24736 Federal Register / Vol. 63, No. 85 / Monday, May 4, 1998 / Proposed Rules

1Weekly Compilation of Presidential Documents,

Vol. 33, No. 26, page 938, at page 944.

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR–4284–P–01]

RIN 2502–AH07

Authority To Reduce FHA Mortgage

Insurance Premium for Mortgages on

Single Family Properties in Central

Cities

AGENCY: Office of the Assistant

Secretary for Housing—Federal Housing

Commissioner, HUD.

ACTION: Proposed rule.

SUMMARY: This proposed rule provides

express authority for a reduced FHA

single family mortgage insurance

premium (MIP) for properties located in

central cities. The purpose of this rule

is to help increase the homeownership

rate in areas of the country where the

homeownership rate is low.

DATES: Comment due date: July 6, 1998.

ADDRESSES: Interested persons are

invited to submit comments regarding

this proposed rule to the Regulations

Division, Office of the General Counsel,

Room 10276, Department of Housing

and Urban Development, 451 Seventh

Street, SW, Washington, DC 20410.

Communications should refer to the

above docket number and title.

Facsimile (FAX) comments are not

acceptable. A copy of each comment

submitted will be available for public

inspection and copying during regular

business hours (7:30 a.m. to 5:30 p.m.)

eastern time at the above address.

FOR FURTHER INFORMATION CONTACT: John

J. Coonts, Director, Office of Insured

Single Family Housing, Room 9266,

Department of Housing and Urban

Development, 451 Seventh Street, SW,

Washington, DC 20410, telephone

(voice) (202) 708–3046. (This is not a

toll-free number.) Hearing-impaired or

speech-impaired individuals may access

the voice telephone listed by calling the

Federal Information Relay Service

during working hours at 1–800–877–

8339.

SUPPLEMENTARY INFORMATION: Three

times during President Clinton’s

administration, FHA has reduced the

up-front mortgage insurance premium

(MIP) for single family mortgages below

the level permitted by statute. In 1994

(through Mortgagee Letter 94–14), FHA

reduced the MIP from the thenapplicable statutory maximum of 3.0%

to 2.25%. FHA further reduced the upfront MIP for first-time homebuyers who

have received homeownership

counseling to 2.00 (Mortgagee Letter 96–

48) and from 2.00 to 1.75% (Mortgagee

Letter 97–37). These measures were

designed to boost the Nation’s

homeownership rate, particularly

among those who are most likely to

have difficulty paying closing costs,

without adversely affecting the actuarial

soundness of the Mutual Mortgage

Insurance Fund. The homeownership

rate for 1997 was 65.7 percent, the

highest annual rate in American history,

due in part to these and other measures

adopted as part of the National

Homeownership Strategy of the

National Partners in Homeownership

initiated by HUD.

The homeownership rate in cities,

however, continues to lag far behind the

rate in suburbs—49.8 % compared to

72.1% as of June 1997. President

Clinton addressed this problem in his

June 23, 1997 remarks to the United

States Conference of Mayors in which

he announced an Urban Homestead

initiative to help Americans become

homeowners in cities. In announcing

one part of the initiative, President

Clinton stated:

But you and I know not enough homes are

in our cities. In the last 4 years, we’ve

reduced FHA mortgage premiums three

times, to lower the average closing cost on a

new home by $1,200. That’s made a lot of

difference to a lot of young people, and I’m

proud of that. Today, we’re going to cut the

premium another $200 for people if they buy

homes in our central cities. This will bring

the total reduction, since we took office, of

closing costs to those families to $1,400.1

In this rule, FHA proposes to carry

out the President’s pledge of an

additional $200 estimated savings for a

typical central city homebuyer by

authorizing a reduced premium—for

those who would otherwise qualify for

the 1.75% premium—of 1.50% for

homeowners in a central city. The rule

would not establish a specific MIP level

for central cities, but would generally

permit FHA to establish an MIP level for

a central city property that would be up

to 25 basis points lower than the MIP

that would otherwise be due. The rule

would define a central city as any city

or county that meets the definition of

‘‘metropolitan city’’ or ‘‘urban county’’

for purposes of HUD’s Community

Development Block Grant (CDBG)

program; i.e., any CDBG entitlement

grantee.

This definition is deliberately broad

to ensure that all areas that may

experience a lower homeownership rate

due to urban location will benefit from

a reduction in MIP level. Because the

definition is based on well-established

boundaries for existing governmental

jurisdictions that are already used for a

major HUD program, the definition will

avoid the confusion that might arise if

new lines were drawn solely for MIP

purposes. The definition proposed in

the rule is clear and concise and—

unlike some other possible approaches

that were considered—lends itself to

effective computer tracking that will

enable FHA to study and evaluate the

effect of the MIP reduction.

FHA has concluded that the proposed

definition of central cities will permit

FHA to reduce the upfront MIP to

1.50% for a first-time homebuyer who

has received pre-purchase counseling,

while also permitting FHA to maintain

the Mutual Mortgage Insurance Fund on

an actuarially sound basis and in excess

of the statutory capital requirement.

Findings and Certifications

Regulatory Flexibility Act

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. In this rule,

FHA proposes to carry out the

President’s pledge of an additional $200

estimated savings for a typical central

city homebuyer by authorizing a

reduced premium—for those who

would otherwise qualify for the 1.75%

premium—of 1.50% for homeowners in

a central city. The rule will have no

adverse or disproportionate economic

impact on small entities. Small entities

are specifically invited, however, to

comment on whether this rule will

significantly affect them, and persons

are invited to submit comments

according to the instructions in the DATE

and ADDRESSES sections in the preamble

of this proposed rule.

Environmental Impact

This proposed rule is exempt from

environmental review requirements

under 24 CFR 50.19(c)(6). That

exemption applies to various rate and

cost determinations and related

administrative or fiscal requirements or

procedures which do not constitute a

development decision that affects the

physical condition of specific project

areas or building sites. The sole impact

of the proposed rule would be to permit

a reduced MIP level for homes in central

cities.

Executive Order 12612, Federalism

The General Counsel, as the

Designated Official under section 6(a) of

Executive Order 12612, Federalism, has

determined that this rule will not have
Federal Register / Vol. 63, No. 85 / Monday, May 4, 1998 / Proposed Rules 24737

substantial direct effects on States or

their political subdivisions, or the

relationship between the Federal

Government and the States, or on the

distribution of power and

responsibilities among the various

levels of government. No programmatic

or policy changes will result from this

rule that would affect the relationship

between the Federal Government and

State and local governments.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (Pub. L. 104–4;

approved March 22, 1995) (UMRA)

establishes requirements for Federal

agencies to assess the effects of their

regulatory actions on State, local, and

tribal governments, and on the private

sector. This rule does not impose any

Federal mandates on any State, local, or

tribal governments, or on the private

sector, within the meaning of the

UMRA.

Catalog

The Catalog of Federal Domestic

Assistance number for the basic FHA

single family mortgage insurance

program is 14.117.

List of Subjects in 24 CFR Part 203

Hawaiian Natives, Home

improvement, Indians—lands, Loan

programs—housing and community

development, Mortgage insurance,

Reporting and recordkeeping

requirements, Solar energy.

Accordingly, the Department

proposes to amend 24 CFR part 203 as

follows:

PART 203—SINGLE FAMILY

MORTGAGE INSURANCE

1. The authority citation for 24 CFR

part 203 continues to read as follows:

Authority: 12 U.S.C. 1709, 1710, 1715b and

1715u; 42 U.S.C. 3535(d).

2. Section 203.284 is amended by

adding a new paragraph (i) to read as

follows:

§ 203.284 Calculation of up-front and

annual MIP on or after July 1, 1991.

* * * * *

(i) Central cities. If the mortgage is on

property in a central city, the Secretary

may establish the percentage used to

calculate up-front MIP level at a rate

that is up to 25 basis points lower than

the rate used to calculate MIP for a

comparable mortgage on property that is

not in a central city. For purposes of this

section, ‘‘central city’’ means any city or

county that is included in the

definitions of ‘‘metropolitan city’’ or

‘‘urban county’’ in sections 102(4) and

102(6) of the Housing and Community

Development Act of 1974, 42 U.S.C.

5302(4) and 5302(6).

3. Section 203.285(c) is revised to

read as follows:

§ 203.285 Fifteen-year mortgages:

Calculation of up-front and annual MIP on

or after December 26, 1992.

* * * * *

(c) Applicability of certain provisions.

The provisions of §§ 203.261. 203.262,

203.264, 203.265, 203.266, 203.267,

203.268, 203.269, 203.280, 203.282,

203.284(c), 203.284(g) and 203.284(i) are

applicable to mortgages subject to

premiums under this section.

* * * * *

Dated: March 27, 1998.

Art Agnos,

Acting General Deputy Assistant Secretary

for Housing-Deputy Federal Housing

Commissioner.

[FR Doc. 98–11792 Filed 5–1–98; 8:45 am]

BILLING CODE 4210–27–P