[Federal Register Volume 60, Number 33 (Friday, February 17, 1995)]
[Rules and Regulations]
[Pages 9297-9298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3975]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner
24 CFR Parts 207, 213, 221, and 236
[Docket No. R-95-1660; FR-3342-F-03]
RIN 2502-AG04
Deletion of Value Criterion in Section 223(a)(7) Refinancing
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Section 223(a)(7) of the National Housing Act authorizes HUD
to insure mortgages given to refinance existing HUD-insured mortgages.
In the past, HUD's implementing regulations have prohibited the
refinanced mortgage amount from exceeding a stated percentage of the
value of the property. This value criterion precluded some troubled
projects from lowering their debt service payments and gaining a more
sound financial footing. On October 26, 1993, HUD published an interim
rule in the Federal Register deleting the value criterion from the HUD
regulations implementing Section 223(a)(7), which was extended by a
notice published on October 26, 1994. This rule makes final the
policies contained in the October 26, 1993, interim rule.
EFFECTIVE DATE: March 20, 1995.
FOR FURTHER INFORMATION CONTACT: Jane Luton, Acting Director, Policies
and Procedures Division, Department of Housing and Urban Development,
451 Seventh Street, SW., Room 6142, Washington, DC 20410. Telephone
number (202) 708-2556; and TDD (202) 708-4594. (These are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
Background
Section 223(a)(7) of the National Housing Act (12 U.S.C.
1715n(a)(7)) (the Act) authorizes HUD to insure mortgages given to
refinance existing HUD-insured mortgages under any section or title of
the Act. Due to requirements of the Act, the HUD regulations
implementing Section 223(a)(7) limit the principal amount of the
refinanced mortgage to the amount of the original insured mortgage.
Additionally, HUD's implementing regulations had prohibited the
refinanced mortgage amount from exceeding a stated percentage of the
Federal Housing Commissioner's estimate of value of the project after
completion of any repairs or improvements to the property. Unlike the
original-value limitation noted above, this value criterion was not a
statutory requirement.
The value criterion precluded many troubled projects from
refinancing their HUD-insured mortgages, thus preventing them from
lowering their debt service payments and gaining a sounder financial
footing. Because Section 223(a)(7) mortgages are already limited by the
amount of the original insured mortgage, HUD felt the public interest
and HUD's Insurance Fund would be better served by allowing these loans
to be refinanced to take advantage of lower interest rates.
Therefore, on October 26, 1993, HUD published an interim rule (58
FR 57558) removing the value criterion from its regulations
implementing Section 223(a)(7). The effect of the interim rule was
extended by a notice published on October 26, 1994 (59 FR 53731). This
rule makes final the policies contained in the October 26, 1993,
interim rule.
Comments on the October 26, 1993, Interim Rule
By the expiration of the comment period on the October 26, 1993,
interim rule, HUD had received only two comments, both from the same
commenter.
The first comment addressed the backlog of applications languishing
in some HUD offices and requested that HUD Field Offices be notified
that Section 223(a)(7) refinancing applications already in process
should be given priority over those received after the effective date
of the interim rule. The preamble to the interim rule established
processing priorities, in order to better manage the increased workload
anticipated as a result of the rule change. Supplemental instructions
were provided to HUD Field Office staff and mortgagees through issuance
of HUD Notice H93-89 and Mortgagee Letter 93-39, both dated November
24, 1993, addressing processing priorities and other issues. Inasmuch
as the [[Page 9298]] priorities are no longer applicable, HUD has not
adopted the comment in this final rule.
The interim rule's preamble refers to deletion of the 90 percent-
of-value criterion. The commenter noted that Section 223(a)(7)
applications refinancing loans insured pursuant to section 223(f) of
the Act are subject to an 85 percent-of-value limitation, in lieu of 90
percent. The commenter believed this could cause confusion and
recommended that the rule explicitly eliminate the 85 percent loan-to-
value limitation. Although the specific language of the regulatory
change is clear, HUD accepts the commenter's suggestion that the
explanation of the change should be clarified to avoid confusion.
Because there are also instances (in 24 CFR 221.560(a)(1)(iii) and 24
CFR 236.40(b)(1)(iii)) where the value criterion limited the maximum
insurable mortgage amount to 100 percent-of-value in lieu of 90 percent
or 85 percent, HUD is revising the preamble simply to state that HUD is
deleting the value criterion in Section 223(a)(7) refinancing.
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
deletes a counterproductive restriction that unnecessarily limits the
refinancing of certain HUD-insured mortgages. By removing this
restriction, HUD hopes to avoid unnecessary defaults by viable projects
and resulting losses to HUD's Insurance Fund.
Environmental Review
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20 of the HUD regulations, the
policies and procedures contained in this rule relate only to the
establishment of loan limits and approval of mortgage refinancing under
section 223(a)(7) of the National Housing Act, and, therefore, are
categorically excluded from the requirements of the National
Environmental Policy 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. The rule is limited
to removing an unnecessary restriction on refinancing certain HUD-
insured mortgages at more favorable rates.
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 would
result from promulgation of this rule, as those policies and programs
relate to family concerns.
Regulatory Agenda
This rule was listed as sequence 1793 in HUD's Semiannual Agenda of
Regulations published on November 14, 1994 (59 FR 57632, 57654), under
Executive Order 12866 and the Regulatory Flexibility Act.
List of Subjects
24 CFR Part 207
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements, Solar energy.
24 CFR Part 213
Cooperatives, Mortgage insurance, Reporting and recordkeeping
requirements.
24 CFR Part 221
Low and moderate income housing, Mortgage insurance, Reporting and
recordkeeping requirements.
24 CFR Part 236
Grant programs--housing and community development, Low and moderate
income housing, Mortgage insurance, Rent subsidies, Reporting and
recordkeeping requirements.
Accordingly, the interim rule published in the Federal Register on
October 26, 1993 (58 FR 57558), entitled, ``Parts 207, 213, 221, and
236, Deletion of the 90-Percent-of-Value Criterion in Section 223(a)(7)
Refinancing'', is adopted as final with the following change:
PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE
The authority citation for part 207 is revised to read as follows:
Authority: 12 U.S.C. 1701z-11(e), 1713, and 1715b; 42 U.S.C.
3535(d).
Dated: February 8, 1995.
Jeanne K. Engel,
General Deputy Assistant Secretary for Housing-Federal Housing
Commissioner.
[FR Doc. 95-3975 Filed 2-16-95; 8:45 am]
BILLING CODE 4210-27-P
