[Federal Register Volume 76, Number 168 (Tuesday, August 30, 2011)]
[Proposed Rules]
[Pages 53851-53853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-22189]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR-5461-P-01]
RIN 2502-AJ01


Federal Housing Administration (FHA): Suspension of Section 
238(c) Single-Family Mortgage Insurance in Military Impacted Areas

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would suspend FHA's mortgage insurance 
program for military impacted areas under section 238(c) of the 
National Housing Act (Act). This single-family mortgage insurance 
program, established by regulation in 1977, has been significantly 
underutilized for the past several years. Additionally, these mortgage 
loans are insured under comparable terms and conditions as loans 
insured under HUD's primary single-family mortgage insurance program 
under section 203(b) of the National Housing Act. Accordingly, those 
borrowers who would be served under section 238(c) of the Act are 
served equally well under the section 203(b) mortgage insurance 
program. The suspension of this mortgage insurance program is 
consistent with the President's budget request for Fiscal Year 2012.

DATES: Comment Due Date: October 31, 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.
    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 20410-0001.
    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 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). Individuals with speech or hearing impairments 
may access this number via TTY by calling the toll-free Federal 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: Karin Hill, Director, Office of Single

[[Page 53852]]

Family Program Development, Office of Housing, Department of Housing 
and Urban Development, 451 7th 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 Federal Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 238(c) of the National Housing Act (12 U.S.C. 1715z-3(c)) 
(Act) was added by the Housing and Community Development Act of 1977 
(Pub. L. 95-128) to authorize HUD to insure mortgages executed in 
connection with the construction, repair, rehabilitation, or purchase 
of property located near any installation of the Armed Forces of the 
United States in federally impacted areas in which conditions are such 
that one or more of the applicable insuring requirements under another 
single-family mortgage insurance program cannot be met. In addition, 
insurance may only be provided under section 238(c) if: (1) HUD finds 
that the benefits to be derived from providing the insurance outweigh 
the risk of probable costs to the government; and (2) the Secretary of 
the Department of Defense certifies that there is no present intention 
to curtail substantially the personnel assigned or to be assigned to 
the installation. HUD is authorized to establish premiums and other 
charges to assure that the mortgage insurance program authorized under 
section 238(c) of the Act is actuarially sound, and to prescribe terms 
and conditions relating to the insurance found to be necessary and 
appropriate to the implementation of section 238(c). HUD's regulation 
implementing section 238(c) is codified at 24 CFR 203.43e. The 
regulation, promulgated in 1977, closely tracks the language of section 
238(c) of the Act, and the section 238(c) mortgage insurance program is 
not subject to any regulatory requirements different from HUD's 
principal single-family mortgage insurance program authorized under 
section 203(b) of the Act.\1\
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    \1\ From 1977 to 1983, mortgages insured under section 238(c) 
were subject to a higher mortgage insurance premium than other FHA 
single-family mortgage insurance programs (0.5 percent vs. 1.0 
percent). In 1983, HUD reduced the mortgage insurance premium for 
section 238(c) mortgages to conform to other FHA programs because 
HUD determined that ``the actuarial experience under Section 238(c) 
provides no basis for charging a higher mortgage insurance premium 
in federally impacted areas'' (see 48 FR 35088-01).
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    Although established to ensure the availability of affordable 
housing in military impacted areas, the program has been minimally 
utilized by eligible borrowers. Section 238(c) mortgage insurance has 
been available in only six counties throughout the country, three in 
Georgia and three in New York. From January 1, 2005, to June 30, 2010, 
FHA insured 4,542 single-family home loans in these six counties, and 
only 2,309 were endorsed under section 238(c) of the Act. The 2,309 
loans endorsed since 2005 represent only .05 percent of all FHA-insured 
loans endorsed during that span.
    The President's budget request for Fiscal Year (FY) 2011 
acknowledged the underutilization of the section 238(c) program and 
advised that HUD would take action to halt the availability of the 
program in light of the significant underutilization. The FY 2011 
budget request found at http://www.gpoaccess.gov/usbudget/fy11/index.html states the following:

    The Budget assumes that HUD will administratively suspend the 
Section 238(c) program in 2011. The Section 238(c) program provides 
single family mortgage insurance similar to MMI for a small number 
of families in areas affected by military installations. The 
elimination of Section 238(c) will not negatively impact the 
availability of FHA insured financing in the six counties currently 
covered under this program. (See HUD Appendix to the Budget at page 
620 at http://www.gpoaccess.gov/usbudget/fy11/appendix.html).\2\
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    \2\ The President's Budget for FY 2012, found at http://www.whitehouse.gov/omb/budget/Overview, contains identical language 
to the paragraph cited above in the HUD Appendix to the FY 2012 
Budget at page 591.
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II. This Proposed Rule

    Consistent with the President's budget request, HUD proposes to 
suspend the section 238(c) program and remove Sec.  203.43e from its 
codified regulations. HUD's proposed removal of the regulations at 
Sec.  203.43e is not inconsistent with suspension of the section 238(c) 
mortgage insurance program. As noted in Section I of this preamble, the 
regulatory language tracks the statutory language. As also noted 
earlier in this preamble, section 238(c) mortgage insurance operates in 
a comparable manner as HUD's primary single-family mortgage insurance. 
If HUD subsequently determines that there is a demand for this program 
and that military families would be better served by this program, HUD 
can reactivate the program on the basis of the statutory language and 
does not need a regulation to make insurance available under this 
program. If such a situation occurs, HUD would notify the public 
through Federal Register notice that the program has been activated, so 
that eligible borrowers would be able to inquire about the availability 
of insurance under this program from their lenders. HUD notes that the 
removal of the regulations at Sec.  203.43e would have no impact on 
loans already endorsed for FHA insurance under the section 238(c) 
program.
    The proposed suspension of this underutilized mortgage insurance 
program, and the proposed removal of the regulations at 24 CFR 203.43e, 
is not only consistent with the President's budget requests for FY 2011 
and 2012, but with the President's Executive Order (EO) 13563, entitled 
``Improving Regulation and Regulatory Review,'' signed by the President 
on January 18, 2011, and published on January 21, 2011, at 76 FR 3821. 
This EO requires executive agencies to analyze regulations that are 
``outmoded, ineffective, insufficient, or excessively burdensome, and 
to modify, streamline, expand, or repeal them in accordance with what 
has been learned.'' For the reasons discussed in the Background section 
of this preamble, HUD has determined that the underutilization of the 
section 238(c) mortgage insurance program renders the program and its 
regulations outmoded and HUD, therefore, proposes to suspend the 
program and remove the regulations.

III. Findings and Certification

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 proposed rule would not modify or add any new regulatory 
burdens on FHA-approved mortgage lenders. Rather, the proposed rule 
would remove Sec.  203.43e from HUD's regulations, in conformity to 
HUD's (and the Administration's) decision to no longer exercise its 
authority to insure mortgages under section 238(c) of the Act. As more 
fully discussed above in the preamble to this rule, the mortgage 
insurance authority provided by section 238(c) of the Act has been 
minimally sought by eligible borrowers and consequently minimally 
utilized by lenders and other small entities participating in the FHA 
programs. Further, as noted above, section 238(c) mortgage insurance 
operated in a manner comparable to FHA's mortgage insurance program 
under section 203(b)

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of the Act, HUD's primary single-family mortgage insurance program.
    Accordingly, for the above reasons, 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 the preamble to this rule.

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.

Environmental Impact

    This proposed 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. 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).

Catalogue of Federal Domestic Assistance

    The Catalogue of Federal Domestic Assistance Number for the 
principal FHA single-family mortgage insurance program is 14.117.

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 to read 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, 1715z-16, and 1715u; 42 
U.S.C. 3535(d).


Sec.  203.43e  [Removed]

    2. Remove Sec.  203.43e.

    Dated: August 24, 2011.
Carol J. Galante,
 Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2011-22189 Filed 8-29-11; 8:45 am]
BILLING CODE 4210-67-P