[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

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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]
BILLING CODE P