[Federal Register Volume 76, Number 166 (Friday, August 26, 2011)]
[Proposed Rules]
[Pages 53362-53364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-21910]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 202
[Docket No. FR-5416-P-01]
RIN 2502-AI91
Approval of Farm Credit System Lending Institutions in FHA
Mortgage Insurance Programs
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would amend HUD regulations to enable the
direct lending institutions of the Farm Credit System to seek approval
to participate in the Federal Housing Administration (FHA) mortgage
insurance programs as approved mortgagees and lenders. Recent
difficulties in mortgage finance markets have reduced the availability
of housing credit in rural areas. HUD proposes to extend FHA mortgagee
and lender eligibility to the Farm Credit System to provide an
additional avenue for mortgage financing in these areas.
DATES: Comment Due Date: October 25, 2011.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Regulations Division, Office of General
Counsel, Department of Housing and Urban Development, 451 7th Street,
SW., Room 10276, Washington, DC 20410-0500. Communications must refer
to the above docket number and title. There are two methods for
submitting public comments. All submissions must refer to the above
docket number and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street, SW., Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
http://www.regulations.gov. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
http://www.regulations.gov Web site can be viewed by other commenters
and interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule.
No Facsimile Comments. Facsimile (Fax) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
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 appointment to review the public comments must be
scheduled in advance by calling the Regulations
[[Page 53363]]
Division at 202-708-3055 (this is not a toll-free number). Individuals
with speech or hearing impairments may access this number via TTY by
calling the Federal Information Relay Service at 800-877-8339. Copies
of all comments submitted are available for inspection and downloading
at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Office of Lender Activities and
Program Compliance, Department of Housing and Urban Development, 451
7th Street, SW., Washington, DC 20410-8000; telephone number 202-708-
1515 (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 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
Section 203(b)(1) of the National Housing Act (12 U.S.C.
1709(b)(1)) (NHA) provides that in order for a mortgage to be eligible
for Federal Housing Administration (FHA) mortgage insurance under Title
II of the NHA, the mortgage shall ``* * * have been made to, and held
by, a mortgagee approved by the Secretary as responsible and able to
service the mortgage properly.'' Similar approval provisions for
lenders are contained in Title I, section 2 of the NHA (12 U.S.C.
1703), which authorizes FHA insurance of lending institutions.
Specifically, section 2(a) of the NHA provides that the Secretary of
HUD is authorized to insure lenders ``which the Secretary finds to be
qualified by experience of facilities. * * *'' The regulations that
implement these statutory mandates are codified at 24 CFR part 202
(entitled ``Approval of Lending Institutions and Mortgagees''). The
regulations establish several categories of mortgagees and lenders,
based upon government association or supervision, capital net worth,
and the mortgage or lending functions in which the applicants for FHA
approval intend to engage.
The part 202 regulations do not currently provide for FHA approval
of lending institutions that are part of the Farm Credit System. The
Farm Credit System is a federally chartered network of borrower-owned
lending institutions composed of cooperatives and related service
organizations. The mission of the Farm Credit System is to provide
sound and dependable credit to American farmers, ranchers, producers,
or harvesters of aquatic products, their cooperatives, and farm-related
businesses. The lending institutions that comprise the Farm Credit
System make appropriately structured loans (including loans for the
purchase of moderately priced homes in rural areas) to qualified
individuals and businesses at competitive rates, and provide financial
services and advice to those persons and businesses. Federal oversight
by the Farm Credit Administration provides for the safety and soundness
of participating lending institutions.
The four farm credit banks, one agricultural credit bank
(hereinafter collectively referred to as the Farm Credit banks), and
their direct lender associations (the Agricultural Credit Associations)
comprise the major functional entities of the Farm Credit System. The
Farm Credit banks are government-sponsored enterprises (GSEs) and must
operate within limits established by the Farm Credit Act of 1971, as
amended (12 U.S.C. 2001 et seq.). In general, the Farm Credit banks
provide services and funds to local Agricultural Credit Associations
that, in turn, provide short-, intermediate-, and long-term credit to
farmers, ranchers, producers, and harvesters of aquatic products, and
to rural residents for moderately priced housing. The Agricultural
Credit Associations also make loans for basic agricultural processing
and marketing activities, and to farm-related businesses.
The Farm Credit banks collectively issue debt securities in the
national and international money markets through the Federal Farm
Credit Banks Funding Corporation and use this capital to provide
borrowers with access to reliable and competitive credit. The full
financial strength of all of the Farm Credit banks stands behind the
debt issued on behalf of the Farm Credit System. In addition, investors
in Farm Credit System debt are protected by the assets of the self-
funded Farm Credit System Insurance Fund, which is administered by the
Farm Credit System Insurance Corporation. Additional information
regarding the Farm Credit System is available on the Farm Credit
Administration Web site at http://www.fca.gov/index.html.
II. This Proposed Rule
This proposed rule would amend HUD's mortgagee and lender approval
regulations at 24 CFR part 202 to enable the direct lending
institutions of the Farm Credit System to seek approval to participate
in the mortgage insurance programs under the NHA as FHA-approved
mortgagees and lenders. At the time HUD originally published its part
202 regulations in 1997, given the then-ready availability of mortgage
credit and the existence of other mortgage assistance programs for
rural housing, there was little need to include the Farm Credit Banks
and Agricultural Credit Associations. However, the downturn in the
mortgage lending market has prompted HUD to reconsider this omission.
As lenders strive to increase capital reserves and tighten underwriting
standards, and as private mortgage insurers retreat from some markets,
the availability of financing for housing is reduced, particularly in
rural areas. HUD proposes to extend FHA mortgagee and lender
eligibility to the Farm Credit System to provide an additional avenue
for mortgage financing in rural areas. Participation in FHA programs
incentivizes lenders to make mortgage credit available by insuring them
against potential losses in the event of defaults. Further, FHA-insured
mortgage loans can be securitized by Ginnie Mae and sold in the
secondary market, which can significantly improve the availability of
funds and permit more favorable interest rates than would otherwise be
likely.
FHA proposes to amend 24 CFR 202.10, which lists the governmental
institutions and GSEs eligible to participate in FHA programs, by
adding the Agricultural Credit Associations as eligible for FHA
approval as Government mortgagees and lenders. Approval of Farm Credit
System direct-lending institutions would be based on the same
requirements applicable to other GSEs under Sec. 202.10. HUD believes
the proposed extension of FHA program eligibility will better enable
the direct-lending institutions of the Farm Credit System to provide
sound and dependable mortgage credit to rural communities.
III. Findings and Certifications
Executive Order 12866, Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this proposed
rule under Executive Order 12866 (entitled ``Regulatory Planning and
Review''). The proposed rule has been determined to be a ``significant
regulatory action,'' as defined in section 3(f) of the Order, but not
economically significant, as provided in section 3(f)(1) of the Order.
Based on Farm Credit Administration (FCA) data, HUD determined it
is reasonable to assume a 5 percent increase in the origination of FHA-
insured mortgages by Farm Credit System institutions as a result of
this proposed rule. Based on the approximately 44,000 rural FCA home
loans originated in 2010, FHA could expect an additional 2,200 loans
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annually. Given this loan volume, the effects of this rule will not in
any year exceed the $100 million threshold for an economically
significant action as set forth by Executive Order 12866.
The docket file for this proposed rule is available for public
inspection in the Regulations Division, Office of General Counsel,
Department of Housing and Urban Development, 451 7th Street, SW., Room
10276, Washington, DC 20410-0500. Due to security measures at the HUD
Headquarters building, please schedule an appointment to review the
docket file by calling the Regulations Division at 202-402-3055 (this
is not a toll-free number). Individuals with speech or hearing
impairments may access this number via TTY by calling the Federal
Information Relay Service at 800-877-8339.
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 not impose any new regulatory requirements
or economic burdens on small entities. Indeed, the rule imposes no new
requirements on any entities. Rather, the proposed rule would merely
provide an option for direct lending institutions of the Farm Credit
System to participate in HUD's mortgage insurance programs under the
NHA as FHA-approved supervised lenders and mortgagees. Farm Credit
System institutions wishing to participate in the programs would be
required to comply with FHA mortgagee and lender approval requirements;
however, participation in the mortgage insurance programs is voluntary.
Accordingly, to the extent that the proposed rule has any economic
impact, it would be to confer the economic benefit of participating in
the FHA mortgage insurance programs to those financial institutions of
the Farm Credit System that voluntarily elect to seek approval as FHA-
approved mortgagees or lenders.
For the above reasons, the undersigned has determined that the
final 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 the preamble to this rule.
Environmental Impact
This rule does not direct, provide for assistance or loan and
mortgage insurance for, or otherwise govern or regulate, real property
acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise, or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. This rule is limited to the eligibility of those
entities that may be approved as FHA-approved lenders. Accordingly,
under 24 CFR 50.19(c)(1), this 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 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
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.
Paperwork Reduction Act
The information collection requirements contained in this notice
have been approved by the Office of Management and Budget (OMB) under
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned
OMB Control Number 2502-0005. In accordance with the Paperwork
Reduction Act, 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 OMB 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 on the private sector. This rule would not
impose any federal mandates on any state, local, or tribal governments,
or on the private sector, within the meaning of the UMRA.
List of Subjects in 24 CFR Part 202
Administrative practice and procedure, Home improvement,
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements.
Accordingly, for the reasons stated in the preamble above, HUD
proposes to amend 24 CFR part 202 as follows:
PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES
1. The authority citation for part 202 continues to read as
follows:
Authority: 12 U.S.C. 1703, 1709, and 1715b; 42 U.S.C. 3535(d).
2. In Sec. 202.10, revise the first sentence of paragraph (a) to
read as follows:
Sec. 202.10 Governmental institutions, Government-sponsored
enterprises, public housing agencies and State housing agencies.
(a) Definition. A Federal, State or municipal governmental agency,
a Federal Reserve Bank, a Federal Home Loan Bank, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, or an
Agricultural Credit Association affiliated with a Farm Credit Bank or
Agricultural Credit Bank, may be an approved mortgagee or lender. * * *
* * * * *
Dated: August 22, 2011.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-21910 Filed 8-25-11; 8:45 am]
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