[Federal Register Volume 67, Number 197 (Thursday, October 10, 2002)]
[Proposed Rules]
[Pages 63198-63200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-25730]



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Part II





Department of Housing and Urban Development





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24 CFR Part 200



FHA Inspector Roster; Proposed Rule

  Federal Register / Vol. 67, No. 197 / Thursday, October 10, 2002 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-4720-P-01]
RIN 2502-AH76


FHA Inspector Roster

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

ACTION: Proposed rule.

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SUMMARY: The purpose of this proposed rule is to establish the Federal 
Housing Administration (FHA) Inspector Roster, and to provide 
placement, recertification and removal procedures for Roster 
applicants. The rule also identifies when a mortgagee must use an 
inspector listed on the Roster.

DATES: Comment Due Date: December 9, 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 Morris, Director, Office of 
Single Family Program Development, 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). 
Persons with hearing or speech disabilities may access this number via 
TTY by calling the toll-free Federal Information Relay Service at (800) 
877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    FHA-approved mortgagees rely upon FHA compliance inspectors to 
determine if the construction quality of a property is acceptable as 
security for an insured loan. Before 1996, FHA's 81 field offices 
maintained a panel of fee inspectors and they were assigned on a 
rotating basis to perform inspections. Since 1996, mortgagees have 
selected inspectors from a panel of inspectors listed on the Internet 
at: https://entp.hud.gov/idapp/html/insplook.cfm?in_fha=No. Although 
there is still a panel of inspectors, it is a compilation of the local 
panels established by the FHA's field offices.
    This rule would establish the FHA Inspector Roster (also referred 
to as the Roster) and provide eligibility requirements and procedures 
and requirements for applicants to follow to be placed on the Roster. 
In addition to demonstrating professional experience and familiarity 
with HUD requirements, an applicant for the Roster would be required to 
provide verification of passing HUD's comprehensive examination for 
inspectors, after such an examination becomes available.
    All inspectors currently listed on the Internet by HUD must be 
recertified according to the new procedures and requirements to 
continue to be eligible to inspect properties for FHA insurance. 
Current inspectors will be permitted to conduct inspections for six 
months after this rule becomes effective, but during that six-month 
period they must apply and be approved for placement on the FHA Roster 
to qualify as inspectors after that six-month period.
    The rule also identifies when mortgagees must use Roster 
inspectors. The FHA requires three inspections for new construction 
when the local jurisdiction in which the property is located does not 
perform inspections and has not issued both a building permit prior to 
construction and a certificate of occupancy or equivalent document. If 
an appraiser who is on FHA's Roster appraises the newly constructed 
property after the two inspections are performed and the construction 
is 100% completed, the final inspection by an inspector on the Roster 
is not necessary. In the case of existing construction, Roster 
inspectors must be used where structural repairs have been made 
requiring an inspection and this inspection is not performed by a 
licensed, bonded, registered engineer, a licensed home inspector, or 
other person specifically registered or licensed to conduct such 
inspections.
    Finally, the rule also includes a procedure for removing an 
inspector from the Roster for cause, generally for actions detrimental 
to the FHA's interests.

II. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been approved by the Office of Management and Budget (OMB) in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 
35), and assigned OMB control number 2502-0548. 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.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538)(UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
tribal governments and the private sector. This proposed rule does not 
impose any Federal mandates on any State, local, or tribal governments 
or the private sector within the meaning of the UMRA.

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
or 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).

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this rule and in so doing 
certifies that this rule would not have a significant economic impact 
on a substantial number of small entities. The proposed rule would 
establish uniform requirements and procedures for being placed on or 
removed from HUD's new FHA Inspector Roster. In doing so, it does not 
affect the amount of HUD-related business that will continue to be 
available for inspectors. This rule would, however, replace the 
existing system under which local HUD offices periodically select 
inspectors competitively according to standards that vary from office 
to office with nation-wide, uniform requirements that open the doors of 
participation with HUD to all inspectors who qualify. The rule also 
clearly defines the terms for continued participation with HUD, and 
provides a uniform, expeditious and equitable procedure for removal 
from the Roster. As such, the rule would result in an industry-wide and 
governmental benefit in that it clarifies the terms of the relationship 
between HUD and its fee inspectors. Notwithstanding HUD's determination 
that this rule will not have a significant economic effect on a 
substantial number

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of small entities, HUD specifically invites comments regarding any less 
burdensome alternatives to this rule that will meet HUD's objectives as 
described in this preamble.

Federalism Impact

    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.

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this proposed 
rule under Executive Order 12866 (entitled ``Regulatory Planning and 
Review''). OMB determined that this proposed rule is a ``significant 
regulatory action,'' as defined in section 3(f) of the Order (although 
not economically significant, as provided in section 3(f)(1) of the 
Order). Any changes made to the proposed rule subsequent to its 
submission to OMB are identified in the docket file, which is available 
for public inspection in the office of 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.

List of Subjects in 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.

    Accordingly, for the reasons discussed in this preamble, HUD 
proposes to amend 24 CFR part 200 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. 1702-1715z-21; 42 U.S.C. 3535(d).

    2. Add a subpart F, consisting of Sec. Sec.  200.170 through 
200.172, under a new undesignated center heading reading ``FHA 
Inspector Roster'' to read as follows:

Subpart F--Placement and Removal Procedures for Participation in 
FHA Programs

FHA Inspector Roster

Sec.
200.170 Purpose of FHA Inspector Roster.
200.171 Placement on the Inspector Roster.
200.172 Removal from the Inspector Roster.


Sec.  200.170  Purpose of FHA Inspector Roster.

    (a) General. HUD maintains the FHA Inspector Roster (Roster), a 
list of the inspectors eligible to determine if the construction 
quality of a property is acceptable as security for an FHA insured 
loan.
    (b) Mortgagee requirement. Only an inspector included on the Roster 
may be selected by a lender to determine if the construction quality of 
a property is acceptable as security for an FHA insured loan, as 
follows:
    (1) For new construction, the FHA requires three inspections by 
Roster inspectors; and
    (2) For existing construction, the FHA requires an inspection by a 
Roster inspector where structural repairs have been made requiring an 
inspection and this inspection is not performed by a licensed, bonded, 
registered engineer, or a licensed home inspector, or other person 
specifically registered or licensed to conduct such inspections.
    (3) The requirements of paragraph (b)(1) of this section do not 
apply if:
    (i) The local jurisdiction where the newly constructed one- to 
four-family property is located performs the inspection(s) and issues a 
building permit prior to construction and a certificate of occupancy or 
equivalent document; or
    (ii) When the new construction is 100% complete, an appraiser who 
is on FHA's Appraiser Roster appraises the property and two inspections 
have already been performed by an FHA Roster inspector.
    (c) Inspector requirement. To be eligible to conduct inspections as 
required by paragraph (b) of this section, an inspector must be listed 
on the Roster, except that any inspector already otherwise listed by 
HUD as eligible to conduct inspections as of [effective date of final 
rule for this section] may conduct inspections until [date that is six 
months after effective date of final rule for this section] without 
being listed on the Roster.
    (d) Effect of placement on the Roster. Placement of an inspector on 
the Roster only qualifies an inspector to be selected by a mortgagee to 
determine if the construction quality of a property is acceptable as 
security for an FHA insured loan. Placement on the Roster does not 
guarantee that an inspector will be selected by any mortgagee. Use of 
an inspector placed on the Roster also does not create or imply any 
warranties or endorsements concerning the inspected property by HUD to 
a prospective homebuyer or any other party.


Sec.  200.171  Placement on the Inspector Roster.

    (a) Application. To be considered for placement on the Roster, an 
inspector must apply to HUD using an application (or materials) in a 
form prescribed by HUD.
    (b) Eligibility. To be eligible for placement on the Roster, an 
inspector must demonstrate the following to HUD:
    (1) A minimum of three years experience in construction-related 
fields;
    (2) Possession of an inspector's State or local license or 
certification if licensing or certification is required by the State or 
local jurisdiction where the inspector will operate;
    (3) That the applicant inspector certifies that he/she has read and 
fully understands the inspection requirements, and any updates to those 
requirements, of:
    (i) HUD Handbook 4905.1 REV-1 (Requirements for Existing Housing, 
One to Four Family Units);
    (ii) HUD Handbook 4910.1 (Minimum Property Standards for Housing);
    (iii) HUD Handbook 4145.1 REV-2 (Architectural Processing and 
Inspections for Home Mortgage Insurance);
    (iv) HUD Handbooks 4150.1 and 4150.2 (Valuation Analysis for Home 
Mortgage Insurance);
    (v) HUD Handbook 4930.3 (Permanent Foundations Guide for 
Manufactured Housing);
    (vi) The applicable local, State or Council of American Building 
Officials (CABO) code; and
    (viii) The HUD requirements at 24 CFR 200.926;
    (4) Verification that the inspector has taken and passed HUD's 
comprehensive examination for inspectors, after such

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an examination becomes available. Inspectors who are included on the 
Roster on [the effective date of the final rule] have until [6 months 
following the effective date] to pass the comprehensive exam. Failure 
to pass the examination by the deadline date constitutes cause for 
removal under Sec.  200.172.


Sec.  200.172  Removal from the Inspector Roster.

    (a) Cause for removal. HUD may remove an inspector from the Roster 
for any cause that HUD determines to be detrimental to HUD or its 
programs. Cause for removal includes, but is not limited to:
    (1) Poor performance on a HUD quality control field review;
    (2) Failure to comply with applicable regulations or other written 
instructions or standards issued by HUD;
    (3) Failure to comply with applicable civil rights requirements;
    (4) Being debarred or suspended, or subject to a limited denial of 
participation;
    (5) Misrepresentation or fraudulent statements;
    (6) Failure to retain standing as a State or local government 
licensed or certified inspector, where such a license or certificate is 
required;
    (7) Failure to respond within a reasonable time to HUD inquiries or 
requests for documentation; or
    (8) Being listed on HUD's Credit Alert Interactive Voice Response 
System (CAIVRS).
    (b) Procedure for removal. An inspector that is debarred or 
suspended, or subject to a limited denial of participation will be 
automatically removed from the Roster. In all other cases, the 
following procedure for removal will be followed:
    (1) HUD will give the inspector written notice of the proposed 
removal. The notice will state the reasons for, and the duration of, 
the proposed removal.
    (2) The inspector will have 20 days from the date of the notice (or 
longer, if provided in the notice) to submit a written response 
appealing the proposed removal and to request a conference. A request 
for a conference must be in writing and must be submitted along with 
the written response.
    (3) A HUD official will review the appeal and send a response 
either affirming, modifying, or canceling the removal. The HUD official 
will not be someone who was involved in HUD's initial removal decision. 
HUD will respond with a decision within 30 days of receiving the appeal 
or, if the inspector has requested a conference, within 30 days after 
the completion of the conference. HUD may extend the 30-day period by 
providing written notice to the inspector.
    (4) If the inspector does not submit a timely written response, the 
removal will be effective 20 days after the date of HUD's initial 
removal notice (or after a longer period provided in the notice). If a 
written response is submitted, and the removal decision is affirmed or 
modified, the removal will be effective on the date of HUD's notice 
affirming or modifying the initial removal decision.
    (c) Placement on the list after removal. An inspector that has been 
removed from the Roster may apply for placement on the Roster (in 
accordance with Sec.  200.171) after the period of the inspector's 
removal from the Roster has expired. An application will be rejected if 
the period for the consultant's removal from the list has not expired.
    (d) Other action. Nothing in this section prohibits HUD from taking 
such other action against an inspector, as provided in 24 CFR part 24, 
or from seeking any other remedy against an inspector available to HUD 
by statute or otherwise.

    Dated: August 6, 2002.
John C. Weicher,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 02-25730 Filed 10-9-02; 8:45 am]
BILLING CODE 4210-27-P