[Federal Register Volume 60, Number 126 (Friday, June 30, 1995)]
[Rules and Regulations]
[Pages 34136-34138]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16128]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner
24 CFR Part 203
[Docket No. FR-3766-F-01]
RIN 2502-AG37
Electronic Payment of Periodic Mortgage Insurance Premiums; Final
Rule
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This final rule amends HUD's Single Family Mortgage Insurance
regulations. This rule authorizes the Federal Housing Administration
(FHA) Commissioner to require that periodic mortgage insurance premiums
(MIP) be remitted electronically. The purpose of this rule is to reduce
the servicing costs to mortgage lenders and to enhance HUD operations.
EFFECTIVE DATE: July 31, 1995.
FOR FURTHER INFORMATION CONTACT: Anne L. Baird-Bridges, Acting
Director, Single Family Insurance Operations Division, Room 2246,
Department of Housing and Urban Development, 451 Seventh Street, SW,
Washington, DC 20410, telephone (202) 708-2438, or (202) 708-4594
(TDD). These are not toll-free 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 electronic payment of up-front
mortgage insurance premiums (MIP) for single family mortgages that are
obligations of the Mutual Mortgage Insurance Fund. In 1989, HUD
implemented the ACH program on a voluntary basis for electronic payment
of periodic (monthly) MIP for single family insured mortgages. In these
single family mortgages, mortgagees collected mortgage insurance
premiums on a monthly basis from the mortgagors and promptly remitted
them to HUD as required by section 530 of the National Housing Act.
These premiums are sometimes referred to as section 530 premiums to
distinguish them from the risk-based premium segment that was adopted
later in July 1991, although regulations under section 530 also apply
to that segment. In 1992, HUD made the ACH program available on a
voluntary basis to the risk-based premium segment of periodic MIP.
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 Federal Housing Administration (FHA) Commissioner to require
that all up-front premium payments be made electronically through ACH.
HUD received five comments 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 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, due to 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.
II. The Method of Electronic Payment
HUD's policy prior to this final rule allowed mortgage lenders to
remit payment of periodic (monthly) mortgage insurance premiums (MIP)
either by mailing checks and remittance forms to the NationsBank
lockbox contractor or electronically through the Automated Clearing
House (ACH) program at Mellon Bank. This final rule will require the
electronic payment of all periodic MIP.
In the ACH program, periodic premium collections (also referred to
as section 530 premiums and risk-based premiums) are processed from
mortgagees and confirmations are remitted back to the mortgagees
electronically, using remote terminals or microcomputers with modems in
lieu of sending checks with HUD forms. Through ACH, the mortgagee's
terminal or microcomputer operator keys in the transaction data, which
is transmitted to Mellon Bank.
Each day at 8 p.m. EST, the Mellon Telecash System originates an
ACH file of debit transactions based on the data keyed by the
mortgagee. When the debit transactions have been processed, the ACH
will transmit the periodic premium data to HUD's premium collection
system. Through this ACH process, the debit amount is drawn from the
designated lender's bank account
[[Page 34137]]
electronically 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 located at Mellon Bank. If the lender's bank
is unable to receive an ACH entry, a paper Depository Transfer Check
(DTC) is used.
The processing of late charges will not change through the ACH
process. Late charges will still be assessed if a payment is not
received by the 10th of the month. Interest will still be due if the
payment is made more than 20 days after the 10th of the month. In the
ACH program, the late charge and interest amount can be entered on the
input screen.
Under this final rule, periodic MIP for all mortgages insured under
the General Insurance Fund, the Special Insurance Fund, and the
periodic risk-based segment of MIP for more recent mortgages insured
under the Mutual Mortgage Insurance Fund will be collected
electronically. Excluded under periodic risk-based MIP are condominium
GPMs, GEMs, and ARMs which are not insured under section 203(b) of the
National Housing Act. Also excluded are any section 203(b) mortgages
insured pursuant to sections 233(e) (older declining areas), 238(c)
(military impacted areas), 247 (Indian reservations), and 248 (Hawaiian
home lands), since those mortgages are not obligations of the Mutual
Mortgage Insurance Fund. HUD will transmit specific administrative
instructions implementing this rule to all HUD-approved mortgagees
before the rule's effective date.
III. Benefits of Electronic Payment
The method of electronic payment provides many benefits to the
mortgage lenders that will reduce their servicing costs and enhance
operations. The advantages of electronic payment are:
(1) The electronic transfer of debits and credits in the ACH
program can increase the lender's control of payment initiation and
funds availability.
(2) Banking costs are reduced. Electronic transfers costs less than
paper check and wire transfers.
(3) Accounting reconciliation is reduced. Payments are computerized
and cash application is more automated than with manual systems.
(4) Built-in edits can reduce data errors created by manual
recording.
(5) The chance of lost or late mail is eliminated.
Although mortgage lender participation in the ACH transfer system
for collecting periodic MIP has been minimal, electronic payment
provides reduced servicing costs and enhanced operations to lenders as
well as HUD.
IV. This Final Rule
This final rule amends the Single Family Mortgage Insurance
regulations to authorize the FHA Commissioner to require the electronic
payment of periodic MIP. In addition, the rule will correct an
inadvertent omission of the language that permits HUD to require
electronic payment of up-front MIP. The final rule for the electronic
payment of up-front mortgage insurance premiums, published in the
Federal Register on March 8, 1993 (58 FR 12901), inadvertently deleted
a reference in Sec. 203.259a to new Sec. 203.285 regarding risk-based
MIP for 15-year mortgages. HUD had added that reference in an interim
rule published in the Federal Register on October 14, 1992 (57 FR
46980). When HUD issued the October 1992 interim rule in final form on
July 30, 1993 (58 FR 41003), it added one reference to Sec. 203.285,
but left out the sentence about electronic MIP. A corrective rule
issued on March 24, 1994 (59 FR 13882) added a second reference to
Sec. 203.285, but that correction still left out the sentence on
electronic MIP.
V. 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 when 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. Because of its experience in promulgating the amendment to the
Title II regulations for electronic payment of insurance premiums
through ACH and the voluntary participation in the ACH program by some
lenders in the electronic payment of periodic MIP, as described in the
``Background'' section of this preamble, HUD finds that prior public
procedure is unnecessary.
VI. Regulatory Reform
Consistent with Executive Order 12866 and President Clinton's
memorandum of March 4, 1995 to all Federal departments and agencies on
the subject of Regulatory Reinvention, HUD is reviewing all its
regulations to determine whether they can be eliminated, streamlined,
or consolidated with other regulations. As part of this review, HUD has
reviewed this rule and determined that it furthers the President's
objectives on regulatory reform. With this rule, HUD more closely
conforms its practices with those in the private sector, by adopting an
advanced technological process that relieves a paperwork and financial
burden on lenders.
VI. Other Matters
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 participating lenders.
Environmental Impact Statement
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.
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
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significant change in existing HUD policies or programs will result
from promulgation of this rule, as those policies and programs relate
to family concerns.
Regulatory Agenda
This rule was listed as item number 1415 in HUD's Semiannual Agenda
of Regulations published on May 8, 1995 (60 FR 23368, 23370) in
accordance with Executive Order 12866 and the Regulatory Flexibility
Act.
List of Subjects in 24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and
recordkeeping requirements, Solar energy.
Accordingly, 24 CFR part 203 is amended as follows:
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
1. The authority citation for 24 CFR part 203 continues to read as
follows:
Authority: 12 U.S.C. 1709, 1710, 1715b and 1715u; 42 U.S.C.
3535(d).
2. Section 203.259a is amended by adding a new sentence to the end
of paragraph (b), to read as follows:
Sec. 203.259a Scope.
* * * * *
(b) * * * In the cases that the Commissioner deems appropriate, the
Commissioner may require, by means of instructions communicated to all
affected mortgages, that up-front MIP be remitted electronically.
* * * * *
3. A new Sec. 203.269 is added to the end of the undesignated
center heading ``Mortgage Insurance Premiums--Periodic Payment'', to
read as follows:
Sec. 203.269 Method of payment of periodic MIP.
In cases that the Commissioner deems appropriate, the Commissioner
may require, by means of instructions communicated to all affected
mortgagees, that periodic MIP be remitted electronically.
4. Section 203.284 is amended by revising paragraph (f) to read as
follows:
Sec. 203.284 Calculation of up-front and annual MIP on or after July
1, 1991.
* * * * *
(f) Applicability of other sections. The provisions of
Secs. 203.261, 203.264, 203.266, 203.267, 203.268(a)(1), 203.269,
203.280, and 203.282 are applicable to mortgages subject to premiums
under this section.
* * * * *
5. Section 203.285 is amended by revising paragraph (c) to read as
follows:
Sec. 203.285 Fifteen-year mortgages: Calculation of up-front and
annual MIP on or after December 26, 1992.
* * * * *
(c) Applicability of certain provisions. The provisions of
Secs. 203.261, 203.266, 203.267, 203.268, 203.269, 203.280, and 203.282
are applicable to mortgages subject to premiums under this section. The
provisions of paragraphs (d), (e), and (g) of Sec. 203.284 also shall
be applicable to mortgages subject to premiums under this section.
* * * * *
Dated: June 20, 1995.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 95-16128 Filed 6-29-95; 8:45 am]
BILLING CODE 4210-27-P
