Daily Rules, Proposed Rules, and Notices of the Federal Government
As part of HUD's efforts to strengthen FHA risk management, HUD published a final rule on April 20, 2010, entitled, “Federal Housing Administration: Continuation of FHA Reform; Strengthening Risk Management Through Responsible FHA-Approved
The revised net worth requirements established by the April 20, 2010, final rule are codified in 24 CFR 202.5(n). As of May 20, 2011, FHA-approved non-small business lenders and mortgagees were required to have a minimum net worth of $1 million “of which no less than 20 percent must be liquid assets consisting of cash or its equivalent acceptable to the Secretary” (§ 202.5(n)(2)(iii)). As of that same date, existing FHA-approved small business lenders and mortgagees were required to have a minimum net worth of $500,000 “of which no less than 20 percent must be liquid assets consisting of cash or its equivalent acceptable to the Secretary” (§ 202.5(n)(2)(iv)).
By May 20, 2013, all FHA-approved lenders and mortgagees, irrespective of size, are required to have a minimum net worth of $1 million, plus an additional net worth of one percent of the total volume in excess of $25 million of FHA single-family insured mortgages originated, underwritten, purchased, or serviced during the prior fiscal year. Further, the regulations require that “[n]o less than 20 percent of the * * * required net worth must be liquid assets consisting of cash or its equivalent acceptable to the Secretary” (§ 202.5(n)(3)(i)).
As the quoted language above indicates, the wording of the liquidity requirement differs slightly between § 202.5(n)(2)(iii) and (iv) (which establishes the requirements effective on May 20, 2011) and § 202.5(n)(3)(i) (which establishes the requirements effective on May 20, 2013). Specifically, § 202.5(n)(2)(iii) and (iv) omit the word “required” when referring to the portion of net worth that must be held in liquid assets. This difference is due to the grammatical context in which these provisions are located.
While the intent of the final rule was that the liquidity requirements apply solely to the
In addition, this final rule makes a related technical correction to § 202.7, which sets forth requirements governing nonsupervised lenders and mortgagees. This final rule removes outdated paragraph (b)(2) of § 202.7, which formerly contained the liquidity requirements for nonsupervised lenders and mortgagees, but has been superseded by the liquidity requirements established by the April 20, 2010, final rule at § 202.5(n). Section 202.5(n) specifies that the new net worth and liquidity requirements “apply to supervised and nonsupervised lenders and mortgagees.”
The April 20, 2010, final rule eliminated HUD's approval of loan correspondents. Loan correspondents may continue to participate in the origination of FHA mortgage loans as sponsored third-party originators through association with a sponsoring FHA-approved mortgagee, but sponsored third-party originators are no longer subject to the FHA lender approval process.
Removing the required HUD approval for loan correspondents was not meant to preclude FHA-approved mortgagees from acting as sponsored third-party originators. However, the current definition of a sponsored third-party originator in § 202.8(a)(3) could be read as prohibiting FHA-approved mortgagees from acting as sponsored third-party originators. It states that a “third-party originator does not hold a Title I Contract of Insurance or Title II Origination Approval agreement * * *.” This final rule revises the definition of a sponsored third-party originator to clarify that a sponsored third-party originator may hold a Title I Contract of Insurance or Title II Origination Approval Agreement if it is also an FHA-approved lender or mortgagee.
In addition, this rule will make technical corrections to HUD's regulations by removing references to loan correspondents, loan originators, and other outdated terms, where applicable. Where appropriate, this final rule replaces these terms with “sponsored third-party originator.” However, since HUD does not approve sponsored third-party originators, references to loan correspondents, loan originators, and like phrases will be removed without replacement where the regulations are applicable only to FHA-approved entities.
The HUD regulations affected by these corrections are those governing the Mortgagee Review Board (24 CFR part 25), civil money penalties (24 CFR part 30), FHA Title I property improvements and manufactured home loans (24 CFR part 201), approval of lending institutions and mortgagees (24 CFR part 202), single-family mortgage insurance (24 CFR part 203) and home equity conversions mortgage insurance (24 CFR part 206). The specific regulations revised by this final rule are §§ 25.3, 25.5, 25.6, 30.10, 30.36, 30.60, 201.2, 202.8, 203.5, 203.255, and 206.31.
In general, HUD publishes a rule for public comment before issuing a rule for effect, in accordance with HUD's regulations on rulemaking at 24 CFR part 10. Part 10, however, provides, in § 10.1, for exceptions from that general rule where HUD finds good cause to omit advance notice and public participation. The good cause requirement is satisfied when the prior public procedure is “impracticable, unnecessary, or contrary to the public interest.”
HUD finds that good cause exists to publish this rule for effect without soliciting public comment, on the basis that public procedure is unnecessary. All of the changes made by this rule are technical in nature and do not make any substantive changes to HUD's requirements for individuals and entities participating in FHA programs. This rule merely makes conforming changes to provisions regarding the liquidity requirements of FHA-approved lenders and mortgagees in order to provide clarification, removes or replaces obsolete references to “loan
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601
Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule will not have federalism implications and would not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.
This rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition or new construction, or establish, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. This rule is limited to clarification and corrections to HUD's regulations. Accordingly, under 24 CFR 50.19(c)(1), this rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments, and on the private sector. This final rule would not impose any federal mandates on any state, local, or tribal governments, or on the private sector, within the meaning of the UMRA.
The Catalogue of Federal Domestic Assistance Number for the principal FHA single-family mortgage insurance program is 14.117.
Administrative practice and procedure, Loan programs—housing and community development, Organization and functions (Government agencies), Reporting and recordkeeping requirements.
Administrative practice and procedure, Grant programs—housing and community development, Loan programs—housing and community development, Mortgages, Penalties.
Claims, Health facilities, Historic preservation, Home improvement, Loan programs—housing and community development, Manufactured homes, Mortgage insurance, Reporting and recording requirements.
Administrative practice and procedure, Home improvement, Manufactured homes, Mortgage insurance, Reporting and recordkeeping requirements.
Hawaiian Natives, Home improvement, Indians—lands, Loan programs—housing and community development, Mortgage insurance, Reporting and recordkeeping requirements, Solar energy.
Aged, Condominiums, Loan programs—housing and community development, Mortgage insurance, Reporting and recordkeeping requirements.
Accordingly, for the reasons stated in the preamble, HUD amends 24 CFR parts 25, 30, 201, 202, 203, and 206, as follows:
12 U.S.C. 1708(c), 1708(d), 1709(s), 1715b, and 1735(f)-14; 42 U.S.C. 3535(d).
(1) The original lender under the mortgage, as that term is defined at sections 201(a) and 207(a)(1) of the National Housing Act (12 U.S.C. 1707(a), 1713(a)(1));
(2) A lender, as defined in this section;
(3) A branch office or subsidiary of the mortgagee or lender; or
(4) Successors and assigns of the mortgagee or lender, as are approved by the Commissioner.
(d) * * *
(1) * * *
(ii) During the period of suspension, a lender may not originate new Title I loans under its Title I Contract of Insurance or apply for a new Contract of Insurance.
(e) * * *
(1) * * *
(ii) During the period of withdrawal, a lender may not originate new Title I loans under its Title I Contract of Insurance or apply for a new Contract of Insurance. The Board may limit the geographical extent of the withdrawal, or limit its scope (e.g., to either the single family or multifamily activities of a withdrawn mortgagee). Upon the expiration of the period of withdrawal, the mortgagee may file a new application for approval under 24 CFR part 202.
(cc) Violation by a Title I lender of any of the applicable provisions of this section or 24 CFR 202.11(a)(2).
12 U.S.C. 1701q-1, 1703, 1723i, 1735f-14, and 1735f-15; 15 U.S.C. 1717a; 28 U.S.C. 2461 note; 42 U.S.C. 1437z-1 and 3535(d).
(a) * * *
(8) Sponsored third-party originators;
(a) General. The Assistant Secretary for Housing-Federal Housing Commissioner, or his or her designee, may initiate a civil money penalty action against any dealer or sponsored third-party originator that violates section 2(b)(7) of the National Housing Act (12 U.S.C. 1703). Such violations include, but are not limited to:
(3) Failing to sign a credit application if the dealer or sponsored third-party originator assisted the borrower in completing the application;
12 U.S.C. 1703; 42 U.S.C. 3535(d).
(1) Holds a valid Title I contract of insurance and is approved by the Secretary under 24 CFR part 202 to originate, purchase, hold, service, and/or sell loans insured under this part; or
(2) Is under suspension or holds a Title I contract of insurance that has been terminated, but that remains responsible for servicing or selling Title I loans that it holds and is authorized to file insurance claims on such loans.
12 U.S.C. 1703, 1709, and 1715b; 42 U.S.C. 3535(d).
(n) * * *
(2) * * *
The revision reads as follows:
(b) * * *
The revisions read as follows:
(a) * * *
(1) The sponsored third-party originator is working with and through an FHA-approved lender or mortgagee; and
(2) The sponsored third-party originator or an officer, partner, director, principal, manager, supervisor, loan processor, or loan originator of the
(a) * * *
(1) * * *
12 U.S.C. 1709, 1710, 1715b, 1715z-16, 1715u, and 1717z-21; 42 U.S.C. 3535(d).
(e) * * *
(3) A mortgagee and an appraiser must ensure that an appraisal and related documentation satisfy FHA appraisal requirements, and both bear responsibility for the quality of the appraisal in satisfying such requirements. A Direct Endorsement Mortgagee that submits, or causes to be submitted, an appraisal or related documentation that does not satisfy FHA requirements is subject to administrative sanction by the Mortgagee Review Board pursuant to parts 25 and 30 of this title.
(b) * * *
(11) A mortgage certification on a form prescribed by the Secretary, stating that the authorized representative of the mortgagee who is making the certification has personally reviewed the mortgage documents and the application for insurance endorsement, and certifying that the mortgage complies with the requirements of paragraph (b) of this section. The certification shall incorporate each of the mortgagee certification items that apply to the mortgage loan submitted for endorsement, as set forth in the applicable handbook or similar publication that is distributed to all Direct Endorsement mortgagees;
12 U.S.C. 1715b, 1715z-1720; 42 U.S.C. 3535(d).
(a) * * *
(1) A charge to compensate the mortgagee for expenses incurred in originating and closing the mortgage loan, which may be fully financed with the mortgage. The Secretary may establish limitations on the amount of any such charge. HUD will publish any such limit in the