95-6157. Title I Property Improvement and Manufactured Home Loans; Electronic Payment of Title I Insurance Charges  

  • [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
    
    
    
    
    
    _______________________________________________________________________
    
    
    
    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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    [[Page 13854]] 
    
    
    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.
    [[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
    
    

Document Information

Effective Date:
4/13/1995
Published:
03/14/1995
Department:
Housing and Urban Development Department
Entry Type:
Rule
Action:
Final rule.
Document Number:
95-6157
Dates:
April 13, 1995.
Pages:
13854-13855 (2 pages)
Docket Numbers:
Docket No. R-95-1765, FR-3823-F-01
RINs:
2502-AG41
PDF File:
95-6157.pdf
CFR: (1)
24 CFR 201.31