[Federal Register Volume 60, Number 49 (Tuesday, March 14, 1995)]
[Rules and Regulations]
[Pages 13854-13855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-6157]



      

[[Page 13853]]

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Part VI





Department of Housing and Urban Development





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24 CFR Part 201



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Title I Property Improvement and Manufactured Home Loans; Electronic 
Payment of Title I Insurance Charges; Final Rule

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

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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.
[[Page 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 Sec. 201.31 to read as 
follows:


Sec. 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