[Federal Register Volume 73, Number 172 (Thursday, September 4, 2008)]
[Rules and Regulations]
[Pages 51596-51597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-20471]



24 CFR Part 206

[Docket No. FR-5129-F-02]
RIN 2502-AI49

Home Equity Conversion Mortgages (HECMs): Determination of 
Maximum Claim Amount; and Eligibility for Discounted Mortgage Insurance 
Premium for Certain Refinanced HECM Loans

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

ACTION: Final rule.


SUMMARY: This final rule adopts, without change, an interim rule that 
made two technical changes to HUD's Home Equity Conversion Mortgage 
(HECM) program. First, the interim rule extended the date for 
calculating the maximum claim amount in the HECM program from the date 
of the underwriter's receipt of the appraisal report to the date of 
closing. This change provides a more easily verifiable and more easily 
identifiable date. Second, the interim rule corrected an unintended 
consequence that results in a situation where HECM loans that are not 
in default but have been assigned pursuant to regulatory provisions, 
and remain in effect, are not eligible to be refinanced with a 
discounted initial mortgage insurance premium (MIP). The interim rule 
permitted such HECM loans to be eligible for the discounted initial MIP 
upon refinancing, in accordance with the purpose of the HECM program, 
which is to improve the financial situation of elderly homeowners. HUD 
received one public comment in response to a solicitation of comments 
on the interim rule, which was supportive of the interim rule.

DATES: Effective Date: October 6, 2008.

FOR FURTHER INFORMATION CONTACT: James Beavers, Deputy Director, Single 
Family Program Development, Office of Single Family Housing, Department 
of Housing and Urban Development, 451 Seventh Street, SW., 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 through TTY by calling the toll-free Federal Information Relay 
Service at 1-800-877-8339.


I. Background

    The statutory and regulatory background to this rule is fully 
discussed in the preamble to the January 8, 2008, interim rule at 73 FR 
1434-1435. HUD's Home Equity Conversion Mortgage (HECM) statute is at 
section 255 of the National Housing Act, 12 U.S.C. 1715z-20.
    The January 2008 interim rule revised the point in time at which 
the appraised value of the property and the maximum dollar amount for 
an area under 12 U.S.C. 1709(b)(2) are compared to determine the 
maximum claim amount. The definition of ``maximum claim amount'' 
currently codified in HUD's regulations in 24 CFR 206.3 provides that 
both of these values ``must be as of the date the Direct Endorsement 
Lender or Lender Insurance Underwriter receives the appraisal report.'' 
For reasons described in the January 8, 2008, interim rule, however, 
the date is changed to the date of loan closing.
    The interim rule also addressed an issue in the HECM program in 
which refinanced HECM notes assigned to HUD under assignment provisions 
at Sec.  206.107(a)(1) (election of assignment or shared premium 
option) and Sec.  206.121(b) (assignment to HUD when the mortgagee is 
unable or unwilling to make payments to mortgagor), but not in default, 
could not be insured at the reduced initial mortgage insurance premium 
(MIP) rates applicable to refinanced HECM loans. The interim rule 
clarified that refinanced HECM loans in these categories are also 
eligible for mortgage insurance at the reduced rate.

II. This Final Rule

    This final rule adopts the interim rule without change. The 
following provides a summary of the regulatory amendments made by the 
interim rule, and adopted without change by the final rule.
     The interim rule removed the second sentence of 24 CFR 
206.3, and revised the first sentence to read:

    Maximum claim amount means the lesser of the appraised value of 
the property, as determined by the appraisal used in underwriting 
the loan, or the maximum dollar amount for an area established by 
the Secretary for a one-family residence under section 203(b)(2) of 
the National Housing Act (as adjusted where applicable under section 
214 of the National Housing Act) as of the date of loan closing.

     The interim rule revised the last sentence of Sec.  
206.53(a) to remove the term ``presently'' and clarify that the 
refinancing provisions apply to ``existing'' HECM loans, including 
those assigned under Sec. Sec.  206.107(a)(1) and 206.121(b).

III. Discussion of Public Comments

    The public comment period on the January 8, 2008, interim rule 
closed on March 10, 2008. HUD received one comment, which supported the 
change made by the rule, and urged HUD to make other changes to the 
program regulations that would especially assist elderly minority 
homeowners. With no other issues for consideration at the final rule 
stage, HUD is adopting the interim rule without change.

IV. Findings and Certifications

Environmental Impact

    The final rule involves external administrative or fiscal 
requirements or procedures that are related to loan limits and rate or 
cost determinations and that 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 rule is 
categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

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 final rule would not have a significant impact on entities, 
because the establishment of a date of maximum claim amount is an 
automated process and merely changing the date as of which the 
calculation is made imposes no additional burden on any entity. 
Allowing for discounted MIPs for refinancings provides a benefit to 
borrowers and presents no impact on any business entities.
    Accordingly, the undersigned certifies that this rule will not have 
a significant economic impact on a substantial number of small 

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 would not have 

[[Page 51597]]

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 final rule will 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 (CFDA) program number is 

List of Subjects in 24 CFR Part 206

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


Accordingly, the interim rule amending 24 CFR part 206, which was 
published at 73 FR 1434 on January 8, 2008, is adopted as a final rule 
without change.

    Dated: August 22, 2008.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.
 [FR Doc. E8-20471 Filed 9-3-08; 8:45 am]