[Federal Register Volume 80, Number 34 (Friday, February 20, 2015)]
[Proposed Rules]
[Pages 9253-9256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-03457]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 203, 207, 220, 221, 232, 235, 236 and 241

[Docket No. FR-5805-P-01]
RIN 2502-AJ26


Federal Housing Administration (FHA): Standardizing Method of 
Payment for FHA Insurance Claims

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule is a cost-savings measure to update HUD's 
regulations regarding the payment of FHA insurance claims in 
debentures. Section 520(a) of the National Housing Act affords the 
Secretary discretion to pay insurance claims in cash or debentures. 
Although HUD has given mortgagees the option to elect payment of FHA 
insurance claims in debentures in some sections of HUD's regulations, 
HUD has not paid an FHA insurance claim under these regulations using 
debentures in approximately 5 years. This proposed rule would amend 
applicable FHA regulations to bring consistency in determining the 
method of payment for FHA insurance claims.

DATES: Comment Due Date: April 21, 2015.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 7th Street 
SW., Room 10276, Washington, DC 20410-0500. Communications must refer 
to the above docket number and title. There are two methods for 
submitting public comments. All submissions must refer to the above 
docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (fax) comments are not acceptable.
    Public Inspection of Public Comments. HUD will make all properly 
submitted comments and communications available for public inspection 
and copying between 8 a.m. and 5 p.m. weekdays at the above address. 
Due to security measures at the HUD Headquarters building, you must 
schedule an appointment in advance to review the public comments by 
calling the Regulations Division at 202-708-3055 (this is not a toll-
free number). Individuals with speech or hearing impairments may access 
this number via TTY by calling the toll-free Federal Relay Service at 
800-877-8339. Copies of all comments submitted are available for 
inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: For information about: HUD's Single 
Family Housing program, contact Ivery Himes, Director, Office of Single 
Family Asset Management, Office of Housing, Department of Housing and 
Urban

[[Page 9254]]

Development, 451 7th Street SW., Room 9172, Washington, DC, 20410; 
telephone number 202-708-1672; HUD's Multifamily Housing program, 
contact Sivert Ritchie, Multifamily Claims Branch, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
6252, Washington, DC 20410-8000; telephone number 202-708-2510. The 
telephone numbers listed above are not toll-free numbers. Persons with 
hearing or speech impairments may access these numbers through TTY by 
calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Prior to the Housing and Urban Development Act of 1965, the 
Secretary was required to pay insurance claims on mortgages or loans 
insured under the National Housing Act in debentures. Section 215 of 
the Housing and Urban Development Act of 1965 amended Title V of the 
National Housing Act to add a new section which authorized the 
Secretary, in his discretion, to pay insurance claims on mortgages or 
loans insured under any section of the National Housing Act in cash or 
debentures.\1\
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    \1\ Section 520(a) of the National Housing Act (12 U.S.C. 1735d) 
states: ``Notwithstanding any other provision of this Act with 
respect to the payment of insurance benefits, the Secretary is 
authorized, in his discretion, to pay in cash or in debentures any 
insurance claim or part thereof which is paid on or after the date 
of the enactment of the Housing and Urban Development Act of 1965 on 
a mortgage or a loan which was insured under any section of this Act 
either before or after such date.''
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    In some of FHA's regulations in 24 CFR, subtitle B, chapter II, HUD 
has discretionarily provided mortgagees with the ability to request and 
receive payment of an insurance claim on a loan insured under the 
National Housing Act in debentures. As a result of these regulations, 
HUD has needed to maintain an interagency agreement with Treasury, 
which is the agency responsible for issuing and servicing debentures, 
costing HUD over $206,000 per year, despite the fact that there are no 
current debentures being serviced by Treasury for HUD, and HUD has not 
paid an FHA insurance claim in debentures in approximately 5 years.

II. This Proposed Rule

    HUD proposes to use the authority provided in section 520(a) of the 
National Housing Act to reflect the Secretary's discretion to pay FHA 
insurance claims in cash or debentures. This change will enable HUD, in 
the future, to make a fiscally responsible decision about maintaining 
the costly interagency agreement with Treasury.
    This rule proposes to amend the following sections to bring 
consistency in the payment of FHA insurance claims among FHA programs: 
Sec. Sec.  203.400, 203.476, 203.478, 207.259, 220.751, 220.822, 
221.762, 232.885, 235.215, 236.265, 241.261, 241.885 and 241.1205. As a 
result of these changes, Sec.  220.760 will be eliminated because it 
will be unnecessary.

III. Findings and Certifications

Regulatory Review--Executive Order 13563

    Executive Order 13563 (Improving Regulations and Regulatory Review) 
directs executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned.'' Executive Order 13563 also directs that, where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, agencies are to identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public.
    The broader purposes of the reform to FHA's regulations regarding 
Secretarial discretion of the type of FHA insurance claim payment are 
to eliminate unnecessary spending and bring consistency regarding the 
payment of insurance claims across all FHA programs. As discussed in 
the preamble, the interagency agreement with Treasury costs HUD over 
$206,000 per year, even though HUD currently does not have any 
debentures for payment of FHA insurance claims in circulation, and has 
not made a payment in debentures in approximately 5 years for these 
insurance claims. In addition, different FHA programs treat payment of 
FHA insurance claims differently, and this proposed rule will simplify 
the regulations so that the authority to determine the method of claim 
payment always rests with the Secretary.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
This rule only changes the party which has the authority to determine 
the method of payment of FHA single family, multifamily, and healthcare 
insurance claims.
    Accordingly, the undersigned certifies that this rule will not have 
a significant economic impact on a substantial number of small 
entities. Notwithstanding HUD's determination that this rule will not 
have a significant effect 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 the preamble to this rule.

Environmental Impact

    The proposed rule does not direct, provide for assistance or loan 
and 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).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either (i) imposes substantial direct compliance costs on state and 
local governments and is not required by statute, or (ii) preempts 
state law, unless the agency meets the consultation and funding 
requirements of section 6 of the Executive order. This proposed rule 
would not have federalism implications and would not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments, and on the private sector. This proposed rule would 
not impose any Federal mandates on any state, local, or tribal 
governments, or on the private sector, within the meaning of the UMRA.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for Mortgage 
Insurance-Housing in Older, Declining Areas is 14.123; Mortgage 
Insurance-

[[Page 9255]]

Rental Housing is 14.134; Mortgage Insurance-Rental and Cooperative 
Housing for Moderate Income Families and Elderly, Market Interest Rate; 
Mortgage Insurance-Rental Housing in Urban Renewal Areas is 14.139; 
Supplemental Loan Insurance-Multifamily Rental Housing is 14.151; 
Mortgage Insurance for the Purchase or Refinancing of Existing 
Multifamily Housing Projects is 14.155.

Paperwork Reduction Act

    This proposed rule reduces information collection requirements 
already submitted to the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, an agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a currently valid OMB 
control number.

List of Subjects

24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians-lands, Loan programs-
housing and community development; Mortgage insurance; Reporting and 
recordkeeping requirements; Solar energy.

24 CFR Part 207

    Manufactured homes, Mortgage insurance, Reporting and recordkeeping 
requirements, Solar energy.

24 CFR Part 220

    Home improvement, Loan programs-housing and community development, 
Mortgage insurance, Reporting and recordkeeping requirements, Urban 
renewal.

24 CFR Part 221

    Low and moderate income housing, Mortgage insurance, Reporting and 
recordkeeping requirements.

24 CFR Part 232

    Fire prevention, Health facilities, Loan programs-health, Loan 
programs-housing and community development, Mortgage insurance, Nursing 
homes, Reporting and recordkeeping requirements.

24 CFR Part 235

    Condominiums, Cooperatives, Grant programs-housing and community 
development, Low and moderate income housing, Mortgage insurance, 
Reporting and recordkeeping requirements.

24 CFR Part 236

    Grant programs-housing and community development, Low and moderate 
income housing, Mortgage insurance, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 241

    Home improvement, Loan programs-housing and community development, 
Mortgage insurance, Reporting and recordkeeping requirements, Solar 
energy.

    Accordingly, for the reasons stated above, HUD proposes to amend 24 
CFR parts 203, 207, 220, 221, 232, 235, 236, and 241 as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

0
1. The authority citation for part 203 is revised to read as follows:

    Authority: 12 U.S.C. 1709, 1710, 1715b, 1715z-16, 1715u, 1717z-
21 and 1735d; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).

0
2. Revise Sec.  203.400, to read as follows:


Sec.  203.400  Method of payment.

    (a) If the application for insurance benefits is acceptable to the 
Commissioner, payment of the insurance claim shall be made in cash, in 
debentures, or in a combination of both, as determined by the 
Commissioner either at, or prior to, the time of payment.
    (b) An insurance claim paid on a mortgage insured under section 
223(e) of the National Housing Act shall be paid in cash from the 
Special Risk Insurance Fund.
0
3. Revise Sec.  203.476(g), to read as follows:


Sec.  203.476  Claim application and items to be filed.

* * * * *
    (g) All property of the borrower held by the lender or to which it 
is entitled and, if the Commissioner elects to make payments in 
debentures, all cash held by the lender or to which it is entitled, 
including deposits made for the account of the borrower and which have 
not been applied in reduction of the principal loan indebtedness;
* * * * *
0
4. Revise Sec.  203.478(c), to read as follows:


Sec.  203.478  Payment of insurance benefits.

* * * * *
    (c) Method of payment. Payment of an insurance claim shall be made 
in cash, in debentures, or in a combination of both, as determined by 
the Commissioner either at, or prior to, the time of payment.
* * * * *

PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE

0
5. The authority citation for part 207 is revised to read as follows:

    Authority: 12 U.S.C. 1701z-11(e), 1709(c)(1), 1713, 1715(b) and 
1735d; 42 U.S.C. 3535(d).

0
6. Amend Sec.  207.259 by revising paragraph (a), to read as follows:


Sec.  207.259  Insurance Benefits.

    (a) Method of payment. (1) Upon either an assignment of the 
mortgage to the Commissioner or a conveyance of the property to the 
Commissioner in accordance with requirements in Sec.  207.258, payment 
of an insurance claim shall be made in cash, in debentures, or in a 
combination of both, as determined by the Commissioner either at, or 
prior to, the time of payment.
    (2) An insurance claim paid on a mortgage insured under section 
223(e) of the National Housing Act shall be paid in cash from the 
Special Risk Insurance Fund.
* * * * *

PART 220--MORTGAGE INSURANCE AND INSURED IMPROVEMENT LOANS FOR 
URBAN RENEWAL AND CONCENTRATED DEVELOPMENT

0
7. The authority citation for part 220 is revised to read as follows:

    Authority:  12 U.S.C. 1713, 1715b, 1715k and 1735d; 42 U.S.C. 
3535(d).

0
8. Revise Sec.  220.751(a), to read as follows:


Sec.  220.751  Cross-reference.

    (a) All of the provisions of subpart B, part 207 of this chapter, 
covering mortgages insured under section 207 of the National Housing 
Act, apply with full force and effect to multifamily project mortgages 
insured under section 220 of the National Housing Act, except Sec.  
207.256b Modification of mortgage terms.
* * * * *


Sec.  220.760  [Removed]

0
9. Remove Sec.  220.760.


Sec.  220.822  [Amended].

0
10. In Sec.  220.822, remove and reserve paragraph (b).

[[Page 9256]]

PART 221--LOW COST AND MODERATE INCOME MORTGAGE INSURANCE--SAVINGS 
CLAUSE

0
11. The authority citation for part 221 is revised to read as follows:

    Authority: 12 U.S.C. 1715b, 1715l and 1735d; 42 U.S.C. 3535(d).


Sec.  221.762  [Amended].

0
12. In Sec.  221.762, remove and reserve paragraph (a).

PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE 
FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES

0
13. The authority citation for part 232 is revised to read as follows:


    Authority:  12 U.S.C. 1715b, 1715w, 1735d and 1735f-19; 42 
U.S.C. 3535(d).

0
14. Revise Sec.  232.885(a), to read as follows:


Sec.  232.885  Insurance benefits.

    (a) Method of payment. Payment of an insurance claim shall be made 
in cash, in debentures, or in a combination of both, as determined by 
the Commissioner either at, or prior to, the time of payment.
* * * * *

PART 235--MORTGAGE INSURANCE AND ASSISTANCE PAYMENTS FOR HOME 
OWNERSHIP AND PROJECT REHABILITATION

0
15. The authority citation for part 235 is revised to read as follows:

     Authority:  12 U.S.C. 1715b, 1715z and 1735d; 42 U.S.C. 
3535(d).

0
16. Revise Sec.  235.215, to read as follows:


Sec.  235.215  Method of paying insurance benefits.

    If the application for insurance benefits is acceptable to the 
Secretary, the insurance claim shall be paid in cash, in debentures, or 
in a combination of both, as determined by the Commissioner either at, 
or prior to, the time of payment.

PART 236--MORTGAGE INSURANCE AND INTEREST REDUCTION PAYMENT FOR 
RENTAL PROJECTS

0
17. The authority citation for part 236 is revised to read as follows:

    Authority: 12 U.S.C. 1715b, 1715z-1 and 1735d; 42 U.S.C. 
3535(d).

Sec.  236.265  [Amended].

0
18. In Sec.  236.265, remove and reserve paragraph (a).

PART 241--SUPPLEMENTARY FINANCING FOR INSURED PROJECT MORTGAGES

0
19. The authority citation for part 241 is revised to read as follows:

     Authority: 12 U.S.C. 1715b, 1715z-6 and 1735d; 42 U.S.C. 
3535(d).

0
20. Revise Sec.  241.261, to read as follows:


Sec.  241.261  Payment of insurance benefits.

    All of the provisions of Sec.  207.259 of this chapter relating to 
insurance benefits shall apply to multifamily loans insured under this 
subpart.

0
21. Revise Sec.  241.885(a), to read as follows:


Sec.  241.885  Insurance benefits.

    (a) Method of payment. Payment of insurance claims shall be made in 
cash, in debentures, or in a combination of both, as determined by the 
Commissioner either at, or prior to, the time of payment.
* * * * *
0
22. Revise Sec.  241.1205, to read as follows:


Sec.  241.1205  Payment of insurance benefits.

    All the provisions of Sec.  207.259 of this chapter relating to 
insurance benefits shall apply to an equity or acquisition loan insured 
under subpart F of this part.

    Dated: January 15, 2015.
Biniam Gebre,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2015-03457 Filed 2-19-15; 8:45 am]
BILLING CODE 4210-67-P