[Federal Register Volume 89, Number 79 (Tuesday, April 23, 2024)]
[Rules and Regulations]
[Pages 30272-30277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08648]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5 and 202
[Docket No. FR-6291-F-02]
RIN 2502-AJ60
Revision of Investing Lenders and Investing Mortgagees
Requirements and Expansion of Government-Sponsored Enterprises
Definition
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, Department of Housing and Urban Development (HUD).
ACTION: Final rule.
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SUMMARY: This rule amends the requirements for investing lenders and
investing mortgagees to gain or maintain their status as a Federal
Housing Administration (FHA) approved lender or mortgagee. This
revision makes FHA's approval requirements consistent with investing
mortgagees' and investing lenders' risk, reduces barriers to FHA
approval for new investing mortgagees and investing lenders, and
increases access to capital for all FHA-approved mortgagees and
lenders. HUD is clarifying that the general annual certification
requirement for lenders and mortgagees is applicable to investing
lenders and investing mortgagees. HUD is also defining Government-
Sponsored Enterprises (GSEs) separately from other governmental-type
entities to ensure that FHA requirements specific to loan origination
do not apply to GSEs. Finally, HUD is eliminating obsolete language
related to lender and mortgagee net worth requirements. This final rule
adopts HUD's July 18, 2023, proposed rule with minor revisions.
DATES: Effective: May 23, 2024.
FOR FURTHER INFORMATION CONTACT: Volky Garcia, Division Director,
Department of Housing and Urban Development, 451 7th Street SW,
Washington, DC 20410, telephone 202-402-8229 (this is not a toll-free
number), email [email protected]. HUD welcomes and is prepared to
receive calls from individuals who are deaf or hard of hearing, as well
as from individuals with speech or communication disabilities. To learn
more about how to make an accessible telephone call, please visit
https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
SUPPLEMENTARY INFORMATION:
I. Background
Current HUD regulations at 24 CFR part 202, subpart A, establish
minimum standards and requirements for the
[[Page 30273]]
Secretary to approve lenders and mortgagees to participate in FHA's
Title I and Title II programs. Subpart B identifies the classes of
lenders and mortgagees eligible to participate in FHA's Title I and
Title II programs and outlines additional specific requirements for
participation in the programs.
In 2010, HUD amended 24 CFR part 202, subpart A, to include
investing lenders and investing mortgagees as a class of lenders and
mortgagees subject to HUD's net worth requirements currently found at
Sec. 202.5(n). At the time the investing lender and investing
mortgagee net worth requirement change was made in 2010, HUD also
incorporated new financial reporting, audit, and quality control plan
requirements for investing lenders and investing mortgagees into
various HUD handbooks; however, no corresponding updates were made to
24 CFR part 202, subpart B, to reflect the investing lender and
investing mortgagee requirements. Additionally, FHA increased the
minimum net worth requirements applicable to certain classes of lenders
and mortgagees in 24 CFR part 202 in 2010. These new net worth
requirements were phased in over a period of three years, beginning on
May 20, 2010, and becoming fully phased in by May 20, 2013. The net
worth requirements during that three-year transition period are now
obsolete, but the phased-in net worth requirements language remains in
HUD's regulations.
Current HUD regulations at Sec. 202.10 also define the classes of
lenders and mortgagees that qualify as governmental institutions,
Government-Sponsored Enterprises, public housing agencies, and State
housing agencies. Currently, various GSEs \1\ are included in the Sec.
202.10(a) definition along with Federal, State, or municipal
governmental agencies and Federal Reserve Banks at Sec. 202.10(a). For
several years, certain GSEs have contended that they do not have the
infrastructure that other lenders and mortgagees listed in Sec. 202.10
have to ensure compliance with FHA requirements related to loan and
mortgage origination because they cannot and do not originate loans or
mortgages. FHA has reviewed the mission and structure of the GSEs and
determined that they should not be subject to FHA requirements specific
to loan and mortgage origination because the GSEs do not originate
loans or mortgages.
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\1\ The GSEs are the Federal Home Loan Banks, the Federal Home
Loan Mortgage Corporation (commonly known as Freddie Mac), and the
Federal National Mortgage Association (commonly known as Fannie
Mae).
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II. The Proposed Rule
On July 18, 2023, HUD published for public comment a proposed rule
(88 FR 45863) to amend 24 CFR parts 5 and 202, which govern numerous
administrative requirements for investing lenders and investing
mortgagees. The proposed rule sought to add investing lenders and
investing mortgagees to the list of entities that must comply with the
uniform financial reporting standards found in 24 CFR 5.801(a)(5). The
rule proposed to adjust audit and certification requirements for
investing lenders and investing mortgagees, as well as to delete
obsolete language regarding phased-in net worth requirements currently
found at Sec. 202.5(n)(2). In addition, the proposed rule aimed to
clarify that investing lenders and investing mortgagees without
servicing authority do not have to implement a written quality control
plan under Sec. 202.5(h).
III. This Final Rule
The final rule adopts the proposed rule with three changes. First,
it makes a clarifying edit to the language of Sec. 202.5(h). In the
proposed rule, HUD sought to clarify existing regulatory language and
exempt investing lenders and investing mortgagees from the Sec.
202.5(h) requirement that they implement a quality control plan. Public
comments stated that the proposed language was unclear. In response,
HUD is amending the proposed text of Sec. 202.5(h) to clarify the
exception for investing lenders and investing mortgagees.
The second change adds the word ``investing'' before the phrase
``lender or mortgagee'' throughout Sec. 202.9(b)(4) to ensure
uniformity in Sec. 202.9(b). This change is not substantive because
the section is limited to investing lenders and investing mortgagees by
the existing regulatory text and does not change any auditing,
compliance, or reporting requirements. In addition, this change will
serve to clarify who must submit audit reports under Sec. 202.9(b)(4).
The third change is a non-substantive change that revises the first
sentence of Sec. 202.9(a) to clarify the definition of investing
lender or investing mortgagee. Specifically, the change adds specific
cross-references that more clearly identify when an organization is not
an investing lender or investing mortgagee.
IV. Public Comments
The public comment period closed on September 18, 2023, and HUD
received four distinct comments related to the proposed rule. The
comments were from Housing Finance Authorities (HFAs), a nonprofit that
works with HFAs, and an interested individual. A detailed breakdown of
the comments and HUD responses is provided below.
Support for the proposed annual certification requirement language
in Sec. 202.5(m).
Two commenters supported the proposed amendment to Sec. 202.5(m),
which would require investing lenders and investing mortgagees to
certify that they have not been refused a license and have not been
sanctioned by any State(s) in which it will purchase, hold, sell, or
service FHA-approved loans or mortgages.
HUD Response: HUD appreciates the stakeholder feedback in support
of the proposed amendment to Sec. 202.5(m).
No concerns with the proposed net worth requirements in Sec.
202.5(n).
One commenter stated that they have no concerns with the proposed
capital standards that would require investing lenders and investing
mortgagees to maintain a certain net worth based on the size of their
portfolios, as detailed by the proposed language for Sec. 202.5(n).
HUD Response: HUD appreciates the stakeholder feedback; however,
there is no change to the net worth requirement. Investing lenders and
investing mortgagees are already required to comply with the general
approval requirements in Sec. 202.5, including the net worth
requirements in Sec. 202.5(n). The rule deletes the phased-in net
worth requirements for years 2010 and 2011 currently found at Sec.
202.5(n)(2) because the requirements are fully phased-in.
The proposed rule could negatively impact the availability of FHA-
approved mortgages.
One commenter stated that the proposed rule would reduce the
incentives for investing lenders and investing mortgagees to originate
or purchase FHA-insured mortgages because GSEs or other entities that
are eligible to purchase or securitize FHA-insured mortgages would face
``lower requirements and fees'' compared to investing lenders and
investing mortgagees. The commenter stated that the decrease in demand
by investing lenders and investing mortgagees could hurt the viability
of FHA's programs and increase the financial risk to FHA's portfolio by
centralizing lower quality loans within one institution. The commenter
suggested that HUD monitor the impact of the rule on the availability
of FHA-supported mortgages or loans after implementation and enact
adjustments as needed.
HUD Response: HUD appreciates the commenter's concerns but believes
the
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impact on availability will be minimal given the provisions of the rule
are mostly clarifying in nature with limited changes. This impact is
minimal, in part, because investing lenders and investing mortgagees
are not authorized to originate Title I loans or Title II mortgages as
described in Sec. 202.9(a). In Sec. 202.9, HUD further clarifies the
definition of an investing lender and investing mortgagee and updates
and clarifies the existing financial statement and audit requirements.
With respect to revising the GSE definition, the regulatory text now
aligns with the mission and structure of the GSEs. HUD will continue to
monitor the availability of FHA-insured mortgages after this rule
becomes effective.
Increased risk to FHA's portfolio and the stability of the
secondary market.
One commenter stated that the investing requirements and
redefinition of the GSEs under the proposed rule, when taken together,
could shift many of the loans and mortgages under Title I and Title II
to GSEs like Fannie Mae and Freddie Mac. According to the commenter,
this centralization could increase the risk to FHA's portfolio as well
as reduce the stability and liquidity in the secondary housing market.
The commenter recommended that HUD analyze and more thoroughly consider
the impact of the proposed rule on the stability and resilience of the
secondary mortgage market, as well as on consumer protection.
HUD Response: The rule makes clarifying edits and limited updates
to Sec. Sec. 202.5, 202.9, and 202.10 with respect to the definition
of an investing lender and investing mortgagee, investing lender and
investing mortgagee financial statement and audit requirements, annual
certification language, and the GSE definition. Given that the rule is
limited to clarifying edits and minimal updates, HUD does not foresee
that the rule will lead to investing lenders or investing mortgagees
exiting the secondary market. Accordingly, HUD does not anticipate that
the rule will lead to a shift of loans and mortgages to GSEs. In
addition, the rule removes obsolete language that is no longer
applicable and updates current regulatory citations. HUD will continue
to monitor for any secondary market impacts after this rule becomes
effective.
The proposed audit requirements are burdensome and unnecessary.
The commenter said the proposed rule would lead to HFAs, that are
approved as investing lenders and investing mortgagees, drawing from
resources dedicated to substantive projects to ensure compliance with
the proposed audit requirement. According to the commenter, this would
occur because many programs that HFAs administer do not provide
administrative funds while others provide insufficient administrative
funds or only enough to barely cover the costs of administering the
programs. The commenter also said that these requirements are
unnecessary because HFAs, as well as other State and local programs,
are subject to substantial public oversight by State auditors, State
executives, and State legislatures. The commenter stated that this
oversight renders the information sought by HUD duplicative of
existing, publicly available information.
HUD Response: The Federal regulations found at Sec. 202.5 exempt
HFAs from the auditing requirements, which make it unnecessary for HFAs
to draw from resources dedicated to substantive projects to complete
these requirements. In addition, HFAs are approved as government
mortgagees subject to the requirements of Sec. Sec. 202.5 and 202.10,
and the government mortgagee requirements in the HUD OIG's HUD
Consolidated Audit Guide and the FHA Single Family Housing Policy
Handbook 4000.1.
HFAs with small portfolios should be exempt from Sec.
202.9(b)(4)(i).
One commenter requested that HUD consider excluding from some or
all of the proposed rules HFAs which may technically own FHA mortgages
but have a diminishing portfolio that is serviced by an FHA approved
mortgagee. The commenter stated the proposed Sec. 202.9(b)(4)(i)
requirement that investing lenders and investing mortgagees provide an
analysis of escrow funds would be difficult because HFAs do not have
access to the required knowledge or information, which is a problem
that is amplified when the portfolio is small. The commenter stated
that the information is instead possessed by the original or underlying
FHA-approved mortgage and should be provided to HUD under current
regulations.
HUD Response: The Sec. 202.9(b)(4)(i) requirement pertaining to an
analysis of escrow funds is only applicable to investing lenders and
investing mortgagees. This section does not apply to HFAs, which are
classified as government mortgagees. An HFA, as a government mortgagee,
must only comply with the applicable requirements in Sec. 202.5, Sec.
202.10, the HUD Consolidated Audit Guide, and the FHA Single Family
Housing Policy Handbook 4000.1. This final rule adds language to the
definition of investing lender or investing mortgagee in to Sec.
202.9(a) to more clearly identify organizations that are not investing
lenders or investing mortgagees.
The proposed quality control plan language is unclear in Sec.
202.5(h).
Two commenters stated support for exempting investing lenders and
investing mortgagees from the requirement that they implement a quality
control plan to ensure compliance with the regulation. However, both
commenters said the proposed language was ``difficult to parse''
because the clause containing the phrase ``unless approved under Sec.
202.9 without servicing authority'' does not clearly identify that
investing lenders and investing mortgagees are exempt from the quality
control plan requirement. The commenters suggested the lack of clarity
could be addressed by moving the phrase ``without servicing authority''
from its original clause and placing it after the opening phrase of
``lenders or mortgagees.'' One commenter provided a second solution,
stating the proposed rule could implement the ``eminently clear''
language from the preamble.
HUD Response: HUD appreciates the commenters' suggested language
revisions to Sec. 202.5(h) and has amended the final rule to address
the commenters' suggestions. Specifically, HUD has moved the phrase
``unless approved under Sec. 202.9 without servicing authority'' to
the end of the sentence. In addition, the sentence has minor clarifying
edits.
Lack of clarity on whether entities would be regulated under a
single GSE definition and if so, how it would be done.
A commenter said that the proposed rule would expand the definition
of GSEs to include any entity that is chartered by Congress to provide
secondary market liquidity regardless of whether it is owned or
controlled by the Federal Government. Specifically, the commenter
stated that the proposed expansion to the definition of GSEs ``could
include entities such as Ginnie Mae or Farmer Mac'' that currently have
different levels of Federal support than Fannie Mae and Freddie Mac.
The commenter also stated that ``the proposed rule does not specify how
these entities would be regulated under a single definition of GSEs, or
whether there would be a single regulator for all of them.'' The
commenter said that this is a problem because the rule does not specify
how these entities would be regulated by HUD in a uniform manner or
whether there would be a single regulator for all of them. According to
the commenter, these issues might create confusion or inconsistency in
the
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oversight and regulation of these entities.
HUD Response: The final rule aims to distinguish GSEs from all
other governmental institutions and does not change which entities fall
under the GSE definition. HUD moved the definition of GSE into Sec.
202.10(b) without changing the list of entities meeting the definition.
HUD's definition of GSE, which is located at Sec. 202.10(a), includes
the Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
and Federal National Mortgage Association. The GSE definition does not
include the Governmental National Mortgage Association (Ginnie Mae) or
The Federal Agricultural Mortgage Corporation (Farmer Mac). The rule
will not change how these entities are regulated but does make clear
that GSEs have limited authorizations and are not subject to the FHA
requirements that are specific to loan or mortgage origination.
The proposed GSE definition could affect the accountability and
transparency of entities like Ginnie Mae and Farmer Mac.
A commenter stated that the proposed definition of GSEs could
reduce the accountability and transparency of Ginnie Mae and Farmer
Mac, as well as their access to Federal subsidies and support. The
commenter said that this could happen because ``Ginnie Mae has an
explicit guarantee from the Federal Government that its securities will
be paid, while Farmer Mac has no explicit guarantee from the Federal
Government but has some tax exemptions and borrowing privileges.'' This
concern led the commenter to suggest that HUD ensure that these
entities are subject to adequate oversight, supervision, and disclosure
by their regulators, Congress, and the public.
HUD Response: Current regulation combines governmental institutions
and GSEs in its definition, requiring GSEs to follow policy specific to
loan origination even though they do not originate FHA loans. The final
rule defines GSEs separate and apart from all other governmental
institutions and reduces the administrative burden of having to adhere
to compliance requirements that are not related to the functions they
are performing. The final rule makes clear that GSEs have limited
authorizations and are not subject to the FHA requirements that are
specific to loan or mortgage origination. Also, the GSE definition does
not include Ginnie Mae and Farmer Mac. This exclusion means that
changes to the GSE definition will not lead to transparency issues with
Ginnie Mae and Farmer Mac. HUD does not foresee an impact on the
secondary housing market but will continue to monitor this after the
rule becomes effective.
The proposed GSE definition could impact Fannie Mae's and Freddie
Mac's conservatorship reform.
One commenter stated that the proposed rule would affect the role
and function of Fannie Mae and Freddie Mac in the housing finance
system, which is currently undergoing a major reform process. The
commenter said the reform process aims to end the conservatorship of
Fannie Mae and Freddie Mac, which has been in place since 2008, and to
establish a more competitive and efficient secondary mortgage market.
The commenter warned the proposed rule could have implications for the
timing and outcome of the reform process, as well as for the future
structure and governance of Fannie Mae and Freddie Mac.'' The commenter
suggested that HUD coordinate with other Federal agencies to ensure
consistency and alignment of policies and standards related to housing
finance reform.
HUD Response: Certain GSEs, unlike many other lenders or
mortgagees, do not have the infrastructure available to ensure
compliance with FHA requirements. The final rule relieves GSEs of these
requirements by defining GSEs separate and apart from all other
governmental institutions. This definition makes clear that GSEs have
limited authorizations and does not amend the programs or services
provided by Fannie Mae and Freddie Mac. Given that the final rule only
changes compliance requirements to ensure appropriateness with the
limited nature of authorizations for GSEs, HUD does not believe the
change will impact the role and function of Fannie Mae and Freddie Mac
in the housing finance system or the Federal Housing Finance Agency's
oversight of Fannie Mae and Freddie Mac.
GSE exclusion based on origination authority should apply to
similarly situated HFAs.
One commenter stated that the reasoning provided in the proposed
rule for excluding GSEs from FHA requirements specific to loan or
mortgage origination, which is that GSEs cannot originate loans, is
applicable to many HFAs. The commenter recommended that these similarly
situated HFAs be treated like GSEs and be exempted from the loan or
mortgage origination requirements as appropriate.
HUD Response: HUD notes that all HFAs that currently participate in
FHA's Title I and Title II programs are approved as government
mortgagees authorized to perform activities associated with loan or
mortgage origination. While FHA understands from the commenters that
not all HFAs currently originate, or are authorized to originate, HFA
lending activities and authorizations can change over time. HUD also
lacks the information needed to make an informed and reasoned judgment
on whether it is appropriate to depart from the existing requirements
for HFAs, as well as how such a change would be implemented, at this
time. Accordingly, FHA is maintaining the current framework in Sec.
202.10(a) for HFAs.
V. Findings and Certifications
Regulatory Review--Executive Orders 12866, 13563, and 14094
Pursuant to Executive Order 12866 (Regulatory Planning and Review),
a determination must be made whether a regulatory action is significant
and therefore, subject to review by the Office of Management and Budget
(OMB) in accordance with the requirements of the order. Executive Order
13563 (Improving Regulation and Regulatory Review) emphasizes the
importance of quantifying both costs and benefits, reducing costs,
harmonizing rules, and promoting flexibility. The order also directs
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.'' Executive Order 13563 further directs that, where relevant,
feasible, and consistent with regulatory objectives, and to the extent
permitted by law, agencies are to identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public. Executive Order 14094 entitled ``Modernizing
Regulatory Review'' (hereinafter referred to as the ``Modernizing
E.O.'') amends section 3(f) of Executive Order 12866, among other
things.
As discussed above, this rule defines GSEs under a separate
definition within Sec. 202.10. It clarifies the audit, financial
statement, and certification requirements of investing lenders and
investing mortgagees. It eliminates obsolete net worth requirements for
investing lenders and investing mortgagees. This rule was determined
not to be a ``significant regulatory action'' as defined in section
3(f) of Executive Order 12866 as amended by Executive Order 14094.
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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 changes in this rule are limited to defining GSEs under a separate
definition within Sec. 202.10; clarifying the audit, financial
statement, and certification requirements of investing lenders and
investing mortgagees; and eliminating obsolete language within 24 CFR
part 202 regarding lenders and mortgagees net worth requirements. The
minor nature of changes led HUD to conclude that the proposed rule was
non-significant, a finding later affirmed by OMB. HUD solicited
comments from the public at the proposed rule stage and received no
comments suggesting that it would impose a significant economic impact
on a substantial number of small entities. In addition, HUD is only
making a minor clarifying edit to the final rule in response to public
comments. Accordingly, the undersigned certifies that the rule will not
have a significant economic impact on a substantial number of small
entities.
Environmental Impact
This rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 under 24 CFR 50.19(c)(1)
because it does not direct, provide for assistance or loan and mortgage
insurance for, or otherwise govern or regulate, real property
acquisition, disposition, rehabilitation, alteration, demolition, or
new construction, or establish, revise or provide for standards for
construction or construction materials, manufactured housing, or
occupancy.
Executive Order 13132, Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule
either: (i) imposes substantial direct compliance costs on State and
local governments and is not required by statute, or (ii) preempts
State law, unless the agency meets the consultation and funding
requirements of section 6 of the Executive order. This rule does not
have federalism implications and does 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 rule does 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
24 CFR Part 5
Administrative practice and procedure, Aged, Claims, Crime,
Government contracts, Grant programs--housing and community
development, Individuals with disabilities, Intergovernmental
relations, Loan programs--housing and community development, Low and
moderate income housing, Mortgage insurance, Penalties, Pets, Public
housing, Rent subsidies, Reporting and recordkeeping requirements,
Social security, Unemployment compensation, Wages.
24 CFR Part 202
Administrative practice and procedure, Home improvement,
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements.
For the reasons stated in the preamble, HUD amends 24 CFR parts 5
and 202 as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
0
1. The authority citation for part 5 continues to read as follows:
Authority: 12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437f,
1437n, 3535(d); 42 U.S.C. 2000bb et seq.; 34 U.S.C. 12471 et seq.;
Sec. 327, Pub. L. 109-115, 119 Stat. 2396; E.O. 13279, 67 FR 77141,
3 CFR, 2002 Comp., p. 258; E.O. 13559, 75 FR 71319, 3 CFR, 2010
Comp., p. 273; E.O. 14015, 86 FR 10007, 3 CFR, 2021 Comp., p. 517.
0
2. In Sec. 5.801, revise paragraph (a)(5) to read as follows:
Sec. 5.801 Uniform financial reporting standards.
(a) * * *
(5) HUD-approved Title I and Title II supervised, nonsupervised,
and investing lenders and investing mortgagees.
* * * * *
PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES
0
3. 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).
0
4. In Sec. 202.5, revise paragraph (h), (m) introductory text, and
(n)(1) and (2), and remove paragraph (n)(3) to read as follows:
Sec. 202.5 General approval standards.
* * * * *
(h) Quality control plan. Lenders or mortgagees shall implement a
written quality control plan, acceptable to the Secretary, that assures
compliance with the regulations of this chapter and other issuances of
the Secretary regarding loan or mortgage origination and servicing
unless the lenders or mortgagees were approved under Sec. 202.9
without servicing authority.
* * * * *
(m) Reports. Each lender and mortgagee must submit an annual
certification on a form prescribed by the Secretary. Upon application
for approval and with each annual recertification, each lender and
mortgagee must submit a certification that it has not been refused a
license and has not been sanctioned by any State or States in which it
will originate, purchase, hold, sell, or service insured mortgages or
Title I loans. In addition, each mortgagee shall file the following:
* * * * *
(n) * * *
(1) Applicability. The requirements of paragraph (n) of this
section apply to approved supervised and nonsupervised lenders and
mortgagees under Sec. Sec. 202.6 and 202.7, and approved investing
lenders and investing mortgagees under Sec. 202.9. For ease of
reference, these institutions are referred to as ``approved lenders or
mortgagees'' for purposes of paragraph (n) of this section. These
requirements also apply to applicants for FHA approval under Sec. Sec.
202.6, 202.7, and 202.9. For ease of reference, these institutions are
referred to as ``applicants'' for purposes of paragraph (n) of this
section.
(2) Requirements--(i) Single family net worth requirements.
Irrespective of size, each applicant and each approved lender or
mortgagee for participation solely under the FHA single family programs
shall have a net worth of not less than $1 million, plus an additional
net worth of one percent of the total volume, in excess of $25 million,
of FHA single family insured mortgages originated, underwritten,
purchased, or serviced during the prior fiscal year, up to a maximum
required net worth of $2.5 million. No less than 20 percent of the
applicant's or approved lender's or mortgagee's required net worth must
be liquid assets consisting of cash or its equivalent acceptable to the
Secretary.
[[Page 30277]]
(ii) Multifamily net worth requirements. Irrespective of size, each
applicant for approval and each approved lender or mortgagee for
participation solely under the FHA multifamily programs shall have a
net worth of not less than $1 million. For those multifamily approved
lenders or mortgagees that also engage in mortgage servicing, an
additional net worth of one percent of the total volume, in excess of
$25 million, of FHA multifamily mortgages originated, purchased, or
serviced during the prior fiscal year, up to a maximum required net
worth of $2.5 million. For multifamily approved lenders or mortgagees
that do not perform mortgage servicing, an additional net worth of one
half of one percent of the total volume, in excess of $25 million, of
FHA multifamily mortgages originated during the prior fiscal year, up
to a maximum required net worth of $2.5 million. No less than 20
percent of the applicant's or approved lender's or mortgagee's required
net worth must be liquid assets consisting of cash or its equivalent
acceptable to the Secretary.
(iii) Dual participation net worth requirements. Irrespective of
size, each applicant for approval and each approved lender or mortgagee
that is a participant in both FHA single family and multifamily
programs must meet the net worth requirements as set forth in paragraph
(n)(2)(i) of this section.
* * * * *
0
6. In Sec. 202.9:
0
a. Revise the section heading and paragraph (a);
0
b. In paragraphs (b) introductory text and (b)(1) and (2), remove the
words ``investing lender or mortgagee'' and add, in their place, the
words ``investing lender or investing mortgagee''; and
0
c. Revise paragraph (b)(3) and add paragraph (b)(4).
The revisions and addition read as follows:
Sec. 202.9 Investing lenders and investing mortgagees.
(a) Definition. An investing lender or investing mortgagee is an
organization that is not approved as a supervised lender or mortgagee
under Sec. 202.6, a nonsupervised lender or mortgagee under Sec.
202.7, or a governmental or similar institution under Sec. 202.10. An
investing lender or investing mortgagee may purchase, hold, or sell
Title I loans or Title II mortgages, respectively, but may not
originate Title I loans or Title II mortgages in its own name or submit
applications for the insurance of mortgages. An investing lender or
investing mortgagee may not service Title I loans or Title II mortgages
without prior approval of the Secretary.
(b) * * *
(3) Fidelity bond. An investing lender or investing mortgagee shall
maintain fidelity bond coverage and errors and omissions insurance
acceptable to the Secretary and in an amount required by the Secretary,
or alternative insurance coverage approved by the Secretary, that
assures the faithful performance of the responsibilities of the
mortgagee.
(4) Audit report. An investing lender or mortgagee must comply with
the financial reporting requirements in24 CFR part 5, subpart H. Audit
reports shall be based on audits performed by a certified public
accountant, or by an independent public accountant licensed by a
regulatory authority of a State or other political subdivision of the
United States on or before December 31, 1970. Audit reports shall
include:
(i) A financial statement in a form acceptable to the Secretary,
including a balance sheet and a statement of operations and retained
earnings, a statement of cash flows, an analysis of the investing
lender's or mortgagee's net worth adjusted to reflect only assets
acceptable to the Secretary, and an analysis of escrow funds; and
(ii) Such other financial information as the Secretary may require
to determine the accuracy and validity of the audit report.
0
7. In Sec. 202.10:
0
a. Revise paragraph (a);
0
b. Remove paragraph (c);
0
c. Redesignate paragraph (b) as paragraph (c); and
0
d. Add new paragraphs (b) and (d).
The revision and additions read as follows:
Sec. 202.10 Governmental institutions, Government-Sponsored
Enterprises, public housing agencies and State housing agencies.
(a) Federal, state, and municipal governmental agencies and Federal
Reserve Banks. A Federal, State, or municipal government agency or a
Federal Reserve Bank may be an approved lender or mortgagee. A
mortgagee approved under this paragraph (a) may submit applications for
Title II mortgage insurance. A lender or mortgagee approved under this
paragraph (a) may originate, purchase, service, or sell Title I loans
and insured mortgages, respectively. A mortgagee or lender approved
under this paragraph (a) is not required to meet a net worth
requirement. A lender or mortgagee shall maintain fidelity bond
coverage and errors and omissions insurance acceptable to the Secretary
and in an amount required by the Secretary, or alternative insurance
coverage approved by the Secretary, that assures the faithful
performance of the responsibilities of the mortgagee. There are no
additional requirements beyond the general approval requirements in
Sec. 202.5 or as provided under paragraph (c) of this section.
(b) Government-Sponsored Enterprises. The Government-Sponsored
Enterprises are the Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, and Federal National Mortgage Association. A Government-
Sponsored Enterprise may be an approved lender or mortgagee. A lender
or mortgagee approved under this paragraph (b) may purchase, service,
or sell Title I loans and insured mortgages, respectively. A mortgagee
or lender approved under this paragraph (b) is not required to meet a
net worth requirement. There are no additional requirements beyond the
general approval requirements in Sec. 202.5.
* * * * *
(d) Audit requirements. The insuring of loans and mortgages under
the Act constitutes ``Federal financial assistance'' (as defined in 2
CFR 200.1) for purposes of audit requirements set out in 2 CFR part
200, subpart F. Non-Federal entities (as defined in 2 CFR 200.1) that
receive insurance as lenders and mortgagees shall conduct audits in
accordance with 2 CFR part 200, subpart F.
Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2024-08648 Filed 4-22-24; 8:45 am]
BILLING CODE 4210-67-P