75812 Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / Proposed Rules 

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.

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: 

• The Federal eRulemaking Portal at: 

http://www.regulations.gov; or 

• 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 §§ 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 § 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 § 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 

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

75814 Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / Proposed Rules 

under the Administrative Procedures 

Act. The appeals procedures are located 

in § 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:

Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / Proposed Rules 75815

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.

§ 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.

§ 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 

§ 200.1535, and is not a prerequisite to 

the probation, or suspension, or 

termination of MAP privileges.

§ 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 § 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 MAPApproved 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.

§ 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 § 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 MAPapproved 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.

§ 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 

§ 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 

75816 Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / Proposed Rules 

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 preapplication, 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 FHAapproved 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.

§ 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.

§ 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 FHAinsured 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 

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

§ 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 

§ 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 postconference 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. 

75818 Federal Register / Vol. 69, No. 242 / Friday, December 17, 2004 / Proposed Rules 

(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.

§ 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 § 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 

§ 200.1535.

§ 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