[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8551-8552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02667]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5680-N-01]
Federal Housing Administration (FHA) Risk Management Initiatives:
Changes to Maximum Loan-to-Value Financing Solicitation of Comment
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice.
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SUMMARY: This proposed notice would make changes to the loan-to-value
(LTV) financing available to qualified borrowers of FHA-insured loans.
This notice proposes to set a 95 percent maximum LTV for FHA-insured
loans over $625,500, with certain exemptions. FHA's annual Fiscal Year
2012 report to Congress on the financial status of the FHA Mutual
Mortgage Insurance Fund (MMIF, or Fund), reported a decline from Fiscal
Year 2011 in the Fund's statutorily mandated capital reserve ratio and
cited FHA's decision to continue taking steps to improve the MMIF's
short- and long-term outlook. HUD has determined that this proposed
change to the LTV requirements is necessary to improve the health of
the MMIF, while ensuring continued access to mortgage credit for
American families.
DATES: Comment Due Date: March 8, 2013.
ADDRESSES: Interested persons are invited to submit comments regarding
this notice 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
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
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 www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Karin Hill, Director, Office of Single
Family Program Development, Office of Housing, Department of Housing
and Urban Development, 451 7th Street SW., Room 9278, Washington, DC,
20410; telephone number 202-708-4308 (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 Relay Service at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
During times of economic volatility, the FHA has maintained its
countercyclical influence, supporting the private sector when access to
housing finance capital is otherwise constrained. FHA played this role
in the recent housing crisis, and the volume of FHA insurance increased
rapidly during the housing crisis as private sources of mortgage
finance retreated from the market. However, the growth of the MMIF
portfolio over the period of time during the housing crisis has
contributed significantly to the projected losses to, and a
corresponding decrease in the financial soundness of, the Fund.
Consistent with the Secretary's responsibility under the National
Housing Act (12 U.S.C. 1701 et seq.) to ensure that the MMIF remains
financially sound, FHA has taken a number of steps to improve the
health of the Fund, while ensuring continued access to mortgage credit
for American families.
FHA's annual Fiscal Year 2012 report to Congress on the financial
status of the MMIF reported a decline in the Fund's statutory capital
reserve ratio and cited FHA's plans to continue taking action to
improve the Fund's financial soundness.\1\ The report estimated that
implementing a number of changes to FHA policy since 2009 has improved
the economic value of the Fund by at least $20 billion.\2\
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\1\ U.S. Department of Housing and Urban Development, Annual
Report to Congress Regarding the Financial Status of the FHA Mutual
Mortgage Insurance Fund, Fiscal Year 2012. (Fiscal 2012 Report) See
http://portal.hud.gov/hudportal/documents/huddoc?id=F12MMIFundRepCong111612.pdf
\2\ Id. at 52.
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II. This Notice--Proposed Changes to Maximum LTV for Loans in Excess of
$625,500
Although the steps taken since 2009 have had a positive effect on
the financial soundness of the Fund, the projected levels of default,
foreclosure, and claims within the existing MMIF portfolio and a number
of predicted economic factors have resulted in a lower statutory
capital reserve ratio for the MMIF for Fiscal Year 2012 compared to
Fiscal Year 2011. In order to further protect the financial soundness
of the MMIF, FHA must be vigilant in monitoring the performance of the
portfolio, and adjust its standards to effectively manage financial
risk. As a result, FHA has been continually evaluating its portfolio to
identify and respond to risks in ways that benefit the Fund and,
ultimately, consumers and taxpayers. During its evaluation, FHA has
determined that the MMIF is subject to greater risk when FHA insures
loan amounts in excess of $625,500. In response to this risk, the
maximum LTV
[[Page 8552]]
will be limited to 95 percent for loans in excess of $625,500.\3\ LTV
limits do not include the addition of the Up-Front Mortgage Insurance
Premium (UFMIP).\4\
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\3\ Id. at 17. The FHA Actuarial Report advises that the
majority of FHA endorsements have historically had LTV ratios above
95 percent.
\4\ HUD Handbook 4.155.2, (Lender's Guide to the Single Family
Mortgage Insurance Process) at Chapter 7, pertaining to Mortgage
Insurance Premiums, notes that in most of the FHA mortgage insurance
programs, FHA collects an UFMIP and an annual insurance premium,
which is collected in monthly installments. The total FHA-insured
first mortgage on a property is limited to 100 percent of the
appraised value and the UFMIP is required to be included within that
limit. However, the UFMIP is otherwise not considered when
determining compliance with statutory loan limits or LTV limits in
accordance with Section 203(d) of the National Housing Act. See
http://portal.hud.gov/FHA-Handbooks/collections/current/print/4155-2_7.pdf
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Certain FHA-insured loans will be exempted from this notice. Loans
made pursuant to the FHA Streamline Refinance without an appraisal
program, which has no LTV calculation, and the 203(k) Rehabilitation
Mortgage Insurance Program, which utilizes two different LTV
calculations in addition to the cost of improvements, are exempted. The
Secretary may, as he deems necessary, exempt from this notice loans
from other programs by publishing a Federal Register notice for
comment.
III. Solicitation of Public Comments
FHA welcomes comments on the proposals set forth in this notice,
including whether there may be additional FHA programs that should be
exempted from this notice, for a period of 30 calendar days. FHA also
welcomes comments on the economic effects in the proposals set forth in
this notice. All comments will be considered in the development of the
Federal Register notice that will follow this proposed notice and that
will establish the maximum LTV for loans over a specified amount. The
final notice will address any significant issues raised by the public
comments, and may include changes to the LTV requirements proposed in
this notice. The final notice will also announce the effective date for
the LTV requirements.
IV. Environmental Review
This notice involves discretionary establishment and review of loan
limits which 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 notice is categorically
excluded from environmental review under the National Environmental
Policy Act of 1969 (42 U.S.C. 4321).
Dated: January 30, 2013.
Carol J. Galante,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2013-02667 Filed 2-5-13; 8:45 am]
BILLING CODE 4210-67-P