[Federal Register Volume 73, Number 111 (Monday, June 9, 2008)]
[Proposed Rules]
[Pages 32632-32634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-12813]



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Part II





Department of Housing and Urban Development





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24 CFR Part 203



Federal Housing Administration: Acceptable Payment History for Late 
Request for Endorsement of Mortgage for Insurance; Proposed Rule

  Federal Register / Vol. 73, No. 111 / Monday June 9, 2008 / Proposed 
Rule  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR-5160-P-01]
RIN 2502-AI56


Federal Housing Administration: Acceptable Payment History for 
Late Request for Endorsement of Mortgage for Insurance

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

ACTION: Proposed rule.

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SUMMARY: HUD's current regulations require that a mortgage show an 
acceptable payment history when submitted for late endorsement, but 
they are silent as to what constitutes an acceptable payment history. 
This proposed rule would provide factors that establish an acceptable 
payment history when a mortgage is submitted for Federal Housing 
Administration (FHA) insurance more than 60 days after closing, and 
would make one technical amendment pertaining to the submission of 
documentation for endorsement.

DATES: Comment Due Date: August 8, 2008.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Room 10276, Washington, DC 20410-0500. Interested persons also may 
submit comments electronically through the Federal eRulemaking Portal 
at http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically so that HUD, in turn, can make them 
immediately available to the public. Commenters should follow the 
instructions provided on that site to submit comments electronically. 
Facsimile (FAX) comments are not acceptable. In all cases, 
communications must refer to the docket number and title. All comments 
and communications submitted to HUD will be available for public 
inspection and copying between 8 a.m. and 5 p.m. weekdays at the above 
address. Due to security measures at the HUD Headquarters building, an 
advance appointment to review the public comments must be scheduled by 
calling the Regulations Division at (202) 708-3055 (this is not a toll-
free number). Copies of all comments submitted are available for 
inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Margaret E. Burns, Director, Office of 
Single Family Program Development, Office of Housing, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Room 9278, 
Washington, DC 20410-8000; telephone number (202) 708-2121 (this is not 
a toll-free number). Persons with hearing or speech impairments may 
access this number via TTY by calling the toll-free Federal Information 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Current HUD regulations at 24 CFR 203.255(c)(7) provide that when a 
mortgage is submitted for insurance more than 60 days after closing, it 
must show an acceptable payment history as part of the pre-endorsement 
review conducted by HUD. Although HUD may determine on a case-by-case 
basis what constitutes an acceptable payment history, such a procedure 
is time consuming and inefficient. In the recent past, HUD has issued 
more general guidance for determining an acceptable payment history on 
two occasions. Mortgagee Letter 2004-14, issued April 12, 2004, 
provided for the submission of a payment history or ledger, as well as 
a certification that:

    1. All mortgage payments due have been made by the mortgagor 
prior to or within the month due. If any payments have been made 
after the month due, the loan is not eligible for endorsement until 
six consecutive payments have been made prior to and/or within the 
calendar month due, and;
    2. All escrow accounts for taxes, hazard insurance, and mortgage 
insurance premiums are current and intact, except for disbursements 
that may have been made to cover payments for which the accounts 
were specifically established, and;
    3. The mortgage lender did not provide the funds to bring and/or 
keep the loan current or to bring about the appearance of an 
acceptable payment history.

    Subsequently, on May 17, 2005, HUD issued Mortgagee Letter 2005-23, 
which eliminated the submission of the payment history or ledger, as 
well as the requirement for six consecutive payments. Instead of the 
payment history or the 6 months of payments, the certification under 
Mortgagee Letter 2005-23 included a statement that no mortgage payment 
is currently unpaid more than 30 days. The second and third factors, 
however, continued to be included.

II. This Proposed Rule

    Having gained experience with the approaches in each of the cited 
Mortgagee Letters, HUD has determined that the first factor of 
Mortgagee Letter 2004-14, along with the two additional factors 
included in both Mortgagee Letters, provide an acceptable level of 
assurance that a mortgage for which a late endorsement is requested 
shows an acceptable payment history. The record of six consecutive 
payments as evidence of an acceptable payment history had been a 
longstanding HUD policy before the issuance of Mortgagee Letter 2005-
23, which instead provided the alternative of an assurance that the 
loan was current at the time it was submitted for FHA's insurance 
endorsement. HUD considers it appropriate to return to its earlier, 
more rigorous longstanding policy, particularly at time of increased 
defaults and of concerns over the too-permissive lending practices 
associated with these increases. A more rigorous policy is expected to 
result in a lower level of default and claims on loans submitted to FHA 
for late endorsement. Accordingly, HUD, in this rule, is proposing to 
include the three factors of Mortgagee Letter 2004-14 in its 
regulations at 24 CFR 203.255(c)(7). In doing so, HUD will provide 
clarity and certainty as to which mortgages qualify for late 
endorsement when submitted more than 60 days after closing. Paperwork 
approval is concurrently being sought for the associated ledger and 
certification requirements. The certification requirements will be 
provided in Sec.  203.255(b).
    To achieve the regulatory changes discussed above, section 
203.255(c) would be amended to designate the introductory paragraph as 
paragraph (c)(1) and revise existing paragraph (c)(7) as (c)(1)(vii), 
to include the three factors as paragraphs (A) through (C).\1\ The 
current, undesignated, second paragraph in Sec.  203.255(c)(7) would be 
designated as Sec.  203.255(c)(2). As noted above, HUD would also amend 
Sec.  203.255(b) to include the certification

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requirement. In addition to these changes, HUD would make a technical 
amendment. Newly designated paragraph (c)(2) would be revised to remove 
the erroneous indication that a false or fraudulent certification can 
be corrected and resubmitted in a way that would then make the mortgage 
eligible for endorsement. Certifications are subject to statutory 
requirements and penalties that the existing language in this 
regulation could not supersede.
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    \1\ On September 5, 2007, HUD announced FHASecure, an initiative 
that allows families with strong credit histories who had been 
making timely payments on their non-FHA-insured mortgages before a 
loan interest rate reset--but are now in default--to qualify for 
refinancing with FHA mortgage insurance. The proposed acceptable 
payment history standards would apply to the FHA-insured mortgage 
used to refinance the debt, but would not apply to the non-FHA-
insured mortgage being refinanced. Therefore, this proposed rule 
does not affect the eligibility of a family that otherwise meets the 
eligibility criteria, but is in default on their mortgage, from 
participating in FHASecure. A copy of Mortgagee Letter 2007-11, 
which announced FHASecure, may be downloaded at: http://portal.hud.gov/fha/reference/ml2007/07-11ml.doc.
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III. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule have been submitted to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, HUD 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 OMB 
control number. Interested persons are invited to submit comments 
regarding the information collection requirements in this proposed 
rule. Comments must be received within 60 days from the date of this 
proposed rule.
    The burden of the information collections resulting from this 
proposed rule is estimated as follows:

                                       Reporting and Recordkeeping Burden
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                                                                                     Estimated
                                                                     Number of     average time      Estimated
      Description of information collection          Number of     responses per        for        annual burden
                                                      parties       respondent      requirement     (in hours)
                                                                                    (in hours)
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Payment History/Ledger..........................           8,700              13             .10          11,310
Lender Certification............................           8,700              13             .50          56,550
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    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Comments must refer 
to the proposal by name and docket number (FR-5160-P-01) and must be 
sent to:

HUD Desk Officer,
Office of Management and Budget,
New Executive Office Building,
Washington, DC 20503,
Fax number: (202) 395-6974

     and

Reports Liaison Officer,
Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner,
Department of Housing and Urban Development,
451 Seventh Street, SW.,
Washington, DC 20410-8000.

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. 
This proposed rule would provide factors for determining what 
constitutes an acceptable payment history for the purpose of late 
endorsement of a mortgage. The rule would not impose any additional 
burden on entities or individuals, but only examines compliance, over a 
limited period of time, with obligations that individuals have agreed 
to assume in exchange for a benefit. Accordingly, the undersigned 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities.
    Notwithstanding HUD's determination that this rule will not have a 
significant effect 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 this preamble.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made, 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)). That finding is available for 
public inspection between the hours of 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
finding by calling the Regulations Division at (202) 708-3055 (this is 
not a toll-free number).

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 rule will not have federalism 
implications and would 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 (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 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 UMRA.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance Number for FHA mortgage 
insurance for homes is 14.117.

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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 discussed in the preamble, HUD 
proposes to amend 24 CFR part 203 as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

    1. The authority citation for part 203 continues to read as 
follows:

    Authority: 12 U.S.C. 1709, 1710, 1715b, and 1715u; 42 U.S.C. 
3535(d).

    2. In Sec.  203.255 by:
    A. Redesignating paragraph (b)(14) as (b)(15),
    B. Adding a new paragraph (b)(14),
    C. Redesignating paragraph (c) introductory text and paragraphs 
(c)(1) through (c)(7) as paragraph (c)(1) introductory text and 
paragraphs (c)(1)(i) through (c)(1)(vii), respectively,
    D. Designating the undesignated paragraph following (c)(7) as 
paragraph (c)(2), and
    E. Revising newly designated paragraph (c)(1)(vii) to read as 
follows:


Sec.  203.255  Insurance of mortgage.

* * * * *
    (b) * * *
    (14) In the case where a mortgage lender submits a loan for 
endorsement more than 60 days after closing as permitted by the 
Secretary, a certification to the Secretary that the lender has 
complied with the factors identified in Sec.  203.255(c)(1)(vii).
    (c)(1) * * *
    (vii) The mortgage was not in default when submitted for insurance 
or, if submitted for insurance more than 60 days after closing, the 
mortgage shows an acceptable payment history. A mortgage that meets the 
following factors shows an acceptable payment history:
    (A) All mortgage payments due have been made by the mortgagor prior 
to or within the month due. If any payments have been made after the 
month due, the loan is not eligible for endorsement until six 
consecutive payments have been made prior to or within the calendar 
month due, and;
    (B) All escrow accounts for taxes, hazard insurance, and mortgage 
insurance premiums are current and intact, except for disbursements 
that may have been made to cover payments for which the accounts were 
specifically established, and;
    (C) The mortgage lender did not provide the funds to bring and/or 
keep the loan current or to bring about the appearance of an acceptable 
payment history.
    (2) In addition to the reviews and determinations made in paragraph 
(c)(1) of this section, the Secretary is authorized to determine if the 
mortgage fails to meet a statutory or regulatory requirement. If, 
following this review, the mortgage is determined to be eligible, the 
Secretary will endorse the mortgage for insurance by issuance of a 
Mortgage Insurance Certificate. If the mortgage is determined to be 
ineligible, the Secretary will, among other things, inform the 
mortgagee in writing of this determination and will include the reasons 
for the determination and further inform whether any actions may be 
taken to correct the determination of ineligibility for endorsement.
* * * * *

    Dated: May 12, 2008.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.
 [FR Doc. E8-12813 Filed 6-6-08; 8:45 am]
BILLING CODE 4210-67-P