[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14744]
[[Page Unknown]]
[Federal Register: June 17, 1994]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner
24 CFR Parts 207, 213, 221, and 242
[Docket No. R-94-1723; FR-3603-F-01]
RIN 2502-AG19
Disposition of Fire and Hazard Insurance Proceeds
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule revises certain provisions in HUD regulations
covering multifamily mortgage insurance which have the effect of
requiring prior HUD endorsement before the expenditure of any fire and
hazard insurance loss proceeds by mortgagees. Instead of this
requirement the regulations would be revised to allow loss proceeds to
be expended to restore or repair the property without prior HUD
approval. The proceeds may not however, be used for any other purposes
without prior HUD approval.
EFFECTIVE DATE: July 18, 1994.
FOR FURTHER INFORMATION CONTACT: James Tahash, Planning and Procedures
Division, Office of Multifamily Housing Management, Room 6182,
Department of Housing and Urban Development, 451 Seventh Street, SW,
Washington, DC 20410, voice (202) 708-3944, TDD (202) 708-4594. (These
are not toll-free numbers.)
SUPPLEMENTARY INFORMATION: Under existing HUD regulations (24 CFR
207.260) in the event a loss occurs to the mortgaged property under any
policy of fire or other hazard insurance and the mortgagee has received
the proceeds therefrom, it shall not exercise its option under the
mortgage to use the proceeds of the insurance for the repairing,
replacing, or rebuilding of the premises, or apply them to the mortgage
indebtedness, or make any other disposition of the proceeds without the
prior written approval of the Commissioner. Through cross-referencing
this requirement is also made applicable to other FHA multifamily
programs i.e. Part 213 Cooperative Housing Mortgage Insurance, Part 220
Mortgage Insurance and Insured Improvement Loans for Urban Renewal and
Concentrated Development Areas, Part 221 Low Cost and Moderate Income
Mortgage Insurance, Part 231 Housing Mortgage Insurance for the
Elderly, Part 232 Mortgage Insurance for Nursing Homes, Intermediate
Care Facilities, and Board and Care Homes, Part 234 Condominium
Ownership Mortgage Insurance, Part 236 Mortgage Insurance and Interest
Reduction Payments for Rental Projects, Part 241 Supplementary
Financing for Insured Project Mortgages and Part 242 Mortgage Insurance
for Hospitals.
This rule revises current regulatory requirements to provide that
the mortgagee may exercise its option to use the insurance proceeds for
the repairing, replacing or rebuilding of the premises without prior
HUD approval. It may not however make any other disposition of
insurance proceeds without prior approval.
The Department has found that its Field Office staff resources can
be more effectively allocated to tasks other than the endorsing of
property insurance loss drafts where the proceeds, in any event, are
going to be used to restore or repair the property. We estimate that
from $10,000 to $20,000 per year in staff resources could be saved by
making this change. Mortgagees could have similar savings (from
reduction of paperwork and check cashing steps) of from $5,000 to
$10,000 per year. Project owners also could have savings. Approximately
20,000 project owners, their mortgagees and their insurance agents and
companies should benefit by eliminating this unnecessary procedural
step.
The rule also makes conforming revisions to 24 CFR 207.10, 213.13,
221.521 and 242.43 of HUD regulations to provide that fire and hazard
and insurance have attached a standard mortgagee clause making loss
payable to the mortgagee, its successors and assigns rather than the
current requirement that loss be payable to the mortgagee and the
Commissioner as their interests may appear.
Due to the strictly technical nature of this rule, the Department
has determined that the notice and public comment procedure under Title
5 of the United States Code is unnecessary and is therefore issuing
this document as a final rule.
Procedural Matters
Executive Order 12866--Regulatory Planning and Review
This rule was reviewed by the Office of Management and Budget under
Executive Order 12866, Regulatory Planning and Review. Any changes made
to the rule as a result of that review are clearly identified in the
docket file which is available for public inspection in the office of
the Department's Rules Docket Clerk, room 10276, 451 Seventh Street
SW., Washington, DC.
Regulatory Flexibility Act
In accordance with 5 U.S.C. 605(b) (the Regulatory Flexibility
Act), the undersigned hereby certifies that this rule does not have a
significant economic impact on a substantial number of small entities.
This rule is technical in nature. It effects no substantive changes in
HUD programs or policies.
Semiannual Agenda
This rule was listed as item 1569 in the Department's Semiannual
Agenda of Regulations published on April 25, 1994 (59 FR 20424, 20444)
under 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 do not have Federalism implications and, thus,
are not subject to review under the Order. No programmatic or policy
changes result from this rule's promulgation which would affect
existing relationships 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. The rule is technical in nature and makes no significant change
in existing HUD policies or programs.
Environment
An environmental assessment is unnecessary, since internal
administrative procedures whose content do not constitute a development
decision affecting the physical condition of specific project areas or
building sites is categorically excluded from the Department's National
Environmental Policy Act procedures under 24 CFR 50.20(k).
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 242
Hospitals, Mortgage insurance, Reporting and recordkeeping
requirements.
Accordingly, 24 CFR parts 207, 213, 221, and 242 are amended to
read as follows:
PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE
1. The authority citation for 24 CFR part 207 continues to read as
follows:
Authority: 12 U.S.C. 1713 and 1715b; 42 U.S.C. 3535(d). Sections
207.258 and 207.258b are also issued under 12 U.S.C. 1701z-11(e).
2. Section 207.10 is revised to read as follows:
Sec. 207.10 Covenant for fire insurance.
The mortgage shall contain a covenant acceptable to the
Commissioner binding the mortgagor to keep the property insured by a
standard policy or policies against fire and such other hazards as the
Commissioner, upon the insurance of the mortgage, may stipulate, in an
amount which will comply with the coinsurance clause applicable to the
location and character of the property, but not less than 80 percent of
the actual cash value of the insurable improvements and equipment of
the project. The initial coverage shall be in an amount estimated by
the Commissioner at the time of completion of the entire project or
units thereof. The policies evidencing such insurance shall have
attached thereto a standard mortgagee clause making loss payable to the
mortgagee, its successors and assigns.
3. Paragraph (e) of Sec. 207.260 is revised to read as follows:
Sec. 207.260 Protection of mortgage security.
* * * * *
(e) Application of insurance proceeds. (1) In the event a loss has
occurred to the mortgaged property under any policy of fire or other
hazard insurance and the mortgagee has received the proceeds therefrom,
it may exercise its option under the mortgage to use the proceeds of
such insurance for the repairing, replacing, or rebuilding of the
premises. It may not make other disposition of such proceeds, without
the prior written approval of the Commissioner.
(2) If the proceeds are applied to the mortgage with such prior
written approval and result in the payment in full of the entire
mortgage indebtedness, the contract of mortgage insurance made with the
Commissioner shall thereupon terminate.
(3) If the Commissioner shall fail to give his approval to the use
or application of such funds within 60 days after written request by
the mortgagee, the mortgagee may use or apply such funds for any of the
purposes specified in the mortgage without the approval of the
Commissioner.
PART 213--COOPERATIVE HOUSING MORTGAGE INSURANCE
4. The authority citation for 24 CFR part 213 continues to read as
follows:
Authority: 12 U.S.C. 1715b, 1715e; 42 U.S.C. 3535(d).
5. Section 213.13 is revised to read as follows:
Sec. 213.13 Covenant for fire insurance.
The mortgage shall contain a covenant acceptable to the
Commissioner binding the mortgagor to keep the property insured by a
standard policy or policies against fire and such other hazards as the
Commissioner, upon the insurance of the mortgage, may stipulate, in an
amount which will comply with the coinsurance clause applicable to the
location and character of the property, but not less than 80 percent of
the actual cash value of the insurable improvements and equipment of
the project. The initial coverage shall be in an amount estimated by
the Commissioner at the time of completion of the entire project or
units thereof. The policies evidencing such insurance shall have
attached thereto a standard mortgagee clause making loss payable to the
mortgagee, its successors and assigns.
PART 221--LOW COST AND MODERATE INCOME MORTGAGE INSURANCE
6. The authority citation for 24 CFR part 221 is revised to read as
follows:
Authority: 12 U.S.C. 1715b and 1715l; 42 U.S.C. 3535(d); sec.
221.544(a)(3) is also issued under 12 U.S.C. 1707(a).
7. Section 221.521 is revised to read as follows:
Sec. 221.521 Covenant for fire insurance.
The mortgage shall contain a covenant acceptable to the
Commissioner binding the mortgagor to keep the property insured by a
standard policy or policies against fire and such other hazards as the
Commissioner, upon the insurance of the mortgage, may stipulate, in an
amount which will comply with the coinsurance clause applicable to the
location and character of the property, but not less than 80 percent of
the actual cash value of the insurable improvements and equipment of
the project. The initial coverage shall be in an amount estimated by
the Commissioner at the time of completion of the entire project or
units thereof. The policies evidencing such insurance shall have
attached thereto a standard mortgagee clause making loss payable to the
mortgagee, its successors and assigns.
PART 242--MORTGAGE INSURANCE FOR HOSPITALS
8. The authority citation for 24 CFR part 242 continues to read as
follows:
Authority: 12 U.S.C. 1715b, 1715n(f), 1715z-7; 42 U.S.C.
3535(d).
9. Section 242.43 is revised to read as follows:
Sec. 242.43 Covenant for fire insurance.
The mortgage shall contain a covenant acceptable to the
Commissioner binding the mortgagor to keep the property insured by a
standard policy or policies against fire and such other hazards as the
Commissioner, upon the insurance of the mortgage, may stipulate, in an
amount which will comply with the coinsurance clause applicable to the
location and character of the property, but not less than 80 percent of
the actual cash value of the insurable improvements and equipment of
the project. The initial coverage shall be in an amount estimated by
the Commissioner at the time of completion of the entire project or
units thereof. The policies evidencing such insurance shall have
attached thereto a standard mortgagee clause making loss payable to the
mortgagee, its successors and assigns.
Dated: June 9, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-14744 Filed 6-16-94; 8:45 am]
BILLING CODE 4210-27-P
