2650 Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

Office of the Assistant Secretary for

Housing—Federal Housing

Commissioner

24 CFR Parts 202 and 203

[Docket No. FR–3957–I–01]

RIN 2502–AG57

Streamlining Mortgagee Requirements

AGENCY: Office of the Assistant

Secretary for Housing—Federal Housing

Commissioner, HUD.

ACTION: Interim rule.

SUMMARY: This rule revises FHA’s

mortgagee requirements to streamline

and make the FHA process more flexible

for mortgagees and FHA’s customers

and clients.

DATES: Effective date: February 26, 1996.

Comment due date: March 26, 1996.

ADDRESSES: Interested persons are

invited to submit comments regarding

this rule to the Rules Docket Clerk,

Office of General Counsel, Room 10276,

Department of Housing and Urban

Development, 451 Seventh Street, SW,

Washington, DC 20410–0500.

Communications should refer to the

above docket number and title.

Facsimile (FAX) comments are not

acceptable. A copy of each

communication submitted will be

available for public inspection and

copying between 7:30 a.m. and 5:30

p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT:

William M. Heyman, Director, Office of

Lender Activities and Land Sales

Registration, Room 9156, Department of

Housing and Urban Development, 451

Seventh Street, SW, Washington, DC

20410, telephone (voice) (202) 708–

1515, (TDD) (202) 708–4594. (These are

not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Background

Earlier this year an FHA Single

Family Business Practices Working

Group was established to develop

recommendations to streamline the FHA

process, reduce or eliminate

unnecessary requirements, promote

greater opportunities for first-time

homebuyers and minorities, and

maintain a responsible risk management

program. The Working Group was

comprised of representatives of

mortgage lenders, State and local

governments, trade associations,

realtors, government-sponsored

enterprises, and other interested parties.

The revisions made by this rule result

from the efforts and recommendations

made by the Working Group. They will

make the FHA process more flexible for

mortgagees, and for State and local

governments and nonprofit associations,

and also expand homeownership

opportunities. They will also assist in

making the FHA a more effective

organization to serve the needs of our

customers and clients. The revisions

should also minimize the differences

between FHA and conventional loan

processing and place greater reliance

and accountability on mortgagees.

A number of recommended changes

did not require rulemaking and,

therefore, were made effective

immediately with the issuance of

Mortgagee Letter 95–36, dated August 2,

1995. However, some of the

recommended changes require either

rulemaking or modification of existing

data systems. This rule sets forth the

changes that require rulemaking for

implementation. Changes effected as a

result of modifications of existing data

systems will be announced later.

This Interim Rule

This interim rule makes the following

changes:

—Section 202.11(a)(5) is revised to

establish uniform requirements on the

use of authorized agents by

supervised and nonsupervised

mortgagees. For conforming reasons,

§§ 202.13(e) and 202.17(d) are

removed.

—Section 202.12(m) is revised to

eliminate the requirement that a

branch office of a mortgagee must be

approved by FHA to originate FHA

mortgages. A branch registry process

is permitted. However, a

nonsupervised loan correspondent

will be required to provide evidence

that it complies with the net worth

requirements for itself and all of its

branches, as set forth in

§ 202.12(n)(3).

—Section 202.15(c)(1) is revised to

eliminate the requirement that loans

must be closed in the name of the

Loan Correspondent, and to permit

such mortgages to be closed in either

the name of the Loan Correspondent

or its Sponsor(s).

—Section 202.15(c)(5) is revised to

eliminate the compliance report and

the report on internal control from

Loan Correspondents’ annual audited

financial statements.

—Section 203.3(b)(2) is revised to

eliminate the requirement that FHA

individually approve mortgagees’

Direct Endorsement underwriters and

to establish a registry process for the

underwriter. Also, The requirement

that the technical staff utilized by the

mortgagee be approved by the

Secretary is removed. For conforming

reasons, §§ 203.3(b)(3) and (c) are

eliminated.

Other Matters

Justification for Interim Rule

In general, the Department 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 does provide

for exceptions from that general rule

where the Department 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) The Department

finds that good cause exists to publish

this rule for effect without first

soliciting public comment, in that

public procedure is contrary to the

public interest and unnecessary.

No mortgagees or potential mortgagors

will be adversely affected by the

revisions made by this rule without

prior public comment. To the contrary,

the revisions will streamline and make

the FHA processes more flexible for

mortgagees and FHA’s customers and

clients.

For these reasons, HUD has

concluded that the public interest

would not be served by the delay that

issuance of a proposed rule would

involve.

Environmental Finding

A Finding of No Significant Impact

with respect to the environment has

been made in accordance with HUD

regulations at 24 CFR Part 50, which

implement section 102(2)(C) of the

National Environmental Policy Act of

1969. The Finding of No Significant

Impact is available for public inspection

between 7:30 a.m. and 5:30 p.m.

weekdays in the Office of the Rules

Docket Clerk, Office of the General

Counsel, Department of Housing and

Urban Development, Room 10276, 451

Seventh Street, SW., Washington, DC

20410.

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
Federal Register / Vol. 61, No. 18 / Friday, January 26, 1996 / Rules and Regulations 2651

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

insuring mortgages 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

because it revises mortgagee

requirements.

The Regulatory Flexibility Act

In accordance with 5 U.S.C. 605(b)

(the Regulatory Flexibility Act), the

Secretary by his approval of this rule

hereby certifies that this rule does not

have a significant economic impact on

a substantial number of small entities

because the changes made by this rule

are primarily procedural and will not

have a significant economic impact.

List of Subjects in Part 202

Administrative practice and

procedure, Home improvement,

Manufactured homes, Mortgage

insurance, Reporting and recordkeeping

requirements.

List of Subjects in Part 203

Hawaiian Natives, Home

improvement, Indians—lands, Loan

programs—housing and community

development, Mortgage insurance,

Reporting and recordkeeping

requirements, Solar energy.

Accordingly, Subchapter B of Chapter

II of title 24 of the Code of Federal

Regulations is amended as follows:

CHAPTER II—OFFICE OF THE ASSISTANT

SECRETARY FOR HOUSING—FEDERAL

HOUSING COMMISSIONER, DEPARTMENT

OF HOUSING AND URBAN DEVELOPMENT

Subchapter B—Mortgage and Loan

Insurance Programs Under National

Housing Act and Other Authorities

PART 202—APPROVAL OF LENDING

INSTITUTIONS AND MORTGAGEES

1. The authority for part 202

continues to read as follows:

Authority: 12 U.S.C. 1703, 1709, and

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

2. Part 202 is amended by revising—

a. In § 202.11, paragraph (a)(5) to read

as follows:

§ 202.11 Approval, recertification,

withdrawal of approval and termination of

approval agreement.

(a) * * *

(5) A mortgagee approved under

§§ 202.13, 202.14, or 202.17 may, with

the approval of the Secretary, designate

another mortgagee approved under

§§ 202.13 or 202.14 as authorized agent

for the purpose of submitting

applications for mortgage insurance in

its name and on its behalf.

* * * * *

b. In § 202.12, paragraph (m) to read

as follows:

§ 202.12 General approval requirements.

* * * * *

(m) Branch offices. A mortgagee

approved under §§ 202.13 or 202.14, or

a mortgagee that meets the definition of

a supervised mortgagee under § 202.13

and applies for approval as a loan

correspondent under § 202.15, may

maintain branch offices for the

submission of applications for mortgage

insurance, provided that registration of

such branches is maintained with the

Secretary. A nonsupervised loan

correspondent approved under § 202.15

will be required to provide evidence

that it complies with net worth

requirements for itself and all of its

branches, as set forth in § 202.12(n)(3).

The mortgagee shall remain fully

responsible to the Secretary for the

actions of its branch offices.

* * * * *

§ 202.13 [Removed]

c. In § 202.13, paragraph (e) is

removed.

d. In § 202.15, the first sentence of

paragraph (c)(1) and paragraph (c)(5) are

revised, to read as follows:

§ 202.15 Loan correspondents.

* * * * *

(c) * * *

(1) A loan correspondent shall close

all mortgages in its own name or the

name of its sponsor(s). * * *

* * * * *

(5) It shall file an audit report with the

Secretary within 90 days of the close of

its fiscal year (or within an extended

time if, at the discretion of the

Secretary, an extension is granted), and

at such other times as may be requested,

unless it meets the definition of a

supervised mortgagee in § 202.13(a).

Audit reports shall be based on audits

performed by a Certified Public

Accountant, or by an Independent

Public Accountant licensed by a

regulatory authority of a State or other

political subdivision of the United

States on or before December 31, 1970.

The audit report shall include:

(i) A financial statement in a form

acceptable to the Secretary, including a

balance sheet and a statement of

operations and retained earnings and

analysis of the loan correspondent’s net

worth adjusted to reflect only assets

acceptable to the Secretary, and an

analysis of escrow funds; and

(ii) Such other financial information

as the Secretary may require.

* * * * *

e. In § 202.17, paragraph (d) is

removed.

PART 203—SINGLE FAMILY

MORTGAGE INSURANCE

3. The authority for part 203

continues to read as follows:

Authority: 12 U.S.C. 1709, 1715b; 42

U.S.C. 3535(d). Subpart C also, is issued

under 12 U.S.C. 1715u.

4. In § 203.3, paragraph (b)(2) is

revised, and paragraphs (b)(3) and (c)

are removed and reserved, to read as

follows:

§ 203.3 Approval of mortgagees for Direct

Endorsement.

* * * * *

(b) * * *

(2) The mortgagee has on its

permanent staff an underwriter that is

authorized by the mortgagee to bind the

mortgagee on matters involving the

origination of mortgages through the

Direct Endorsement procedure and that

is registered with the Secretary and such

registration is maintained with the

Secretary. The technical staff may be

employees of the mortgagee or may be

hired on a fee basis from a roster

maintained by the Secretary. The

mortgagee shall use appraisers

permitted by § 203.5(e).

(3) [Reserved].

* * * * *

(c) [Reserved].

* * * * *

Dated: November 29, 1995.

Nicolas P. Retsinas,

Assistant Secretary for Housing—Federal

Housing Commissioner.

[FR Doc. 96–1304 Filed 1–25–96; 8:45 am]

BILLING CODE 4210–27–P