[Federal Register Volume 67, Number 199 (Tuesday, October 15, 2002)]
[Notices]
[Pages 63671-63672]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26197]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4679-N-05]


Reduction in Certain FHA Multifamily Mortgage Insurance Premiums

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

ACTION: Notice.

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SUMMARY: This notice reissues the notice published on August 30, 2002, 
effective October 1, 2002, lowering the mortgage insurance premiums 
(MIPs) for certain Federal Housing Administration (FHA) multifamily 
mortgage insurance programs whose commitments will be issued in Fiscal 
Year 2003, and republishing others at the rate that was in effect in 
Fiscal Year 2002 (hereafter, ``the August notice''). This notice 
includes responses to comments from the public that HUD received on the 
August notice.

FOR FURTHER INFORMATION CONTACT: Michael McCullough, Director, Office 
of Multifamily Development, U.S. Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410, (202) 708-
1142. Hearing- or speech-impaired individuals may access these numbers 
via TTY by calling the Federal Information Relay Service at (800) 877-
8339 (this is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

A. The Interim Rule and August Notice

    The interim rule on ``Mortgage Insurance Premiums in Multifamily 
Programs,'' published on July 2, 2001, at 66 Federal Register 35070, 
revised previous regulations that set mortgage insurance premiums 
(MIPs) at a specific figure. The Secretary may now change MIPs within 
the full range of HUD's statutory authority of one fourth of one 
percent to one percent. That rule stated that HUD would provide a 30-
day period for public comment on future notices changing mortgage 
insurance premiums in multifamily insured housing programs (66 FR 
35071).
    On August 30, 2002, HUD published a notice pursuant to the interim 
rule setting new mortgage insurance premiums for FY 2003, which became 
effective on October 1, 2002 (67 FR 55859). HUD accepted public 
comments on the August notice. HUD is now publishing its response to 
the public comments and republishing the FY 2003 mortgage insurance 
premiums and transition provisions.

B. Public Comments

    HUD received two public comments on the August notice, both from 
trade associations. Both comments were generally favorable to the new 
premiums, but they did raise some issues for HUD's consideration. HUD 
is making no change to the rates or other aspects of the notice, 
however, as a result of those comments for reasons explained in the 
responses to the comments.
    Comment: Two commenters supported the reduction in the mortgage 
insurance premiums. One commenter specifically praised the premium 
reduction in the Section 221(d)(4) program. The other commenter stated 
that ``the reductions proposed in the notice are a step in the right 
direction.''
    HUD Response: No response is necessary.
    Comment: The commenters expressed views on the data and assumptions 
underlying the rates. Both commenters praised HUD's willingness to 
share the formula and data, or what one commenter referred to as the 
``model,'' underlying the mortgage insurance premium calculation. One 
commenter was satisfied with the revisions to the model, while the 
other commenter stated that HUD should continue to update its data to 
assure that the mortgage insurance premium for each program reflects 
the actual risk to the government. Both commenters stated that they 
wanted to be included in discussions of any future revisions to the 
formula and data, or model.
    HUD Response: The MIP reductions were a result of a comprehensive 
review of the credit subsidy calculations instituted by the Secretary 
in response to industry concerns. HUD staff had several meetings with 
the industry and considered industry input in the re-analysis of the 
credit subsidy rates and assumptions. HUD is required to update the 
data and assumptions each year and we expect to have similar 
discussions with the industry in the future.
    Comment: Regarding the transition provisions of the notice, one 
commenter praised HUD's decision to reprocess applications with 
outstanding firm commitments but which have not yet been initially 
endorsed at the new, lower rates, and did not object to the fact that 
certain applications will have to be reviewed to ensure that the 
underwriting conclusions remain valid. However, this commenter 
suggested that HUD begin reprocessing these cases ``prior to October 
1'' at the request of the mortgagee to assure that the loans can close 
as soon as possible.
    HUD Response: HUD has directed the field staff to begin 
reprocessing of outstanding commitments at the lower MIP.
    Comment: Both commenters urged HUD to publish the final notice as 
quickly as possible.
    HUD Response: No response is needed.

II. This Notice

    This notice restates and republishes the August notice at the same 
premium rates as stated in that notice. The rates effective as of 
October 1, 2002 continue to be as follows for the remainder of FY 2003:

------------------------------------------------------------------------
                                                                FY 2003
                   Multifamily loan program                      basis
                                                                 points
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Section 207--Multifamily Housing--New Construction/                   61
 Substantial Rehabilitation..................................

[[Page 63672]]

 
Section 207--Manufactured Home Parks.........................         61
Section 220--Housing In Urban Renewal Areas..................         61
Section 221(d)(3)--Moderate Income Housing...................         80
Section 221(d)(4)--Moderate Income Housing...................         57
Section 223(a)(7)--Refinancing of Insured Multifamily Project         50
Section 223(d)--Operating Loss Loans.........................         80
Section 207/223(f)--Purchase or Refinance Housing............         50
Section 231--Housing for the Elderly.........................         61
Section 232--Health Care Facilities..........................         50
Section 232 pursuant to Section 223(f)--Purchase or Refinance         50
 Health Care Facilities......................................
Section 234(d)--Condominium Housing..........................         50
Section 241(a)--Additions & Improvements for Apartments......         80
Section 241(a)--Additions & Improvements for Health Care              50
 Facilities..................................................
Section 242--Hospitals.......................................         50
Title XI--Group Practice.....................................         50
HOPE VI Projects with or without LIHTC--[221(d)(4)]..........         57
HOPE VI Projects with or without LIHTC--[207, 220 and 231]...         61
Low Income Housing Tax Credit Projects--221(d)(4), 207, 220,          50
 and 231 without HOPE VI.....................................
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III. Applicable Mortgage Insurance Premium Regulations

    The MIP regulations are contained in 24 CFR 207.252, 207.252a, and 
207.254, published at 66 FR 35072 (July 2, 2001). This notice is 
published in accordance with the procedures stated in those 
regulations.

IV. Transition Guidelines

A. General

    If a firm commitment has been issued at a higher mortgage insurance 
premium (MIP) and FHA has not initially endorsed the note, the lender 
may request the field office to reprocess the commitment at the lower 
MIP and issue an amended commitment on or after October 1, 2002. If the 
initial endorsement has occurred, the MIP cannot be changed.

B. Extension of Outstanding 80 basis point Firm Commitments

    FHA may extend outstanding firm commitments when the HUB/Program 
Center determines that the underwriting conclusions (rents, expenses, 
construction costs, mortgage amount and cash required to close) are 
still valid.

C. Reprocessing of Outstanding 80 basis point Firm Commitments

    FHA will consider requests from mortgagees to reprocess outstanding 
firm commitments at the lower mortgage insurance premium once the new 
premiums become effective in Fiscal Year 2003:
    1. Outstanding commitments with initial 60 day expiration dates on 
or after the effective date of the MIP notice. FHA Multifamily HUB/
Program Center staff will simply reprocess these cases to reflect the 
impact of the lower MIP and issue amended commitments;
    2. Outstanding commitments with initial expiration dates prior to 
the effective date of the MIP notice which have pending extension 
requests or have had extensions granted by FHA beyond the initial 60 
day period. These cases will require more extensive reprocessing by FHA 
staff. Reprocessing will include an updated FHA field staff analysis 
and review of rents, expenses, construction costs, particularly 
considering any changes in Davis-Bacon wage rates and cash required to 
close. (An updated appraisal may be required from the mortgagee 
depending on the age of the appraisal.) If reprocessing results in 
favorable underwriting conclusions, HUB/Program Center staff will issue 
amended commitments at the new MIP.

D. Reopening of Expired 80 Basis Point Firm Commitments

    FHA will consider requests from mortgagees, which requests may be 
either updated Traditional Application Processing (TAP) firm commitment 
applications or updated Multifamily Accelerated Processing (MAP) 
applications with updated exhibits, to reopen expired 80 basis point 
commitments on or after the effective date of the MIP notice, provided 
that the reopening requests are received within 90 days of the 
expiration of the commitments and include the $.50 per thousand of 
requested mortgage reopening fee. Reopening requests will be 
reprocessed by FHA field staff under the instructions in paragraph C.2 
above.
    After expiration of the 90 day reopening period, mortgagees are 
required to submit new applications with the $3 per thousand 
application fee. (MAP applications must start at the preapplication 
stage.)

Credit Subsidy

    Mortgagee Letters will be issued from time to time to advise 
mortgagees of any requirements for credit subsidy, and the availability 
of credit subsidy. In Fiscal Year 2003, it is anticipated that only 
three programs will require credit subsidy: Section 221(d)(3) for 
nonprofit sponsors and cooperatives for new construction or substantial 
rehabilitation, Section 223(d) for operating loss loans for both 
apartments and health care facilities, and Section 241(a) for 
supplemental loans for additions or improvements to existing apartments 
only. FHA will not issue amended commitments for increased mortgage 
amounts nor obligate additional credit subsidy for projects requiring 
credit subsidy in Fiscal Year 2003.

    Dated: October 9, 2002.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner, HUD.
[FR Doc. 02-26197 Filed 10-9-02; 3:52 pm]
BILLING CODE 4210-27-P