[Federal Register Volume 61, Number 63 (Monday, April 1, 1996)]
[Rules and Regulations]
[Pages 14410-14417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7640]
[[Page 14409]]
_______________________________________________________________________
Part VI
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 200, 232, and 241
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner: Revision of FHA Multifamily Processing and Fees; Final
Rule
Federal Register / Vol. 61, No. 63 / Monday, April 1, 1996 / Rules
and Regulations
[[Page 14410]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 200, 232, and 241
[Docket No. FR-3349-F-02]
RIN 2502-AF74
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Revision of FHA Multifamily Processing and Fees
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This rule amends FHA multifamily processing regulations to:
increase processing/commitment fees; recognize a feasibility processing
stage for substantial rehabilitation projects and impose a fee for this
processing; require the project sponsor to request a preapplication
conference; and eliminate the conditional commitment processing stage
for all but Section 242 hospital mortgages, and Section 223(f)
acquisition/refinancing mortgages.
EFFECTIVE DATE: May 1, 1996.
FOR FURTHER INFORMATION CONTACT: Jane Luton, Director, New Products
Division, Office of Multifamily Housing Development, Room 6138,
Department of Housing and Urban Development, 451 Seventh Street SW.,
Washington, DC 20410-8000, telephone (202) 708-2556. (This is not a
toll-free telephone number.) Hearing- or speech-impaired may access
this number via TTY by calling the Federal Information Relay Service at
1-800-877-8339.
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act Statement
The information collection requirements contained in Sec. 290.45 of
this rule have been approved by the Office of Management and Budget in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520), and assigned OMB control number 2502-0029. 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. Rule Description
This rule amends various relevant parts of title 24 of the Code of
Federal Regulations to effect the following changes in its processing
procedures for FHA insurance of multifamily project mortgages. This
final rule is based on a proposed rule published on July 1, 1993 at 58
FR 35724. The section numbering in this rule differs from the proposed
rule. This final rule conforms to the consolidation of the FHA
multifamily mortgage insurance program regulations set forth in another
final rule published elsewhere in today's Federal Register.
1. Increase in Processing Fees
Multifamily mortgage insurance processing and commitment fees
currently do not cover expenses incurred by the Department. A Price
Waterhouse study estimates that during a 7-year period (FY 1985-FY
1991), fees collected (based on $3/$1,000 of the mortgage amount)
covered only 68 percent to 92 percent of HUD's costs. (These costs were
basically local HUD Office Housing costs--they did not include overhead
costs or personnel outside of the local HUD office Multifamily
Development Division.)
Implementation of the Delegated Processing program has resulted in
an even greater shortfall. Under this program, HUD pays outside
contractors to perform underwriting services. Fees charged by delegated
processors are based on their cost of doing business, not on a
percentage of the mortgage amount. The Price Waterhouse study, although
based on a limited sample, indicated that fees collected by HUD covered
only 61 percent of costs incurred. (Implementation of Technical
Discipline Contracts (TDCs), should result in similar deficiencies in
costs versus fees collected.)
Under this rule, HUD regulations are amended to more adequately
cover HUD costs by increasing the aggregate fees to $5/$1,000 (from the
current $3/$1,000) of the mortgage amount. This increase will be within
the statutory limitation prescribed in Section 207(d) of the National
Housing Act. Section 207(d) provides that appraisal and inspection
charges ``shall not aggregate more than 1 per centum, of the original
principal face amount of the mortgage.'' With the exception of Section
223(f) acquisition/refinancing mortgages, inspection fees are currently
based on, and will remain at, not to exceed $5/$1,000 of the mortgage
amount. Consequently, to remain within the statutory limitation of 1
percent, total processing/commitment fees cannot be increased by more
than $2/$1,000 (for a total processing/commitment fee of $5/$1,000).
This rule does not change the fees related to mortgage insurance
processing and commitment for hospitals under Section 242.
2. Feasibility Processing Stage with Fee
Feasibility processing for substantial rehabilitation projects is
recognized by program handbooks as an optional processing stage but it
is not recognized by regulation. For this reason, HUD is not able to
charge a processing fee, even though feasibility processing requires
substantially more effort than Site Appraisal and Market Analysis
(SAMA) processing for new construction projects, which are covered by
regulation and for which a fee is chargeable.
The inability to charge a fee has significantly contributed to the
processing deficit cited above, particularly when a case drops out
after the feasibility analysis is completed. In such cases, HUD also
loses the opportunity to collect a fee for future processing.
Furthermore, under Delegated Processing and Technical Discipline
Contracts (TDCs), outside contractors must be paid, regardless of
whether HUD collects a fee. Collecting a fee to help offset the costs
of paying the contractors is simply a sound business practice.
Consequently, this rule describes feasibility processing for
multifamily substantial rehabilitation projects and reflects long-held
HUD policy and practice that issuance of a feasibility letter is not
binding upon the Department. It is a generally known fact that, in
cases involving substantial rehabilitation, unanticipated major
structural problems may be found at a later stage and may result in a
dramatic increase in the total cost of rehabilitation. Also,
substantial rehabilitation can involve complex readaptation of
buildings, originally constructed for a non-residential purpose, that
may require major architectural changes in the scope of the work, and
consequently, in the Department's conclusions relative to the
feasibility of the proposed project. In addition, substantive
rehabilitation may come as a result of having to make the multifamily
housing projects accessible to persons with disabilities. This rule
reflects current HUD policy in stating that determinations found in a
feasibility letter are not to be binding upon the Department and may be
changed in whole or in part at a later time. The feasibility letter may
even be unilaterally terminated by the Commissioner if found necessary.
3. Preapplication Conference
One of the goals of the Office of Housing is to speed up mortgage
insurance processing. Submission of complete, well-documented
applications by sponsors/mortgagees is essential to expeditious
processing. Only if applications are complete, and time is not wasted
by going back to the sponsor/mortgagee, can processing time
[[Page 14411]]
goals be met. Consequently, the rule permits the local HUD Office to
determine if participation in a preapplication conference is required
as a condition to submission of an initial application. This
requirement will apply in all cases (except for part 242 insurance on
hospital mortgages, and part 241(f) insurance on equity and acquisition
loans) and will include any application by a project sponsor for an
operating loss loan.
During the preapplication conference, sponsors will meet with the
local HUD Office staff to present a project idea, discuss program FHEO
requirements and be advised of any known market or environmental
concerns. Contents of the application, including required exhibits,
will be identified and discussed. In addition, if the proposal is
obviously ineligible for mortgage insurance, the sponsor will be so
advised. If a proposal appears eligible, the local HUD Office will
determine when an application can be expected so that it can consider,
based on work load and other priorities, whether it might be a
candidate for in-house processing, delegated processing or TDC
contracting.
4. Elimination of Conditional Commitment Stage
To speed the processing cycle, the rule eliminates the conditional
commitment processing stage for all applications for loans for
acquisition or refinancing of existing construction pursuant to Section
223(f). Sponsors have the option of submitting an application for SAMA
(or feasibility) or firm commitment processing.
As is now the case, the SAMA (or feasibility) letter is not a
commitment to insure the mortgage, nor does it bind HUD to issue a firm
commitment to insure. The purpose of a firm commitment also remains
unchanged. It will be issued only after completion of technical
processing and will evidence HUD's approval of the application.
After issuing a SAMA letter, HUD technical staff will provide
liaison services to the sponsor's design architect in the development
of preliminary drawings, and specifications which must be submitted
within a time period set forth in the SAMA letter with a processing fee
and in a form prescribed by HUD. HUD will review and comment on the
drawings and specifications which will be provided to the sponsor for
use in preparing the firm commitment application. The fee will be equal
to $1.00 per $1,000 of the mortgage amount.
A preliminary work write-up and outline specifications will be
required for a feasibility application. Final documents, including
final cost estimates, will be submitted at the firm commitment
application stage.
5. Application Fees
The rule imposes a fee for feasibility processing (which HUD has
previously performed without charge) and modifies the overall existing
fee structure which currently requires an aggregate of $3.00 per $1,000
for all processing stages. The modified fee structure imposes an
aggregate fee of $5.00 per $1,000 of mortgage amount, to be distributed
among all processing stages.
Substantial Rehabilitation
A fee of $3.00 per $1,000 is charged at the feasibility stage for
substantial rehabilitation projects. The balance of $2.00 per $1,000
will be charged at the firm commitment stage.
New Construction
A fee of $1.00 per $1,000 is charged at the SAMA stage, $1.00 per
$1,000 for the review of plans and specifications, and the balance of
$3.00 per $1,000 will be charged at the firm commitment stage.
Section 223(f) Loans
Projects to be acquired or refinanced pursuant to Section 223(f)
will be subject to a conditional commitment processing fee of $3.00 per
$1,000 and a firm commitment fee of $2.00 per $1,000.
Loan to Cover Operating Losses
A combined application and commitment fee of $5 per $1,000 of the
loan amount shall be submitted with the application for firm
commitment.
6. Update of Nondiscrimination Provisions
This rule also updates the nondiscrimination requirements in
Sec. 241.640 to reflect current statutory and regulatory prohibitions
against discrimination on the basis of age, disability or familial
status.
7. Change In Section 223(f) Inspection Fees
This final rule contains a provision not contained in the proposed
rule relating to section 223(f) inspection fees. This change is being
implemented as a result of changing program experience under the
section 223(f) refinance program.
The nature of projects currently being considered for Section
223(f) mortgage insurance is significantly different from those
typically submitted when the fee schedule for 223(f) projects was
promulgated for full and coinsurance on August 25, 1987. At that time a
vast majority of the projects were near or at the regulation's upper
repair limits. Currently, HUD is receiving many applications for
refinance to reduce interest rates under the subject program, where
project repairs are very nominal.
The August 25, 1987, regulation provides for a two-tier inspection
fee schedule. One consideration against using a single-tier one percent
inspection fee rate, as was recognized at the time this regulation was
first issued, was that where repairs are minimal, the fee would not
cover the actual cost of making the inspection. This concern is still
valid. This rule does, however, replace the current rigid $30 per
dwelling unit minimum fee with authority in the Commissioner to
establish a minimum project inspection fee. This fee will be
periodically reviewed and may be adjusted upward or downward as
necessary. Initially, the fee will be administratively set at $500
since $500 is the apparent minimum rate that a contractor will charge
HUD for a project inspection regardless of the total work that will
have to be inspected.
This change will lower the inspection fees for all projects larger
than 17 dwelling units for which the repair costs are $3,000 per
dwelling unit or less. Furthermore, for the sake of uniformity this
change is also being incorporated in 24 CFR 232.906(d) covering
inspection fees on mortgage insurance for nursing homes and related
facilities.
B. Proposed Rule and Public Response
The Department received a total of 9 comments in response to the
July 1, 1993, proposed rule (58 FR 35724): eight from private mortgage
companies or developers and one from a national trade organization, The
National Association of Home Builders.
Seven comments expressed general approval of the rule but set forth
specific objections/recommendations. Two commenters (private companies)
expressed general opposition to the rule but raised very similar
objections/recommendations as those generally approving of the rule.
The following specific objections/recommendations were raised in
connection with the rule.
1. Increase in Processing Fees. Five commenters questioned the
manner in which the rule raises processing fees across the board on a
fixed basis without regard to the wide variations in types and size of
FHA applications.
With respect to loan size a number of points were raised:
[[Page 14412]]
a. FHA is now priced to attract most strongly the business on which
it loses money in processing--the ``little'' loans which it
``subsidizes'' by charging far less than the processing costs.
b. FHA is already now priced to be richly profitable on larger
loans, which currently pay an above market price for processing to the
extent they pay more than about $20,000.
c. A price change to 0.5% will inevitably drive away larger loan
business that was profitable, making the problem worse.
d. A price change to 0.5% will leave FHA still dramatically
underpriced and attractive to the ``little'' loans, on which FHA will
continue to lose money in processing.
A second objection is that the cost of processing varies greatly
not only because of loan size but also because of loan type. A 223(f)
refinancing request is relatively easy to process because there is an
existing property with demonstrated rents and occupancy. A 221(d) loan
is inherently more difficult. The property does not yet exist. Plans
must be reviewed. Cost must be reviewed. Far greater judgment must be
brought to bear to evaluate what levels can be prudently anticipated
for rents, expenses, and vacancies.
Clearly, the cost to FHA in processing a 223(f) loan is not the
same as that for a 221(d) loan. It would, therefore, be reasonable to
charge more for 221(d) work than for 223(f) work. Indeed, if the
underlying goal was to have the cases on which FHA presently loses
money in processing bear more of their own costs, it would be entirely
reasonably to thus differentiate.
One basic recommendation to address this situation would be
retention of the current 0.3% fee structure with the addition of both
minimum fees (so the smaller loans cover more of their processing
costs, as they would be obliged to do if using any alternative
financing source) and maximum fees (so as to limit the structural
disincentive that currently drives the larger and more profitable
business away from FHA as a source).
This would provide a ``more level playing field'' across the entire
spectrum of loan sizes.
A similar dollar differentiation would be made with respect to
refinancing as opposed to new construction or substantial
rehabilitation mortgages.
HUD Response: HUD insures mortgages made by private lending
institutions to finance: the construction or rehabilitation of
multifamily rental housing; the purchase or refinance of existing
multifamily or nursing home projects; and the construction or
rehabilitation of nursing homes, intermediate care facilities, assisted
living facilities, and board and care homes. Mortgage insurance is a
contingent Federal liability which is not included in computing the
Federal deficit. However, it is part of the ongoing discussion about
the deficit. The Federal Credit Reform Act of 1990 requires that the
budgetary treatment of all direct loan and loan guarantee programs
recognize, at the front end, the net cost to the Federal Government
resulting from these transactions. The Department is required to
estimate the amount that it might lose on all multifamily project
mortgages it insures and must request ``credit subsidy'' as part of its
budget each Fiscal Year (FY) to cover those losses. Beginning in FY
1992, each HUD budget has included a request for credit subsidy.
Because of current budgetary constraints credit subsidy dollars are a
scarce resource. Large and small projects use up the credit subsidy
dollars at an equal rate. The Department believes this provides the
level playing field referenced above.
A number of commenters indicated that the fees charged on large
loans subsidize small loans. One commenter indicated that the current
market price for processing a loan was about $20,000. Other comments
indicate that the increased fee will drive away larger loans and HUD
will continue to lose money in processing. On the surface it would
appear that the Department's fee structure is excessive. However, no
other financing source currently matches all the benefits available
with HUD mortgage insurance. For example, the Section 221(d)(4) program
provides mortgage insurance for the construction loan and permanent
loan (for up to 40 years with a level annuity payment plan), a maximum
mortgage based on 90 percent of the estimated replacement cost, and a
nonrecourse loan. Further, HUD insurance is a credit enhancement that
provides access to reduced financing costs and the secondary market.
2. Mandatory Preapplication Conferences
Five commenters took issue with these provisions in the rule. The
consensus was that:
1. Preapplication conferences should never be required (and should
be discouraged as a relatively counterproductive use of staff time) on
all refinancing transactions. This would specifically include 223(a)(7)
and 223(f) refinancings.
2. Preapplication conferences should be optional at the local HUD
Office level on new construction and substantial rehabilitation
proposals. Such conferences are not universally necessary and the
proposed rule would unnecessarily restrict local HUD Office flexibility
in this matter. The result of requiring conferences in all cases will
be wasteful and unneeded delays in FHA processing.
HUD Response: As previously stated, one of the Office of Housing's
goals is to speed up mortgage insurance processing. The submission of
complete well-documented applications by sponsors/mortgagors is
essential to expeditious processing. The Department cannot process
loans expeditiously and meet its time goals if applications are
incomplete, and time is wasted by going back to the sponsor/mortgagor.
However, based on comments from Industry and the local HUD Offices, HUD
realizes that a national solution like a mandatory preapplication
conference does not take into account the experience level of the
development team. Therefore, the Department has modified the proposed
regulation to accommodate differing levels of sophistication and
experience. The local HUD Office will decide, on a case-by-case basis,
if a preapplication conference is necessary. The Department, however,
strongly recommends a preapplication conference for all new mortgage
insurance applications involving new sponsors/mortgagors.
3. Requiring Technical Liaison by HUD Staff
Two commenters said that the rule proposal requiring HUD technical
staff to provide liaison services to Sponsor's design architect in
development of drawings, specifications, and cost estimates is
unrealistic. They noted that the local HUD Offices they have dealt with
have generally lacked the staff, expertise and time to commit to this
significant undertaking.
HUD Response: Local HUD Offices are being given the tools necessary
to commit to this activity. Previously, the Department provided the
local HUD Office with delegated processing and technical assistance
contracts to level their workload. To enhance the skill level of the
local HUD Office staff, HUD is currently streamlining the underwriting
process, developing computer systems that will free local HUD Office
staff from the rote aspects of their duties, and providing both formal
and informal training. Therefore, the Department is confident that the
local HUD Offices will be able to perform this task.
[[Page 14413]]
4. Efficient Processing by HUD Staff
Three commenters raised the issue of efficient processing by local
HUD Office staff. The following is an example of a typical comment:
Although we do not disagree with the imposition of a fee at the
SAMA or Feasibility stage, we believe that those applicants who are
paying fees for both SAMA or Feasibility (as appropriate) and Firm
Commitment applications should, in consideration of fees paid,
obtain processing within the time frames as per the HUD regulations
and handbooks. Currently, this is not happening; processing times
are now indeterminate. Applicants have paid fees and are unable to
obtain response from the HUD Offices as to when applications will be
processed and returned to the Sponsor/applicants, which is
unreasonable, notwithstanding of the amount of fees charged. Such
delays in processing are causing tremendous carrying costs to
Sponsors, Architects, Contractors, and HUD approved lenders.
HUD Response: The Department recognizes that processing delays are
costly to the Industry and to HUD. For this reason the Department is
undergoing the process of reinvention and reorganization. Short term
measures to reduce the workload were made available to local HUD
Offices in the form of Delegated Processing and Technical Assistance
Contracts. The Department is currently looking at the underwriting
process to determine which activities can prudently be modified or
eliminated altogether. Ultimately, the Multifamily Production Branch in
the local HUD Office will have a more efficient operation.
5. Site Appraisal and Market Analysis (SAMA)
Two commenters questioned the need for a review of preliminary
plans, etc., after SAMA approval. One made the following
recommendation.
The proposed rule creates a new mandatory processing step for
all sponsors who utilize the SAMA processing stage. This new step
would occur after SAMA approval and would require sponsors to submit
preliminary drawings, specifications and cost estimates, with a
processing fee, to HUD for review and comment. While this step would
be very useful to certain sponsors who desire HUD input on these
documents, it would delay processing for those projects with designs
that had previously been approved by HUD and with costs that the
sponsor felt would be acceptable to HUD at the firm commitment
stage. Therefore, we suggest that this step be optional at the
election of the sponsor.
HUD Response: The Department needs to interact with the development
team of a proposed project at this critical stage. The local HUD
Office's continuous liaison during the design development is critical
for streamlining the underwriting process. However, based on Industry
comments the Department has modified the process. The local HUD Office
will not request the owner's cost estimates nor will it produce cost
estimates during the interim period. Of course, if the development team
is using a previously approved design then the local HUD Office input
will be greatly reduced.
6. Replace SAMA With Feasibility Stage
One commenter made this recommendation:
I agree with your proposal to charge a fee at Feasibility
comparable to the required at SAMA. I feel a better approach,
however, would be to replace the SAMA stage with Feasibility for new
construction as well. This system, which prevailed in the early
1970's, would give a more detailed first look which would, I
believe, offer early euthanasia to infeasible projects and expedite
processing of those that make it to the Firm stage.
HUD Response: The Department disagrees with this recommendation
since it would slow down the processing of proposed new construction
projects while at the same time increasing the sponsor's out-of-pocket
cost. SAMA processing establishes the land value fully improved, the
acceptability of the proposed project site, the proposed composition,
number and size of the units, the market for the number of proposed
units, and the acceptability of the proposed unit rents. To do
feasibility processing, the sponsor would need to supply, as part of
the application package, drawings and specifications. The sponsor would
incur substantial cost without knowing if there was a market for the
project. In turn, the Department would have to review the plans and
specifications before determining a market exists for the proposed
project.
7. Mortgagee Has Option To Go Directly to Final Processing Stage
One commenter recommended that the rule be revised to set forth
more clearly this option of the mortgagee.
HUD Response: The Department's existing administrative policy
permits combining different stages of processing. However, over the
years there has been some confusion over this policy. To clarify
existing Departmental policy, this rule modifies the regulations to
state that at the option of the local HUD Office the SAMA/Feasibility
processing may be combined with the firm commitment processing.
However, HUD recommends this approach only in the case of an
experienced development team.
8. Charge Application Fees for Section 202 Projects
One commenter asked why application fees are not also charged in
connection with Section 202 projects for the elderly and disabled. The
commenter claimed much more time and effort go into the underwriting of
such projects.
HUD Response: The Section 202/811 Capital Advance Program does not
involve mortgage insurance. This program provides funding to nonprofit
organizations that house the elderly and persons with disabilities, two
under-served segments of the general housing population. Since the
funding comes directly from the Department, there is no reason to
charge any processing fees. Further, the Department recognizes that the
program is labor intensive and has established a working group to look
at ways to streamline the program.
C. Other Matters
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) has reviewed and approved this rule, and in so doing
certifies that this rule will not have a significant economic impact on
a substantial number of small entities. The economic impact of this
rule is not significant, and affects small and large entities equally.
Environment
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,
the policies and procedures contained in this rule relate only to
internal administrative procedures whose content does not constitute a
development decision nor affect the physical condition of project areas
on building sites 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 do not have federalism implications and, thus,
are not subject to review under the order. No programmatic or policy
changes result from its promulgation which would affect the existing
relationship between the federal government and state and local
government.
[[Page 14414]]
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.
List of Subjects
24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Home improvement, Housing standards,
Incorporation by reference, Lead poisoning, Loan programs--housing and
community development, Minimum property standards, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
24 CFR Part 232
Fire prevention, Health facilities, Loan programs--health, Loan
programs--housing and community development, Mortgage insurance,
Nursing homes, Reporting and recordkeeping requirements.
24 CFR Part 241
Energy conservation, Home improvement, Loan programs--housing and
community development, Mortgage insurance, Reporting and recordkeeping
requirements, Solar energy.
Accordingly, 24 CFR parts 200, 232, and 241 are amended as follows:
PART 200--INTRODUCTION TO FHA PROGRAMS
1. The authority citation for part 200 continues to read as
follows:
Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).
2. The text of Sec. 200.40 is added to read as follows:
Sec. 200.40 HUD fees.
The following fees apply to mortgages to be insured under this
part.
(a) Application fee--SAMA letter (for new construction). An
application fee of $1 per thousand dollars of the requested mortgage
shall accompany the application for a SAMA letter. An additional fee of
$1 per thousand dollars of the requested mortgage amount shall be
charged for the review of plans and specifications.
(b) Application fee--feasibility letter (for substantial
rehabilitation). An application fee of $3 per thousand dollars of the
requested mortgage amount shall accompany the application for a
feasibility letter.
(c) Application fee--conditional commitment. For a mortgage being
insured under section 223(f) of the Act (12 U.S.C. 1715n), an
application-commitment fee of $3 per thousand dollars of the requested
mortgage amount shall accompany an application for conditional
commitment. For a mortgage being insured under section 242 of the Act
(12 U.S.C. 1715z-7), an application fee of $1.50 per thousand dollars
of the amount loaned shall be paid to the Commissioner at the time the
hospital proposal is submitted to the Secretary of Health and Human
Services for approval.
(d) Application fee--firm commitment: General. (1) Except as
provided in paragraph (d)(2) of this section, an application for firm
commitment shall be accompanied by an application-commitment fee which,
when added to any prior fees received in connection with applications
for a SAMA letter or a feasibility letter will aggregate $5 per
thousand dollars of the requested mortgage amount to be insured. The
payment of an application-commitment fee shall not be required in
connection with an insured mortgage involving the sale by the
government of housing or property acquired, held or contracted pursuant
to the Atomic Energy Community Act of 1955 (42 U.S.C. 2301 et seq.).
(2) Application fee--firm commitment: Hospitals. A firm-commitment
fee which, when added to the application fee, shall aggregate $3 per
thousand dollars of the amount of the loan set forth in the firm
commitment shall be paid within 30 days after the date of the
commitment. If the payment of a commitment fee is not received by the
Commissioner within 30 days after the date of issuance of the
commitment, the commitment shall expire on the 30th day.
(e) Inspection fee. (1) In general. The firm commitment may provide
for the payment of an inspection fee in an amount not to exceed $5 per
thousand dollars of the commitment. If an inspection fee is required,
it shall be paid as follows:
(i) If the case involves insurance of advances, at the time of
initial endorsement; or
(ii) If the case involves insurance upon completion, before the
date construction is begun.
(2) Existing projects. For a mortgage being insured under section
223(f) of the Act, if the application provides for the completion of
repairs, replacements and/or improvements (repairs), the Commissioner
will charge an inspection fee equal to one percent (1%) of the cost of
the repairs. However, where the Commissioner determines the cost of
repairs is minimal, the Commissioner may establish a minimum inspection
fee that exceeds one percent of the cost of repairs and can
periodically increase or decrease this minimum fee.
(f) Fees on increases--(1) In general. Paragraph (f)(1) of this
section applies to all applications except applications involving
hospitals.
(i) Increase in firm commitment before endorsement. An application,
filed before initial endorsement (or before endorsement in a case
involving insurance upon completion), for an increase in the amount of
an outstanding firm commitment shall be accompanied by a combined
additional application and commitment fee. This combined additional fee
shall be in an amount which will aggregate $5 per thousand dollars of
the amount of the requested increase. If an inspection fee was required
in the original commitment, an additional inspection fee shall be paid
in an amount computed at the same dollar rate per thousand dollars of
the amount of increase in commitment as was used for the inspection fee
required in the original commitment. When insurance of advances is
involved, the additional inspection fee shall be paid at the time of
initial endorsement. When insurance upon completion is involved, the
additional inspection fee shall be paid before the date construction is
begun or if construction has begun, it shall be paid with the
application for increase.
(ii) Increase in mortgage between initial and final endorsement.
Upon an application, filed between initial and final endorsement, for
an increase in the amount of the mortgage, either by amendment or by
substitution of a new mortgage, a combined additional application and
commitment fee shall accompany the application. This combined
additional fee shall be in an amount which will aggregate $5 per
thousand dollars of the amount of the increase requested. If an
inspection fee was required in the original commitment, an additional
inspection fee shall accompany the application in an amount not to
exceed the $5 per thousand dollars of the amount of the increase
requested.
(iii) Loan to cover operating losses. In connection with a loan to
cover operating losses (see Sec. 200.22), a
[[Page 14415]]
combined application and commitment fee of $5 per thousand dollars of
the amount of the loan applied for shall be submitted with the
application for a firm commitment. No inspection fee shall be required.
(2) Hospitals. Paragraph (f)(2) of this section applies to
applications in connection with a mortgage to be insured under section
242 of the Act.
(i) Increase in commitment prior to endorsement. Upon an
application, filed prior to initial endorsement (or prior to
endorsement in a case involving insurance upon completion), for an
increase in the amount of an outstanding commitment, an additional
application fee of $1.50 per thousand dollars computed on the amount of
the increase requested shall accompany the application. Any increase in
the amount of a commitment shall be subject to the payment of an
additional commitment fee which, when added to the additional
application fee, will aggregate $3 per thousand dollars of the amount
of the increase. The additional commitment fee shall be paid within 30
days after the date of the amended commitment. If the additional
commitment fee is not paid within 30 days, the commitment for the
increased amount will expire and the previous commitment will be
reinstated. If an inspection fee was required in the original
commitment, an additional inspection fee shall be paid in an amount not
to exceed $5 per thousand dollars of the amount of increase in
commitment. Where insurance of advances is involved, the additional
inspection fee shall be paid at the time of initial endorsement. Where
insurance upon completion is involved, the additional inspection fee
shall be paid prior to the date construction is begun or within 30 days
after the date of the issuance of the amended commitment, if
construction has begun.
(ii) Increase in mortgage between initial and final endorsement.
Upon an application, filed between initial and final endorsement, for
an increase in the amount of the mortgage, either by amendment or by
substitution of a new mortgage, an additional application fee of $1.50
per thousand dollars computed on the amount of the increase requested
shall accompany the application. The approval of any increase in the
amount of the mortgage shall be subject to the payment of an additional
commitment fee which, when added to the additional application fee,
will aggregate $3 per thousand dollars of the amount of the increase
granted. If an inspection fee was required in the original commitment,
an additional inspection fee shall be paid in an amount not to exceed
$5 per thousand dollars of the amount of the increase granted. The
additional commitment and inspection fees shall be paid within 30 days
after the increase is granted.
(g) Reopening of expired commitments. An expired commitment may be
reopened if a request for reopening is received by the Commissioner
within 90 days of the expiration of the commitment. The reopening
request shall be accompanied by a fee of 50 cents per thousand dollars
of the amount of the expired commitment. If the reopening request is
not received by the Commissioner within the required 90-day period, a
new application, accompanied by the required application and commitment
fee, must be submitted.
(h) Transfer fee. Upon application for approval of a transfer of
physical assets or the substitution of mortgagors, a transfer fee of 50
cents per thousand dollars shall be paid on the original face amount of
the mortgage in all cases, except that a transfer fee shall not be paid
where both parties to the transfer transaction are nonprofit
organizations.
(i) Refund of fees. If the amount of the commitment issued or
increase in mortgage granted is less than the amount applied for, the
Commissioner shall refund the excess amount of the application and
commitment fees submitted by the applicant. If an application is
rejected before it is assigned for processing, or in such other
instances as the Commissioner may determine, the entire application and
commitment fee or any portion thereof may be returned to the applicant.
Commitment, inspection and reopening fees may be refunded, in whole or
in part, if it is determined by the Commissioner that there is a lack
of need for the housing or that the construction or financing of the
project has been prevented because of condemnation proceedings or other
legal action taken by a governmental body or public agency, or in such
other instances as the Commissioner may determine. A transfer fee may
be refunded only in such instances as the Commissioner may determine.
(j) Fees not required. The payment of an application, commitment,
inspection, or reopening fee shall not be required in connection with
the insurance of a mortgage involving the sale by the Secretary of any
property acquired under any section or title of the Act.
3. The text of Sec. 200.45 is added to read as follows:
Sec. 200.45 Processing of applications.
(a) Preapplication conference. Except for mortgages insured under
section 241(f) or 242 of the Act, the local HUD Office will determine
whether participation in such a conference is required as a condition
to submission of an initial application for either a site appraisal and
market analysis (SAMA) letter (for new construction), a feasibility
letter (for substantial rehabilitation), or for a firm commitment. The
project sponsor may elect (after the preapplication conference if
required) to submit an application for a SAMA or a feasibility letter
(as appropriate), or for a firm commitment for insurance depending upon
the completeness of the drawings, specifications and other required
exhibits. An application for a SAMA or feasibility letter may be
submitted by the project sponsor. An application for a firm commitment
for insurance must be submitted by both the project sponsor and an
approved mortgagee. Applications shall be submitted to the local HUD
Office on HUD-approved forms. No application will be considered unless
accompanied by all exhibits required by the form and program handbooks.
At the option of the local HUD Office, the SAMA/Feasibility letter
stage of processing can be combined with the firm commitment stage of
processing.
(b) Firm commitment requirement. An application for a firm
commitment must be made by an approved mortgagee for any project for
which a mortgagor seeks mortgage insurance under the Act.
(c) Staged applications. Staged applications leading to an
application for firm commitment shall be made as determined appropriate
by the Commissioner, and in accordance with such terms and conditions
established by the Commissioner. The intermediate stages to firm
commitment may include a site appraisal and market analysis (SAMA)
letter stage or a feasibility letter stage and a conditional
commitment. The conditional commitment stage applies only to mortgages
to be insured pursuant to section 223(f) of the Act.
(d) Effect of SAMA letter, feasibility letter, and firm
commitment--(1) SAMA letter. (i) The issuance of a SAMA letter
indicates completion of the site appraisal and market analysis stage to
determine initial acceptability of the site and recognition of a
specific market need. The SAMA letter is not a commitment to insure a
mortgage for the proposed project and does not bind the Commissioner to
issue a firm commitment to insure. The SAMA letter precedes the later
submission of acceptable plans and specifications for the proposed
project and is limited to advising the applicant as to the following
determinations of the Commissioner, which shall not be
[[Page 14416]]
changed to the detriment of an applicant, if the application for a firm
commitment is received before expiration of the SAMA letter:
(A) The land value fully improved (with off-site improvements
installed);
(B) The acceptability of the proposed project site, the proposed
composition, number and size of the units and the market for the number
of proposed units. Where the application is not acceptable as
submitted, but can be made acceptable by a change in the number, size,
or composition of the units, the SAMA letter may establish the specific
lesser number of units which would be acceptable and any acceptable
alternative plan for the composition and size of units; and
(C) The acceptability of the unit rents proposed. Where rent levels
are unacceptable, the SAMA letter may establish specific rents which
are acceptable.
(ii) After receiving a SAMA letter, the sponsor shall submit design
drawings and specifications in a timeframe prescribed by the
Commissioner. The Commissioner will review and comment on design
development and the drawings and specifications. The comments will be
provided to the sponsor for use in preparing a firm commitment
application.
(2) Feasibility letter. The issuance of a feasibility letter
indicates approval of the preliminary work write-up and outline
specifications and completion of technical processing involving the
estimated rehabilitation cost of the project, the ``as is'' value of
the site, the detailed estimates of operating expenses and taxes, the
specific unit rents, the vacancy allowance, and the estimated mortgage
amount. The issuance of a feasibility letter is not a commitment to
insure a mortgage for the proposed project and does not bind the
Commissioner to issue a firm commitment to insure. Determinations found
in a feasibility letter are not to be binding upon the Department and
may be changed in whole or in part at any later point in time. The
letter may even be unilaterally terminated by the Commissioner if found
necessary.
(3) Conditional commitment. The issuance of a Section 223(f)
conditional commitment indicates completion of technical processing
involving the estimated value of the property, the detailed estimates
of rents, operating expenses and taxes and an estimated mortgage
amount.
(e) Term of SAMA letter, feasibility letter, and conditional
commitment. A SAMA letter, a feasibility letter, and a conditional
commitment shall be effective for whatever term is specified in the
respective letter or commitment.
(f) Rejection of an application. A significant deviation in an
application from the Commissioner's terms or conditions in an earlier
stage application commitment or agreement shall be grounds for
rejection. The fees paid to such date shall be considered as having
been earned notwithstanding such rejection. (Approved by the Office of
Management and Budget under control number 2502-0029.)
PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE
FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES.
4. The authority citation 24 CFR part 232 is revised to read as
follows:
Authority: 12 U.S.C. 1715b, 1715w; 42 U.S.C. 3535(d).
5. Section 232.906 is revised to read as follows:
Sec. 232.906 Processing of applications and required fees.
(a) Processing of applications. The local HUD Office will determine
whether participation in a preapplication conference is required as a
condition to submission of an initial application for either a
conditional or firm commitment. After the preapplication conference an
application for a conditional or firm commitment for insurance of a
mortgage on a project shall be submitted by the sponsor and an approved
mortgagee. Such application shall be submitted to the local HUD Office
on a HUD approved form. An application may, at the option of the
applicant, be submitted for a firm commitment omitting the conditional
commitment stage. No application shall be considered unless accompanied
by all exhibits required by the form and program handbooks. An
application may be made for a commitment which provides for the
insurance of the mortgage upon completion of any improvements or for a
commitment which provides, in accordance with standards established by
the Commissioner, for the completing of specified repairs and
improvements after endorsement.
(b) Application fee--conditional commitment. An application-
commitment fee of $3 per thousand dollars of the requested mortgage
amount shall accompany an application for conditional commitment.
(c) Application fee--firm commitment. An application for firm
commitment shall be accompanied by an application-commitment fee of $5
per thousand dollars of the requested mortgage amount to be insured
less any amount previously received for a conditional commitment.
(d) Inspection fee. Where an application provides for the
completion of repairs, replacements and/or improvements (repairs), the
Commissioner will charge an inspection fee equal to one percent (1%) of
the cost of the repairs. However, where the Commissioner determines the
cost of repairs is minimal, the Commissioner may establish a minimum
inspection fee that exceeds one percent of the cost of repairs and can
periodically increase or decrease this minimum fee.
(e) Cross-reference. The provisions of paragraphs (f)(1) (Fee on
increases), (g) (Reopening of expired commitments), (h) (Transfer fee),
(i) (Refund of fees), and (j) (Fees not required) of Sec. 200.40 of
this chapter apply to applications submitted under subpart E of this
part.
PART 241-- SUPPLEMENTARY FINANCING FOR INSURED PROJECT MORTGAGES
6. The authority citation for part 241 continues to read as
follows:
Authority: 12 U.S.C. 1715b, 1715z-6; 42 U.S.C. 3535(d).
7. Section 241.505 is revised to read as follows.
Sec. 241.505 Processing of applications and required fees.
(a) Preapplication conference. The local HUD Office will determine
whether participation in a preapplication conference is required as a
condition to submission of an initial application for a firm commitment
for insurance of an energy savings improvement loan on a project. An
application for a firm commitment for insurance must be submitted by
both the project sponsor and an approved lender. Applications shall be
submitted to the local HUD Office on HUD-approved forms. No application
will be considered unless accompanied by all exhibits required by the
form and program handbooks.
(b) Application for firm commitment. An application for a firm
commitment shall be accompanied by the payment of an application fee of
$5 per thousand dollars of the requested loan amount to be insured.
(c) Cross-reference. The provisions of paragraphs (e) (Inspection
fee), (f)(1) (Fee on increases), (g) (Reopening of expired
commitments), (i) (Refund of fees), and (j) (Fees not required) of
Sec. 200.40 of this chapter apply to
[[Page 14417]]
applications submitted under subpart E of this part.
8. Section 241.510 is revised to read as follows:
Sec. 241.510 Commitments
(a) Firm Commitment. The issuance of a firm commitment indicates
the Commissioner's approval of the application for insurance and sets
forth the terms and conditions upon which the loan will be insured.
(b) Types of firm commitment. (1) Where the amount of the loan is
$250,000 or more, the firm commitment may provide for the insurance of
advances of loan money made during construction or may provide for the
insurance of the loan after completion of the improvements.
(2) Where the amount of the loan is less than $250,000, the firm
commitment shall provide for insurance of the loan after completion of
the improvements.
(c) Term of commitment. (1) A firm commitment to insure advances
shall be effective for a period of not more than 60 days from the day
of issuance.
(2) A firm commitment to insure upon completion shall be effective
for a designated term within which the borrower is required to begin
construction, and if construction is begun as required, the commitment
shall be effective for such additional period, estimated by the
Commissioner, as will allow for completion of construction.
(3) The term of a firm commitment may be extended in such a manner
as the Commissioner may prescribe.
9. Section 241.640 is revised to read as follows:
Sec. 241.640 Employment discrimination prohibited.
Any contract or subcontract executed for the performance of
constructing the improvements to the project shall provide that there
shall be no discrimination against any employee or applicant for
employment because of race, color, religion, sex, familial status,
disability, age, or national origin.
10. Section 241.1015 is revised to read as follows:
Sec. 241.1015 Processing of applications and required fees.
(a) Application. An application for the issuance of a firm
commitment for insurance of an equity or acquisition loan on a project
shall be submitted by an approved lender and by the owner or purchaser
of the project to the Commissioner on a form prescribed by the
Commissioner. No application shall be considered unless the exhibits
called for by such forms are furnished.
(b) Commitment Fees. An application for a firm commitment shall be
accompanied by the payment of an application-commitment fee of $5.00
per thousand dollars of the requested loan amount to be insured.
11. Section 241.1020 is revised to read as follows:
Sec. 241.1020 Commitments.
(a) Firm Commitment. The issuance of a firm commitment indicates
the Commissioner's approval of the application for insurance and sets
forth the terms and conditions upon which the equity or acquisition
loan will be insured. The firm commitment may provide for the insurance
of advances of the equity or acquisition loan immediately upon
endorsement of the note.
(b) Term of Commitment. (1) A firm commitment is effective for
whatever term is specified in the text of the commitment.
(2) The term of a firm commitment may be extended in such manner as
the Commissioner may prescribe.
(c) Reopening of expired commitments. An expired firm commitment
may be reopened if a request for reopening is received by the
Commissioner within 90 days of the expiration of the commitment. The
reopening request shall be accompanied by a fee of 50 cents per
thousand dollars of the amount of the expired commitment. If the
reopening request is not received by the Commissioner within the
required 90-day period, a new application, accompanied by the required
application and commitment fee, must be submitted.
Date: March 22, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 96-7640 Filed 3-29-96; 8:45 am]
BILLING CODE 4210-27-P
