[Federal Register Volume 69, Number 242 (Friday, December 17, 2004)]
[Proposed Rules]
[Pages 75812-75818]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27535]



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Part VI





Department of Housing and Urban Development





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24 CFR Part 200



Multifamily Accelerated Processing (MAP): MAP Lender Quality Assurance 
Enforcement; Proposed Rule

Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / 
Proposed Rules

[[Page 75812]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-4836-P-01; HUD-2004-0015]
RIN 2502-AI01


Multifamily Accelerated Processing (MAP): MAP Lender Quality 
Assurance Enforcement

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

ACTION: Proposed rule.

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SUMMARY: HUD is publishing for comment the basis for, and procedures 
applicable to, enforcement actions under Multifamily Accelerated 
Processing (MAP), a form of ``fast-track processing'' that gives 
qualified lenders the option of preparing the applicable Federal 
Housing Administration (FHA) forms and doing preliminary underwriting 
for certain loan applications.

DATES: Comment Due Date: February 15, 2005.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410-0500. Interested persons may also submit 
comments electronically through either:
    <bullet> The Federal eRulemaking Portal at: http://www.regulations.gov; or
    <bullet> The HUD electronic Web site at: http://www.epa.gov/feddocket. Follow the link entitled View Open HUD Dockets.'' Commenters 
should follow the instructions provided on that site to submit comments 
electronically.
    Facsimile (fax) comments are not acceptable. In all cases, 
communications must refer to the above docket number and title. All 
comments and communications submitted will be available, without 
revision, for public inspection and copying between 8 a.m. and 5 p.m. 
weekdays at the above address. Copies are also available for inspection 
and downloading at http://www.epa.gov/feddocket.

FOR FURTHER INFORMATION CONTACT: Michael McCullough, Director, Office 
of Multifamily Development, Office of Housing, Room 6138, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 
20410-0500; telephone (202) 708-1142 (this is not a toll-free number). 
Persons with hearing or speech disabilities may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    MAP Lender Quality Assurance Enforcement. Multifamily lenders that 
are approved MAP lenders and that process a multifamily mortgage loan 
using MAP procedures do so with the understanding and agreement that 
their loan processing actions and decisions are subject to HUD review. 
By allowing a MAP lender to prepare much of the documentation for a 
loan submission for FHA multifamily mortgage insurance, HUD places 
confidence in the lender's integrity and competence. If, in the process 
of performing this function, the lender should place the FHA 
multifamily mortgage insurance portfolio at risk, HUD must have (1) an 
accelerated process for review of the lender's actions, and (2) the 
means to act expeditiously to correct violations. This accelerated 
review process and mechanism for HUD action is referred to as ``MAP 
Lender Quality Assurance Enforcement.'' The proposed rule establishes 
in 24 CFR part 200, a new subpart Y, consisting of Sec. Sec.  200.1500 
through 200.1545, which presents the requirements and procedures that 
constitute MAP Lender Quality Assurance Enforcement.
    To accomplish quality assurance of a lender's MAP loan processing 
actions, the Directors of HUD field offices (Hub/Program Centers) and 
the Director of the Office of Multifamily Development initiate 
discussions with MAP lenders regarding concerns with respect to a MAP 
lender's actions. These discussions may lead to the imposition of a 
sanction by HUD, including a warning letter, a Limited Denial of 
Participation (LDP) action against the lender or an employee or 
contract person of the MAP lender, referral to the Office of the 
Inspector General, referral to the MAP Lender Review Board, or referral 
to the Mortgagee Review Board. Sanctions involving MAP probation, 
suspension or termination will generally be the result of a 
recommendation by the Director of the Office of Multifamily 
Development, HUD Headquarters, or Hub Director to the MAP Lender Review 
Board.
    The identification of the specific HUD staff and officials who may 
initiate and participate in the procedures provided in this rule is a 
matter of HUD's organization and HUD's own internal practices or 
procedures, and may change from time to time. Therefore, although this 
preamble may discuss actions taken by specific HUD officials, the 
proposed rule text more generally refers to actions taken by ``HUD'' to 
avoid the necessity of amending the rule whenever there is a change in 
an official's title.
    MAP Lender Review Board. The MAP Lender Review Board (Board) is to 
consist of three HUD Multifamily Housing officials designated by the 
Assistant Secretary for Housing or his designee. The Board is 
authorized to take action against any MAP lender for reasons provided 
in Sec.  200.1530 of this proposed rule entitled, ``Bases for 
sanctioning a MAP lender.'' Actions include: warning letters, 
probation, suspension or termination of MAP lender privileges. 
Decisions will be by majority vote. Board members are expected to 
possess a sound knowledge of multifamily housing origination, 
underwriting and construction loan procedures. HUD's Office of 
Inspector General (OIG) and Office of General Counsel (OGC) will each 
designate a non-voting advisor to the Board. Further, the Board is 
authorized to refer MAP lenders to OIG and may refer the staff, or the 
contractors of the MAP lender, to the Deputy Assistant Secretary (DAS) 
for Multifamily Housing for imposition of an LDP, as defined in 24 CFR 
24.105. The general procedures governing the Board are provided in 
Sec.  200.1535 of this rule.
    MAP Warning Letters. HUD Multifamily Hub and Program Center 
Directors, the Director of Multifamily Development, and the Board may 
issue MAP warning letters for minor offenses as well as for more 
serious offenses. Warning letters must specify the MAP violations and 
may direct the taking of corrective actions. In addition, these HUD 
officials will issue MAP warning letters to MAP lenders for violations 
by a MAP lender's third party contractor. A MAP warning letter does not 
suspend or terminate a lender's MAP privileges, but it may be used as 
evidence in a subsequent action which results in the imposition of 
probation, suspension, or termination. The issuance of a MAP warning 
letter is not, however, a prerequisite for these more serious actions. 
Section 200.1505 of this rule addresses HUD's use of warning letters.
    MAP Probation. The Board may place a lender on MAP probation after 
following procedures that give notice and a pre-deprivation conference 
to the MAP lender. MAP probation is limited to the time to make the 
corrective changes and/or improvements required by the Board. When the 
MAP lender has taken all corrective actions or completed the 
improvements directed by the Board, the MAP lender shall notify the 
Board. Once the Board is satisfied that the corrective actions have 
occurred, the

[[Page 75813]]

probation period shall end. Failure on the part of the MAP lender to 
take responsible corrective action in a timely manner to satisfy the 
charges that resulted in the probation creates the potential for a 
recommendation to the Board of either MAP suspension or termination. In 
such instances, and to the extent practical, the Board members who 
served on the original Board bringing the original charges should 
comprise the Board that hears the subsequent charges.
    MAP probation covers all MAP lender activity regardless of 
geographic location. HUD shall issue the notice of MAP probation in 
writing. During MAP probation, the MAP lender's corporate name shall be 
removed from the HUD Web site listing approved MAP lenders, but the 
corporate name shall be returned to the Web site once MAP probation has 
been lifted. During MAP probation, a MAP lender may not submit, and the 
HUD field office may not accept, materials for a new MAP pre-
application or firm commitment application after the close of business 
on the date of the probation letter. However, a MAP lender placed on 
probation may continue to process applications submitted to the HUD 
Hub/Program Center prior to the close of business on the date of the 
probation letter. Placing a MAP lender on MAP probation does not impact 
the authority of the subject lender from receiving, or continuing to 
process, non-MAP mortgage loans. MAP probation is covered by Sec.  
200.1510 of this rule.
    Suspension of MAP Privileges. The Board may suspend a MAP lender 
from MAP activity for serious offenses after following procedures that 
give notice and a pre-deprivation conference to the MAP lender. 
Suspension is time limited to no more than one year, except where 
conditions are imposed. Any conditions that may be imposed by MAP 
probation may also be applied to MAP suspension. If both a time limit 
and corrective conditions are imposed, MAP suspension shall terminate 
following (1) the expiration of the time limit, (2) the MAP lender's 
submission to the Board of a certification of compliance with any 
conditions imposed, and (3) the Board's notification to the MAP lender 
that it has received the certification of compliance and is satisfied 
that the corrective actions have occurred. Suspension of MAP privileges 
carries the same lender processing restrictions as MAP probation, cited 
above. Suspension is nationwide in effect. Section 200.1515 of this 
rule addresses MAP suspension.
    Termination of MAP Privileges. The Board may terminate a lender's 
eligibility for MAP for poor performance, among other reasons after 
following procedures that give notice and a pre-deprivation conference 
to the MAP lender. An application for reinstatement of MAP authority 
following notification of termination may not be submitted until 12 
months have passed from the date of termination. Requirements for 
reinstatement shall be similar to the initial qualification for MAP 
lender approval stated in Chapter 2 of the MAP Guide with the 
additional proof that the conditions that resulted in the termination 
have been resolved to the satisfaction of HUD. MAP termination affects 
all MAP processing by the lender nationwide. HUD will not endorse any 
MAP loan processed by the terminated lender unless a firm commitment 
was issued prior to the date of termination. MAP applications and pre-
applications in process should be transferred either to the traditional 
application processing (TAP) procedure or to another MAP lender. In 
either case, the loan must be reprocessed in its entirety.
    In certain circumstances, termination of MAP lender status may also 
occur without action by the Board. Failure by a MAP lender to maintain 
its status as an FHA approved Lender results in immediate removal as an 
approved MAP lender. In addition, MAP lenders must maintain a minimum 
level of MAP lender activity. This rule would require all MAP lenders 
to submit either a pre-application package or firm commitment 
application at least once every 12 months. Failure to maintain this 
minimum level of MAP activity will subject the lender to removal from 
the MAP program by the Office of Multifamily Development. Notification 
will be given to the MAP lender prior to termination for violation of 
this minimum level of activity requirement. When a MAP lender loses its 
MAP lender status as a result of failure to meet and maintain the 
minimum level of MAP activity, the lenders' status to process using TAP 
is unaffected. MAP lenders who have their MAP status rescinded for 
inactivity may reapply for MAP lender approval to commence one year 
from the effective date of having their approved MAP lender status 
terminated. Termination of MAP lenders is addressed in Sec.  200.1520 
of the rule.
    Settlement Agreements. The Director of HUD's Office of Multifamily 
Development may enter into discussions with a MAP lender leading to a 
negotiated settlement agreement between HUD and the MAP lender before 
or after the issuance of a warning letter or referral to the Board. For 
example, discussions may result in a settlement agreement under which 
the MAP lender agrees to implement or revise a quality control plan, in 
lieu of being referred to the Board. When these discussions occur 
following a referral to the Board for possible disciplinary action, any 
settlement agreement reached is subject to approval by the Board. The 
provisions for settlement agreements appear at Sec.  200.1525 of the 
rule.
    Lender Notification. Prior to the MAP Board reviewing any matter 
for consideration of a sanction against a MAP lender, the Board 
Chairperson shall notify the subject MAP lender. This notification 
shall be in writing stating the specific alleged violation(s) along 
with the citation of the HUD requirements that are the subject of the 
charge. The MAP lender shall be provided an opportunity to meet 
informally with the Board, through a conference call, in person, or by 
teleconference video, using HUD facilities and/or to present in writing 
any relevant information. The MAP lender shall also be provided an 
opportunity to respond in writing to the Board regarding the alleged 
violation prior to any meeting. The MAP Lender Review Board procedures 
are included in Sec.  200.1535.
    The Review Board shall have the power, however, to issue a notice 
of action to terminate a MAP lender, or to place a MAP lender on 
probation or suspension without advance notice to the MAP lender in 
those instances where the Board believes there exists a need to protect 
the financial interest of the government from imminent harm. In all 
such instances, the Board shall notify the lender of the Board's 
decision promptly giving the reasons for the decision. The lender shall 
have the right to submit materials to the Board and to appear before 
the Board to seek prompt reconsideration of the Board's decision. These 
imminent harm provisions appear at Sec.  200.1540.
    Appeals. When the Board imposes a sanction of probation, suspension 
or termination against a MAP lender, the lender shall have the option 
of requesting an informal conference with a designated appeals official 
designated by the Assistant Secretary for Housing. The designated 
appeals official will not be a member of the Board involved in the 
original sanction decision. If the appeals official overturns the 
Board's decision, on probation, suspension or termination, the lender 
shall return immediately to active status as a MAP lender. 
Participation in the appeals process is not a prerequisite for the 
filing of an action for judicial review

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under the Administrative Procedures Act. The appeals procedures are 
located in Sec.  200.1545 of this rule.

II. Issues Highlighted for Public Comment

    HUD is specifically seeking comment on whether quantitative 
measures, such as a lender's frequency or severity of claims, exist 
which may serve as a basis for sanctioning MAP lenders, and if so, what 
those quantitative measures may be. In the current proposed rule, HUD 
lists numerous qualitative measures that may serve as the basis of 
sanctions, but does not include quantitative measures. HUD is also 
particularly interested in obtaining public comment on additional 
qualitative measures that might serve as the basis for sanctions and 
whether the MAP Lender Quality Assurance Enforcement process may be 
made less burdensome, while still providing MAP lenders the opportunity 
to respond adequately to a notice of violation and to participate in 
the resolution of problems.

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 an economically 
significant regulatory action, as provided under section 3(f)(1) of the 
Order). Any changes made to the 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, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 20410-0500.

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 proposed rule does not 
impose any Federal mandates on any State, local, or tribal government 
or the private sector within the meaning of UMRA.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts State law, unless the relevant 
requirements of section 6 of the executive order are met. 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.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this proposed rule and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities for the following 
reasons. The rule provides clear, uniform, expeditious, and equitable 
requirements and procedures to permit HUD to take enforcement actions, 
correct MAP violations, and protect the financial interests of the 
government. As such, the rule results in an industrywide and 
governmental benefit in that it clarifies the terms of the relationship 
between HUD and MAP lenders.
    Notwithstanding HUD's determination that this rule will not have a 
significant economic impact 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 this preamble.
    With respect to taking appropriate enforcement action against a MAP 
lender, HUD is cognizant that section 222 of the Small Business 
Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121) (referred 
to as ``SBREFA'') requires the Small Business and Agriculture 
Regulatory Enforcement Ombudsman to ``work with each agency with 
regulatory authority over small businesses to ensure that small 
business concerns that receive or are subject to an audit, on-site 
inspection, compliance assistance effort or other enforcement related 
communication or contact by agency personnel are provided with a means 
to comment on the enforcement activity conducted by this personnel.'' 
To implement this statutory provision, the Small Business 
Administration has requested that agencies include the following 
language on agency publications and notices that are provided to small 
businesses at the time the enforcement action is undertaken. The 
language is as follows:

Your Comments Are Important

The Small Business and Agriculture Regulatory Enforcement Ombudsman 
and 10 Regional Fairness Boards were established to receive comments 
from small businesses about Federal agency enforcement actions. The 
Ombudsman will annually evaluate the enforcement activities and rate 
each agency's responsiveness to small business. If you wish to 
comment on the enforcement actions of [insert agency name], call 1-
888-REG-FAIR (1-888-734-3247).

    As HUD stated in its notice describing HUD's actions on the 
implementation of SBREFA, which was published on May 21, 1998 (63 FR 
28214), HUD intends to work with the Small Business Administration to 
provide small entities with information on the Fairness Boards and 
National Ombudsman program, at the time enforcement actions are taken, 
to ensure that small entities have the full means to comment on the 
enforcement activity conducted by HUD.

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
or 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 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number applicable to the 
program affected by this rule is 14.134.

List of Subjects in 24 CFR Part 200

    Administrative practice and procedure, Claims, Equal employment 
opportunity, Fair housing, Home improvement, Housing standards, 
Incorporation by reference, Lead poisoning, Loan programs--housing and 
community development, Minimum property standards, Mortgage insurance, 
Organization and functions (Government agencies), Penalties, Reporting 
and recordkeeping requirements, Social security, Unemployment 
compensation, Wages.

    Accordingly, HUD proposes to amend 24 CFR part 200 as follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

    1. The authority citation for 24 CFR part 200 continues to read as 
follows:


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    Authority: 12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).
    2. A new subpart Y is added to read as follows:
Subpart Y--Multifamily Accelerated Processing (MAP): MAP Lender Quality 
Assurance Enforcement
Sec.
200.1500 Sanctions against a MAP lender.
200.1505 Warning letter.
200.1510 Probation.
200.1515 Suspension of MAP privileges.
200.1520 Termination of MAP privileges.
200.1525 Settlement agreements.
200.1530 Bases for sanctioning a MAP lender.
200.1535 MAP Lender Review Board.
200.1540 Imminent harm notice of action.
200.1545 Appeals of MAP Lender Review Board decisions.


Sec.  200.1500  Sanctions against a MAP lender.

    (a) In addition to any other legal remedy available to HUD, HUD may 
take the following actions with respect to a MAP lender:
    (1) Warning letter;
    (2) Probation;
    (3) Suspension;
    (4) Termination;
    (5) Limited Denial of Participation (LDP);
    (6) Referral to the Mortgagee Review Board; and
    (7) Referral to the Office of Inspector General.
    (b) The actions listed in paragraphs (a)(1) through (a)(4) of this 
section are carried out in accordance with the requirements of this 
subpart. An LDP is a sanction applied in accordance with subpart G of 
24 CFR part 24 to participants in loan transactions other than FHA-
insured lenders. The Mortgagee Review Board procedures are found at 24 
CFR part 25.


Sec.  200.1505  Warning letter.

    (a) In general. HUD may issue a warning letter, which specifies 
problems or violations identified by HUD, to a MAP lender.
    (b) Effect of warning letter. The warning letter:
    (1) Does not suspend a lender's MAP privileges;
    (2) May impose a higher level of review of the lender's 
underwriting by HUD;
    (3) May direct the taking of a corrective action; and
    (4) May require a meeting in a designated HUD office with the 
principal owners or officers, or both, of the MAP lender to discuss the 
specified problems and violations, and possible corrective actions.
    (c) Relationship to other sanctions. The issuance of a warning 
letter is not subject to the MAP Lender Review Board procedures in 
accordance with Sec.  200.1535, and is not a prerequisite to the 
probation, or suspension, or termination of MAP privileges.


Sec.  200.1510  Probation.

    (a) In general. Only the MAP Lender Review Board (or Board) may 
place a lender on probation, in accordance with the procedures of Sec.  
200.1535.
    (b) Effect of probation. (1) Probation is intended to be corrective 
in nature and not punitive. As a result, release from probation is 
conditioned upon the lender meeting a specific requirement or 
requirements, such as replacement of a staff member. A lender's failure 
to take prompt corrective action after being placed on probation may be 
the basis for a recommendation of either suspension or termination. Any 
such recommendation shall, when possible, go to a MAP Lender Review 
Board composed of the same members who issued the original probation.
    (2) During the probation period, a MAP lender:
    (i) Shall be removed from the MAP-Approved Lender list posted on 
HUD's Web site;
    (ii) May not submit, and HUD may not accept, materials after the 
close of business of the date of the probation letter for a new 
application under MAP for multifamily mortgage insurance from HUD; and
    (iii) May continue to process any existing application for 
multifamily mortgage insurance submitted to a Multifamily Hub or 
Program Center before the date of the probation letter.
    (3) The MAP Lender Review Board may impose a higher level of review 
of the lender's underwriting by HUD;
    (4) Probation is nationwide in effect.
    (c) Duration of probation. (1) Probation continues until all 
specific corrective actions required by the MAP Lender Review Board 
(for example, exclusion of a specific staff member from work on MAP 
loans) are taken by the MAP lender. When all corrective actions have 
been taken, the MAP lender shall notify the Board. Once the Board is 
satisfied that the corrective actions have occurred, the probation 
period shall end.
    (2) A false statement that corrective action has been taken 
constitutes a false certification and may constitute a violation of 18 
U.S.C. 1001.
    (3) When probation is lifted, the lender's name shall be promptly 
reinstated on the MAP-Approved Lender list posted on HUD's Web site.


Sec.  200.1515  Suspension of MAP privileges.

    (a) In general. Only the MAP Lender Review Board may suspend a 
lender's eligibility for MAP, in accordance with the procedures of 
Sec.  200.1535.
    (b) Effect of suspension. (1) A suspension may impose any 
conditions that may be imposed by probation.
    (2) During the suspension period a MAP lender:
    (i) Shall be removed from the MAP-approved lender list posted on 
HUD's Web site;
    (ii) May not submit, and the HUD field office may not accept, 
materials after the close of business of the date of the suspension 
letter for a new application for multifamily mortgage insurance from 
HUD; and
    (iii) May continue to process any existing application for 
multifamily mortgage insurance submitted to a Multifamily Hub or 
Program Center before the date of the suspension letter.
    (3) The MAP Lender Review Board may impose a higher level of review 
of the lender's underwriting by HUD;
    (4) Suspension is nationwide in effect.
    (c) Duration of suspension. (1) Suspension may not exceed 12 
months, except where conditions are imposed. If both a time period and 
conditions are imposed, a suspension shall terminate only when:
    (i) The time period of the suspension has expired;
    (ii) The MAP lender has submitted a certification of compliance 
with those conditions to the Board; and
    (iii) The Board has notified the MAP lender it has received the 
certification of compliance and is satisfied that the corrective 
actions have occurred.
    (2) When suspension is lifted, the lender's name shall be promptly 
reinstated on the MAP-Approved Lender list posted on HUD's Web site.


Sec.  200.1520  Termination of MAP privileges.

    (a) In general. Except as provided in paragraph (b) of this 
section, only the MAP Lender Review Board may terminate a lender's MAP 
privileges, in accordance with the procedures of Sec.  200.1535.
    (b) Administrative termination. HUD will notify a lender of 
immediate termination of MAP privileges when either of the following 
circumstances is present:
    (1) Failure by the MAP lender to maintain its status as an FHA-
approved lender; or
    (2) Failure by the MAP lender to maintain a minimum level of MAP 
lender activity, as evidenced by failure to submit either a pre-
application package or firm commitment application at least once every 
12 months.
    (c) Effect of termination. (1) The terminated lender shall be 
removed

[[Page 75816]]

from the MAP-Approved Lender list on HUD's Web site.
    (2) A terminated lender may not submit, and the HUD field office 
may not accept, materials after the close of business of the date of 
the termination letter for new multifamily mortgage insurance from HUD.
    (3) Any MAP pre-application or MAP application in process may no 
longer be processed under MAP by the terminated Lender. The lender will 
either:
    (i) Immediately transfer the transaction to the traditional 
application processing (TAP) procedure. HUD will completely reprocess 
all stages of the transaction; or
    (ii) Immediately transfer the project to a new MAP lender. The new 
MAP lender must completely reprocess all stages of the transaction. At 
no time can the new MAP lender assign the pre-application, the firm 
application, the mortgage insurance commitment, or the insured 
construction loan back to the original MAP lender.
    (4) HUD will not endorse any MAP loan processed by the terminated 
lender unless a firm commitment was issued before the date of 
termination.
    (i) Firm commitments involving new construction or substantial 
rehabilitation must be immediately transferred to a new MAP lender. At 
no time can the new MAP lender assign the firm mortgage insurance 
commitment, or the insured construction loan, back to the original MAP 
lender.
    (ii) Firm commitments issued for Section 223(f) projects may be 
transferred before final endorsement to any approved FHA lender or kept 
in the lender's portfolio.
    (iii) For those construction loans that have been initially 
endorsed, the MAP lender will lose its MAP privileges for construction 
loan administration. HUD will assume all the construction loan 
administration duties it normally performs for TAP processing.
    (iv) The original lender may service a transferred loan once it is 
finally endorsed.
    (5) Termination is nationwide in effect.
    (6) When a MAP lender loses its MAP lender status as a result of 
termination, the Lender's status to process transactions using TAP is 
unaffected, provided that the Lender has maintained its status as an 
FHA-approved multifamily lender.
    (d) Reinstatement. An application for reinstatement of MAP 
authority may not be made until at least 12 months after the date of 
termination. The requirements for reinstatement shall be the same as 
for initial qualification, and the applicant must show that the 
problems that led to termination have been resolved.


Sec.  200.1525  Settlement agreements.

    (a) HUD staff, as authorized, may negotiate a settlement agreement 
with a MAP lender before or after the issuance of a warning letter or 
referral to the MAP Lender Review Board. Once a matter has been 
referred to the MAP Lender Review Board, only the Board may approve a 
settlement agreement.
    (b) Settlement agreements may provide for:
    (1) Cessation of any violation;
    (2) Correction or mitigation of the effects of any violation;
    (3) Removal of lender staff from positions involving origination, 
underwriting and/or construction loan administration;
    (4) Actions to collect sums of money wrongfully or incorrectly paid 
by the MAP lender to a third party;
    (5) Implementation or revision of a quality control plan or other 
corrective measure acceptable to HUD; and
    (6) Modification of the duration or provisions of any 
administrative sanction deemed to be appropriate by HUD.
    (c) A MAP lender's compliance with a settlement agreement is 
evidenced by the lender certifying its compliance with the conditions 
of the agreement, and HUD's determination that the lender is in 
compliance with the conditions of the agreement.
    (d) Failure by a MAP lender to comply with a settlement agreement 
may result in a probation, or suspension, or termination of MAP 
privileges, or referral to the Mortgagee Review Board.


Sec.  200.1530  Bases for sanctioning a MAP lender.

    It is HUD policy that approved MAP lenders are expected to comply 
at all times with HUD's underwriting and construction loan 
administration requirements and not to take any action that presents a 
risk to HUD's insurance funds. A MAP lender's improper underwriting and 
construction loan administration activities may lead to a warning 
letter or other sanction from HUD. Examples of such activities include, 
but are not limited to, the following:
    (a) Minor offenses that may be the basis for a warning letter 
include:
    (1) Failure to provide required exhibits or the submission of 
incomplete or inaccurate exhibits. Although the MAP lender will be 
permitted to correct minor errors or provide additional information, 
substantial inaccuracies or lack of significant information will result 
in a return of the application and retention of any fee collected;
    (2) Repeated failure to complete processing to firm commitment 
unrelated to an underwriting analysis that demonstrates that the 
process should not proceed to firm commitment;
    (3) Preparation of an underwriting summary that is not supported by 
the appropriate documentation and analysis;
    (4) Failure to notify the HUD processing office promptly of changes 
in the mortgage loan application for a firm commitment submitted, such 
as changes in rents, numbers of units, or gross project area;
    (5) Failure to meet MAP closing requirements or construction loan 
administration requirements;
    (6) Business practices that do not conform to those generally 
accepted by prudent lenders or that show irresponsibility; and
    (7) Failure to cooperate with a Lender Qualifications and 
Monitoring Division review by HUD.
    (b) Serious offenses that might be a basis for a warning letter or 
probation, suspension, or termination include:
    (1) Receipt of multiple warning letters over any one-year period. 
In determining which sanction to pursue as a result of prior warning 
letters, HUD will consider the facts and circumstances surrounding 
those warning letters and the corrective actions, if any, undertaken by 
the lender;
    (2) Fraud or material misrepresentation in the lender's 
participation in FHA multifamily programs;
    (3) Lender collusion with, or influence upon, third party 
contractors to modify reports affecting the contractor's independent 
evaluation;
    (4) A violation of MAP procedures by a third party contractor, 
which the MAP lender knew, or should have known, was occurring and 
which, if performed by the MAP lender itself, would constitute a ground 
for a sanction under this chapter;
    (5) Evidence that a lender's inadequate or inaccurate underwriting 
was a cause for assignment of an FHA-insured mortgage and claim for 
insurance benefits to HUD;
    (6) Identity-of-interest violations as defined by Chapter 2 of the 
MAP Guide;
    (7) Payment by, or receipt of a payment by, a MAP lender of any 
kickback or other consideration, directly or indirectly, which would 
affect the lender's independent evaluation, or represent a conflict of 
interest, in

[[Page 75817]]

connection with any FHA-insured mortgage transaction;
    (8) Failure to comply with any agreement, certification, 
undertaking, or condition of approval listed in a MAP lender's 
application for approval;
    (9) Noncompliance with any requirement or directive of the MAP 
Lender Review Board;
    (10) Violation of the requirements of any contract with HUD, or 
violation of the requirements in any statute or regulation;
    (11) Submission of false information, or a false certification, to 
HUD in connection with any MAP mortgage transaction;
    (12) Failure of a MAP lender to respond in a timely manner to 
inquiries from the MAP Lender Review Board in accordance with this 
subpart;
    (13) Indictment or conviction of a MAP lender or any of its 
officers, directors, principals or employees for an offense that 
reflects on the responsibility, integrity, or ability of the lender to 
participate in the MAP initiative;
    (14) Employing or retaining an officer, partner, director, or 
principal at the time when the person was suspended, debarred, 
ineligible, or subject to an LDP under 24 CFR part 24, or otherwise 
prohibited from participation in HUD programs, when the MAP lender knew 
or should have known of the prohibition;
    (15) Employing or retaining an employee who is not an officer, 
partner, director or principal, and who is or will be working on HUD-
FHA program matters, at a time when that person was suspended, 
debarred, ineligible, or subject to an LDP under 24 CFR part 24 or 
otherwise prohibited from participation in HUD programs, when the MAP 
lender knew or should have known of the prohibition;
    (16) Failure to cooperate with an audit or investigation by the HUD 
Office of Inspector General or an inquiry by HUD into the conduct of 
the MAP lender's FHA-insured loans; and
    (17) Failure to fund MAP mortgage loans or any misuse of mortgage 
loan proceeds.


Sec.  200.1535  MAP Lender Review Board.

    (a) Authority. (1) Sanctions. The MAP Lender Review Board (or 
Board) is authorized to impose appropriate sanctions on a MAP lender 
after:
    (i) Conducting an impartial review of all information and 
documentation submitted to the Board; and
    (ii) Making factual determinations that there has been a violation 
of MAP requirements.
    (2) Settlement agreements. The Board is authorized to approve 
settlement agreements in accordance with Sec.  200.1525 of any matter 
pending before the Board.
    (3) Extensions. The Board is authorized to extend, on its own 
initiative or for good cause at the written request of a MAP lender, 
any time limit otherwise applicable under this section. Notice of any 
such extension shall be timely provided to a MAP lender.
    (b) Notice of violation. Before the Board reviews a matter for 
consideration of a sanction, the Board's Chairman will issue written 
notice of violation to the MAP lender's contact person as listed on the 
Multifamily MAP Web site. The notice is sent by overnight delivery and 
must be signed for by an employee of the MAP lender upon receipt. The 
notice:
    (1) Informs the lender that the Board is considering a specific 
violation;
    (2) States the specific facts alleged concerning the violation, 
with citation to the HUD requirements that have been violated;
    (3) Includes as attachments copies of all documents evidencing the 
violation and upon which the Board will rely in reaching a decision;
    (4) Provides the lender with the opportunity to request in writing, 
within 15 business days after the date of the issuance of the notice, 
to:
    (i) Meet for an informal conference with the Board in person or by 
video conference using HUD facilities at Headquarters or one of HUD's 
field offices; and
    (ii) Present written evidence and any other relevant information at 
the conference;
    (5) Requires a written response to be submitted to the Board by a 
date specified within the notice;
    (6) Provides the street address, e-mail address, or facsimile (fax) 
number for purposes of receiving the lender's request for an informal 
conference and written response; and
    (7) Is made part of the administrative record of the Board's 
decision of the matter.
    (c) Response to notice. (1) The MAP lender's written response 
required by the notice of violation may not exceed 15 double-spaced 
typewritten pages and must include an executive summary, a statement of 
the facts, an argument and a conclusion. The response and supporting 
documentation must be submitted in triplicate.
    (2) Failure to respond by the dates specified within the notice may 
result in a determination by the Board without conducting an informal 
conference with the MAP lender and without consideration of any written 
response submitted by the MAP lender.
    (d) Informal conference. (1) The Board will schedule an informal 
conference and notify the lender of the time and place of the 
conference, if one is requested.
    (2) At the conference, the Board will meet with the lender or its 
designees and HUD staff to review documentary evidence and 
presentations by both sides.
    (3) Oral statements made at the informal meeting will not be 
considered as part of the administrative record of the Board's 
determination, except:
    (i) The Board may note for the record and consider voluntary 
admissions, made by the lender or a representative of the lender, of 
any element of the violation charged;
    (ii) Statements substantiated by any additional documents or 
evidence submitted in accordance with paragraphs (e)(1) or (e)(3) of 
this section; and
    (iii) Transcripts prepared and submitted in accordance with 
paragraph (e)(2) of this section.
    (e) Post-conference submissions. (1) Any additional documents, 
evidence, or written arguments relevant to the notice of violation and 
the informal conference that the lender or HUD staff wish to present to 
the Board, must be presented within five business days after date of 
the informal conference.
    (2) No transcript of the informal conference will be made, unless 
the lender elects to have a transcript made by a certified court 
reporter at its own expense. If the lender elects to have a transcript 
made, the lender must provide three copies of the transcript to HUD 
within five business days after the date of the informal conference. 
The transcript will not become a part of the administrative record of 
the Board's decision unless it is submitted within the required five-
day period frame.
    (3) Following the receipt of any post-conference submissions, the 
Board may request or permit additional documents or evidence to be 
submitted within a period set by the Board for inclusion in the 
administrative record.
    (f) Board action. (1) The Board will confer to consider the 
evidence included in the administrative record and make a final 
decision concerning the matter. Any record of confidential 
communications between and among Board members at this stage of the 
proceedings is privileged from disclosure and will not be regarded as a 
part of the administrative record of any matter.

[[Page 75818]]

    (2) In determining what action is appropriate concerning the 
matter, the Board considers, among other factors:
    (i) The seriousness and the extent of the violation;
    (ii) Any history of prior offenses;
    (iii) Deterrence of future violations;
    (iv) Any inappropriate benefits received by the MAP lender;
    (v) Potential inappropriate benefit to other persons; and
    (vi) Any mitigating factors.
    (3) Board decisions will be determined by majority vote.
    (g) Notice of action. (1) The Board will issue its final decision 
within 10 business days after the date of the informal conference or 
the expiration of any period allowed for the submission of documents 
and evidence, whichever is later.
    (2) The Board will notify the MAP lender of its final decision by 
overnight delivery of a written notice of the final decision to the MAP 
lender's contact person as listed on the Multifamily MAP Web site. The 
Board will also notify HUD field offices of its final decision.
    (3) The final decision finds that a violation either does, or does 
not, exist. If a violation is found to exist, the final decision:
    (i) States the violation and any factual findings of the Board;
    (ii) States the nature and duration of the sanction;
    (iii) Informs the MAP lender of its right to an appeal conference 
and identifies the appeals official to be contacted; and
    (iv) May add to or modify the violation as stated in the initial 
notice of violation.


Sec.  200.1540  Imminent harm notice of action.

    The Board may issue an imminent harm notice of action to terminate 
a MAP lender, or to place a MAP lender on probation or suspension 
without advance notice to the MAP lender in those instances where the 
Board determines there exists a need to protect the financial interest 
of HUD from imminent harm. In all such instances, the Board shall 
notify the lender of the Board's decision promptly and give the reasons 
for the decision in accordance with Sec.  200.1535(g)(2) and (3). The 
lender shall have the right to submit materials to the Board and to 
appear before the Board to seek prompt reconsideration of the Board's 
decision in accordance with the procedures of Sec.  200.1535.


Sec.  200.1545  Appeals of MAP Lender Review Board decisions.

    (a) Request for appeal. Whenever the Board imposes a sanction of 
probation, suspension or termination against a MAP lender, the lender 
may request, in writing, an appeal conference before the appeals 
official. The MAP lender must deliver the written request for an appeal 
to the appeals official within 10 business days after the date noted on 
the notice of action or the right to an appeal is deemed waived. 
Participation in the appeal process under this section is not a 
prerequisite to filing an action for judicial review under the 
Administrative Procedure Act.
    (b) Appeals Official. The appeals official must be an individual 
who has not been previously involved with the proceedings or settlement 
discussions at issue.
    (c) Notice of action in effect. The notice of action issued by the 
Board remains in effect while the appeal is pending.
    (d) Scheduling of appeal. (1) Upon receipt of the request for an 
appeal, the appeals official will promptly notify the MAP lender of the 
time and place of the appeal conference. The appeal conference will be 
held within 10 business days after receipt of the MAP lender's appeal 
request, except as provided in paragraph (d)(2) of this section.
    (2) A MAP lender may request, and the appeals official may agree, 
to have an appeal conference held more than 10, but not more than 30 
business days after the date the lender requests an appeal.
    (e) Scope of appeal. The appeals official may consider information 
included in the administrative record and any new information presented 
at the appeal conference that is substantiated in accordance with 
paragraph (f) of this section. In addition, the appeals official may 
consider voluntary admissions by the lender or a representative of the 
lender of any element of the violation charged.
    (f) Additional documents. (1) Transcript. No transcript of the 
appeal conference will be made, unless the MAP lender elects to have a 
transcript made by a certified court reporter at its own expense. If 
the lender elects to have a transcript made, it must provide three 
copies of the transcript to the appeals official within five business 
days after the date of the appeal conference.
    (2) Other documents. Any additional, relevant documents or written 
arguments that the MAP lender wishes to present to the appeals official 
must be presented within five business days after the date of the 
appeal conference.
    (g) Determination of appeal. Within 10 business days after the date 
of the appeal conference or the expiration of the period allowed for 
the submission of documents and written arguments, whichever is later, 
the appeals official will make a written determination to confirm, 
modify, or overturn the Board's decision and notice of action. If the 
appeals official overturns the Board's decision, the lender shall 
immediately return to an active status as a MAP lender and the written 
determination to overturn will be posted on HUD's MAP Web site.

    Dated: November 23, 2004.
John C. Weicher,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 04-27535 Filed 12-16-04; 8:45 am]
BILLING CODE 4210-27-P