75204 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 206 

[Docket No. FR–4667–F–03] 

RIN 2502–AH63 

Home Equity Conversion Mortgage 

(HECM) Program; Insurance for 

Mortgages To Refinance Existing 

HECMs and Reduced Initial Mortgage 

Insurance Premiums (MIP)

AGENCY: Office of Assistant Secretary for 

Housing—Federal Housing 

Commissioner, HUD.

ACTION: Final rule.

SUMMARY: On March 25, 2004, HUD 

published an interim rule implementing 

certain statutory changes to the Home 

Equity Conversion Mortgage (HECM) 

Program made by section 201 of the 

American Homeownership and 

Economic Opportunity Act of 2000 

(AHEOA). Among other changes, the 

rule provided for a reduced initial 

mortgage insurance premium (MIP) on 

HECM refinancings. The interim rule 

requested comments on the MIP 

provision of the rule. This final rule 

follows publication of the March 25, 

2004, interim rule. HUD did not receive 

any public comments on the interim 

regulatory change regarding the reduced 

MIP for HECM refinancings and, 

therefore, is adopting the interim rule 

without change.

DATES: Effective Date: January 14, 2005.

FOR FURTHER INFORMATION CONTACT:

Vance T. Morris, Director, Office of 

Single Family Program Development, 

Office of Insured Single Family 

Housing, Room 9266, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Washington, DC 

20410–8000; telephone (202) 708–2121 

(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 Information Relay Service at 

(800) 877–8339.

SUPPLEMENTARY INFORMATION

I. Background 

HUD’s Home Equity Conversion 

Mortgage (HECM) Program enables 

homeowners 62 years of age or older 

who have paid off their mortgages or 

have small mortgage balances to stay in 

their homes while using some of their 

equity as income. The program enables 

these homeowners to obtain financing 

with a Federal Housing Administration 

(FHA) insured reverse mortgage, which 

is a mortgage that converts equity into 

income. The FHA insures HECM loans 

to protect lenders against loss. Such a 

loss could occur if amounts withdrawn 

exceed equity when the homeowner’s 

property is sold. The statutory authority 

for the HECM Program is section 255 of 

the National Housing Act (12 U.S.C. 

1715z–20) (NHA). HUD’s regulations 

implementing the HECM Program are 

located at 24 CFR part 206. 

Section 201 of the American 

Homeownership and Economic 

Opportunity Act of 2000 (Pub. L. 106–

569, approved December 27, 2000) 

(AHEOA) made several changes to the 

HECM Program. Among other 

amendments, section 201(a) of AHEOA 

added a new section 255(k) to the NHA. 

Section 255(k) in part authorizes FHA to 

offer mortgage insurance for the 

refinancing of existing HECMs and 

establishes several homeowner 

protection and streamlining 

requirements concerning such 

refinancings. On June 5, 2001 (66 FR 

30278), HUD published a proposed rule 

to implement certain statutory changes 

to the HECM Program made by section 

201 of the AHEOA. The proposed rule 

solicited public comments on the 

proposed changes to the HECM Program 

regulations. Two commenters wrote 

that, in addition to implementing the 

changes contained in the proposed rule, 

HUD should also implement its 

statutory authority to reduce the initial 

mortgage insurance premium (MIP) for 

HECM refinancings. Specifically, 

section 201(a) of AHEOA added a new 

section 255(k)(4) to the NHA which 

authorizes HUD to reduce the amount of 

the initial MIP collected on a HECM 

refinancing. 

On March 25, 2004 (69 FR 15586), 

HUD published an interim rule that 

considered the public comments 

received on the proposed rule and made 

effective the proposed regulatory 

changes to the HECM Program 

contained in the June 5, 2001 proposed 

rule. In response to the public 

comments requesting that HUD 

implement section 255(k)(4) of the 

NHA, the interim rule also established 

a reduced MIP for HECM refinancings. 

The regulatory provisions of the 

March 25, 2004, interim rule took effect 

on April 26, 2004. However, in order to 

provide for public comments on the 

amount of the MIP, HUD issued the MIP 

provision on an interim basis and 

requested public comments for a period 

of 60 days on the amount of the initial 

MIP. HUD did not request public 

comment on the other provisions of the 

interim rule, since these provisions 

were contained in the July 5, 2001, 

proposed rule and were, therefore, 

already the subject of public comments. 

As noted above, certain statutory 

changes to the HECM Program were 

already enumerated in the June 5, 2001, 

proposed rule. For more information on 

these prior changes, interested persons 

should refer to the June 5, 2001, 

proposed rule preamble; for information 

on the agency’s discussion of the public 

comments received on the June 5, 2001, 

proposed rule, interested persons 

should refer to the March 25, 2004, 

interim rule preamble. 

II. This Final Rule 

This final rule follows publication of 

the March 25, 2004, interim rule. The 

comment period on the initial MIP 

provision closed on May 25, 2004. HUD 

did not receive any public comments on 

the interim regulatory change regarding 

the reduced initial MIP for HECM 

refinancings. Accordingly, this final rule 

adopts the interim rule of March 25, 

2004, without changes. 

Specifically, this final rule adopts 

§ 206.53(c), which was established by 

the March 25, 2004, interim rule. New 

§ 206.53(c) implements the statutory 

authority provided to HUD by section 

255(k) of the NHA to reduce the initial 

MIP for HECM refinancings. The change 

provides that the initial MIP paid by the 

mortgagee shall not exceed two percent 

of the increase in the maximum claim 

amount (i.e., the difference between the 

maximum claim amount for the new 

home equity conversion mortgage and 

the maximum claim amount for the 

existing home equity conversion 

mortgage that is being refinanced). 

HUD believes that the initial MIP 

limit made effective by this rule will 

result in a lower initial MIP for a 

refinanced HECM loan than for a 

comparable ‘‘first’’ HECM secured by a 

similar property. Also, the initial MIP 

limit will allow more homeowners to 

refinance their HECM loans at a lower 

interest rate, thus allowing homeowners 

to stay in their homes while using some 

of their equity. 

III. Findings and Certifications 

Regulatory Planning and Review

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866 (entitled 

‘‘Regulatory Planning and Review’’). 

OMB determined that this rule is a 

‘‘significant regulatory action’’ as 

defined in section 3(f) of the order 

(although not economically significant, 

as provided in section 3(f)(1) of the 

order). Any changes made to this rule 

subsequent to its submission to OMB 

are identified in the docket file, which 

is available for public inspection in the 

Regulations Division, Room 10276, 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75205

Office of General Counsel, Department 

of Housing and Urban Development, 

451 Seventh Street, SW., Washington, 

DC 20410–0500. 

Information Collection Requirements 

The information collection 

requirements contained in § 206.53 have 

been approved by OMB in accordance 

with the Paperwork Reduction Act of 

1995 (44 U.S.C. 3501–3520) and 

assigned OMB control number 2502–

0524. 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 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 the 

private sector. This rule does not 

impose any Federal mandates on any 

State, local, or tribal government or the 

private sector within the meaning of 

UMRA. 

Environmental Impact 

A Finding of No Significant Impact 

with respect to the environment was 

made at the proposed rule stage in 

accordance with HUD regulations at 24 

CFR part 50, which implement section 

102(2)(C) of the National Environmental 

Policy Act of 1969 (42 U.S.C. 

4332(2)(C)). The Finding remains 

applicable to this final rule and is 

available for public inspection between 

the hours of 8 a.m. and 5 p.m. weekdays 

in the Regulations Division, Room 

10276, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Washington, DC 20410–0500. 

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 

amendments made by this final rule will 

not impose any economic costs on small 

lenders and other participants in the 

HECM Program. Lenders will not be 

adversely affected by the reductions in 

the initial MIP established by this final 

rule, since the initial MIP is payable to 

HUD and not the lenders. Therefore, the 

undersigned certifies that this final rule 

will not have a significant economic 

impact on a substantial number of small 

entities. 

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 

final 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. 

Catalog of Domestic Assistance Number 

The Catalog of Domestic Assistance 

Number for the HECM Program is 

14.871.

List of Subjects in 24 CFR Part 206 

Aged, Condominiums, Loan 

programs—housing and community 

development, Mortgage insurance, 

Reporting and recordkeeping 

requirements.

Accordingly, for the reasons stated in 

the preamble, the interim rule for part 

206 of subpart B of Title 24 of the Code 

of Federal Regulations, revising 

§ 206.31(a)(1) and adding § 206.53, 

published on March 25, 2004, at 69 FR 

15586, is promulgated as final, without 

change.

Dated: November 5, 2004. 

John C. Weicher, 

Assistant Secretary for Housing-Federal 

Housing Commissioner.

[FR Doc. 04–27310 Filed 12–14–04; 8:45 am] 

BILLING CODE 4210–27–P