender or mortgagee in Sec. 202.6(a) need 
not file annual audit reports. Audit reports shall be based on audits 
performed by a certified public accountant, or by an independent public 
accountant licensed by a regulatory authority of a State or

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other political subdivision of the United States on or before December 
31, 1970, and shall include:
    (i) A financial statement in a form acceptable to the Secretary, 
including a balance sheet, statement of operations and retained 
earnings, a statement of cash flows, an analysis of the net worth 
adjusted to reflect only assets acceptable to the Secretary and an 
analysis of escrow funds; and
* * * * *

    Dated: August 7, 2002.
John C. Weicher,
 Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 02-20678 Filed 8-14-02; 8:45 am]
BILLING CODE 4210-27-P