[Federal Register Volume 81, Number 155 (Thursday, August 11, 2016)]
[Proposed Rules]
[Pages 53095-53097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19255]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 30 and 206

[Docket No. FR-5353-N-02]
RIN 2502-AI79


 Federal Housing Administration (FHA): Strengthening the Home 
Equity Conversion Mortgage Program

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

ACTION: Supplemental notice of proposed rulemaking.

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SUMMARY: On May 19, 2016, HUD published in the Federal Register, a 
proposed rule that would codify several significant changes to FHA's 
Home Equity Conversion Mortgage program that were previously issued 
under the authority granted to HUD in the Housing and Economic Recovery 
Act of 2008 and the Reverse Mortgage Stabilization Act of 2013, and to 
make additional regulatory changes. The Home Equity Conversion Mortgage 
program is FHA's reverse mortgage program that enables seniors who have 
equity in their homes to withdraw a portion of the accumulated equity. 
The intent of the Home Equity Conversion Mortgage program is to ease 
the financial burden on elderly homeowners facing increased health, 
housing, and subsistence costs at a time of reduced income. This 
document opens the public comment period solely for the provision 
addressed in this document to address a suggested change offered during 
the public comment period for the proposed rule regarding the lender's 
option to file a claim when the loan balance reaches 98 percent of the 
maximum claim amount.

DATES: Comment Due Date: September 12, 2016.

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 20410-0001.

[[Page 53096]]

    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 
document. 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, Senior Policy Advisor, 
Office of Single Family Housing, Department of Housing and Urban 
Development, 451 7th Street SW., Room 9282, Washington, DC 20410; 
telephone number 202-402-3084 (this is not a toll-free number). 
Individuals with speech or hearing impairments may access this number 
through TTY by calling the toll- free Federal Relay Service at 800-877-
8339.

SUPPLEMENTARY INFORMATION:

I. Background

A. The HECM Program

    On May 19, 2016, at 81 FR 31769, HUD published a document that 
proposed to amend its regulations, at 24 CFR parts 30 and 206, that 
govern HUD's reverse mortgage program, called the Home Equity 
Conversion Mortgage (HECM) program. The HECM program allows eligible 
borrowers, 62 years of age or older, to convert the equity in their 
homes into liquid assets. The withdrawal of equity may take a variety 
of forms, as authorized by the National Housing Act (NHA) and selected 
by the borrower. The home, which serves as security for the FHA-insured 
mortgage, must be, and must continue to be, the borrower's principal 
residence during the life of the borrower. For adjustable interest rate 
HECMs, equity payments to the borrower may be in the form of monthly 
disbursements for life or a fixed term of years, disbursements from a 
line of credit advance or a combination of monthly disbursements and a 
line of credit. For fixed interest rate HECMs, equity payments to the 
borrower must be in the form of a single lump sum disbursement at 
closing.
    The maximum amount of equity in the home that is available to a 
borrower under a HECM loan is the ``principal limit'' that is 
calculated for that loan. The borrower retains ownership of the 
property and may sell the home at any time keeping any residual sale 
proceeds in excess of the outstanding loan balance. Until the mortgage 
is repaid, and regardless of whether or not additional disbursements 
under the mortgage are permissible, interest on the mortgage, mortgage 
insurance premiums, and servicing charges, where applicable, continue 
to accrue.
    The subject of this document regards the mortgagee's election of 
the assignment option as provided in Sec.  206.107(a). This section 
gives the mortgagee an option, before the mortgage is submitted for 
insurance endorsement, to select either: (1) The assignment option, 
which allows the mortgagee to assign the HECM to the Secretary if the 
mortgage balance is equal to or greater than 98 percent of the maximum 
claim amount; or (2) the shared premium option, which allows the 
mortgagee to retain a portion of the monthly mortgage insurance 
premiums (MIP) but does not allow the mortgagee to assign the mortgage 
unless the mortgagee fails to make payments and the Secretary demands 
assignment. Under the assignment option, the mortgagee may only assign 
the mortgage to the Secretary if the following are also true: (1) The 
mortgagee is current in making the required payments to the mortgagor; 
(2) the mortgagee is current in making the required MIP payments to the 
Secretary; (3) the mortgage is not due and payable; and (4) the 
mortgage is a first lien of record and title to the property securing 
the mortgage is good and marketable.

B. The Proposed Rule and the Public Comment

    The May 19, 2016, proposed rule proposed to codify a number of 
changes that had been implemented through mortgagee letters under the 
authority of the Housing and Economic Recovery Act of 2008 (Pub. L. 
110-289, approved July 30, 2008) (HERA) and the Reverse Mortgage 
Stabilization Act of 2013 (Pub. L. 113-29, approved August 9, 2013) 
(RMSA).
    The public comment period on the proposed rule closed on July 18, 
2016. All public comments submitted to date can be found at https://www.regulations.gov/document?D=HUD-2016-0052-0001, and each public 
comment is assigned a number that begins with HUD-2016-0052. On June 
23, 2016, a public commenter (HUD-2016-0052-0010) brought to HUD's 
attention a suggested change to the HECM program's policy that grants 
the mortgagee the option to assign a HECM loan to FHA if the 
outstanding loan balance is equal to or greater than 98 percent of the 
maximum claim amount. The commenter stated that, in some cases, a 
mortgagee may decline to file a claim in this scenario if the property 
value has risen rapidly and the loan has an above-market rate. The 
commentator concluded that lenders in this way have a ``put option'' 
and ``can choose to keep the best loans and make claims for the worst 
ones''. In order to address this issue, the commenter suggested that 
HUD require that an assignment claim be made when the loans reach 98 
percent of the maximum claim amount. HUD seeks public comment on the 
feasibility of this proposal as HUD is considering whether to adopt it.

II. Proposed Approach To Require Claims Be Made at 98 Percent of 
Maximum Claim Amount

    Through this document, HUD solicits public comment solely on the 
issue of requiring mortgagees to file a claim when the HECM loan 
reaches 98 percent of the maximum claim amount. If HUD were to 
implement this proposal, HUD would amend Sec.  206.107(a) to require 
the mortgagee to assign the mortgage to the Commissioner if the 
mortgage balance is equal to or greater than 98 percent of the maximum 
claim amount, or the mortgagor has requested a payment which exceeds 
the difference between the maximum claim amount and the mortgage 
balance.
    By proposing the change to the assignment option suggested by the 
public commenter, HUD would not alter the other proposed changes to

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Sec.  206.107(a). The criteria for assigning a HECM loan to the 
Commissioner in Sec.  206.107(a) would remain, thereby still precluding 
the mortgagee from assigning the HECM loan if the loan or the 
mortgagee's servicing of the loan does not meet the criteria. 
Therefore, the proposal would require the mortgagee to assign the 
mortgage to the Commissioner at the given threshold unless the loan or 
the mortgagee's servicing of the loan does not meet the assignment 
criteria.
    HUD is soliciting public comment solely on this proposal for a 
period of 30 days.

    Dated: August 9, 2016.
Genger Charles,
 General Deputy Assistant Secretary for Housing.
[FR Doc. 2016-19255 Filed 8-10-16; 8:45 am]
 BILLING CODE 4210-67-P