13854 Federal Register / Vol. 60, No. 49 / Tuesday, March 14, 1995 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

Office of the Assistant Secretary for

Housing—Federal Housing

Commissioner

24 CFR Part 201

[Docket No. R–95–1765; FR–3823–F–01]

RIN 2502–AG41

Title I Property Improvement and

Manufactured Home Loans; Electronic

Payment of Title I Insurance Charges

AGENCY: Office of the Assistant

Secretary for Housing—Federal Housing

Commissioner, HUD.

ACTION: Final rule.

SUMMARY: This final rule amends the

regulations governing the property

improvement and manufactured home

loan insurance programs under Title I,

section 2 of the National Housing Act.

This rule permits the Secretary to

require that Title I insurance charge

payments be made through the

Automated Clearing House (ACH)

program. The purpose of this rule is to

improve the efficiency of the Federal

Housing Administration (FHA) Title I

insurance program and reduce costs to

HUD lenders.

EFFECTIVE DATE: April 13, 1995.

FOR FURTHER INFORMATION CONTACT:

James A. White, Acting Director, Title I

Accounting and Servicing Division,

Room 3100, Department of Housing and

Urban Development, 470 L’Enfant Plaza,

East, Washington, DC 20024; telephone

(202) 755–7545, extension 105; or (202)

708–4594 (voice/TDD). (These are not

toll-free telephone numbers.)

SUPPLEMENTARY INFORMATION:

I. Background

In 1985 the Department of Housing

and Urban Development (HUD)

implemented the Automated Clearing

House (ACH) program, with voluntary

participation by mortgagees, for the

payment of up-front mortgage insurance

premiums for single-family mortgages

that are obligations of the Mutual

Mortgage Insurance Fund.

On June 9, 1992, HUD published a

proposed rule in the Federal Register

(57 FR 24424) that would amend the

Title II regulations to permit the FHA

Commissioner to require that all such

premium payments be made through

ACH. Five comments were received in

response to that proposed rule. Two

comments were from automated

clearing house associations, and

expressed general approval of HUD’s

proposal. Two comments were from

national trade associations; both of these

were favorable to the proposal, although

one expressed a number of technical

operational concerns. The fifth

comment, from a small lender,

expressed a similar concern to one

raised by one of the trade associations,

namely the financial impact on small

lenders.

On March 8, 1993, HUD published a

final rule in the Federal Register (58 FR

12901) that was unchanged from the

proposed rule. However, because of the

concerns communicated in the

comments, HUD allowed a one-year

grace period for institutions making 300

or fewer new FHA single family loans

per year. Also in 1993, HUD

implemented the ACH program on a

voluntary basis for the payment of Title

I insurance charges.

The ACH system is designed to

process the collection of Title I

insurance charges from lenders, using

remote terminals instead of sending

checks and HUD–646 forms by mail.

The lender’s terminal operator dials a

number that ties the terminal or

personal computer into the collection

agent’s telenet system. The collection

agent originates an ACH file of debit

transactions based on the data keyed by

the lender.

Each day at 6 p.m. eastern time, the

collection agent originates an ACH file

of debit transactions based on the data

keyed by the lender. When the debit

transactions have been processed, the

ACH will transmit the Title I insurance

charge data to HUD’s Title I Insurance

System. Through this ACH process, the

debit amount is drawn electronically

from the designated lender’s bank

account the next day, or can be

‘‘warehoused’’ and drawn on the

lender’s bank account on a future date.

The corresponding credit entry will

update HUD’s account.

Without ACH, HUD personnel must

correct all incorrect data submitted by

lenders, and the HUD system must

prepare, key, and then reprocess the

corrected transaction. The ACH transfer

system eliminates most errors. Built-in

edits will verify data and produce an

error message for lenders entering their

payment data via terminal/personal

computer, and an error fax confirmation

for lenders entering their payment data

via mainframe to mainframe. The ACH

transfer system uses the lender contract

number as part of the logon procedure.

Any error in the lender contract number

results in the ACH transfer system

rejecting the logon attempt. In addition,

the ACH transfer system will verify that

the payment amount equals the billing

amount less the exceptions.

Penalty charges and interest charges

will be processed in the same manner as

in the past and billed on the next

statement. Penalty charges are levied if

payment is received later than 25 days

after the billing date. Interest charges are

assessed when payment is received on

or after the 55th day after the billing

date. For the ACH program, penalty

charge and interest charge amounts are

automatically calculated by the system.

ACH provides lenders with numerous

tangible benefits that should reduce

their servicing costs. The advantages of

ACH are:

(1) Control of payment timing—The

use of ACH debits and credits can

increase control of payment initiation

and funds availability;

(2) Banking costs are reduced—ACH

transfers cost less than paper checks and

wire transfers;

(3) Accounting reconciliation is

reduced—Payments are computerized

and cash application is more automated

than with manual systems;

(4) On-line edits can reduce data

errors created by manual recording;

(5) The chance of lost/late mail is

eliminated;

(6) ACH payments are fully traceable;

(7) The premium payments are drawn

down electronically from the lender’s

designated bank account.

Because ACH provides lenders as well

as HUD with numerous tangible benefits

that reduce servicing costs, HUD

intends to use ACH as the sole method

for collecting Title I insurance charges.

HUD believes that this rule does not

have a significant economic impact on

the smaller lending community for two

reasons. First, lenders need only have

access to a personal computer to

participate in the ACH program, and

personal computing is pervasive within

the industry. Second, implementation of

this process will be phased in and

coordinated with lenders on an

individual basis. This rule implements

a program that will enhance operations

and be cost beneficial for all Title I

lenders.

Under this final rule, insurance

charges will be collected by the ACH

program for all property improvement

and manufactured home loan insurance

programs under Title I, section 2 of the

National Housing Act (12 U.S.C. 1703).

Instructions implementing this rule will

be transmitted to all Title I lenders at

least 30 days before payment of Title I

insurance charges by ACH will be

required. The instructions will provide

for a grace period of up to one year for

compliance by small lenders with

portfolios of fewer than 200 loans.
Federal Register / Vol. 60, No. 49 / Tuesday, March 14, 1995 / Rules and Regulations 13855

II. Justification for Final Rulemaking

In general, HUD publishes a rule for

public comment before issuing a rule for

effect, in accordance with its own

regulations on rulemaking (24 CFR part

10). However, part 10 provides for

exceptions from that general rule if HUD

finds good cause to omit advance notice

and public participation. The good

cause requirement is satisfied when

prior public procedure is

‘‘impracticable, unnecessary, or contrary

to the public interest’’ (24 CFR 10.1).

HUD finds that good cause exists to

publish this rule for effect without first

soliciting public comment. Due to

HUD’s experience in promulgating the

amendment to the Title II regulations for

payment of insurance premiums

through ACH, and the voluntary

participation in the ACH program by

some Title I lenders, HUD finds that

prior public procedure is unnecessary.

III. Other Matters

Environmental Impact

In accordance with 40 CFR 1508.4 of

the regulations of the Council on

Environmental Quality, and 24 CFR

50.20(k) of the HUD regulations, this

rule is categorically excluded from the

requirements of the National

Environmental Policy Act. The rule

relates solely to internal administrative

procedures, the content of which do not

involve a development decision or affect

the physical condition of project areas

or building sites, but only relate to the

performance of accounting, auditing,

and fiscal functions.

Regulatory Flexibility Act

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this rule before

publication and by approving it certifies

that this rule does not have a significant

economic impact on a substantial

number of small entities. The rule

implements a program that will enhance

operations and be cost beneficial for all

Title I lenders. In addition, the plan to

phase in the program with lenders on an

individual basis assures against undue

burdens on small organizations.

Regulatory Agenda

This rule was not listed in the

Department’s Semiannual Agenda of

Regulations published on November 14,

1994 (59 FR 57632) in accordance with

Executive Order 12866 and the

Regulatory Flexibility Act.

Executive Order 12612, Federalism

The General Counsel, as the

Designated Official under section 6(a) of

Executive Order 12612, Federalism, has

determined that the policies contained

in this rule will not have 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. As a

result, the rule is not subject to review

under the Order. Specifically, the

requirements of this rule are directed to

lenders, and do not impinge upon the

relationship between the Federal

government and State and local

governments.

Executive Order 12606, The Family

The General Counsel, as the

Designated Official under Executive

Order 12606, The Family, has

determined that this rule does not have

potential for significant impact on

family formation, maintenance, and

general well-being, and thus is not

subject to review under the Order. No

significant change in existing HUD

policies or programs will result from

promulgation of this rule, as those

policies and programs relate to family

concerns.

Catalog of Federal Domestic Assistance

Program numbers are:

14.110 Manufactured Home Loan

Insurance—Financing Purchase of

Manufactured Homes as Principal

Residences of Borrowers;

14.142 Property Improvement Loan

Insurance for Improving All Existing

Structures and Building of New

Nonresidential Structures; and

14.162 Mortgage Insurance—

Combination and Manufactured Home

Lot Loans.

List of Subjects in 24 CFR Part 201

Health facilities, Historic

preservation, Home improvement, Loan

programs—housing and community

development, Manufactured homes,

Mortgage insurance, Reporting and

recordkeeping requirements.

Accordingly, 24 CFR part 201 is

amended as follows:

PART 201—TITLE I PROPERTY

IMPROVEMENT AND MANUFACTURED

HOME LOANS

1. The authority citation for 24 CFR

part 201 continues to read as set forth

below:

Authority: 12 U.S.C. 1703; 42 U.S.C.

3535(d).

2. A new paragraph (b)(4) is added to

§ 201.31 to read as follows:

§ 201.31 Insurance charge.

* * * * *

(b) * * *

(4) The Secretary may require that

loan insurance charges be remitted

electronically. Instructions

implementing this requirement shall be

communicated to all affected lenders.

* * * * *

Dated: February 8, 1995.

Nicolas P. Retsinas,

Assistant Secretary for Housing—Federal

Housing Commissioner.

[FR Doc. 95–6157 Filed 3–13–95; 8:45 am]

BILLING CODE 4210–27–P