[Federal Register Volume 64, Number 30 (Tuesday, February 16, 1999)]
[Proposed Rules]
[Pages 7726-7730]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3562]
[[Page 7725]]
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Part III
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 203
Single Family Mortgage Insurance; Informed Consumer Choice Disclosure
Notice; Proposed Rule
Federal Register / Vol. 64, No. 30 / Tuesday, February 16, 1999 /
Proposed Rules
[[Page 7726]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 203
[Docket No. FR-4411-P-01]
RIN 2502-AH30
Single Family Mortgage Insurance; Informed Consumer Choice
Disclosure Notice
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
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SUMMARY: HUD is publishing this proposed rule to implement a recent
statutory amendment to HUD's FHA Single Family Mortgage Insurance
Program. The statutory amendment requires the original lender to
disclose certain information, in the form of a notice, to each
prospective borrower who has applied for an FHA-insured home mortgage;
and HUD to develop this disclosure notice. Specifically, through the
disclosure notice, the lender must provide the borrower with an
analysis comparing the mortgage costs of the FHA-insured mortgage to
the mortgage costs of other similar conventional mortgage products that
the lender offers and for which the borrower might qualify. The
disclosure notice must also provide information about when the
borrower's requirement to pay FHA mortgage insurance premiums
terminates.
DATES: Submit comments on or before March 18, 1999.
ADDRESSES: Submit your comments about this proposed rule to the Office
of the General Counsel, Rules Docket Clerk, room 10276, Department of
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC
20410-0500. Your comments should refer to the above docket number and
title. We do not accept facsimile (FAX) comments. A copy of each
communication submitted will be available for public inspection and
copying during regular business hours (7:30 a.m. to 5:30 p.m. Eastern
time) at the above address.
FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Home
Mortgage Insurance Division, Office of Insured Single Family Housing,
Department of Housing and Urban Development, 451 Seventh Street, SW,
Washington, DC 20410-8000, Room 9270; Telephone: (202) 708-2121 (this
is not a toll-free number). Hearing or speech-impaired individuals may
access this number via TTY by calling the toll-free Federal Information
Relay Service at (800) 877-8399.
SUPPLEMENTARY INFORMATION:
I. Background
Section 225(a) of the Departments of Veterans Affairs and Housing
and Urban Development, and Independent Agencies Appropriations Act,
1999 (HUD FY 1999 Appropriations Act), Pub. L. 105-276, 112 Stat. 2461,
amended sec. 203(b)(2) of the National Housing Act by adding at the end
of the section the following language:
In conjunction with any loan insured under this section, an
original lender shall provide to each prospective borrower a
disclosure notice that provides a one page analysis of mortgage
products offered by that lender and for which the borrower would
qualify. This notice shall include: (i) a generic analysis comparing
note rate (and associated interest payments), insurance premiums,
and other costs and fees that would be due over the life of the loan
for a loan insured by the Secretary under this subsection with note
rates, insurance premiums (if applicable), and other costs and fees
that would be expected to be due if the mortgagor obtained instead
other mortgage products offered by the lender and for which the
borrower would qualify with similar loan-to-value ratio in
connection with a conventional mortgage . . . assuming prevailing
interest rates; and (ii) a statement regarding when the mortgagor's
requirement to pay mortgage insurance premiums for a mortgage
insured under this section would terminate or a statement that the
requirement will terminate only if the mortgage is refinanced, paid
off, or otherwise terminated.
This amendment requires original lenders to provide each
prospective FHA-insured mortgage borrower with an analysis comparing
the mortgage costs of the FHA-insured mortgage to the mortgage costs of
other similar conventional mortgage products that the lender offers and
for which the borrower might qualify. The amendment also requires the
lender to provide information to the borrower about when the borrower's
requirement to pay FHA mortgage insurance premiums terminates.
Section 225(b) of the FY 1999 HUD Appropriations Act directs HUD to
develop the disclosure notice document, through which the lender must
disclose this information. Section 225(b) also directs HUD to develop
this notice within 150 days of enactment of the FY 1999 HUD
Appropriations Act and to develop the notice through notice and comment
rulemaking.
This proposed rule includes, for comment, a model disclosure notice
that contains the consumer information required to be disclosed by
section 225(a). The proposed rule also provides a model format for the
notice. The proposed rule includes an amendment to HUD's regulations at
24 CFR part 203 that would add a new section, Sec. 203.10. Section
203.10 would conform HUD's regulations to the statutory lender
disclosure requirement.
II. Proposed Informed Consumer Choice Disclosure Notice
The following provides HUD's proposal for the informed consumer
choice disclosure notice. HUD specifically solicits comments and
recommendations on the format of the proposed disclosure notice. FHA
anticipates that lenders will develop generic disclosure notices that
compare a typical FHA mortgage in the marketplace with typical
conventional mortgages offered by that lender, using a $100,000 sales
price (or other such amount as may be typical within the lender's
market) and using the suggested format and instructions shown below for
guidance.
As conventional mortgage offerings and pricing change over time,
lenders will be required to modify their disclosure notices
accordingly. HUD believes that a generic disclosure notice (similar to
those provided on ARMs) reflects the intent of Congress in enacting
sec. 225(a) and does not impose an unreasonable burden on lenders.
Therefore, HUD will not require a case-specific disclosure notice for
each borrower who may qualify for both a FHA-insured mortgage and
conventional financing. To do otherwise would significantly increase
mortgage origination costs and be counter to the intent of the
Paperwork Reduction Act of 1995.
To complete the generic disclosure format shown below, lenders
should use the following instructions. At the lenders discretion,
lenders may add additional line items to the disclosure format, shown
below, if the conventional financing is so unique or creative that such
additions are necessary to make a meaningful comparison.
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II. Findings and Certifications
Justification for Shortened Comment Period
Generally, HUD provides a 60-day public comment period on all rules
in accordance with 24 CFR part 10. Section 225(b) of the HUD FY 1999
Appropriations Act directs HUD to develop this rule within 150 days of
the date of enactment. The HUD FY 1999 Appropriations Act was enacted
on October 21, 1998. The deadline to develop this rule, therefore, is
March 20, 1999. To assist us in meeting this deadline, we have
shortened the public comment period to 30 days.
Paperwork Reduction Act Statement
The proposed information collection requirements contained at
Sec. 203.10 of this proposed rule have been submitted to the Office of
Management and Budget (OMB) for review under sec. 3507(d) of the
Paperwork Reduction Act of 1995, 44 U.S.C. Chapter 35. An agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a valid
control number.
(a) In accordance with 5 CFR 1320.5(a)(1)(iv), HUD is setting forth
the following concerning the proposed collection of information:
(1) Title of the information collection proposal: Single Family
Mortgage Insurance; Informed Consumer Choice Disclosure Notice
(2) Summary of the collection of information: The information
collection requires lenders to provide prospective borrowers with a
disclosure notice that contains an analysis of the costs of an FHA-
insured mortgage compared with the costs of other conventional mortgage
products that a lender offers and for which the borrower might qualify.
In order to produce this notice, the lender would be required to
collect information about any applicable mortgage products, such as
interest rates, insurance premiums, and other costs and fees that would
be due over the life of the particular mortgage product.
(3) Description of the need for the information and its proposed
use: The need for the disclosure notice was mandated by Congress. The
notice would be provided to prospective borrowers who have applied for
an FHA-insured mortgage so that they would be able to evaluate the
overall costs of an FHA-insured mortgage versus a similar conventional
mortgage for which the mortgagor might also qualify.
(4) Description of the likely respondents, including the estimated
number of likely respondents, and proposed frequency of response to the
collection of information: Respondents would be HUD-approved lenders
participating in the Single Family Mortgage Insurance Program. The
estimated number of respondents is described in paragraph (5). The
proposed frequency of responses would be variable as lenders would
revise their disclosure notices only when their mortgage product
offerings change.
(5) Estimate of the total reporting and recordkeeping burden that
will result from the collection of information:
Reporting Burden:
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Number of Est. Avg. response Est. annual
Reference respondents Freq. of response time (hours) burden (Hrs.)
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Sec. 203.10...................... 9000 Varies............... \1/2\ Hour........... 4500
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Recordkeeping Burden
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Hours per Total annual
Recordkeepers recordkeeper responses
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There are no recordkeeping burdens associated with this disclosure
notice.
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(b) In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting
comments from members of the public and affected agencies concerning
the proposed collection of information in order to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance HUD's functions, including whether
the information will have practical utility;
(2) Evaluate the accuracy of HUD's estimate of the proposed
collection of information's burden;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the proposed collection of information's burden on
respondents, including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
Interested persons are invited to submit comments regarding the
proposed information collection requirements. Comments must be received
within 60 days from the date of this proposal. Comments must refer to
this proposed rule by name and docket number (FR-4411-P-01) and must be
sent to:
Joseph F. Lackey, Jr., HUD Desk Officer, Office of Management and
Budget, New Executive Office Building, Washington, DC 20503
and
Reports Liaison Officer, Office of the Assistant Secretary for Housing-
Federal Housing Commissioner, Department of Housing and Urban
Development, 451 7th Street, SW, Room 9116, Washington, DC 20410
Environmental Impact
In accordance with 24 CFR 50.19(c)(1) of HUD's regulations, this
proposed rule does not direct, provide for assistance or loan and
mortgage insurance for, or otherwise govern or regulate, real property
acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise, or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Therefore, this proposed rule is categorically
excluded from the requirements of the National Environmental Policy
Act, 42 U.S.C. 4321-4347.
Regulatory Flexibility Act
The Secretary has reviewed this proposed rule before publication
and by approving it certifies, in accordance with 5 U.S.C. 605(b) (the
Regulatory Flexibility Act), that this proposed rule would not have a
significant economic impact on a substantial number of small entities.
The proposed rule simply
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implements a statutory disclosure requirement and provides a proposed
format for that notice. While HUD does not anticipate that this
proposed rule would have a significant economic impact on a substantial
number of small entities, HUD specifically requests comments regarding
alternatives to compliance that may be less burdensome for small
entities.
Federalism
The General Counsel, as the Designated Official under sec. 6(a) of
Executive Order 12612 (Federalism) has determined that the policies
contained in this proposed rule would not have substantial direct
effects on States or their political subdivisions, on the relationship
between the Federal Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number for part 203 is
14.117.
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 proposed to be 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. Add Sec. 203.10 to read as follows:
Sec. 203.10 Informed consumer choice disclosure notice.
(a) Applicability. Before making a mortgage insured under this
part, the mortgagee must provide a prospective mortgagor with an
informed consumer choice disclosure notice, in a format prescribed by
the Commissioner.
(b) Contents of notice. The informed consumer choice disclosure
notice must provide a generic analysis of the costs of conventional
mortgage products, offered by the mortgagee and for which the mortgagor
might qualify, that have similar loan-to-value ratios as the
prospective FHA-insured mortgage.
(c) Timing. The informed consumer choice disclosure notice must be
provided to the prospective mortgagor within three days of signing the
mortgage loan application for the prospective FHA-insured mortgage.
(d) Effective date. This section applies to any application for
FHA-insured mortgage insurance under Sec. 203(b) of the National
Housing Act (12 U.S.C. 1709) that the mortgagee receives on or after
[Insert effective date of the final rule].
Dated: January 29, 1999.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 99-3562 Filed 2-12-99; 8:45 am]
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