[Federal Register Volume 67, Number 162 (Wednesday, August 21, 2002)]
[Proposed Rules]
[Pages 54312-54313]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21227]



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Part IV





Department of Housing and Urban Development





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24 CFR Part 203



Schedule for Submission of One-Time and Up-Front Mortgage Insurance 
Premiums; Proposed Rule

  Federal Register / Vol. 67, No. 162 / Wednesday, August 21, 2002 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR-4690-P-01]
RIN 2502-AH64


Schedule for Submission of One-Time and Up-Front Mortgage 
Insurance Premiums

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

ACTION: Proposed rule.

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SUMMARY: Mortgage insurance premiums (``MIPs'') in many of HUD's single 
family mortgage insurance programs are paid at the beginning of the 
mortgage, as either a ``one-time'' or ``up-front'' payment. Since 1993, 
HUD has required that all up-front MIPs be paid electronically through 
automated clearinghouses. One-time MIPs are also paid electronically. 
Given the electronic processing of payments, which requires only a 
short time period, a 15 calendar day period in which to remit the funds 
is no longer necessary, and shortening the period would result in 
increased efficiencies within the mortgage insurance programs. In 
addition, some lenders have misused MIP funds during the 15-day period. 
Therefore, this rule proposes to shorten the remittance period from 15 
calendar days to three business days (Monday through Friday, exclusive 
of Federal holidays) for both one-time and up-front MIPs.
    In addition, there is some confusion about when the remittance time 
period begins. Therefore, this rule proposes a more precise definition 
of when the remittance period begins.

DATES: Comment Due Date: October 21, 2002.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Office of 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) comments are not acceptable. A 
copy of each communication submitted will be available for public 
inspection and copying between 7:30 a.m. and 5:30 p.m. weekdays at the 
above address.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Office of 
Single Family Program Development, U.S. Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410, at (202) 
708-2121. Persons with hearing or speech impairments may access these 
numbers via TTY by calling the Federal Information Relay Service at 
(800) 877-8339.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 203(c)(1) of the National Housing Act authorizes the 
Secretary to set the premium charge for insurance of mortgages under 
Title II of the National Housing Act. In a June 23, 1983, final rule 
(48 FR 28804) that followed a proposed rule and public comment, HUD 
established the one-time MIP for single-family programs, citing 
improved cash management for HUD without increased burdens on 
borrowers. The specific programs affected by this one-time MIP are 
listed in 24 CFR 203.259a, and include loans for refinancing loans 
insured under the National Housing Act (see 24 CFR 203.43(c)); 
mortgages in Hawaiian Home Lands (see 24 CFR 203.43i); and loans which 
are obligations of the Mutual Mortgage Insurance fund, which were 
executed before July 1, 1991.
    Under the implementing rule for the one-time MIP, at 24 CFR 
203.280--203.283, mortgagees in the affected programs pay the entire 
premium for the borrower within 15 days of closing. The rule generally 
contemplates that borrowers would amortize the mortgage insurance 
premium over the life of the loan, and that the premium amount would be 
calculated based on actuarial factors including the mortgage term and 
the costs projected by HUD discounted at a rate based on the expected 
rate of return of the mortgage insurance fund's investments. (See 48 FR 
28795.)
    Section 203(c)(2) of the National Housing Act authorizes the up-
front MIP, implemented at 24 CFR 203.284, which applies to all other 
mortgages executed on or after July 1, 1991 that are obligations of the 
Mutual Mortgage Insurance Fund. The up-front MIP requires the payment 
of a single premium of up to 2.25 percent of the original insured 
principal balance of the mortgage, and annual payments of .50 percent 
of the remaining insured principal balance for stated periods of time 
that vary depending on the original principal obligation of the 
mortgage.
    HUD's regulations at 24 CFR 203.280 state that, for mortgages in 
which a one-time MIP is charged, the payment shall be made within 15 
days of closing. In addition, up-front MIPs under 24 CFR 203.284 and 
203.285 are subject to the same 15-day requirement. See 24 CFR 
203.284(f) and 203.285(c), incorporating 24 CFR 203.280 by cross-
reference.
    Since April 7, 1993, it has been mandatory for lenders to make up-
front MIP payments in the single-family insurance program through an 
electronic system. (See, e.g., Mortgagee Letter 94-25.) The one-time 
MIP is remitted electronically as well. (See, e.g., Mortgagee Letter 
96-33.) In such an environment, where the funds are transmitted within 
a few moments rather than by mailing, it is no longer necessary for the 
lender to retain the funds beyond a brief period for accounting 
purposes. Furthermore, there have been some instances of MIP premium 
monies being misused by some lenders during the 15-day period, and 
earlier remittance should eliminate this problem while improving the 
cash flow of the insurance fund.

B. This Proposed Rule

    This proposed rule would amend 24 CFR 203.280 and 203.282 to reduce 
the remittance period for the up-front and one-time MIP in affected 
single-family programs from 15 calendar days to 3 business days, and to 
adjust the late charge provisions accordingly. Business days are Monday 
through Friday, excluding Federal holidays. In addition, the rule 
provides that in the case of refinancings, the three-day period will be 
counted from the date of disbursement of the mortgage proceeds rather 
than the loan closing.

Findings and Certifications

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this proposed rule, and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities. This rule imposes no 
new obligations of any kind, but only shortens the timing of an 
existing obligation to remit one-time and up-front mortgage insurance 
premiums. Because these premiums are remitted electronically, very 
little remittance time is actually required. This rule should impose no 
significant burdens on business.
    Notwithstanding HUD's determination that this rule does not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comment regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in the preamble.

Environmental Impact

    This proposed rule does not direct, provide for assistance of loan 
and

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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 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Executive Order 13132, 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 rule 
does not have federalism implications and does 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 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) 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 proposed 
rule does not impose any Federal mandates on any State, local, or 
tribal governments, or on the private sector, within the meaning of the 
UMRA.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number applicable to 
this rule is 14.117.

List of Subjects for 24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and 
recordkeeping requirements, Solar energy.

    For the reasons stated in the preamble, HUD amends 24 CFR part 203 
as follows:

PART 203--SINGLE FAMILY HOUSING MORTGAGE INSURANCE

    1. 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).

Subpart B--Contract Rights and Obligations

    2. Revise 24 CFR 203.280 to read as follows:


Sec. 203.280  One-time or up-front MIP.

    (a) For mortgages for which a one-time or up-front MIP is to be 
charged in accordance with Secs. 203.259a, 203.284, or Sec. 203.285, 
the mortgagee shall, as a condition to the endorsement of the mortgage 
for insurance, pay to the Commissioner for the account of the 
mortgagor, in a manner prescribed by the Commissioner, a premium 
representing the total obligation for the insuring of the mortgage by 
the Commissioner or the up-front portion of the total obligation, as 
applicable, within three business days of the date of closing, or, in 
the case of a refinancing transaction, within three business days from 
the date of disbursement of the mortgage proceeds.
    (b) For purposes of this section, ``business days'' means Monday 
through Friday, exclusive of Federal holidays.
    3. Revise 24 CFR 203.282 to read as follows:


Sec. 203.282  Mortgagee's late charge and interest.

    (a) Payment of a one-time or up-front MIP is late if not received 
by HUD within three business days after the closing, or the 
disbursement of the loan funds in a refinancing transaction. Late 
payments shall include a late charge of four percent of the amount of 
the MIP.
    (b) If payment of the MIP is not received by HUD within 30 days 
after the closing, or the disbursement of the loan funds in a 
refinancing transaction, the mortgagee will be charged additional late 
fees until payment is received at an interest rate set in conformity 
with the Treasury Fiscal Requirements Manual.

    Dated: July 8, 2002.
John C. Weicher,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 02-21227 Filed 8-20-02; 8:45 am]
BILLING CODE 4210-27-P