[Federal Register Volume 69, Number 240 (Wednesday, December 15, 2004)]
[Rules and Regulations]
[Pages 75204-75205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27310]



[[Page 75203]]

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Part IV





Department of Housing and Urban Development





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24 CFR Part 206



Home Equity Conversion Mortgage (HECM) Program; Insurance for Mortgages 
To Refinance Existing HECMs and Reduced Initial Mortgage Insurance 
Premiums (MIP); Final Rule

  Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 206

[Docket No. FR-4667-F-03]
RIN 2502-AH63


Home Equity Conversion Mortgage (HECM) Program; Insurance for 
Mortgages To Refinance Existing HECMs and Reduced Initial Mortgage 
Insurance Premiums (MIP)

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

ACTION: Final rule.

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SUMMARY: On March 25, 2004, HUD published an interim rule implementing 
certain statutory changes to the Home Equity Conversion Mortgage (HECM) 
Program made by section 201 of the American Homeownership and Economic 
Opportunity Act of 2000 (AHEOA). Among other changes, the rule provided 
for a reduced initial mortgage insurance premium (MIP) on HECM 
refinancings. The interim rule requested comments on the MIP provision 
of the rule. This final rule follows publication of the March 25, 2004, 
interim rule. HUD did not receive any public comments on the interim 
regulatory change regarding the reduced MIP for HECM refinancings and, 
therefore, is adopting the interim rule without change.

DATES: Effective Date: January 14, 2005.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Office of 
Single Family Program Development, Office of Insured Single Family 
Housing, Room 9266, 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). Individuals with speech or 
hearing impairments may access this number through TTY by calling the 
toll-free Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION

I. Background

    HUD's Home Equity Conversion Mortgage (HECM) Program enables 
homeowners 62 years of age or older who have paid off their mortgages 
or have small mortgage balances to stay in their homes while using some 
of their equity as income. The program enables these homeowners to 
obtain financing with a Federal Housing Administration (FHA) insured 
reverse mortgage, which is a mortgage that converts equity into income. 
The FHA insures HECM loans to protect lenders against loss. Such a loss 
could occur if amounts withdrawn exceed equity when the homeowner's 
property is sold. The statutory authority for the HECM Program is 
section 255 of the National Housing Act (12 U.S.C. 1715z-20) (NHA). 
HUD's regulations implementing the HECM Program are located at 24 CFR 
part 206.
    Section 201 of the American Homeownership and Economic Opportunity 
Act of 2000 (Pub. L. 106-569, approved December 27, 2000) (AHEOA) made 
several changes to the HECM Program. Among other amendments, section 
201(a) of AHEOA added a new section 255(k) to the NHA. Section 255(k) 
in part authorizes FHA to offer mortgage insurance for the refinancing 
of existing HECMs and establishes several homeowner protection and 
streamlining requirements concerning such refinancings. On June 5, 2001 
(66 FR 30278), HUD published a proposed rule to implement certain 
statutory changes to the HECM Program made by section 201 of the AHEOA. 
The proposed rule solicited public comments on the proposed changes to 
the HECM Program regulations. Two commenters wrote that, in addition to 
implementing the changes contained in the proposed rule, HUD should 
also implement its statutory authority to reduce the initial mortgage 
insurance premium (MIP) for HECM refinancings. Specifically, section 
201(a) of AHEOA added a new section 255(k)(4) to the NHA which 
authorizes HUD to reduce the amount of the initial MIP collected on a 
HECM refinancing.
    On March 25, 2004 (69 FR 15586), HUD published an interim rule that 
considered the public comments received on the proposed rule and made 
effective the proposed regulatory changes to the HECM Program contained 
in the June 5, 2001 proposed rule. In response to the public comments 
requesting that HUD implement section 255(k)(4) of the NHA, the interim 
rule also established a reduced MIP for HECM refinancings.
    The regulatory provisions of the March 25, 2004, interim rule took 
effect on April 26, 2004. However, in order to provide for public 
comments on the amount of the MIP, HUD issued the MIP provision on an 
interim basis and requested public comments for a period of 60 days on 
the amount of the initial MIP. HUD did not request public comment on 
the other provisions of the interim rule, since these provisions were 
contained in the July 5, 2001, proposed rule and were, therefore, 
already the subject of public comments.
    As noted above, certain statutory changes to the HECM Program were 
already enumerated in the June 5, 2001, proposed rule. For more 
information on these prior changes, interested persons should refer to 
the June 5, 2001, proposed rule preamble; for information on the 
agency's discussion of the public comments received on the June 5, 
2001, proposed rule, interested persons should refer to the March 25, 
2004, interim rule preamble.

II. This Final Rule

    This final rule follows publication of the March 25, 2004, interim 
rule. The comment period on the initial MIP provision closed on May 25, 
2004. HUD did not receive any public comments on the interim regulatory 
change regarding the reduced initial MIP for HECM refinancings. 
Accordingly, this final rule adopts the interim rule of March 25, 2004, 
without changes.
    Specifically, this final rule adopts Sec.  206.53(c), which was 
established by the March 25, 2004, interim rule. New Sec.  206.53(c) 
implements the statutory authority provided to HUD by section 255(k) of 
the NHA to reduce the initial MIP for HECM refinancings. The change 
provides that the initial MIP paid by the mortgagee shall not exceed 
two percent of the increase in the maximum claim amount (i.e., the 
difference between the maximum claim amount for the new home equity 
conversion mortgage and the maximum claim amount for the existing home 
equity conversion mortgage that is being refinanced).
    HUD believes that the initial MIP limit made effective by this rule 
will result in a lower initial MIP for a refinanced HECM loan than for 
a comparable ``first'' HECM secured by a similar property. Also, the 
initial MIP limit will allow more homeowners to refinance their HECM 
loans at a lower interest rate, thus allowing homeowners to stay in 
their homes while using some of their equity.

III. Findings and Certifications

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866 (entitled ``Regulatory Planning and Review''). 
OMB determined that this 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 this rule subsequent to its submission to OMB are identified in 
the docket file, which is available for public inspection in the 
Regulations Division, Room 10276,

[[Page 75205]]

Office of General Counsel, Department of Housing and Urban Development, 
451 Seventh Street, SW., Washington, DC 20410-0500.

Information Collection Requirements

    The information collection requirements contained in Sec.  206.53 
have been approved by OMB in accordance with the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2502-
0524. 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 currently 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 rule does not impose 
any Federal mandates on any State, local, or tribal government or the 
private sector within the meaning of UMRA.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made at the proposed rule stage in accordance with HUD regulations 
at 24 CFR part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding 
remains applicable to this final rule and is available for public 
inspection between the hours of 8 a.m. and 5 p.m. weekdays in the 
Regulations Division, Room 10276, Office of General Counsel, Department 
of Housing and Urban Development, 451 Seventh Street, SW., Washington, 
DC 20410-0500.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The amendments made by this final rule will not impose any economic 
costs on small lenders and other participants in the HECM Program. 
Lenders will not be adversely affected by the reductions in the initial 
MIP established by this final rule, since the initial MIP is payable to 
HUD and not the lenders. Therefore, the undersigned certifies that this 
final rule will not have a significant economic impact on a substantial 
number of small entities.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final 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.

Catalog of Domestic Assistance Number

    The Catalog of Domestic Assistance Number for the HECM Program is 
14.871.

List of Subjects in 24 CFR Part 206

    Aged, Condominiums, Loan programs--housing and community 
development, Mortgage insurance, Reporting and recordkeeping 
requirements.

    Accordingly, for the reasons stated in the preamble, the interim 
rule for part 206 of subpart B of Title 24 of the Code of Federal 
Regulations, revising Sec.  206.31(a)(1) and adding Sec.  206.53, 
published on March 25, 2004, at 69 FR 15586, is promulgated as final, 
without change.

    Dated: November 5, 2004.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 04-27310 Filed 12-14-04; 8:45 am]
BILLING CODE 4210-27-P