[Federal Register Volume 61, Number 6 (Tuesday, January 9, 1996)]
[Rules and Regulations]
[Pages 684-685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-113]




[[Page 683]]

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Part II





Department of Housing and Urban Development





_______________________________________________________________________



Office of the Secretary



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24 CFR Part 25



Mortgagee Review Board; Streamlined Final Rule

Federal Register / Vol. 61, No. 6 / Tuesday, January 9, 1996 / Rules 
and Regulations 

[[Page 684]]


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Secretary

24 CFR Part 25

[Docket No. FR-3979-F-01]
RIN 2501-AC09


Mortgagee Review Board; Streamlined Final Rule

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: This rule further streamlines HUD's regulations on the 
Mortgagee Review Board (MRB). This rule is part of HUD's efforts to 
comply with the President's regulatory reform initiatives by producing 
concise regulations that are easy to use and understand. This rule will 
not change the substantive requirements of the MRB regulations, but it 
will eliminate provisions that are redundant of the MRB statute.

EFFECTIVE DATE: February 8, 1996.

FOR FURTHER INFORMATION CONTACT: Emmett N. Roden, Assistant General 
Counsel for Administrative Proceedings, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street, S.W., Room 
10251, Washington, D.C. 20410, telephone (202) 708-2350. The telephone 
number for the hearing impaired (TDD) is (202) 708-9300. These are not 
toll-free numbers.

SUPPLEMENTARY INFORMATION: The Mortgagee Review Board (MRB or the 
Board) final rule was published in the Federal Register on August 1, 
1995 (60 FR 39236). The August 1, 1995 final rule streamlined the 
hearing procedures to allow the Board to delegate its hearing authority 
to a hearing official. This new process is much less time-consuming and 
expensive, and it is consistent with the President's regulatory reform 
initiatives expressed in Executive Order 12866 and the President's 
memorandum of March 4, 1995 to all Federal departments and agencies.
    However, HUD has determined that it can further streamline the 
regulations by removing language that is redundant of the MRB statute 
(12 U.S.C. 1708(c)-(d)). For example, the statute fully describes the 
types of administrative actions that the Board may take against 
mortgagees, the Board's authority to request the Secretary to issue 
cease and desist orders to mortgagees, and the requirement to notify 
GNMA of withdrawal actions. Since these statutory provisions are nearly 
self-explanatory and widely accessible, it is unnecessary to repeat 
them in the Code of Federal Regulations.
    Therefore, this rule removes several redundant provisions from the 
MRB regulations. This rule revises Sec. 25.3 to remove the following 
definitions: administrative action, cease and desist order, letter of 
reprimand, notice of charges, party, probation, reasonable cause, 
suspension, and withdrawal. The rule revises Sec. 25.5 (Administrative 
actions) and removes Sec. 25.12 (Cease and desist orders). The rule 
also revises Sec. 25.14 concerning the requirement to notify GNMA of 
withdrawal actions, and removes Sec. 25.15 concerning annual reports to 
the Secretary. In place of the redundant statutory language, this rule 
includes the references to the appropriate statutory provisions.
    Although the statutory provisions are accessible and are referenced 
in the new rule text, HUD seeks to ensure that this rule is easy to 
use. Therefore, HUD intends to provide mortgagees with a copy of the 
MRB statute along with the copies of the updated regulatory text that 
HUD routinely provides.
    This rule also amends the regulations to correct three minor 
errors. First, this rule corrects a typographical error in 
Sec. 25.9(l); the word ``inquiries'' should appear instead of 
``inquires.'' Second, this rule corrects Sec. 25.9(p) to refer to 
prudent ``mortgagees'' rather than ``lenders.'' HUD had intended to use 
the term ``mortgagees'' in this paragraph, in conformance with the 
definition of that term in Sec. 25.3. Third, this rule restores 
language in Sec. 25.5(d) regarding the effect of a suspension upon 
Title I lenders that was inadvertently deleted from Sec. 202.9(a)(3) in 
the August 1, 1995 final rule.

Justification for Final Rulemaking

    HUD generally publishes a rule for public comment before issuing a 
final rule for effect, in accordance with its regulations on rulemaking 
(24 CFR part 10). However, part 10 provides exceptions from the 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. 
Since this rule does not alter any rights or responsibilities of 
parties affected by the rule nor any substantive requirements of the 
rule, such prior public procedure is unnecessary.

Findings and Other Matters

National Environmental Policy Act

    In accordance with 40 CFR 1508.4 of the regulations of the Council 
on Environmental Quality and 24 CFR 50.20(k) of HUD regulations, the 
policies and procedures contained in this rule relate only to 
administrative decisions, which do not constitute development decisions 
and do not affect the physical condition of a project area or building. 
Therefore, this rule is categorically excluded from the requirements of 
the National Environmental Policy Act.

Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 
605(b)), the Secretary hereby certifies that this rule would not have a 
significant economic impact on a substantial number of small entities. 
The rule streamlines the Mortgagee Review Board regulations by removing 
language from the Code of Federal Regulations that is redundant of 
language that appears in the United States Code. It will have no 
adverse or disproportionate economic impact on small businesses.

Executive Order 12606, The Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this final rule does not 
have potential for significant impact on family formation, maintenance, 
and general well-being. 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. Therefore, the rule is 
not subject to review under the Order.

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 final rule is not subject to review under the Order.

List of Subjects in 24 CFR Part 25

    Administrative practice and procedure, Loan programs--housing and 
community development, Organization and functions (Government 
agencies).


[[Page 685]]

    Accordingly, 24 CFR part 25 is amended as follows:

PART 25--MORTGAGEE REVIEW BOARD

    1. The authority citation for part 25 continues to read as follows:

    Authority: 12 U.S.C. 1708 (c)-(d)), 1709(s), 1715b, and 1735 
(f)-14; 42 U.S.C. 3535(d).

    2. Section 25.3 is amended by removing the definitions for the 
following terms: ``administrative action'', ``cease and desist order'', 
``letter of reprimand'', ``notice of charges'', ``party'', 
``probation'', ``reasonable cause'', ``suspension'', and 
``withdrawal''; and by revising the definitions for the terms 
``lender'', ``loan correspondent'', and ``mortgagee'', to read as 
follows:


Sec. 25.3  Definitions.

* * * * *
    Lender. A financial institution as defined in Sec. 202.2(a) of this 
title.
    Loan correspondent. A financial institution as defined in 
Sec. 202.2(b) of this title.
    Mortgagee. For purposes of the regulations in this part, the term 
``mortgagee'' includes:
    (1) The original lender
    under the mortgage, as that term is defined at sections 201(a) and 
207(a)(1) of the National Housing Act (12 U.S.C. 1707(a), 1713(a)(1));
    (2) A lender or loan correspondent as defined in this section;
    (3) A branch office or subsidiary of the mortgagee, lender, or loan 
correspondent; or
    (4) Successors and assigns of the mortgagee, lender, or loan 
correspondent, as are approved by the Commissioner.
* * * * *
    3. Section 25.5 is revised to read as follows:


Sec. 25.5  Administrative actions.

    (a) General. The Board is authorized to take the following 
administrative actions: letter of reprimand, probation, suspension, 
withdrawal, or settlement agreement. These actions are described at 12 
U.S.C. 1708(c)(3), and as further set out in this section.
    (b) Letter of reprimand. A letter of reprimand shall be effective 
upon receipt of the letter by the mortgagee. Failure to comply with a 
directive in the letter of reprimand may result in any other 
administrative action under this part that the Board finds appropriate.
    (c) Probation. Probation shall be effective upon receipt of the 
notice of probation by the mortgagee. Failure to comply with the terms 
of probation may result in any other administrative action under this 
part that the Board finds appropriate.
    (d) Suspension. A suspension shall be based upon adequate evidence 
and shall be effective upon receipt of the notice of suspension by the 
mortgagee. During the period of suspension, HUD will not endorse any 
mortgage originated by the suspended mortgagee unless prior to the date 
of suspension a firm commitment has been issued relating to any such 
mortgage, or a Direct Endorsement underwriter has approved the 
mortgagor for any such mortgage. During the period of suspension, a 
lender or loan correspondent may not originate new title I loans under 
their Title I Contracts of Insurance or apply for a new Contract of 
Insurance.
    (e)(1) Withdrawal. During the period of withdrawal, HUD will not 
endorse any mortgage originated by the withdrawn mortgagee unless prior 
to the date of withdrawal a firm commitment has been issued relating to 
any such mortgage, or a Direct Endorsement underwriter has approved the 
mortgagor for any such mortgage. During the period of withdrawal, a 
lender or loan correspondent may not originate new title I loans under 
their Title I Contracts of Insurance or apply for a new Contract of 
Insurance. The Board may limit the geographical extent of the 
withdrawal, or limit its scope (e.g., to either the single family or 
multifamily activities of a withdrawn mortgagee). Upon the expiration 
of the period of withdrawal, the mortgagee may file a new application 
for approval under 24 CFR part 202.
    (2) Effective date of withdrawal. (i) If the Board determines that 
immediate action is in the public interest or in the best interests of 
the Department, then withdrawal shall be effective upon receipt of the 
Board's notice of withdrawal.
    (ii) If the Board does not determine that immediate action is 
necessary according to paragraph (e)(2)(i) of this section, then 
withdrawal shall be effective either:
    (A) Upon the expiration of the 30-day period specified in 
Sec. 25.8, if the mortgagee has not requested a hearing; or
    (B) Upon receipt of the Board's decision under Sec. 25.8, if the 
mortgagee requests a hearing.
    4. Section 25.9 is amended by revising paragraphs (l) and (p) to 
read as follows:


Sec. 25.9  Grounds for an administrative action.

* * * * *
    (l) Failure of a mortgagee to respond to inquiries from the Board;
* * * * *
    (p) Business practices which do not conform to generally accepted 
practices of prudent mortgagees or which demonstrate irresponsibility;
* * * * *


Sec. 25.12  [Removed]

    5. Section 25.12 is removed.


Sec. 25.13  [Redesignated as Sec. 25.12]

    6. Section 25.13 is redesignated as Sec. 25.12.
    7. Section 25.14 is redesignated as Sec. 25.13, and is revised to 
read as follows:


Sec. 25.13  Notifying GNMA of withdrawal actions.

    When the Board issues a notice of violation that could lead to 
withdrawal of a mortgagee's approval, or is notified by GNMA of an 
action that could lead to withdrawal of GNMA approval, the Board shall 
proceed in accordance with 12 U.S.C. 1708(d).

(Approved by the Office of Management and Budget under Control 
Number 2502-0450.)


Sec. 25.15  [Removed]

    8. Section 25.15 is removed.


Sec. 25.16  [Redesignated as Sec. 25.14]

    9. Section 25.16 is redesignated as Sec. 25.14.


Sec. 25.18  [Redesignated as Sec. 25.15]

    10. Section 25.18 is redesignated as Sec. 25.15.

    Dated: December 15, 1995.
Henry G. Cisneros,
Secretary.
[FR Doc. 96-113 Filed 1-8-96; 8:45 am]
BILLING CODE 4210-32-P