95-16128. Electronic Payment of Periodic Mortgage Insurance Premiums; Final Rule  

  • [Federal Register Volume 60, Number 126 (Friday, June 30, 1995)]
    [Rules and Regulations]
    [Pages 34136-34138]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-16128]
    
    
    
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    DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
    Office of the Assistant Secretary for Housing-Federal Housing 
    Commissioner
    
    24 CFR Part 203
    
    [Docket No. FR-3766-F-01]
    RIN 2502-AG37
    
    
    Electronic Payment of Periodic Mortgage Insurance Premiums; Final 
    Rule
    
    AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
    Commissioner, HUD.
    
    ACTION: Final rule.
    
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    SUMMARY: This final rule amends HUD's Single Family Mortgage Insurance 
    regulations. This rule authorizes the Federal Housing Administration 
    (FHA) Commissioner to require that periodic mortgage insurance premiums 
    (MIP) be remitted electronically. The purpose of this rule is to reduce 
    the servicing costs to mortgage lenders and to enhance HUD operations.
    
    EFFECTIVE DATE: July 31, 1995.
    
    FOR FURTHER INFORMATION CONTACT: Anne L. Baird-Bridges, Acting 
    Director, Single Family Insurance Operations Division, Room 2246, 
    Department of Housing and Urban Development, 451 Seventh Street, SW, 
    Washington, DC 20410, telephone (202) 708-2438, or (202) 708-4594 
    (TDD). These are not toll-free 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 electronic payment of up-front 
    mortgage insurance premiums (MIP) for single family mortgages that are 
    obligations of the Mutual Mortgage Insurance Fund. In 1989, HUD 
    implemented the ACH program on a voluntary basis for electronic payment 
    of periodic (monthly) MIP for single family insured mortgages. In these 
    single family mortgages, mortgagees collected mortgage insurance 
    premiums on a monthly basis from the mortgagors and promptly remitted 
    them to HUD as required by section 530 of the National Housing Act. 
    These premiums are sometimes referred to as section 530 premiums to 
    distinguish them from the risk-based premium segment that was adopted 
    later in July 1991, although regulations under section 530 also apply 
    to that segment. In 1992, HUD made the ACH program available on a 
    voluntary basis to the risk-based premium segment of periodic MIP.
        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 Federal Housing Administration (FHA) Commissioner to require 
    that all up-front premium payments be made electronically through ACH. 
    HUD received five comments 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 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, due to 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.
    
    II. The Method of Electronic Payment
    
        HUD's policy prior to this final rule allowed mortgage lenders to 
    remit payment of periodic (monthly) mortgage insurance premiums (MIP) 
    either by mailing checks and remittance forms to the NationsBank 
    lockbox contractor or electronically through the Automated Clearing 
    House (ACH) program at Mellon Bank. This final rule will require the 
    electronic payment of all periodic MIP.
        In the ACH program, periodic premium collections (also referred to 
    as section 530 premiums and risk-based premiums) are processed from 
    mortgagees and confirmations are remitted back to the mortgagees 
    electronically, using remote terminals or microcomputers with modems in 
    lieu of sending checks with HUD forms. Through ACH, the mortgagee's 
    terminal or microcomputer operator keys in the transaction data, which 
    is transmitted to Mellon Bank.
        Each day at 8 p.m. EST, the Mellon Telecash System originates an 
    ACH file of debit transactions based on the data keyed by the 
    mortgagee. When the debit transactions have been processed, the ACH 
    will transmit the periodic premium data to HUD's premium collection 
    system. Through this ACH process, the debit amount is drawn from the 
    designated lender's bank account 
    
    [[Page 34137]]
    electronically 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 located at Mellon Bank. If the lender's bank 
    is unable to receive an ACH entry, a paper Depository Transfer Check 
    (DTC) is used.
        The processing of late charges will not change through the ACH 
    process. Late charges will still be assessed if a payment is not 
    received by the 10th of the month. Interest will still be due if the 
    payment is made more than 20 days after the 10th of the month. In the 
    ACH program, the late charge and interest amount can be entered on the 
    input screen.
        Under this final rule, periodic MIP for all mortgages insured under 
    the General Insurance Fund, the Special Insurance Fund, and the 
    periodic risk-based segment of MIP for more recent mortgages insured 
    under the Mutual Mortgage Insurance Fund will be collected 
    electronically. Excluded under periodic risk-based MIP are condominium 
    GPMs, GEMs, and ARMs which are not insured under section 203(b) of the 
    National Housing Act. Also excluded are any section 203(b) mortgages 
    insured pursuant to sections 233(e) (older declining areas), 238(c) 
    (military impacted areas), 247 (Indian reservations), and 248 (Hawaiian 
    home lands), since those mortgages are not obligations of the Mutual 
    Mortgage Insurance Fund. HUD will transmit specific administrative 
    instructions implementing this rule to all HUD-approved mortgagees 
    before the rule's effective date.
    III. Benefits of Electronic Payment
    
        The method of electronic payment provides many benefits to the 
    mortgage lenders that will reduce their servicing costs and enhance 
    operations. The advantages of electronic payment are:
        (1) The electronic transfer of debits and credits in the ACH 
    program can increase the lender's control of payment initiation and 
    funds availability.
        (2) Banking costs are reduced. Electronic transfers costs less than 
    paper check and wire transfers.
        (3) Accounting reconciliation is reduced. Payments are computerized 
    and cash application is more automated than with manual systems.
        (4) Built-in edits can reduce data errors created by manual 
    recording.
        (5) The chance of lost or late mail is eliminated.
        Although mortgage lender participation in the ACH transfer system 
    for collecting periodic MIP has been minimal, electronic payment 
    provides reduced servicing costs and enhanced operations to lenders as 
    well as HUD.
    
    IV. This Final Rule
    
        This final rule amends the Single Family Mortgage Insurance 
    regulations to authorize the FHA Commissioner to require the electronic 
    payment of periodic MIP. In addition, the rule will correct an 
    inadvertent omission of the language that permits HUD to require 
    electronic payment of up-front MIP. The final rule for the electronic 
    payment of up-front mortgage insurance premiums, published in the 
    Federal Register on March 8, 1993 (58 FR 12901), inadvertently deleted 
    a reference in Sec. 203.259a to new Sec. 203.285 regarding risk-based 
    MIP for 15-year mortgages. HUD had added that reference in an interim 
    rule published in the Federal Register on October 14, 1992 (57 FR 
    46980). When HUD issued the October 1992 interim rule in final form on 
    July 30, 1993 (58 FR 41003), it added one reference to Sec. 203.285, 
    but left out the sentence about electronic MIP. A corrective rule 
    issued on March 24, 1994 (59 FR 13882) added a second reference to 
    Sec. 203.285, but that correction still left out the sentence on 
    electronic MIP.
    
    V. 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 when 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. Because of its experience in promulgating the amendment to the 
    Title II regulations for electronic payment of insurance premiums 
    through ACH and the voluntary participation in the ACH program by some 
    lenders in the electronic payment of periodic MIP, as described in the 
    ``Background'' section of this preamble, HUD finds that prior public 
    procedure is unnecessary.
    
    VI. Regulatory Reform
    
        Consistent with Executive Order 12866 and President Clinton's 
    memorandum of March 4, 1995 to all Federal departments and agencies on 
    the subject of Regulatory Reinvention, HUD is reviewing all its 
    regulations to determine whether they can be eliminated, streamlined, 
    or consolidated with other regulations. As part of this review, HUD has 
    reviewed this rule and determined that it furthers the President's 
    objectives on regulatory reform. With this rule, HUD more closely 
    conforms its practices with those in the private sector, by adopting an 
    advanced technological process that relieves a paperwork and financial 
    burden on lenders.
    VI. Other Matters
    
    Regulatory Flexibility Act
    
        The Secretary, in accordance with the Regulatory Flexibility Act (5 
    U.S.C. 605(b)), has reviewed this rule before publication and by 
    approving it certifies that this rule does not have a significant 
    economic impact on a substantial number of small entities. The rule 
    implements a program that will enhance operations and be cost 
    beneficial for all participating lenders.
    
    Environmental Impact Statement
    
        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.
    
    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 
    
    [[Page 34138]]
    significant change in existing HUD policies or programs will result 
    from promulgation of this rule, as those policies and programs relate 
    to family concerns.
    
    Regulatory Agenda
    
        This rule was listed as item number 1415 in HUD's Semiannual Agenda 
    of Regulations published on May 8, 1995 (60 FR 23368, 23370) in 
    accordance with Executive Order 12866 and the Regulatory Flexibility 
    Act.
    
    List of Subjects in 24 CFR Part 203
    
        Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
    housing and community development, Mortgage insurance, Reporting and 
    recordkeeping requirements, Solar energy.
        Accordingly, 24 CFR part 203 is amended as follows:
    
    PART 203--SINGLE FAMILY MORTGAGE INSURANCE
    
        1. The authority citation for 24 CFR part 203 continues to read as 
    follows:
    
        Authority: 12 U.S.C. 1709, 1710, 1715b and 1715u; 42 U.S.C. 
    3535(d).
    
    
        2. Section 203.259a is amended by adding a new sentence to the end 
    of paragraph (b), to read as follows:
    
    
    Sec. 203.259a  Scope.
    
    * * * * *
        (b) * * * In the cases that the Commissioner deems appropriate, the 
    Commissioner may require, by means of instructions communicated to all 
    affected mortgages, that up-front MIP be remitted electronically.
    * * * * *
        3. A new Sec. 203.269 is added to the end of the undesignated 
    center heading ``Mortgage Insurance Premiums--Periodic Payment'', to 
    read as follows:
    Sec. 203.269  Method of payment of periodic MIP.
    
        In cases that the Commissioner deems appropriate, the Commissioner 
    may require, by means of instructions communicated to all affected 
    mortgagees, that periodic MIP be remitted electronically.
        4. Section 203.284 is amended by revising paragraph (f) to read as 
    follows:
    
    
    Sec. 203.284  Calculation of up-front and annual MIP on or after July 
    1, 1991.
    
    * * * * *
        (f) Applicability of other sections. The provisions of 
    Secs. 203.261, 203.264, 203.266, 203.267, 203.268(a)(1), 203.269, 
    203.280, and 203.282 are applicable to mortgages subject to premiums 
    under this section.
    * * * * *
        5. Section 203.285 is amended by revising paragraph (c) to read as 
    follows:
    
    
    Sec. 203.285  Fifteen-year mortgages: Calculation of up-front and 
    annual MIP on or after December 26, 1992.
    
    * * * * *
        (c) Applicability of certain provisions. The provisions of 
    Secs. 203.261, 203.266, 203.267, 203.268, 203.269, 203.280, and 203.282 
    are applicable to mortgages subject to premiums under this section. The 
    provisions of paragraphs (d), (e), and (g) of Sec. 203.284 also shall 
    be applicable to mortgages subject to premiums under this section.
    * * * * *
        Dated: June 20, 1995.
    Nicolas P. Retsinas,
    Assistant Secretary for Housing-Federal Housing Commissioner.
    [FR Doc. 95-16128 Filed 6-29-95; 8:45 am]
    BILLING CODE 4210-27-P
    
    

Document Information

Effective Date:
7/31/1995
Published:
06/30/1995
Department:
Housing and Urban Development Department
Entry Type:
Rule
Action:
Final rule.
Document Number:
95-16128
Dates:
July 31, 1995.
Pages:
34136-34138 (3 pages)
Docket Numbers:
Docket No. FR-3766-F-01
RINs:
2502-AG37
PDF File:
95-16128.pdf
CFR: (4)
24 CFR 203.269
24 CFR 203.284
24 CFR 203.285
24 CFR 203.259a