This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

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Rules and Regulations Federal Register

617 

Vol. 74, No. 4 

Wednesday, January 7, 2009 

BOARD OF DIRECTORS OF THE HOPE 

FOR HOMEOWNERS PROGRAM 

24 CFR Part 4001 

[Docket No. B–2009–F–03] 

RIN 2580–AA01 

HOPE for Homeowners Program: 

Program Regulations: Upfront 

Payment Incentive for Subordinate 

Mortgage Lien Holders and Other 

Program Changes 

AGENCY: Board of Directors of the HOPE 

for Homeowners Program. 

ACTION: Interim final rule. 

SUMMARY: This interim final rule 

amends the HOPE for Homeowners 

Program regulations established by the 

Board of Directors (Board) of the HOPE 

for Homeowners Program (Program) and 

published on October 6, 2008. The 

regulations are being amended to 

provide additional flexibility and 

options to lenders as authorized by 

amendments to section 257 of the 

National Housing Act made by the 

Emergency Economic Stabilization Act, 

which was signed into law on October 

3, 2008, and to make additional changes 

designed to improve the Program. 

Specifically, the regulations are 

amended to expand the Program to 

include 2-to-4 unit properties as eligible 

Program properties, which is consistent 

with the definition of ‘‘single family 

residence’’ under the National Housing 

Act. The regulations are also amended 

to provide for the option of an upfront 

payment in lieu of a future appreciation 

payment from the Secretary of Housing 

and Urban Development (Secretary) to a 

holder of an existing subordinate 

mortgage. The upfront payment would 

be offered by the Secretary as an 

incentive to facilitate agreement by all 

mortgage lien holders to release their 

liens on the mortgage to be refinanced 

under the Program. The amendments 

made by this rule also include 

increasing the maximum term of 

Program mortgages from 30 to 40 years, 

as well as increasing or modifying the 

allowable loan-to-value and debt-toincome ratios for new mortgages under 

the Program. The regulations are also 

amended to modify the equity sharing 

provision of the Program for borrowers 

who may have equity in their homes at 

the time they are accepted into the 

Program, and to make the timeframe for 

lenders to obtain endorsement for 

Program loans consistent with other 

FHA programs. 

All these amendments are designed to 

expand the number of eligible borrowers 

and participating lenders and servicers, 

and improve the Program’s operations 

consistent with the requirements and 

purposes of the Program. In addition, 

the regulations are amended to clarify 

the provisions regarding mortgagor 

eligibility, total monthly mortgage 

payment, and shared appreciation in the 

value of the refinanced property. 

DATES: Effective Date: January 7, 2009. 

Comment Due Date: March 9, 2009. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this rule to the Regulations Division, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 Seventh Street, SW., Room 10276, 

Washington, DC 20410–0500. 

Communications should refer to the 

above docket number and title. 

Comment by Mail. Please note that 

due to security measures at all federal 

agencies, submission of comments by 

mail often results in delayed delivery. 

Electronic Submission of Comments. 

HUD now accepts comments 

electronically. Interested persons may 

now submit comments electronically 

through the Federal eRulemaking Portal 

at http://www.regulations.gov. HUD 

strongly encourages commenters to 

submit comments electronically. 

Electronic submission allows the 

commenter maximum time to prepare 

and submit a comment, ensures timely 

receipt by HUD, and enables HUD to 

make them immediately available for 

public viewing. Commenters should 

follow the instructions provided at 

http://www.regulations.gov to submit 

comments electronically. 

No Facsimile Comments. Facsimile 

(FAX) comments are not acceptable. In 

all cases, communications must refer to 

the docket number and title. 

Public Inspection of Public 

Comments. All comments and 

communications submitted will be 

available, without revision, for 

inspection and downloading at http:// 

www.regulations.gov. Comments are 

also available for public inspection and 

copying between 8 a.m. and 5 p.m. 

weekdays at the Regulations Division. 

Due to security measures at the HUD 

Headquarters building, please schedule 

an appointment to review the comments 

by calling the Regulations Division at 

(202) 708–3055 (this is not a toll-free 

number). 

FOR FURTHER INFORMATION CONTACT: 

Emmanuel Yeow, Secretary of the Board 

of Directors of the HOPE for 

Homeowners Program, Department of 

Housing and Urban Development, 451 

7th Street, SW., Room 9110, 

Washington, DC 20410–8000, telephone 

202–708–3600 (this is not a toll-free 

number). Persons with hearing-or 

speech-impairments may access this 

number through TTY by calling the tollfree Federal Information Relay Service 

at 800–877–8339. 

SUPPLEMENTARY INFORMATION: 

Background 

The HOPE for Homeowners Act of 

2008 (Title IV of Division A of the 

Housing and Economic Recovery Act of 

2008 (HERA), (Pub. L. 110–289, 122 

Stat. 2654, approved July 30, 2008)), 

amended Title II of the National 

Housing Act (NHA) to add a new 

section 257. New section 257 (12 U.S.C. 

1701z–22) establishes within the 

Federal Housing Administration (FHA), 

the Program, a temporary FHA program 

that offers homeowners and mortgage 

loan holders (or servicers acting on their 

behalf) insurance on the refinancing of 

loans for distressed mortgagors to 

support long term sustainable 

homeownership and avoid foreclosure. 

Section 257 of the NHA authorizes the 

Department of Housing and Urban 

Development (HUD) acting through 

FHA, to insure such refinanced eligible 

mortgages commencing no earlier than 

October 1, 2008, and the authority to 

insure new mortgages expires 

September 30, 2011. 

On September 30, 2008, the Board 

approved regulations that established 

the core requirements necessary and 

appropriate for implementation of the 

Program. These regulations were 

618 Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Rules and Regulations 

published in the Federal Register on 

October 6, 2008, at 73 FR 58418. 

Under the Program, refinanced 

mortgages are offered by FHA-approved 

mortgagees to eligible borrowers who 

are at risk of losing their homes to 

foreclosure. The refinanced mortgage 

insured by FHA has a principal loan 

balance below the current appraised 

value of the home, creating new equity 

in the mortgaged property. To 

participate in the Program, eligible 

borrowers must be unable to afford their 

existing mortgage payments, must 

occupy the residence that is the security 

for the refinanced mortgage as their 

primary residence, and may not have 

any present ownership interest in 

another residence. Investors and 

investor properties are not eligible for 

the Program. Under the Program, 

participating mortgagors share their new 

equity and future appreciation of the 

value of the property subject to the 

refinanced mortgage with FHA. 

Participation in this Program is 

voluntary. No mortgagees, servicers, or 

investors are compelled to participate. 

Under the Program, all holders of 

outstanding mortgage liens on a 

property to which a mortgage relates 

must agree to accept the proceeds of the 

refinanced FHA-insured loan as 

payment in full of all indebtedness 

under the existing mortgage(s). The 

Secretary is directed by HERA to take 

actions, subject to standards established 

by the Board, to facilitate coordination 

and agreement between the holders of 

the existing senior mortgage and 

existing subordinate mortgages. 

On October 3, 2008, the President 

signed into law the Emergency 

Economic Stabilization Act of 2008 

(Pub. L. 110–343, 122 Stat. 3765) 

(EESA). Section 124 of EESA amended 

section 257 of the NHA to, among other 

things, authorize the Secretary, subject 

to standards established by the Board, to 

make upfront payments to a holder of an 

existing subordinate mortgage in lieu of 

providing the subordinate lien holder a 

portion of HUD’s 50 percent interest in 

the future appreciation of the value of 

the property. Upfront payments may 

provide a more effective incentive to 

subordinate lien holders to release their 

liens on a mortgage eligible to be 

refinanced under the Program, thereby 

better enabling a borrower to participate 

in the Program. In addition, section 124 

of EESA amended section 257(e)(1)(B) of 

the NHA to clarify that a borrower’s 

debt-to-income ratio may be calculated 

for purposes of that section as of March 

1, 2008, or may be calculated as of a 

later date, due to mortgage resets that 

occur after that date under the mortgage 

terms in effect on March 1, 2008. 

Finally, section 124 of EESA amended 

section 257 of the NHA to give the 

Board discretionary authority to raise 

the maximum loan-to-value ratio of a 

Program mortgage, which was set prior 

to the amendment at 90 percent. 

This Interim Final Rule 

This interim final rule makes the 

following changes to the Program 

regulations at 24 CFR part 4001: 

A. Upfront Payment in Lieu of a Future 

Appreciation Payment 

As authorized by section 124 of EESA, 

this interim final rule amends the 

Board’s regulations at 24 CFR 4001.120 

(Appreciation Sharing) to permit a 

holder of an existing subordinate 

mortgage to receive a payment at the 

time a mortgage is refinanced under the 

Program in lieu of a share of any future 

appreciation in the value of the property 

that is owed to HUD. As a condition of 

receiving such payment, the subordinate 

mortgage holder must release the 

borrower of all indebtedness under the 

loan and release the holder’s lien on the 

property. 

The following matrix, codified as 

Appendix A to the Program regulations, 

provides the mechanism for 

determining the risk-adjusted future 

appreciation payment a holder of an 

existing subordinate mortgage may be 

eligible to receive. The Appendix is 

amended by this final rule to reflect the 

risk-adjusted upfront payment a holder 

of an existing subordinate mortgage may 

be eligible to receive in lieu of the future 

appreciation payment. Appendix A is 

also amended to provide that, when 

calculating a subordinate mortgage lien 

holder’s potential appreciation share, 

payment will be based upon principal 

and interest ‘‘as of the first day of the 

month in which the borrower makes 

application for the Program mortgage’’ 

(as opposed to the ‘‘date of origination 

of the Program mortgage,’’ as provided 

for in the appendix to the final rule 

issued on October 6, 2008). These 

amendments are necessary because 

subordinate mortgage lien holders must 

be notified in advance of origination of 

the amount of any upfront or future 

appreciation share they may be eligible 

to receive, and they must agree in 

writing to accept one of these payment 

options. If the upfront option is 

selected, the originating lender must 

provide payment instructions to the 

closing agent in advance of origination. 

If the future appreciation option is 

selected, HUD must prepare and deliver 

the Appreciation Share Certificate prior 

to origination. 

CALCULATION OF UPFRONT AND APPRECIATION SHARING PAYMENT

Subordinate mortgage lien holder’s cumulative combined loan-to-value ratio 

Upfront payment option 

Percent of unpaid principal and interest that 

lien holder is eligible to 

receive # (percent) 

Future appreciation 

option* 

Percent of unpaid principal and interest that 

lien holder is eligible to 

receive # (percent) 

>135% ...................................................................................................................................... 3 9 

≤135% ...................................................................................................................................... 4 12 

*A payment to a subordinate mortgage lien holder will depend on actual appreciation of the property, as determined in accordance with 24 

CFR 4001.120. Payment will be made according to the subordinate lien holder’s position of priority in relation to the property at the time the Program mortgage is originated. 

# Payment will be based upon principal and interest as of the first day of the month in which the borrower made application for the Program 

mortgage and calculated at the pre-default contract rate of interest. 

In establishing the upfront payment 

option, the Board took into account 

information received from market 

participants concerning the price 

currently received in the market for 

delinquent subordinate mortgages. The 

Board expects that the majority of 

subordinate mortgage liens to be 

released under the Program will be 

delinquent. The information provided 

by market participants indicates that 

delinquent subordinate mortgages 

recently have traded at substantially 

below their par values, with market 

values that approximate the ranges 

established by the Board for the upfront 

payment option. As a result, the Board 

believes that the compensation provided 

Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Rules and Regulations 619 

by the upfront payment option at the 

time of settlement should be sufficient 

to facilitate the participation of 

subordinate mortgage lien holders in the 

Program. The Board believes that 

providing an upfront payment option of 

3 to 4 percent, as provided in this 

interim final rule, should likely provide 

the subordinate mortgage lien holder 

with about the same risk-adjusted 

compensation as the holder would 

receive under the right to receive a 

maximum of 9 to 12 percent of the 

unpaid principal and interest on the 

subordinate mortgage out of the future 

appreciation on the property (as is 

provided in the final regulations 

published on October 6, 2008). The 

upfront payment option will be subject 

to the same eligibility requirements as 

the future appreciation option. 

B. Increased Loan-to-Value and Income 

Ratios 

This interim final rule amends 

§ 4001.110 (Underwriting) to increase 

the allowable loan-to-value ratio (LTV) 

of a Program mortgage up to 96.5 

percent for any mortgagor whose: (i) 

New total monthly mortgage payment 

under the Program mortgage will not 

exceed 31 percent of the mortgagor’s 

monthly gross income, and (ii) total 

monthly recurring expenses (including 

mortgage payments) will not exceed 43 

percent of the mortgagor’s monthly 

gross income. This amendment is 

designed to promote Program 

participation by existing senior 

mortgage lien holders. Raising the LTV 

could reduce the gap between the 

existing mortgage balance and the new 

Program mortgage, reducing losses that 

existing primary lien holders may incur 

in connection with a Program mortgage. 

At the same time, the changes seek to 

ensure the new Program mortgage is 

sustainable by limiting the permissible 

DTI ratios to 31⁄43 percent for borrowers 

with a new LTV of greater than 90 

percent. The rule also amends 

§ 4001.110 to allow a mortgagor whose 

Program mortgage has an LTV that does 

not exceed 90 percent to qualify 

immediately for the Program, without 

any trial modification period, if: (i) The 

mortgagor’s new total monthly mortgage 

payments will not exceed 38 percent of 

the mortgagor’s monthly gross income; 

and (ii) the mortgagor’s monthly 

recurring expenses (including mortgage 

expenses) will not exceed 50 percent of 

monthly gross income. The trial 

modification requirement will no longer 

be required under the Program, and the 

provisions related to trial modification 

are removed by this rule. 

Together these amendments should 

expand the number of eligible borrowers 

that may qualify for the Program and 

reduce the operational hurdles and 

other disincentives for lenders or 

servicers to participate in the Program. 

At the same time, the amendments 

balance a borrower’s resulting LTV and 

mortgage debt- and total household 

debt-to-income ratios to help create a 

sustainable new mortgage for the 

borrower. 

C. Extending Program Mortgage Terms 

From 30 to 40 Years 

The rule amends the Program 

regulations at § 4001.110(c) to extend 

the maximum term of a Program 

mortgage from 30 to 40 years. Section 

257(e)(5)(B) of the NHA requires a 

mortgage refinanced under the Program 

to have a term ‘‘not less than’’ 30 years, 

meaning that a longer term is possible. 

A conforming change is made to 

§ 4001.102, which cross-references the 

applicability of HUD’s regulations 

governing eligibility for single family 

mortgage insurance at 24 CFR part 203, 

subpart A. Specifically, the rule amends 

§ 4001.102 to specify that the provisions 

of 24 CFR 203.17(d) limiting the term of 

a HUD-insured mortgage to 30 years are 

not applicable to the Program. 

For mortgagors with very high 

mortgage and household debt loads, 

extending the amortization period may 

reduce their monthly payments 

sufficiently to enable them to qualify for 

the Program. Whether a particular 

borrower would obtain a lower monthly 

payment through a 40 year mortgage 

will depend on, among other things, the 

applicable interest rate. In order for a 

Program mortgage to qualify for 

inclusion in a pool of Program 

mortgages to back securities guaranteed 

by the Government National Mortgage 

Association (Ginnie Mae), the mortgage 

should be for a term of either 30 or 40 

years to maintain consistency in the 

mortgages within a securitization pool. 

If the lender intends to hold the 

Program mortgage or securitize the 

mortgage other than through the Ginnie 

Mae program, then this operational 

limitation would not apply, and the 

lender is free to set the term of the 

mortgage at 30 years, 40 years, or some 

intermediate number of years. 

D. Mortgagor Eligibility, Total Monthly 

Mortgage Payment, and Shared 

Appreciation and Shared Equity 

Requirements 

Under the explicit authority granted 

by section 257(e)(1)(B) of the NHA, this 

rule amends the Program regulations at 

24 CFR 4001.106 (Eligible mortgagors) 

to provide additional flexibility for 

homeowners with adjustable rate 

mortgages to meet the requirement that 

the mortgagor must have had on March 

1, 2008, ‘‘or thereafter is likely to have, 

due to the terms of the mortgage being 

reset,’’ a total monthly mortgage 

payment of more than 31 percent of the 

mortgagor’s monthly gross income. As 

under the current Program regulations, 

any mortgagor will meet this 

requirement if the mortgagor had, as of 

March 1, 2008, a total monthly mortgage 

payment of more than 31 percent of the 

mortgagor’s monthly gross income. In 

addition, this rule amends the existing 

Program regulations to permit a 

mortgagor that had an adjustable rate 

senior or subordinate mortgage on 

March 1, 2008, that by its terms resets 

after March 1, 2008, to alternatively 

qualify for the Program if the mortgagor 

has, as of the date the mortgagor first 

applies for the Program mortgage, a total 

monthly mortgage payment under 

mortgages existing on March 1, 2008, of 

more than 31 percent of the mortgagor’s 

monthly gross income at the time of 

application for the Program mortgage. 

This rule amends 24 CFR 4001.106 to 

reflect this new, alternative qualification 

option for borrowers who had a 

qualifying adjustable-rate mortgage on 

March 1, 2008. 

As under the current Program 

regulations, a borrower’s ‘‘total monthly 

mortgage payment’’ is based on the 

borrower’s fully indexed and fully 

amortizing principal and interest 

payment under the terms of the 

mortgage, as well as amounts required 

to be paid for real estate taxes, hazard 

and mortgage insurance, and certain 

other fees and charges. (See 24 CFR 

4001.07 (Definition of total monthly 

mortgage payment).) This rule also 

amends § 4001.106(a) to correct a 

technical error by replacing ‘‘monthly 

total mortgage payment’’ with the 

defined term ‘‘total monthly mortgage 

payment.’’ 

This interim final rule also makes 

certain modifications to the provisions 

regarding the calculation of shared 

appreciation at § 4001.120 

(Appreciation sharing). The regulation 

at § 4001.120(a)(1) currently provides 

that the amount of appreciation in the 

value of a property securing a Program 

mortgage will be calculated, subject to 

certain adjustments, based on the ‘‘gross 

proceeds from the sale or disposition of 

the property.’’ A non-sale disposition of 

a property, however, may not involve 

the transfer of any proceeds. In addition, 

a sale transaction between the borrower 

and a related party (including a person 

acting on behalf of the mortgagor or a 

related party) may not accurately reflect 

the appreciation in the value of the 

underlying property. In light of the 

foregoing, the rule amends § 4001.120 to 

620 Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Rules and Regulations 

1Section 257(v) of the NHA states that the 

provisions and requirements of section 203(b) of the 

NHA should apply with respect to the Program, 

except as otherwise provided in section 257 of the 

NHA or by the Board. 

provide that, for purposes of the 

appreciation sharing provisions of the 

rule, the appreciation in the value of a 

property will, subject to certain 

adjustments, be based on (1) the gross 

proceeds of a sales transaction, unless 

the transaction is with or on behalf of 

a related party, and (2) the current 

appraised value of the property in the 

case of a non-sale disposition of the 

property or the sale of the property to 

a related party or a person acting on 

behalf of a related party. The definitions 

section of the rule (12 CFR 4001.07) also 

has been amended to include a 

definition of a ‘‘related party’’ of a 

person. This definition includes the 

immediate family of the person, as well 

as entities owned or controlled by the 

person or the person’s immediate 

family. 

E. Eligibility of Two-to-Four Unit 

Properties 

The rule amends § 4001.07 

(Definitions) and § 4001.108 (Eligible 

properties) to expand the types of 

residential properties that are eligible to 

serve as security for a Program mortgage 

to include a 2-to-4 unit residence. After 

further review of section 257 of the 

NHA, the Board determined that the 

term ‘‘residence’’ as used in section 257 

may include a 2-to-4 unit residence, 

which is consistent with how such term 

is applied under section 203(b) of the 

NHA.1 The Board also concluded that 

expansion of the Program to include a 

2-to-4 unit residence would allow more 

borrowers to participate in the Program, 

especially in certain geographic areas, 

such as the Northeast, where 2-to-4 unit 

residences are more prevalent. 

Notwithstanding whether the property 

has 1, 2, 3, or 4 unit(s), the residence 

must be the borrower’s primary 

residence, as this term is defined in 

§ 4001.07, and the borrower cannot have 

an interest in any residential property 

other than the subject 1-to-4 unit 

residence. 

F. Clarification of Initial Equity 

Under section 257 of the NHA and the 

current regulations, a borrower must 

share with HUD the amount of ‘‘equity’’ 

created as a direct result of the 

origination of a Program mortgage. The 

amount of such ‘‘initial’’ equity that a 

borrower must share with HUD, under 

the existing regulations, is based 

(subject to certain adjustments) on the 

difference between the property’s 

current appraised value at the time of 

origination of the Program mortgage and 

the principal amount of the new 

Program mortgage. Consequently, under 

the existing regulations, if a borrower 

has some existing equity in the home at 

the time the borrower enters the 

Program, this equity would have to be 

shared with HUD. In order to prevent 

such an unintended result, this rule 

modifies the calculation of equity 

sharing in § 4001.118. Under the 

modified calculation of initial equity to 

be shared with HUD, lenders should 

deduct the original principal balance on 

the Program mortgage from the lesser of: 

(1) The appraised value of the property 

at the time of origination; or (2) the 

outstanding amount due under all 

existing senior mortgages, existing 

subordinate mortgages, and nonmortgage liens on the property. 

G. Endorsement Timeframe 

Currently under § 4001.116(d), a 

mortgagee must submit a complete case 

binder within 120 days from the date of 

closing for a mortgage to be eligible for 

insurance. The timeframe for lenders to 

obtain endorsement for Program loans 

has been expanded so that it is 

consistent with other FHA programs. To 

ensure that lenders comply with the 

first payment default provision 

established in the law, the Board will 

continue to require the lender to include 

in the file evidence that the borrower 

has made the first payment within 120 

days of loan closing. If the borrower has 

not made such payment, the loan would 

not be eligible for payment of a claim 

under the Program. 

III. Findings and Certifications 

Administrative Procedure Act 

Section 553(a) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) 

Section 553(a) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.) 

(APA) provides that advance notice and 

public comment procedures do not 

apply to a matter relating to agency 

management or personnel or to public 

property, loans, grants, benefits or 

contracts (see 5 U.S.C. 553(a)). Because 

this rule amends regulations for a new 

mortgage insurance program under the 

supervision of the Board, it is exempt 

from notice and comment rulemaking as 

provided in 5 U.S.C. 553(a). 

Nevertheless, the Board has determined 

to request public comment on these 

interim final rule amendments, which 

are effective upon publication in the 

Federal Register. The Board will 

consider any public comments received 

in fulfilling its responsibilities under 

section 257 of the NHA and will 

respond to comments when the Board 

takes final action on this interim final 

rule. 

Executive Order 12866, Regulatory 

Planning and Review 

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866, 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). The first Program regulations 

promulgated by the Board were 

determined to be economically 

significant and an economic analysis 

accompanied issuance of the first 

Program regulations. It has been 

determined that the amendments made 

by this rule do not by themselves meet 

the threshold of economic significance 

set forth in the executive order. As 

noted in the preamble description of the 

economic analysis prepared for the 

October 6, 2008 final rule, the major 

unknown for purposes of an economic 

analysis is Program participation. 

Participation to date has been lower 

than expected under the original 

analysis for the October 6, 2008 final 

rule. Though changes under this rule 

would likely expand participation, the 

increment is not expected to reach the 

threshold for economic significance. 

Although the analysis of the 

amendments made by this rule does not 

anticipate increased participation that 

would result in crossing the threshold 

for economic significance, these changes 

are expected to increase the cost to the 

Federal government of insuring Program 

mortgages, as the amendments made by 

this rule are expected to transfer 

additional risk to the Federal 

government. 

The docket file for this rule is 

available for public inspection in the 

Regulations Division, Office of General 

Counsel, Department of Housing and 

Urban Development, 451 7th Street, 

SW., Room 10276, Washington, DC 

20410–0500. Due to security measures 

at the HUD Headquarters building, an 

advance appointment to review the 

public comments must be scheduled by 

calling the Regulations Division at (202) 

402–3055 (this is not a toll-free 

number). Individuals with speech or 

hearing impairments may access this 

number via TTY by calling the Federal 

Information Relay Service at (800) 877– 

8339. 

Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any rule that has federalism 

Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Rules and Regulations 621 

implications if the rule either imposes 

substantial direct compliance costs on 

state and local governments and is not 

required by statute, or the rule preempts 

state law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the Executive Order. This 

rule does not have federalism 

implications and does not impose 

substantial direct compliance costs on 

state and local governments nor 

preempts 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 the 

private sector. This rule will not impose 

any federal mandates on any state, local, 

or tribal governments or the private 

sector within the meaning of UMRA. 

List of Subjects in 24 CFR Part 4001 

Administrative procedures, Practice 

and procedure, Mortgage insurance, 

Reporting and recordkeeping 

requirements. 

■ For the reasons set forth in the 

preamble, the Board of Directors of the 

HOPE for Homeowners Program amends 

the regulations in part 4001 in Title 24 

of the Code of Federal Regulations to 

read as follows: 

Chapter XXIV—Board of Directors of the 

HOPE for Homeowners Program 

PART 4001—HOPE FOR 

HOMEOWNERS PROGRAM 

■ 1. The authority of 24 CFR part 4001 

continues to read as follows: 

Authority: 12 U.S.C. 1701z–22. 

■ 2. In § 4001.07, insert the definition of 

‘‘Related party’’ to follow the definition 

of ‘‘Program mortgage’’ to read as 

follows: 

§ 4001.07 Definitions. 

* * * * * 

Related party of a person means any 

of the following or another person 

acting on behalf of the person or any of 

the following— 

(1) The person’s father, mother, 

stepfather, stepmother, brother, sister, 

stepbrother, stepsister, son, daughter, 

stepson, stepdaughter, grandparent, 

grandson, granddaughter, father-in-law, 

mother-in-law, brother-in-law, sister-inlaw, son-in-law, daughter-in-law, the 

spouse of any of the foregoing, and the 

person’s spouse; 

(2) Any entity of which 25 percent or 

more of any class of voting securities is 

owned, controlled or held in the 

aggregate by the person or the persons 

referred to in paragraph (1); and 

(3) Any entity of which the person or 

any person referred to in paragraph (1) 

serves as a trustee, general partner, 

limited partner, managing member, or 

director. 

* * * * * 

■ 3. In § 4001.102(a), add the phrase 

‘‘203.17(d) Maturity;’’ immediately 

following the phrase ‘‘203.16 Certificate 

and contract regarding use of dwelling 

for transient or hotel purposes;’’. 

■ 4. Revise § 4001.106 to read as 

follows: 

§ 4001.106 Eligible mortgagors. 

A mortgagor shall be eligible to 

refinance his or her existing mortgages 

under section 257 of the Act only if: 

(a)(1) The mortgagor had, on March 1, 

2008, a total monthly mortgage payment 

(based on mortgages outstanding on 

March 1, 2008) of more than 31 percent 

of the mortgagor’s monthly gross 

income; or 

(2) If the mortgagor’s existing senior 

mortgage or existing subordinate 

mortgage, if any, is an adjustable-rate 

mortgage that by its terms resets after 

March 1, 2008, the mortgagor has a total 

monthly mortgage payment (based on 

mortgages outstanding on March 1, 

2008) of more than 31 percent of the 

mortgagor’s monthly gross income 

calculated as of the date the mortgagor 

first applies for the Program mortgage; 

(b) The mortgagor does not have an 

ownership interest in any other 

residential property; 

(c) The mortgagor has not been 

convicted of fraud under federal or state 

law in the past 10 years; 

(d) The mortgagor certifies that the 

mortgagor has not intentionally 

defaulted on any mortgage or debt and 

has not knowingly, or willfully and with 

actual knowledge, furnished material 

information known to be false for 

purposes of obtaining any Program 

mortgage; and 

(e) The mortgagor meets such other 

requirements as the Board may adopt. 

■ 5. Revise § 4001.108(a) to read as 

follows: 

§ 4001.108 Eligible properties. 

(a) A mortgage may be insured under 

the Program only if the property that is 

to be the security for the mortgage is a 

1-to-4 unit residence. 

* * * * * 

■ 6. In § 4001.110, revise paragraphs (a) 

and (c) to read as follows: 

§ 4001.110 Underwriting. 

* * * * * 

(a) Loan-to-value and income 

thresholds. The loan-to-value (LTV), 

payment-to-income, and debt-to-income 

ratios of the Program mortgage do not 

exceed the thresholds set forth in either 

paragraph (a)(1) or (a)(2) of this section. 

(1) Program mortgage with LTV ratio 

of 90 percent or less. (i) The initial 

principal balance of the Program 

mortgage as a percentage of the current 

appraised value of the property does not 

exceed 90 percent; 

(ii) The total monthly mortgage 

payment of the mortgagor under the 

Program mortgage does not exceed 38 

percent of the mortgagor’s monthly 

gross income; and 

(iii) The sum of the total monthly 

mortgage payment under the Program 

mortgage and all monthly recurring 

expenses of the mortgagor does not 

exceed 50 percent of the mortgagor’s 

monthly gross income. 

(2) Program mortgage with up to 96.5 

percent LTV. (i) The initial principal 

balance of the Program mortgage as a 

percentage of the current appraised 

value of the property does not exceed 

96.5 percent; 

(ii) The total monthly mortgage 

payment of the mortgagor under the 

Program mortgage does not exceed 31 

percent of the mortgagor’s monthly 

gross income; and 

(iii) The sum of the total monthly 

mortgage payment under the Program 

mortgage and all monthly recurring 

expenses of the mortgagor does not 

exceed 43 percent of the mortgagor’s 

monthly gross income. 

* * * * * 

(c) The Program mortgage shall have 

a maturity of not less than 30 years and 

not more than 40 years from the date of 

origination. 

* * * * * 

■ 7. In § 4001.116, revise paragraphs (d) 

and (e) to read as follows: 

§ 4001.116 Representations and 

prohibitions. 

* * * * * 

(d) FHA insurance. A mortgage is 

eligible for insurance if the mortgagee 

submits a complete case binder within 

such time period as the Board 

prescribes. The binder shall include 

evidence acceptable to the Board that 

the mortgage is current. 

(e) Mortgagor failure to make first 

mortgage payment. FHA shall not pay a 

mortgage insurance claim to any 

mortgagee if the first total monthly 

mortgage payment is not made within 

120 days from the date of closing of the 

mortgage. The mortgagee shall not, 

directly or indirectly, make all or a part 

of the first total monthly mortgage 

622 Federal Register / Vol. 74, No. 4 / Wednesday, January 7, 2009 / Rules and Regulations 

1Request of the United States Postal Service 

Regarding Inbound Express Mail International 

(EMS) from Foreign Posts to Add Inbound 

International Expedited Services 2 to Competitive 

Product List; and Notice of Establishment of Rates 

and Classifications Not of General Applicability, 

November 19, 2008 (Request). 

payment on behalf of the mortgagor. The 

mortgagee is prohibited from escrowing 

funds at closing for all or part of the first 

total monthly mortgage payment. 

■ 8. Revise § 4001.118(a)(1) to read as 

follows: 

§ 4001.118 Equity sharing. 

(a) Initial Equity. For purposes of 

section 257(k)(1) of the Act, the initial 

equity created as a direct result of the 

origination of a Program mortgage on a 

property, as calculated by the Program 

mortgage lender, shall equal: 

(1) The lesser of— 

(i) The appraised value of the 

property that was used at the time of 

origination of the Program mortgage to 

underwrite the mortgage and to 

determine compliance with the 

maximum loan-to-value ratio at 

origination established by section 

257(e)(2)(B) of the Act; or 

(ii) The outstanding amount due 

under all existing senior mortgages, 

existing subordinate mortgages, and 

non-mortgage liens on the property; less 

* * * * * 

■ 9. In § 4001.120, revise the heading, 

revise paragraphs (a)(1) and (c)(2), and 

add paragraph (e) to read as follows: 

§ 4001.120 Appreciation sharing or upfront 

payment. 

(a) * * * 

(1) In the case of— 

(i) A sale of the property to one or 

more persons none of which is a related 

party of the mortgagor, the gross 

proceeds from the sale of the property; 

or 

(ii) A disposition of the property or 

the sale of the property to a related party 

of the mortgagor, the current appraised 

value of the property at the time of the 

disposition or sale; less 

* * * * * 

(c) * * * 

(2) The amount of the unpaid 

principal and interest on such existing 

subordinate mortgage, as of the first day 

of the month in which the mortgagor 

made application for the Program 

mortgage, is at least $2,500; and 

* * * * * 

(e) Election to receive upfront 

payment in lieu of a share of 

appreciation. Upon meeting the 

requirements of paragraph (c) of this 

section, the eligible holder(s) of an 

existing subordinate mortgage on a 

property securing a Program mortgage 

may elect to receive, 

contemporaneously with the origination 

of the Program mortgage, a payment 

from FHA in an aggregate amount 

determined in accordance with the 

formula provided in Appendix A to this 

part in lieu of any right to receive a 

portion of FHA’s 50 percent interest in 

the future appreciation in the appraised 

value of such property under paragraph 

(c) of this section. 

■ 10. Appendix A to part 4001, 

including its heading, is revised to read 

as follows: 

APPENDIX A TO PART 4001—CALCULATION OF UPFRONT PAYMENT OR FUTURE APPRECIATION PAYMENT

Subordinate mortgage lien holder’s cumulative combined loan-to-value ratio 

Upfront payment option 

Percent of unpaid principal and interest that 

lien holder is eligible to 

receive # (percent) 

Future appreciation 

option* 

Percent of unpaid principal and interest that 

lien holder is eligible to 

receive # (percent) 

>135% ...................................................................................................................................... 3 9 

≤135% ...................................................................................................................................... 4 12 

* A payment to a subordinate mortgage lien holder will depend on actual appreciation of the property as determined in accordance with 24 

CFR 4001.120. Payment will be made according to the subordinate lien holder’s position of priority in relation to the property at the time the Program mortgage is originated. 

# Payment will be based upon principal and interest as of the first day of the month in which the borrower made application for the Program 

mortgage, calculated at the pre-default contract rate of interest. 

Dated at Washington, DC, this 31st day of 

December 2008. 

By order of the Board of Directors of the 

HOPE for Homeowners Program 

Brian D. Montgomery, 

Chairman of the Board. 

[FR Doc. E9–57 Filed 1–6–09; 8:45 am] 

BILLING CODE 4210–AA–P 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3020 

[Docket Nos. MC2009–10 and CP2009–12; 

Order No. 162] 

International Mail Contracts 

AGENCY: Postal Regulatory Commission. 

ACTION: Final rule. 

SUMMARY: The Commission is adding 

Inbound International Expedited 

Services 2 to the Competitive Product 

List. This action is consistent with 

changes in a recent law governing postal 

operations and a recent Postal Service 

request. Republication of the lists of 

market dominant and competitive 

products is also consistent with new 

requirements in the law. 

DATES: Effective January 7, 2009. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http:// 

www.prc.gov. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 and 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: Regulatory 

History, 73 FR 74212 (December 5, 

2008). 

The Postal Service seeks to add a new 

product identified as Inbound 

International Expedited Services 2 to 

the Competitive Product List. For the 

reasons discussed below, the 

Commission approves the Request. 

I. Background 

On November 19, 2008, the Postal 

Service filed a request pursuant to 39 

U.S.C. 3642 and 39 CFR 3020.30 et seq. 

to add Inbound International Expedited 

Services 2 to the Competitive Product 

List.1 The Postal Service asserts that 

Inbound International Expedited 

Services 2 is a competitive product 

within the meaning of 39 U.S.C. 

3632(b)(3). This Request has been 

assigned Docket No. MC2009–10. 

The Postal Service 

contemporaneously filed notice, 

pursuant to 39 U.S.C. 3632(b)(3) and 39 

CFR 3015.5, that the Governors have 

established prices and classifications 

not of general applicability for Inbound 

Express Mail International (EMS)