[Federal Register Volume 61, Number 133 (Wednesday, July 10, 1996)]
[Rules and Regulations]
[Pages 36452-36453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17559]
[[Page 36451]]
_______________________________________________________________________
Part III
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 202, et al.
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Streamlining Mortgagee Requirements; Final Rule
Federal Register / Vol. 61, No. 133 / Wednesday, July 10, 1996 /
Rules and Regulations
[[Page 36452]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 202, 203, 221, and 234
[Docket No. FR-3957-F-02]
RIN 2502-AG57
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner; Streamlining Mortgagee Requirements
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This rule makes final the January 26, 1996 interim rule which
revised FHA's mortgagee requirements to streamline and make the FHA
process more flexible for mortgagees and FHA's customers and clients.
EFFECTIVE DATE: August 9, 1996.
FOR FURTHER INFORMATION CONTACT: William M. Heyman, Director, Office of
Lender Activities and Land Sales Registration, Room 9156, Department of
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC
20410, telephone (voice) (202) 708-1515, (TTY) (202) 708-4594. (These
are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
Background
Early in 1995 the FHA Single Family Business Practices Working
Group was established to develop recommendations to streamline the FHA
process, reduce or eliminate unnecessary requirements, promote greater
opportunities for first-time homebuyers and minorities, and maintain a
responsible risk management program. The Working Group was comprised of
representatives of mortgage lenders, State and local governments, trade
associations, realtors, government-sponsored enterprises, and other
interested parties.
On January 26, 1996, at 61 FR 2650, the Department published an
interim rule on Streamlining Mortgagee Requirements. The revisions made
by the interim rule resulted from the efforts and recommendations made
by the Working Group. They were designed to make the FHA process more
flexible for mortgagees, and for State and local governments and
nonprofit associations, and also to expand homeownership opportunities.
They were also intended to assist in making the FHA a more effective
organization to serve the needs of our customers and clients. In
addition, the revisions were intended to minimize the differences
between FHA and conventional loan processing and to place greater
reliance and accountability on mortgagees.
The interim rule made the following changes:
--Section 202.11(a)(5) was revised to establish uniform requirements on
the use of authorized agents by supervised and nonsupervised
mortgagees. For conforming reasons, Secs. 202.13(e) and 202.17(d) were
removed.
--Section 202.12(m) was revised to eliminate the requirement that a
branch office of a mortgagee must be approved by FHA to originate FHA
mortgages. A branch registry process is permitted. However, a
nonsupervised loan correspondent is required to provide evidence that
it complies with the net worth requirements for itself and all of its
branches, as set forth in Sec. 202.12(n)(3).
--Section 202.15(c)(1) was revised to eliminate the requirement that
loans must be closed in the name of the Loan Correspondent, and to
permit such mortgages to be closed in either the name of the Loan
Correspondent or its Sponsor(s).
--Section 202.15(c)(5) was revised to eliminate the compliance report
and the report on internal control from Loan Correspondents' annual
audited financial statements.
--Section 203.3(b)(2) was revised to eliminate the requirement that FHA
individually approve mortgagees' Direct Endorsement underwriters and to
establish a registry process for the underwriter. Also, the requirement
that the technical staff utilized by the mortgagee be approved by the
Secretary was removed. For conforming reasons, Secs. 203.3(b)(3) and
(c) were eliminated.
Public Comments
The public was afforded a 60-day comment period on the January 26,
1996 interim rule. Two commenters responded: one certified public
accountant firm and one national association of certified public
accountants. Below is a listing of the comments presented, and the
Department's response follows each comment.
Comment: The commenter questions (1) Whether the auditor needs to
meet GAO Yellow Book general requirements for education, etc., given
the lower level of scope, and (2) is the auditor required to
communicate indications of illegal acts to HUD if such indications are
present?
Response: (1) Unless engaged in other GAO Yellow Book audits, the
auditor of a loan correspondent mortgagee would no longer have to meet
the GAO Yellow Book education requirements. The Department notes,
however, that Professional Standards provide that an auditor should
obtain a level of knowledge of the auditee's business that will enable
the auditor to plan and perform the audit in accordance with Generally
Accepted Auditing Standards. (2) The auditor will still be required to
report illegal acts as set forth in Handbook 2000.04 REV-1,
Consolidated Audit Guide for Audits of HUD Programs.
Comment: The commenter urges the issuance by the Office of the
Inspector General of a supplement to Handbook 2000.04 REV-1,
Consolidated Audit Guide for Audits of HUD Programs. Otherwise, the
commenter believes there will be confusion among both loan
correspondents and their auditors since the Consolidated Audit Guide is
in conflict with the interim rule.
Response: The Department is revising the Consolidated Audit Guide
to reflect this and other changes. In the meantime, loan correspondent
mortgagees and auditors may refer to Mortgagee Letter 96-12 for
guidance.
Comment: Another commenter requests that the final rule state
whether the financial statement audits of Loan Correspondents should be
performed in accordance with Government Auditing Standards or in
accordance with Generally Accepted Auditing Standards (GAAS).
Response: The Department will no longer require that financial
statement audits of loan correspondent mortgagees be performed in
accordance with Government Auditing Standards. Such audits, however,
must be performed according to Generally Accepted Auditing Standards.
Although this will not be incorporated into the final rule, it will be
specified in the Consolidated Audit Guide and in Mortgagee Approval
Handbook 4060.1 REV-1, both of which are being revised by the
Department.
This Rule
No changes are needed to the regulatory text as a result of the
public comments received on the January 26, 1996 interim rule.
Therefore, this final rule adopts the interim rule without substantive
change. In addition, this final rule makes conforming changes to parts
202, 203, 221, and 234.
Other Matters
Environmental Finding
A Finding of No Significant Impact with respect to the environment
was
[[Page 36453]]
made in accordance with HUD regulations at 24 CFR Part 50, which
implement section 102(2)(C) of the National Environmental Policy Act of
1969, for the January 26, 1996 interim rule. Since this final rule
makes no changes to the interim rule, the Finding of No Significant
Impact for the interim rule shall serve as the finding for the final
rule. The Finding of No Significant Impact is available for public
inspection between 7:30 a.m. and 5:30 p.m. weekdays in the Office of
the Rules Docket Clerk, Office of the General Counsel, Department of
Housing and Urban Development, Room 10276, 451 Seventh Street, S.W.,
Washington, D.C. 20410.
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 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 insuring mortgages 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
because it revises mortgagee requirements.
The Regulatory Flexibility Act
In accordance with 5 U.S.C. 605(b) (the Regulatory Flexibility
Act), the Secretary by his approval of this rule hereby certifies that
this rule does not have a significant economic impact on a substantial
number of small entities because the changes made by this rule are
primarily procedural and will not have a significant economic impact.
List of Subjects
24 CFR Part 202
Administrative practice and procedure, Home improvement,
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements.
24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and
recordkeeping requirements, Solar energy.
24 CFR Part 221
Low and moderate income housing, Mortgage insurance, Reporting and
recordkeeping requirements.
24 CFR Part 234
Condominiums, Mortgage insurance, Reporting and recordkeeping
requirements.
Accordingly, under the authority of 42 U.S.C. 3535(d), chapter II
of title 24 of the Code of Federal Regulations is amended by adopting
as final, without change, the interim rule for ``Parts 202 and 203,
Streamling Mortgagee Requirements'', published in the Federal Register
on January 26, 1996 (61 FR 2650). Chapter II is also amended by further
amending part 203, and by amending parts 221 and 234 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, and 1715u; 42 U.S.C.
3535(d).
Secs. 203.51, 203.258, 203.259a, 203.359, 203.363, 203.366, 203.368,
203.369, 203.378, 203.379, 203.380, 203.402, and 203.423 [Amended]
2. Part 203 is amended by removing the word ``approved'' wherever
it appears before the word ``underwriter'' in the following sections:
Secs. 203.51(2), 203.258(c)(2), 203.259a(a)(2)(ii)(B), 203.359(b)
introductory text, 203.363(b) paragraph heading, 203.366(b)(1),
203.368(a)(1)(ii), 203.369(a)(1), 203.369(b), 203.378(c)(3),
203.379(b), 203.380(a)(1)(iii), 203.402(g)(1) paragraph heading,
203.402(g)(2) paragraph heading, and 203.423(a)(1).
PART 221--LOW COST AND MODERATE INCOME MORTGAGE INSURANCE
3. The authority citation for part 221 continues to read as
follows:
Authority: 12 U.S.C. 1707(a), 1715b, and 1715l; 42 U.S.C.
3535(d).
Sec. 221.70 [Amended]
7. In Sec. 221.70(a)(2), the reference to ``approved underwriter''
is revised to read ``underwriter''.
PART 234--CONDOMINIUM OWNERSHIP MORTGAGE INSURANCE
8. The authority for part 234 continues to read as follows:
Authority: 12 U.S.C. 1715b and 1715y; 42 U.S.C. 3535(d). Section
234.520(a)(2)(ii) is also issued under 12 U.S.C. 1707(a).
234.85 [Amended]
9. In Sec. 234.85(a)(2), the reference to ``approved underwriter''
is revised to read ``underwriter''.
Dated: July 2, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 96-17559 Filed 7-9-96; 8:45 am]
BILLING CODE 4210-27-P
