[Federal Register Volume 64, Number 57 (Thursday, March 25, 1999)]
[Rules and Regulations]
[Pages 14568-14569]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-7346]
[[Page 14567]]
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Part VI
Department of Housing and Urban Development
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24 CFR Part 203
FHA Single Family Mortgage Insurance; Statutory Changes for Maximum
Mortgage Limit and Downpayment Requirement; Final Rule
Federal Register / Vol. 64, No. 57 / Thursday, March 25, 1999 / Rules
and Regulations
[[Page 14568]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 203
[Docket No. FR-4431-F-01]
RIN 2502-AH31
FHA Single Family Mortgage Insurance; Statutory Changes for
Maximum Mortgage Limit and Downpayment Requirement
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This final rule amends provisions of current regulations to
provide consistency with recent statutory changes for the maximum
mortgage limit and downpayment requirements for FHA single family
mortgage insurance programs.
EFFECTIVE DATE: April 26, 1999.
FOR FURTHER INFORMATION CONTACT: Vance Morris, Director, Home Mortgage
Insurance Division, Room 9266, Department of Housing and Urban
Development, 451 Seventh Street, SW., Washington, DC 20410, (202) 708-
2700. (This is not a toll free number.) For hearing- and speech-
impaired persons, this number may be accessed via TTY by calling the
Federal Information Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION: On October 21, 1998, President Clinton
approved the Departments of Veterans Affairs and Housing and Urban
Development, and Independent Agencies Appropriations Act, 1999, Pub. L.
105-276. Section 212 of the Act extended on a nationwide basis, through
September 30, 2000, the simplified downpayment calculations that have
been in effect the previous two years for FHA-insured single family
mortgages in Alaska and Hawaii. Section 228 of the Act permitted
increased FHA mortgage limits for high-cost areas of the country and
raised the basic FHA ``floor'' mortgage limit available throughout the
country. The Department has concluded that neither provision presents
implementation issues that require a notice-and-comment procedure
before making the necessary conforming revisions to 24 CFR part 203.
Mortgage Limits
As revised, 24 CFR 203.18 will no longer reproduce the statutory
language of section 203(b)(2)(A) of the National Housing Act (NHA)
regarding dollar amount limitations on FHA-insured mortgages. For a
number of years, in an effort to respond to Congressional expectations
of rapid implementation, the Department has initially implemented
statutory changes in FHA single family mortgage limits through
Mortgagee Letters with the intention of producing a conforming final
rule soon afterwards. The Mortgagee Letter procedure has proven to be
an effective means of rapidly disseminating information on the initial
implementation of these statutory changes. However, HUD's intention to
produce a follow-up conforming final rule rapidly has not always been
realized in the crush of other competing regulatory priorities. For
example, the statutory provision that first related FHA maximum
mortgage limits to Freddie Mac's 1992 conforming loan limits was
approved in October 1992 but not reflected in FHA regulations until the
end of July 1993. In September 1994, the statutory provision was
amended to substitute Freddie Mac's current conforming loan limit for
the 1992 loan limit, but this change is not yet reflected in
regulations.
In recent years, because of the frequent changes in underlying
legislation and the annual changes in mortgage limits due to changes in
the Freddie Mac limit, the regulations have not served as an important
or reliable vehicle for disseminating current information on mortgage
limits to the industry or the general public. The Department has
concluded that the public would be better served by regulations that
make clear that the statute sets out the basic approach to maximum
mortgage limits for an area and that HUD will implement changes in
mortgage limits by non-regulatory administrative means following the
procedure set forth in Sec. 203.18(h). By citing the applicable
statutory section, the revised Sec. 203.18(a) will still serve as an
informational tool for persons who are uncertain where the statutory
provision is located without misleading anyone by outdated provisions.
The Department has also updated 24 CFR 203.29(a) regarding section
214 of the NHA and increased mortgage limits in Alaska, Hawaii, Guam
and the Virgin Islands. Some unnecessary repetition of statutory
language has been omitted, and the regulatory requirement that mortgage
limit increases authorized by section 214 be published in the Federal
Register has been replaced by a reference to Sec. 203.18(h). Section
203.18(h) generally permits area mortgage limit changes within the
statutory minimum and maximum levels to be established by
administrative issuances to affected mortgagees as an alternative to
Federal Register notice, but it has not previously been applicable to
increases authorized by section 214 because of the regulatory language
requiring a Federal Register notice. Section 214 specifically permits
the Secretary to make increases by regulations ``or otherwise''. This
does not require a Federal Register notice, and there is no
administrative need to continue to distinguish the regulatory
procedures for mortgage limits based on section 214 from the procedures
for other mortgage limits.
Downpayment Simplification
Section 203.18 is also revised to present the current requirements
on downpayments and loan-to-value ratios in a more accessible fashion.
In general, the revised rule refers simply to the applicable statutory
provisions in the NHA: section 203(b)(10) on a temporary basis, with
section 203(b)(2)(B) still in effect on a permanent basis. (Until the
interim rule discussed below takes effect, Sec. 203.18(a)(3) will
include the current substantive approach to implementation of
203(b)(2)(B) for high-ratio mortgages on new homes. Readers are advised
to consider this final rule and the interim rule together because
Sec. 203.18(a)(3) of the interim rule, rather than this final rule,
presents HUD's warranty policy for high-ratio mortgages, subject to
further reconsideration after review of public comments on the interim
rule.)
This final rule also continues HUD's previous policy of
distinguishing between secondary and primary residences for downpayment
purposes by limiting insured mortgages on secondary residences to 85%
of appraised value. Section 203(b)(10) has no effect on the calculation
of mortgage amounts under section 203(h) of the NHA for homes for
disaster victims or section 203(i) of the NHA for homes in outlying
areas. Therefore, the language in Sec. 203.18(d) for section 203(i)
mortgages remains the same except for one technical cross-reference
change required because of the revision of Sec. 203.18(a). No changes
are made to Sec. 203.18(e) for homes for disaster victims.
The definition of appraised value in Sec. 203.18(f)(4) is amended
to recognize that the loan-to-value ratios under section 203(b)(10)
downpayment simplification are intended to be applied to appraised
value (or sales price, if lower) without including HUD-approved closing
costs as part of appraised value.
In today's Federal Register, a separate interim rule is published
regarding a substantive change in policy on warranty requirements for
high ratio mortgages on new homes. That interim
[[Page 14569]]
rule will take effect one day after this final rule. It will clarify
the applicability of the Department's current handbook policy requiring
a comprehensive 1-year builder's warranty for new homes, as a necessary
step to full implementation of downpayment simplification for new homes
and as a permanent change in policy. It will also make a substantive
revision to Sec. 203.18(a)(3) of this final rule.
Justification for Final Rule
HUD ordinarily provides an opportunity for the public to comment on
HUD rules before they take effect. However, 24 CFR 10.1 permits HUD to
dispense with notice and public procedures--through either an interim
or a final rule--if HUD determines that notice and public procedure are
impracticable, unnecessary or contrary to the public interest. In this
case, public comment is both unnecessary and contrary to the public
interest. It is unnecessary because the rule as revised simply reflects
the statutory changes, without any other change in substance, with some
simplification in regulatory language. Delayed effectiveness pending
public comment would be contrary to the public interest because the
regulations would mislead by setting forth an outdated version of the
law.
Other Matters
Environmental Review
This final rule is exempted from environmental review under the
categorical exclusion in 24 CFR 50.19(c)(6).
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this final rule, and in so
doing certifies that this rule does not have a significant economic
impact on a substantial number of small entities. This final rule
merely authorizes an alternative way of qualifying a newly-constructed
home for a high-ratio FHA-insured mortgage. The final rule has no
adverse or disproportionate economic impact on small businesses.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this final
rule would 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. No
programmatic or policy changes would result from this final rule that
affect the relationship between the Federal Government and State and
local governments.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance Number for the principal
FHA single family mortgage insurance program is 14.117. This final rule
would also apply through cross-referencing to FHA mortgage insurance
for condominium units (14.133) and other smaller programs.
List of Subjects in 24 CFR part 203
Loan programs--housing and community development, Mortgage
insurance, Reporting and recordkeeping requirements.
Accordingly, 24 CFR part 203 is amended to read as follows:
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
1. The authority citation for part 203 continues to read as
follows:
Authority: 12 U.S.C. 1709, 1710, 1715b, 1715u; 42 U.S.C.
3535(d).
2. Section 203.18 is amended by revising paragraph (a), the
introductory text of paragraph (b), paragraph (d)(1)(i), and paragraph
(f)(4)(ii) to read as follows:
Sec. 203.18 Maximum mortgage amounts.
(a) Mortgagors of principal or secondary residences. The principal
amount of the mortgage must not exceed the lesser of the following
amounts that apply:
(1) The dollar amount limitation that applies for the area under
section 203(b)(2)(A) of the National Housing Act including any increase
in the dollar limitation under Sec. 203.29, as announced in accordance
with Sec. 203.18(h);
(2)(i) The amount based on appraised value that is permitted by
section 203(b)(10) of the National Housing Act, if that provision is in
effect and applies to the mortgage; or
(ii) If section 203(b)(10) is not in effect or otherwise does not
apply to the mortgage, the lesser of the amounts based on appraised
value that are permitted by section 203(b)(2)(B) of the National
Housing Act and paragraph (g) of this section;
(3) An amount equal to 90 percent of the appraised value, if the
dwelling is a new home that was completed 1 year or less from the date
of the mortgage insurance application and the dwelling is neither
approved before the beginning of construction or covered by an
acceptable consumer protection or warranty plan as provided in section
203(b)(2)(B) of the National Housing Act; or
(4) An amount equal to 85 percent of the appraised value if the
mortgage covers a dwelling that is to be occupied as a secondary
residence (as defined in paragraph (f)(2) of this section).
(b) Veteran qualifications. The special veteran terms provided in
section 203(b)(2) of the National Housing Act shall apply only if the
mortgagor submits one of the following certifications:
* * * * *
(d) * * *
(1) * * *
(i) 75 percent of the dollar limitation under (a)(1).
* * * * *
(f) * * *
(4) * * *
(i) * * *
(ii) Borrower-paid closing costs allowed under Sec. 203.27(a)(1)-
(3), except that closing costs do not apply if section 203(b)(10) of
the National Housing Act is in effect and neither sales price nor
closing costs apply for purposes of paragraph (g) of this section.
* * * * *
3. Section 203.29 is amended by revising paragraph (a) to read as
follows:
Sec. 203.29 Eligible mortgages in Alaska, Guam, Hawaii, or the Virgin
Islands.
(a) When is an increased mortgage limit permitted for these areas?
For Alaska, Guam, Hawaii or the Virgin Islands, the Commissioner may
increase the maximum mortgage amount permitted by section 203(b)(2)(A)
of the National Housing Act when authorized by section 214 of that Act,
through the procedures described in Sec. 203.18(h).
* * * * *
Dated: March 11, 1999.
William C. Apgar,
Assistant Secretary for Housing.
[FR Doc. 99-7346 Filed 3-24-99; 8:45 am]
BILLING CODE 4210-27-P
