[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
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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.
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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
