[Federal Register Volume 68, Number 194 (Tuesday, October 7, 2003)]
[Proposed Rules]
[Pages 58006-58007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25214]



[[Page 58005]]

-----------------------------------------------------------------------

Part IV





Department of Housing and Urban Development





-----------------------------------------------------------------------



24 CFR Part 203



Up-Front Mortgage Insurance Premiums for Loans Insured Under Sections 
203(k) and 234(c) of the National Housing Act; Proposed Rule

  Federal Register / Vol. 68, No. 194 / Tuesday, October 7, 2003 / 
Proposed Rule  

[[Page 58006]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR-4749-P-01]
RIN 2502-AH82


Up-Front Mortgage Insurance Premiums for Loans Insured Under 
Sections 203(k) and 234(c) of the National Housing Act

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: HUD charges an up-front mortgage insurance premium (MIP) for 
loans that are obligations of its mutual mortgage insurance fund, and 
of its general insurance fund only for insurance in connection with 
Section 8 homeownership. However, to date there has been no provision 
for up-front premiums for loans such as home rehabilitation loans under 
section 203(k) of the National Housing Act (NHA) and condominium unit 
loans under section 234(c) which are obligations of the general 
insurance fund. Recent statutory changes now provide for an up-front 
MIP for those programs. This rule amends HUD's regulations related to 
mortgage insurance to conform the regulations to the recent statutory 
changes.

DATES: Comment Due Date: December 8, 2003.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, 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 8 a.m. and 5 p.m. weekdays at 
the above address.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Office of 
Single Family Program Development, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410-8000, at 
(202) 708-2121 (this is not a toll-free number). Persons with hearing- 
or speech-impairments 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:

A. Background

    Section 203(c) of the National Housing Act (NHA) authorizes the 
Secretary to set the premium charge for insurance of mortgages under 
Title II of the NHA. Prior to a recent statutory change, section 
203(c)(2) provided for the establishment of an up-front premium for 
mutual mortgage insurance programs not to exceed 2.25 percent of the 
amount of the original insured principal obligation of the mortgage. 
The Fiscal Year (FY) 2002 HUD Appropriations Act (Pub. L. 107-73, 
approved November 26, 2001), amended this authority. Specifically, 
section 207 of the FY 2002 HUD Appropriations Act amended section 
203(c) of the NHA to include mortgages insured under section 203(k) 
(rehabilitation loans) and section 234(c) (condominium loans) among 
those mortgages for which HUD collects a premium payment not to exceed 
2.25 percent of the amount of the original insured mortgage (or not to 
exceed 2.0 percent for a first-time homebuyer who completes an approved 
program of homeownership counseling) at the time of insurance. Finally, 
the statutory amendments that are the subject of this rule only apply 
to mortgages that are executed after the date of enactment of the law, 
which was November 26, 2001. HUD, however, will only collect up-front 
premiums for 203(k) and 234(c) loans originated after the effective 
date of the final rule.

B. This Proposed Rule

    This proposed rule would amend relevant sections of HUD's 
regulations in 24 CFR part 203 to conform these regulations to the 
statutory changes. Specifically, this proposed rule would amend 
regulations at 24 CFR 203.284(a) and 203.285(a), on up-front premiums, 
and Sec.  203.50, on rehabilitation loans under section 203(k). Part 
234, which relates to condominium mortgage insurance, incorporates by 
reference at Sec.  234.255 the provisions of 24 CFR 203.284 and 
203.285, and, therefore, will include the latest revisions, so that 
further revision of part 234 is unnecessary. Transition provisions in 
24 CFR 203.284 and 203.285 for older mortgage loans will remain as 
published in the April 1, 2003, edition of title 24 of the Code of 
Federal Regulations.

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 changes the scheduling and 
conditions of premium payment obligations, requiring an up-front 
payment instead of monthly payments. Generally, these amounts are 
amortized in the mortgage and ultimately impose no obligations on 
businesses.
    Notwithstanding HUD's determination that this rule does not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in the preamble.

Executive Order 12866

    The Office of Management and Budget (OMB) reviewed this proposed 
rule under Executive Order 12866 (entitled ``Regulatory Planning and 
Review''), which the President issued on September 30, 1993. This rule 
was determined economically significant under E.O. 12866. 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 Regulations Division, Office of General Counsel, 
Room 10276, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 20410-0500. The Economic Analysis prepared 
for this rule is also available for public inspection in the 
Regulations Division.

Environmental Impact

    This proposed rule involves the discretionary establishment of a 
rate or cost determination and related external administrative or 
fiscal requirements, which do not constitute a development decision 
affecting the physical condition of specific project areas or building 
sites. Accordingly, under 24 CFR 50.19(c)(6), 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 Order are met. This rule does not have 
federalism implications and does not

[[Page 58007]]

impose substantial direct compliance costs on state and local 
governments or preempt state law within the meaning of the 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.

Congressional Review of Final Rules

    This rule constitutes a ``major rule'' as defined in the 
Congressional Review Act (5 U.S.C. Chapter 8). At the final rule stage, 
this rule will have a 60-day delayed effective date and be submitted to 
Congress in accordance with the requirements of the Congressional 
Review Act.

Catalog of Federal Domestic Assistance

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

List of Subjects in 24 CFR Part 203

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

    Accordingly, for the reasons stated in the preamble, HUD proposes 
to amend 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 A--Eligibility Requirements and Underwriting Procedures

    2. Amend 24 CFR 203.50 by adding a paragraph (m) to read as 
follows:


Sec.  203.50  Eligibility of rehabilitation loans.

* * * * *
    (m) With regard to loans under this section executed on or after 
[the effective date of the final rule], the Commissioner shall charge 
an up-front and annual MIP in accordance with 24 CFR 203.284 or 
203.285, whichever is applicable.

Subpart B--Contract Rights and Obligations

    3. Amend 24 CFR 203.284 by revising paragraph (a) introductory text 
and paragraph (b) to read as follows:


Sec.  203.284  Calculation of up-front and annual MIP on or after July 
1991.

* * * * *
    (a) Permanent provisions. Any mortgage executed on or after October 
1, 1994, that is an obligation of the Mutual Mortgage Insurance Fund, 
as well as any mortgage executed after [the effective date of the final 
rule], which is insured under sections 203(k) or 234(c) of the National 
Housing Act (12 U.S.C. 1709 (k) and 12 U.S.C. 1715y(c)) shall be 
subject to the following requirements:
* * * * *
    (b) Transition provisions; savings provision. Mortgages that are 
obligations of the Mutual Mortgage Insurance Fund and that were insured 
during Fiscal Years 1991-1994, are governed by 24 CFR 203.284(b) as in 
effect on April 1, 2003, (see 24 CFR parts 200-499 revised as of April 
1, 2003).
* * * * *
    4. Amend 24 CFR 203.285 by revising the first sentence of paragraph 
(a) to read as follows:


Sec.  203.285  Fifteen-year mortgages: Calculation of up-front and 
annual MIP on or after December 26, 1992.

    (a) Up-front. Any mortgage for a term of 15 or fewer years executed 
on or after December 26, 1992, that is an obligation of the Mutual 
Mortgage Insurance Fund, and any mortgage executed on or after [the 
effective date of the final rule], to be insured under sections 203(k) 
and 234(c) of the National Housing Act, shall be subject to a single 
up-front premium payment established and collected by the Commissioner 
in an amount not exceeding 2.0 percent of the amount of the original 
insured principal obligation of the mortgage. * * *
* * * * *

    Dated: September 9, 2003.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 03-25214 Filed 10-6-03; 8:45 am]
BILLING CODE 4210-27-P