36260 Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations

DEPARTMENT OF HOUSING AND flexibility to the program by allowing Two changes are made to § 203.18 URBAN DEVELOPMENT additional groups to be exempted. which explain how the maximum ‘‘Origination approval agreement’’ is mortgage amount is calculated. A 24 CFR Parts 200, 201, 202, 203, 206, included in the heading of § 202.11. parenthetical phrase is removed from 221, 233, 234, 280 and 291 The rule deletes § 202.12(d). That § 203.18(a)(1)(ii) to reflect the 1994 paragraph indicates that approval of a legislative change that set the maximum [Docket No. FR±3977±F±01] supervised mortgagee that is a banking dollar amount for an area at 75% of the RIN 2501±AG61 institution or a trust company included current Freddie Mac limit, instead of approval of the mortgagee when acting 75% of the 1992 Freddie Mac limit. A Office of the Assistant Secretary for in a fiduciary capacity. The Department new § 203.18(i) is added to recognize Housing-Federal Housing considers that the paragraph may be that the maximum mortgage amount for Commissioner; Single Family misleading by implying that only an energy efficient mortgage may exceed Miscellaneous Amendments, supervised mortgagees that are banking the area dollar limit that would Clarifications, and Corrections institutions or trust companies may otherwise apply, under conditions hold mortgages in a trust or other prescribed by the Secretary in AGENCY: Office of the Assistant fiduciary capacity. Subject to any accordance with section 106 of the Secretary for Housing-Federal Housing limitations that may appear in Energy Policy Act of 1992. Commissioner, HUD. regulations for particular programs, Section 203.19(c) which applied to ACTION: Final rule. such as § 203.434, regarding a the now-repealed section 203(m) declaration of trust for a pool of single program for mortgage insurance for SUMMARY: This final rule makes a variety family mortgages, the Department does of technical amendments, clarifications seasonal homes is deleted as obsolete. not restrict mortgagees from holding Language is added in § 203.22(a) to and corrections to regulations for the mortgages in a trust or other fiduciary clarify that the mortgage provision single family mortgage insurance capacity. The Department eliminated providing for payment of mortgage programs. None of the amendments or trusts as eligible mortgagees through a insurance premium installments by the clarifications add to the regulatory 1992 revision of part 202 but there was mortgagor does not require payment for burden for mortgagors or mortgagees. no intent to prevent FHA-insured any longer than the period during which EFFECTIVE DATE: August 8, 1996. mortgages from being held as trust mortgage insurance premiums are FOR FURTHER INFORMATION CONTACT: John assets by an approved mortgagee. The payable by the mortgagee to HUD. J. Coonts, Director, Office of Insured Department will deal only with the Obsolete language regarding payment of Single Family Housing, Department of mortgagee, rather than others who may annual charges on ‘‘open-end’’ advances Housing and Urban Development, Room have interests in the mortgages, and will is deleted. 9266, 451 Seventh Street, SW, hold the mortgagee solely responsible Sections 203.24(a)(i) and 203.44, and Washington, DC 20410. Telephone: for complying with obligations imposed related provisions in other parts such as (202) 708–3046; TTY: (202) 4594. (These on mortgagees. 234.70, are amended by deleting are not toll-free telephone numbers.) The provisions regarding approval references to open-end advances. SUPPLEMENTARY INFORMATION: This rule and recertification fees for Title I Section 203.30 is amended to add a is designed to make a large number of lenders and Title II mortgagees are new paragraph (d) regarding technical improvements to the amended by adding a new sentence compliance, for buildings having four regulations for single family programs. permitting the Secretary to identify (4) or more units which were built for The changes will not add to the classes or groups of lenders or first occupancy after March 13, 1991, regulatory burden for mortgagors or mortgagees that are exempt from one or with the Fair Housing Act new mortgagees. Some of the changes are more of the fees. The current exemption contruction requirements at 24 CFR corrections of small errors in the current for governmental lenders and 100.205. regulations that will have no substantive mortgagees is left intact. Sections 203.36 and 234.67 are change on the way the rules have been Part 203 deleted as unnecessary. See sections applied in practice. Other changes will 203.16 and 234.15 regarding the use of The rule eliminates the requirement offer relief from unnecessary a dwelling for transient or hotel in § 203.17(b) (and corresponding requirements. purposes. Following is an explanation of requirements in §§ 221.45 and The language in section 203.38 is changes made by the rule. 234.25(b)) that mortgages involve a amended by changing the two principal obligation in multiples of $50 references to ‘‘unit’’ to ‘‘one or more Part 200 if the mortgage does not include dwellings.’’ A technical change is made to part financing of a one-time mortgage In §§ 203.40, 203.251(s), and 234.1(n), 200 to remove a reference to part 267 insurance premium (MIP) payable ‘‘Commonwealth of the Northern which has been removed from the Code pursuant to § 203.280. One time MIP has Mariana Islands’’ is substituted for the of Federal Regulations. been replaced by the up-front segment ‘‘Trust Territory of the Pacific Islands’’ of risk-based mortgage insurance because the Commonwealth of the Part 201 premiums under §§ 203.284 and Northern Mariana Islands is the only The rule makes a typographical 203.285. Rather than substitute the up- portion of the former Trust Territory of correction to the table of contents and front segment of risk-based MIP for the the Pacific Islands in which FHA single to § 201.18. one time MIP, however, the Department family programs are currently has determined that there is no longer authorized. Part 202 any reason for the general requirement The ‘‘rule of seven’’ in § 203.42 Section 202.3 is amended to revise that other mortgages without a financed currently prohibits mortgage insurance paragraph (j) to provide that the premium be in multiples of $50. All when a mortgagor is purchasing a Secretary may identify classes or groups mortgages may now be in multiples of property to be rented that is ‘‘part of, or of lenders that are exempt from one or $1. Corresponding changes are made to adjacent or contiguous to, a project, more of these fees. This provides more §§ 221.45 and 234.52. subdivision or group of similar rental Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations 36261 properties’’ in which the mortgagor will of the difficulty of operating the Sections 203.356 and 203.402 have a financial interest in more than Hawaiian home lands program for the regarding the notice of foreclosure are seven dwelling units. This rule removes General Insurance Fund (as required for amended to provide a more consistent ‘‘subdivision’’ from the quoted section 203(k) loans) in addition to the application of the rules for curtailment language. Denial of mortgage insurance Mutual Mortgage Fund. This difficulty of debenture interest included in simply because a mortgagor has a no longer exists as a result of a insurance benefits paid to mortgagees. financial interest in eight units in a very subsequent statutory change that Section 203.356 is divided into large subdivision does not further the provides for all Hawaiian home land subsection (a) for the requirements to purpose of the ‘‘rule of seven,’’ which is mortgages to be in the General Insurance provide the notice of foreclosure, and to avoid insuring single family Fund. subsection (b) for exercising reasonable mortgages on rental units that are in Section 225 of the National Housing diligence in prosecuting the foreclosure. such close geographical proximity with Act authorizes FHA insurance for open- Section 203.402(k)(1) is also subdivided. other similar rental units that they could end mortgages under which the New subsection 203.402(k)(1)(ii) limits logically be considered part of one mortgagee could advance additional the amount of debenture interest that multifamily project rather than funds under the mortgage to finance the Secretary may curtail if the unrelated single family units. In later improvements or repairs that mortgagee does not provide the practice, current departmental policy in would substantially protect or improve Secretary the notice of foreclosure. This applying the ‘‘rule of seven’’ has been the basic livability or utility of the change will reduce the debenture directed to properties within a two- property. Although mentioned in the interest curtailment when the mortgagee block radius from one another. regulations, FHA does not have proceeded to foreclose with reasonable Continued reference to a subdivision administrative procedures for the diligence, despite its failure to forward would cause confusion regarding the processing of open-end mortgages; they the initial notice of foreclosure. The intent of § 203.42. are not provided for in HUD’s specific cap on debenture interest Section 203.43(c)(3) and the instructions for mortgage forms, and curtailment will be set by administrative corresponding § 234.52(c) are amended GNMA has no programs for the pooling issuances, but the curtailment will not to permit a $50 increase in the monthly of open-end mortgages. Various exceed what is currently being assessed. payment for refinancing to a shorter provisions in parts 203 and 234, Sections 203.378, 203.379, and term, to reflect the prevailing policy that including §§ 203.44 and 234.70, are 203.380 regarding property condition has been applied to date on a waiver amended to make clear that FHA is not and adjustments for damage are basis. insuring open-end mortgages. amended to clarify that tornado damage Section 203.43b regarding mortgage The introductory paragraph of includes damage by hurricanes. Both insurance on seasonal occupancy homes § 203.49 is amended by including a storm systems are defined as violent under now-repealed section 203(m) is reference to section 203(h) in the second whirlwinds and historically have been deleted as obsolete. sentence to permit adjustable rate treated the same by the Department in Section 203.43f(b) is amended by mortgages (ARMs) in disaster situations. this regard. deleting the last sentence which refers Section 203(h) mortgages generally meet Section 203.502(b) regarding to section 203.17(e). Section 203.17(e) all requirements of section 203(b) notification of transfer of servicing is was completely revised and the current mortgages except that a higher loan-to- amended to change the responsibility cross-reference is not meaningful. value ratio is permitted. The for notifying the Secretary from the The introductory paragraph of Department has determined that ARMs transferor mortgagee to the transferee. § 203.43h is revised to clarify that a should be available on the same terms This change will enhance HUD’s ability mortgage covering a one- to four-family as for section 203(b) mortgages. to coordinate the change in servicer residence located on Indian land is Some issuers of 10-year warranty with the collection of mortgage eligible for insurance pursuant to plans that have been approved by HUD insurance premiums from the new section 248 of the National Housing Act, and used to support high-ratio servicer. if the mortgage is made (1) by an Indian mortgages for new construction have Section 203.670 addresses Tribe or (2) on a leasehold estate, by an read HUD’s warranty plan requirements conveyance of occupied property. Indian who will occupy it as a principal as permitting plans that impose the Paragraph (a) states HUD’s property residence. Tribes are already recognized requirement that homeowners submit disposition policy, which is also stated as eligible non-occupant mortgagors warranty claims to arbitration. This has in § 291.1 in part 291, Disposition of under § 203.18(f)(3). This amendment to never been HUD’s intention under the HUD-Acquired Single Family Property. § 203.43h reconciles the two sections. In warranty plan final rule. Although However, § 291.1 was amended to addition, a statement has been added to arbitration must be available to a reflect a revised policy in a September the definition of an ‘‘Indian tribe,’’ in dissatisfied homeowner, judicial 20, 1993 Interim Rule, made final on § 203.43h(g), to note that, for purposes resolution of disputes must also be September 22, 1994. Therefore, of engaging in section 248 insured available to homeowners. HUD has § 203.670(a) is being amended to reflect mortgage transactions, an Indian tribe modified the wording of § 203.204(g) to the revised policy. may act through its duly authorized make this clear. Section 203.685 is removed. It representative. Section 203.255(b)(2) is amended by authorized waivers of single family The reference to § 203.50 contained in replacing ‘‘upon a form’’ with ‘‘in a servicing regulations, but such waivers § 203.43i is deleted to allow form’’ since application information are now authorized by the Department- rehabilitation loan mortgages under may now be collected electronically wide waiver authority in 24 CFR 5.100. section 203(k) on section 247 Hawaiian through CHUMS. home lands. This would have been Section 203.281(b)(1) is amended by Part 206 permitted by a proposed rule published deleting the language following the first Section 206.13 is removed because it on July 23, 1986, but the provision was comma to simplify the procedures for addresses the terminated single family omitted from a final rule on the calculating the MIP amount for the co-insurance program. Section 206.17 is Hawaiian home lands program small number of cases for which one- amended to recognize that the basic published on March 16, 1987, because time MIP is still used. payment term and tenure payment 36262 Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations options for HECMs can be combined down-payment requirement for that this rule does not have a significant with lines of credit. investors through the regulations that economic impact on a substantial implement section 203(k). In order to number of small entities. This final rule Part 234 make it clear that the 25 percent down- makes a variety of technical Sections 234.11 and 234.54 are added payment provision of § 291.115(b)(2) amendments, clarifications and to conform to corresponding provisions does not apply to section 203(k) investor corrections to regulations for the single in part 203. mortgages, a technical amendment is family mortgage insurance programs. Section 234.16 is amended to add a being made to that section. None of the amendments or new paragraph (d) regarding clarifications add to the regulatory Typographical and Technical Errors, compliance, for buildings having four burden for mortgagors or mortgagees. (4) or more units which were built for and Cross Reference Corrections first occupancy after March 13, 1991, This rule corrects several Executive Order 12612, Federalism with the Fair Housing Act new typographical and technical errors and The General Counsel, as the construction requirements at 24 CFR also corrects and adds cross references Designated Official under section 6(a) of 100.205. and removes cross references that are no Executive Order 12612, Federalism, has longer applicable. Also, § 203.390 is determined that the policies contained Part 280 amended to insert language in this rule will not have substantial Section 280.330(c)(2) is amended by inadvertently omitted when that section direct effects on states or their political adding the following language: ‘‘. .. was last amended on July 1, 1993, at 58 subdivisions, or the relationship remaining balance of the . . .’’. The way FR 35369. between the federal government and the this section is currently written, it states, or on the distribution of power Other Matters appears that the entire original mortgage and responsibilities among the various amount is cancelled. In addition, the Justification for Final Rulemaking levels of government. As a result, the spelling of ‘‘cancelled’’ is corrected. In general, the Department publishes rule is not subject to review under the order. Part 291 a rule for public comment before issuing a rule for effect, in accordance with its Section 291.105(h)(2) is amended to Executive Order 12606, The Family own regulations on rulemaking, 24 CFR give the Secretary more flexibility in The General Counsel, as the part 10. However, part 10 does provide determining what form of cash Designated Official under Executive for exceptions from that general rule equivalents will be acceptable for Order 12606, The Family, has where the agency finds good cause to earnest money deposits in the sale of determined that this rule does not have omit advance notice and public HUD-acquired single family properties, potential for significant impact on participation. The good cause given rapidly changing banking industry family formation, maintenance, and requirement is satisfied when prior practices. For example, the amendment general well-being, and, thus, is not public procedure is ‘‘impracticable, subject to review under the order. No permits HUD to accept teller’s checks unnecessary, or contrary to the public significant change in existing HUD that are currently excluded. interest.’’ (24 CFR 10.1) The Department Section 291.115(b)(2) of the policies or programs will result from finds that good cause exists to publish regulations on HUD property promulgation of this rule, as those this rule for effect without first disposition is amended to clarify that policies and programs relate to family soliciting public comment, in that prior section 203(k) insured financing for public procedure is unnecessary and concerns. investors is available for eligible contrary to public interest because the List of Subjects properties without increased down- amendments made by this rule give 24 CFR Part 200 payment requirements. Section greater clarity and accuracy to the 291.110(e) already provides for section provisions. They do not substantively Administrative practice and 203(k) financing in property disposition affect the rights and duties of procedure, Claims, Equal employment sales. As a general rule, investors are participants in the programs. opportunity, Fair housing, Home precluded from obtaining FHA-insured improvement, Housing standards, mortgage financing. HUD-acquired Environmental Impact Incorporation by reference, Lead properties may be sold to investors with A Finding of No Significant Impact poisoning, Loan programs—housing and FHA-insured financing but, in order to with respect to the environment has community development, Minimum protect the insurance funds, based upon been made in accordance with HUD property standards, Mortgage insurance, past experiences, the property regulations at 24 CFR part 50, which Organization and functions disposition regulations were drafted to implements section 102(2)(C) of the (Government agencies), Penalties, require higher down-payments for National Environmental Policy Act of Reporting and recordkeeping investors. A 25 percent down-payment 1969 (NEPA). This Finding of No requirements, Social security, is required for investors who purchase Significant Impact is available for public Unemployment compensation, Wages. a one-unit single family dwelling with inspection between 7:30 a.m. and 5:30 insured mortgage financing. p.m. weekdays in the Office of the Rules 24 CFR Part 201 The section 203(k) program Docket Clerk, Office of the General Health facilities, Historic specifically makes investors eligible to Counsel, Department of Housing and preservation, Home improvement, Loan obtain mortgage financing with a 15 Urban Development Room 10276, 451 programs—housing and community percent down-payment based upon the Seventh Street, SW, Washington, DC development, Manufactured homes, lesser of the estimated value of the 20410. Mortgage insurance, Reporting and property plus the cost of rehabilitation, recordkeeping requirements. or 110 percent of the estimate of value Regulatory Flexibility Act after rehabilitation. The availability of The Secretary, in accordance with the 24 CFR Part 202 the section 203(k) program for property Regulatory Flexibility Act (5 U.S.C. Administrative practice and disposition sales, as provided by 605(b)), has reviewed this rule before procedure, Home improvement, § 291.110(e), incorporates the 15 percent publication and by approving it certifies Manufactured homes, Mortgage Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations 36263 insurance, Reporting and recordkeeping PART 201ÐTITLE I PROPERTY accordance with such standards and requirements. IMPROVEMENT AND MANUFACTURED requirements as the Secretary may HOME LOANS prescribe. 24 CFR Part 203 (2) The mortgagee shall not 3. The authority citation for 24 CFR Hawaiian Natives, Home discriminate on the basis of race, color, part 201 continues to read as follows: improvement, Indians—lands, Loan religion, national origin, sex, age, or programs—housing and community Authority: 12 U.S.C. 1703; 42 U.S.C. 1436a disability in the selection of an development, Mortgage insurance, and 3535(d). appraiser. 12. Section 203.17 is amended by Reporting and recordkeeping § 201.18 [Amended] requirements, Solar energy. revising paragraph (b) to read as follows: 4. Section 201.18 is amended by 24 CFR Part 206 revising the section heading to read, § 203.17 Mortgage provisions. ‘‘Modification agreement or repayment * * * * * Aged, Condominiums, Loan plan.’’ (b) Mortgage multiples. A mortgage programs—housing and community shall involve a principal obligation in a development, Mortgage insurance, PART 202ÐAPPROVAL OF LENDING multiple of $1. Reporting and recordkeeping INSTITUTIONS AND MORTGAGEES * * * * * requirements. 5. The authority citation for 24 CFR 13. Section 203.18 is amended to 24 CFR Part 221 part 202 continues to read as follows: remove the parenthetical phrase ‘‘(as in effect on September 30, 1992)’’ in Low and moderate income housing, Authority: 12 U.S.C. 1703, 1709, and paragraph (a)(1)(ii) and to add a new 1715b; 42 U.S.C. 3535(d). Mortgage insurance, Reporting and paragraph (i) to read as follows: recordkeeping requirements. 6. Section 202.3(j) is amended to add § 203.18 Maximum mortgage amounts. 24 CFR Part 233 at the end the following sentence: * * * * * Home improvement, Loan programs— § 202.3 General approval requirements. (i) Energy efficient mortgages. The housing and community development, * * * * * principal amount of energy efficient Mortgage insurance, Reporting and (j) * * * The Secretary may identify mortgages may exceed the maximum recordkeeping requirements. classes or groups of lenders that are amounts determined under paragraph exempt from one or more of these fees. (a)(1) of this section under conditions 24 CFR Part 234 * * * * * prescribed by the Secretary in Condominiums, Mortgage insurance, 7. Section 202.11 is amended by accordance with section 106 of the Reporting and recordkeeping revising the section heading to read as Energy Policy Act of 1992. follows: requirements. § 203.19 [Amended] 24 CFR Part 280 § 202.11 Approval, origination approval agreement, recertification, withdrawal of § 203.19 [Amended] Community development, Grant approval and termination of approval 14. Section 203.19 is amended by programs—housing and community agreement. removing paragraph (c). development, Loan programs—housing * * * * * 15. Section 203.22 is amended by and community development, Low and 8. Section 202.12(k) is amended to revising paragraph (a) to read as follows: moderate income housing, Nonprofit add at the end the following sentence: organizations, Reporting and § 203.22 Payment of insurance premiums or charges; prepayment privileges. recordkeeping requirements. § 202.12 General approval requirements. * * * * * (a) Payment of periodic insurance 24 CFR Part 291 (k) * * * The Secretary may identify premiums or charges. Except with respect to mortgages for which a one- Community facilities, Conflict of classes or groups of mortgagees that are time mortgage insurance premium is interests, Homeless, Lead poisoning, exempt from one or more of these fees. paid pursuant to § 203.280, the mortgage Low and moderate income housing, * * * * * may provide for monthly payments by Mortgages, Reporting and recordkeeping § 202.13 [Amended] the mortgagor to the mortgagee of an requirements, Surplus government amount equal to one-twelfth of the property. 9. Section 202.13 is amended by removing paragraph (d) and annual mortgage insurance premium Accordingly, in title 24 of the Code of redesignating paragraph (e) as paragraph payable by the mortgagee to the Federal Regulations, parts 200, 201, 202, (d). Commissioner. Such payments continue 203, 206, 221, 233, 234, 280, and 291 are only so long as the contract of insurance amended as follows: PART 203ÐSINGLE FAMILY shall remain in effect or for such shorter MORTGAGE INSURANCE period as mortgage insurance premiums PART 200ÐINTRODUCTION are payable by the mortgagee to the 10. The authority citation for 24 CFR Commissioner. 1. The authority citation for 24 CFR part 203 continues to read as follows: part 200 continues to read as follows: * * * * * Authority: 12 U.S.C. 1709, 1710, 1715b, 16. Section 203.24 is amended by Authority: 12 U.S.C. 1701–1715z–18; 42 and 1715u; 42 U.S.C. 3535(d). revising paragraph (a)(1) to read as U.S.C. 3535(d). 11. Section 203.5 is amended by follows: revising paragraph (e) to read as follows: § 200.810 [Amended] § 203.24 Application of payments. 2. Section 200.810(b) is amended to § 203.5 Direct Endorsement process. (a) * * * remove the phrase ‘‘, who shall be listed * * * * * (1) Premium charges under the on the HUD Appraiser Roster under (e) Appraisal. (1) A mortgagee shall contract of insurance (other than a one- § 267.8(d)(2) of the chapter,’’. have the property appraised in time or up-front mortgage insurance 36264 Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations premium paid in accordance with the dwelling as a principal residence or through its duly authorized §§ 203.280, 203.284 and 203.285), secondary residence, as these terms are representative. charges for ground rents, taxes, special defined in § 203.18(f); or * * * * * assessments, flood insurance premiums, (ii) When refinancing a mortgage for 26. Section 203.43i is amended by if required, and fire and other hazard a shorter term will result in an increase revising paragraph (a) to read as follows: insurance premiums; in the mortgagor’s regular monthly * * * * * payments of no more than $50. In the § 203.43i Eligibility of mortgages on 17. Section 203.30 is amended by case of a graduated payment mortgage, Hawaiian Home Lands insured pursuant to section 247 of the National Housing Act. adding a new paragraph (d) to read as the reduction in regular monthly follows: payments means a reduction from the (a) Eligibility. A mortgage on a payment due under the existing homestead lease granted by the § 203.30 Certificate of nondiscrimination mortgage for the month in which the Department of Hawaiian Home Lands by the mortgagor. refinancing mortgage is executed. covering a one- to four-family residence * * * * * * * * * * located on Hawaiian home lands is (d) That buildings having four (4) or eligible for insurance pursuant to more units, which were built for first § 203.43b [Removed and reserved] section 247 of the National Housing Act occupancy after March 13, 1991, were 23. Section 203.43b is removed and (12 U.S.C. 1715z–12) if the mortgagor is constructed in compliance with the Fair reserved. a native Hawaiian who will occupy it as Housing Act new construction a principal residence, and if the § 203.43f [Amended] requirements in 24 CFR 100.205. mortgage meets the requirements of this 24. Section 203.43f(b) is amended to § 203.36 [Removed and reserved] subpart as modified by this section. remove the last sentence. Mortgage insurance on cooperative 18. Section 203.36 is removed and 25. Section 203.43h is amended by shares under § 203.43c on homes in reserved. revising the introductory text, revising federally impacted areas under 19. Section 203.38 is revised to read paragraph (b), and revising paragraph § 203.43e is not authorized under this as follows: (g)(3), to read as follows: section. § 203.38 Location of dwelling. § 203.43h Eligibility of mortgages on * * * * * At the time a mortgage is insured Indian land insured pursuant to section 248 27. Section 203.44 is revised to read there must be located on the mortgaged of the National Housing Act. as follows: property one or more dwellings A mortgage covering a one- to four- designed principally for residential use family residence located on Indian land § 203.44 Eligibility of advances. for not more than four families. shall be eligible for insurance pursuant Mortgagees may not make open-end 20. Section 203.40 is amended by to section 248 of the National Housing advances under section 225 of the revising the first sentence to read as Act (12 U.S.C. 1715z–13), National Housing Act (12 U.S.C. 1715p) follows: notwithstanding otherwise applicable in connection with the mortgages requirements related to marketability of insured under this chapter. § 203.40 Location of property. title, if the mortgage meets the 28. Section 203.49 is amended by The mortgaged property shall be requirements of this subpart as modified revising the second sentence of the located within the United States, Puerto by this section and is made by an Indian introductory text and by removing the Rico, Guam, the Virgin Islands, the Tribe or on a leasehold estate, by an second sentence of paragraph (a) Commonwealth of the Northern Mariana Indian who will occupy it as a principal beginning with ‘‘The weekly average Islands, and American Samoa. * ** residence. Mortgage insurance on ** *’’, to read as follows: 21. Section 203.42 is amended by cooperative shares is not authorized revising paragraph (a) to read as follows: under this section. § 203.49 Eligibility of adjustable rate mortgages. § 203.42 Rental properties. * * * * * (b) Eviction procedures. Before HUD ** * This section shall apply only to (a) A mortgage on property upon mortgage loans described under sections which there is a dwelling to be rented will insure a mortgage on Indian land, the tribe having jurisdiction over such 203(b), 203(h) and 203(k) of the National by the mortgagor shall not be eligible for Housing Act. insurance if the property is a part of, or property must certify to the HUD Field adjacent or contiguous to, a project, or Office that it has adopted and will * * * * * group of similar rental properties, in enforce procedures for eviction of 29. Section 203.204 is amended by which the mortgagor has a financial defaulted mortgagors where the insured revising paragraph (a) and by revising interest in eight or more dwelling units. mortgage has been foreclosed. the third sentence of paragraph (g), to read as follows: * * * * * * * * * * 22. Section 203.43 is amended by (g) * * * (3) ‘‘Indian tribe’’ means any Indian or § 203.204 Requirements and limitations of revising paragraph (c)(3) to read as a plan. Alaska native tribe, band, nation, or follows: other organized group or community of (a) A Plan must assure timely § 203.43 Eligibility of miscellaneous type Indians or Alaskan natives recognized resolution of homeowners’ complaints mortgages. as eligible for the services provided to or claims covered under § 203.205. * * * * * Indians or Alaska natives by the Warranties set forth in a Plan must (c) * * * Secretary of the Interior because of its comply with section 2301(a)(1)–(13) of (3) The mortgage must result in a status as such an entity, or that is an the Magnuson-Mass Warranty-Federal reduction in regular monthly payments eligible recipient under chapter 67 of Trade Commission Improvement Act by the mortgagor, except: title 31, United States Code. For (15 U.S.C. 2301–2312) along with the (i) When a fixed rate mortgage is given purposes of engaging in section 248 requirements and criteria set out in this to refinance an adjustable rate mortgage insured mortgage transactions under section. held by a mortgagor who is to occupy this section, an Indian tribe may act * * * * * Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations 36265

(g) * * * A Plan must contain pre- (c) Applicability of certain provisions. tornado, or, for mortgages insured on or arbitration conciliation provisions at no ** * The provisions of paragraphs (c), after January 1, 1977, the property has cost to the homeowner, and provision (d), (e), and (g) of § 203.284 also shall be suffered damage because of the for judicial resolution of disputes, but applicable to mortgages subject to mortgagee’s failure to take action as arbitration, which must be available to premiums under this section. required by § 203.377, the damage must a homeowner during the entire term of * * * * * be repaired before conveyance of the the coverage contract, must be an 36. Section 203.346 is amended by property or assignment of the mortgage assured recourse for a dissatisfied revising the first sentence to read as to the Secretary, except under the homeowner. follows: following conditions: * * * * * * * * * * 30. Section 203.251 is amended by § 203.346 Postponement of foreclosureÐ mortgagors in military service. (b) For mortgages insured under firm revising paragraph (s) to read as follows: commitments issued on or after If at any time during default the § 203.251 Definitions. November 19, 1992, or under direct mortgagor is a ‘‘Person in military endorsement processing where the * * * * * service,’’ as such term is defined in the credit worksheet was signed by the (s) State includes the several States, Soldiers’ and Sailors’ Civil Relief Act of mortgagee’s underwriter on or after Puerto Rico, the District of Columbia, 1940, the period during which the November 19, 1992, the provisions of Guam, the Commonwealth of the mortgagor is in such service shall be paragraph (a) of this section apply and, Northern Mariana Islands, American excluded in computing the period in addition, if the property has been Samoa, and the Virgin Islands. within which the mortgagee shall damaged during the time of the * * * * * commence foreclosure or acquire the mortgagee’s possession by events other 31. Section 203.255 is amended by property by other means as provided in than fire, flood, earthquake, hurricane, revising paragraph (b)(2) to read as § 203.355 of this subpart. * * * or tornado, or if it was damaged follows: 37. Section 203.356 is revised to read notwithstanding reasonable action by as follows: § 203.255 Insurance of mortgage. the mortgagee as required by § 203.377 (b) * * * § 203.356 Notice of foreclosure and pre- of this part, the mortgagee must provide (2) An application for insurance of the foreclosure sale; reasonable diligence notice of such damage to the Secretary mortgage in a form prescribed by the requirements. and may not convey until directed to do Secretary; (a) Notice of foreclosure and pre- so by the Secretary. The Secretary will * * * * * foreclosure sale. The mortgagee must either: give notice to the Secretary, in a format * * * * * § 203.265 [Amended] prescribed by the Secretary, within 30 40. Section 203.380 is amended by 32. Section 203.265(b) is amended in days after the institution of foreclosure revising paragraph (a)(1)(i) to read as the last sentence to remove the phrase proceedings. The mortgagee must give follows: ‘‘Treasury Fiscal Requirements Manual’’ notice to the Secretary, in a format and add in its place the phrase prescribed by the Secretary, within the § 203.380 Certificate of property condition. ‘‘Treasury Financial Manual.’’ time-frame prescribed by the Secretary, (a) * * * 33. Section 203.281 is amended by of the acceptance of any mortgagor into (1) * * * revising paragraph (b)(1) to read as the pre-foreclosure sale procedure. (i) Undamaged by fire, flood, follows: (b) Reasonable diligence. The earthquake, hurricane or tornado; and § 203.281 Calculation of one-time MIP. mortgagee must exercise reasonable * * * * * diligence in prosecuting the foreclosure 41. Section 203.390 is amended by * * * * * proceedings to completion and in (b)(1) The Commissioner shall revising paragraph (b)(1) to read as acquiring title to and possession of the determine the applicable premium follows: property. A time frame that is percentage in accordance with sound determined by the Secretary to financial and actuarial practice. § 203.390 Waiver of titleÐmortgages or constitute ‘‘reasonable diligence’’ for property formerly held by the Secretary. * * * * * each State is made available to * * * * * § 203.284 [Amended] mortgagees. (b) * * * 34. Section 203.284 is amended by: 38. Section 203.378 is amended by (1) If a property held by the Secretary a. Removing the second sentence in revising paragraph (c)(1) to read as is sold by the Secretary who also insures paragraph (a)(1); follows: a mortgage financing the sale, and the b. Removing the phrase ‘‘pursuant to § 203.378 Property condition. mortgage is later reassigned to the paragraph (b)(1)(i) or (b)(2)(i) of this * * * * * Secretary or the property covered by the section,’’ in paragraph (c); and (c) * * * mortgage is later conveyed to the c. Removing the phrase ‘‘Treasury Secretary, the Secretary will not object Fiscal Requirements Manual’’ in the last (1) Damage by fire, flood, earthquake, hurricane, or tornado; to title by reason of any lien or other sentence of paragaph (e), and adding in adverse interest that was senior to the its place the phrase ‘‘Treasury Financial * * * * * mortgage on the date the mortgage was Manual.’’ 39. Section 203.379 is amended by filed for record, except where the lien or 35. Section 203.285 is amended by revising paragraph (a), introductory text, other adverse interest arose from a lien revising the second sentence of and paragraph (b), introductory text, to or interest that had already been paragraph (c) to read as follows: read as follows: recorded against the mortgagor. § 203.285 Fifteen-year mortgages: § 203.379 Adjustment for damage or * * * * * Calculation of up-front and annual MIP on neglect. 42. Section 203.402 is amended by or after December 26, 1992. (a) If the property has been damaged revising paragraphs (b), (c) and (k)(1) to * * * * * by fire, flood, earthquake, hurricane, or read as follows: 36266 Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations

§ 203.402 Items included in paymentÐ information required in § 3500.21(e)(2) PART 206ÐHOME EQUITY conveyed and non-conveyed properties. of this title; and CONVERSION MORTGAGE * * * * * (2) By the transferee mortgagee or INSURANCE (b) Special assessments, which are servicer: noted on the application for insurance 49. The authority citation for 24 CFR or which become liens after the (i) To the mortgagor. The notification part 206 continues to read as follows: insurance of the mortgage. shall be delivered not less than 15 days Authority: 12 U.S.C. 1715b, 1715z–1720; (c) Hazard insurance premiums on the before the effective date of the transfer 42 U.S.C. 3535(d). and shall contain the information mortgaged property not in excess of a § 206.3 [Amended] reasonable rate as defined in required in § 3500.21(e)(2) of this title; § 203.379(a)(4). and 50. Section 206.3 is amended by (ii) To the Secretary. This notification removing the last sentence of the * * * * * definition of ‘‘Maximum claim (k)(1) For properties conveyed to the shall be delivered within 15 days of the transfer, in a format prescribed by the amount’’. Secretary, an amount equivalent to the 51. Section 206.9 is amended by Secretary. debenture interest which would have revising the paragraph heading of been earned, as of the date such * * * * * paragraph (b) to read as follows: payment is made, on the portion of the 45. Section 203.604 is amended by § 206.9 Eligible mortgagees. insurance benefits paid in cash, if such revising the second sentence of portion had been paid in debentures, paragraph (b) to read as follows: * * * * * except that: (b) HUD approved mortgagees. (i) When the mortgagee fails to meet § 203.604 Contact with the mortgagor. § 206.13 [Removed and reserved] any one of the applicable requirements * * * * * of §§ 203.355, 203.356(b), 203.359, 52. Section 206.13 is removed and (b) * * * If default occurs in a 203.360, 203.365, 203.606(b)(1), or reserved. repayment plan arranged other than 203.366 within the specified time and in 53. Section 206.17 is amended by during a personal interview, the a manner satisfactory to the Secretary revising paragraph (a) to read as follows: mortgagee must have a face-to-face (or within such further time as the meeting with the mortgagor, or make a § 206.17 General. Secretary may approve in writing), the reasonable attempt to arrange such a (a) Payment options. A mortgage shall interest allowance in such cash payment meeting within 30 days after such initially provide for the tenure payment shall be computed only to the date on default and at least 30 days before option (§ 206.19(a)), the term payment which the particular required action foreclosure is commenced, or at least 30 option (§ 206.19(b)), or the line of credit should have been taken or to which it days before assignment is requested if payment option (§ 206.19(c)), or a was extended; the mortgage is insured on Hawaiian combination as provided in § 206.25(d), (ii) When the mortgagee fails to meet home land pursuant to section 247 or subject to later change in accordance the requirements of § 203.356(a) of this Indian land pursuant to section 248 or with § 206.26. part within the specified time and in a if assignment is requested under manner satisfactory to the Secretary (or * * * * * § 203.350(d) for mortgages authorized by within such further time as the section 203(q) of the National Housing § 206.45 [Amended] Secretary may approve in writing), the Act. 54. Section 206.45(b) is amended to interest allowance in such cash payment remove the second sentence. shall be computed to a date set * * * * * administratively by the Secretary. 46. Section 203.670 is amended by § 206.121 [Amended] * * * * * revising paragraph (a) to read as follows: 55. Section 206.121(c) is amended to 43. An undesignated center heading remove the citation ‘‘§ 206.27(e)’’ and to § 203.670 Conveyance of occupied add in its place the citation ‘‘GRADUATED PAYMENT property. MORTGAGES’’ is added after § 203.435 ‘‘§ 206.27(d).’’ and before § 203.436. (a) It is HUD’s policy to reduce the 44. Section 203.502 is amended to inventory of acquired properties in a PART 221ÐLOW COST AND revise the first sentence of paragraph (a) manner that expands homeownership MODERATE INCOME MORTGAGE and all of paragraph (b) to read as opportunities, strengthens INSURANCE follows: neighborhoods and communities, and 56. The authority citation for part 221 ensures a maximum return to the continues to read as follows: § 203.502 Responsibility for servicing. mortgage insurance fund. Authority: 12 U.S.C. 1707(a), 1715b, and (a) After January 10, 1994, servicing of * * * * * insured mortgages must be performed 1715l; 42 U.S.C. 3535(d). by a mortgagee that is approved by HUD 47. Section 203.679 is amended by 57. Section 221.45 is revised to read to service insured mortgages. * ** revising paragraph (b)(4) to read as as follows: follows: * * * * * § 221.45 Mortgage obligation in multiples. (b) Whenever servicing of any § 203.679 Continued occupancy after The mortgage shall involve a mortgage is transferred from one conveyance. principal obligation in multiples of $1. mortgagee or servicer to another, notice * * * * * of the transfer of service shall be (b) * * * PART 233ÐEXPERIMENTAL HOUSING delivered: MORTGAGE INSURANCE (1) By the transferor mortgagee or (4) Assignment of the property by the servicer to the mortgagor. The Secretary to a different use or program. 58. The authority citation for part 233 notification shall be delivered not less is revised to read as follows: § 203.685 [Removed] than 15 days before the effective date of Authority: 12 U.S.C. 1715b, 1715x; 42 the transfer and shall contain the 48. Section 203.685 is removed. U.S.C. 3535(d). Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations 36267

59. Section 233.5 is amended by § 234.16 Certificate of nondiscrimination § 234.70 Eligibility of open-end advances. revising paragraph (a) introductory text by mortgagor. Mortgagees may not make open-end and paragraph (b) to read as follows: * * * * * advances under section 255 of the (d) That buildings having four (4) or National Housing Act in connection § 233.5 Cross-reference. more units, which were built for first with mortgages insured under this (a) To be eligible for insurance under occupancy after March 13, 1991, were chapter. this subpart, a mortgage or home constructed in compliance with the Fair improvement loan shall meet the Housing Act new construction PART 280ÐNEHEMIAH HOUSING eligibility requirements for insurance requirements in 24 CFR 100.205. OPPORTUNITY GRANTS PROGRAM under § 203.1 et seq. (part 203, subpart 64. Section 234.25 is amended by revising paragraph (b) to read as follows: 70. The authority citation for 24 CFR A); § 213.501 et seq. (part 213, subpart part 280 continues to read as follows: C); § 220.1 et seq. (part 220, subpart A); § 234.25 Mortgage provisions. l § 221.1 et seq. (part 221, subpart A); Authority: 12 U.S.C. 1715 note; 42 U.S.C. * * * * * 3535(d). § 226.1 et seq. (part 226, subpart A); (b) Mortgage multiples. The mortgage 71. Section 280.330 is amended by § 234.1 et seq. (part 234, subpart A); shall involve a principal obligation in a revising the section heading and § 235.1 et seq. (part 235, subpart A); or multiple of $1. § 237.1 et seq. (part 237, subpart A) of paragraph (c)(2) to read as follows: this chapter, except that: * * * * * 65. Section 234.52 is amended by § 280.330 Loan and Profit. * * * * * revising paragraph (c) to read as follows: * * * * * (b) For the purposes of this subpart, (c) * * * all references in parts 203, 213, 220, § 234.52 Refinancing of existing (2) Loan and Profit—Any amounts mortgages. 221, 226, 234, 235, and 237 of this remaining after distribution of the down chapter to sections 203, 213, 220, 221, * * * * * payment shall be shared equally 809, 234, 235, and 237 of the National (c) The mortgage must result in a between the Secretary and the family, Housing Act shall be construed to refer reduction in regular monthly payments but only to the extent that the Secretary to section 233 of the Act. by the mortgagor, except: recovers an amount equal to the amount (1) When a fixed rate mortgage is of the loan originally made to the family given to refinance an adjustable rate PART 234ÐCONDOMINIUM under this section. If such remaining mortgage held by a mortgagor who is to OWNERSHIP MORTGAGE INSURANCE amounts are insufficient for the occupy the dwelling as a principal Secretary to recover the full amount of 60. The authority for part 234 residence or secondary residence, as the loan made under this section, the continues to read as follows: these terms are defined in § 237.27(e); or remaining balance of the second Authority: 12 U.S.C. 1715qb and 1715y; 42 (2) When refinancing a mortgage for a shorter term will result in an increase in mortgage shall be cancelled and shall U.S.C. 3535(d). Section 234.520(a)(2)(ii) is not be transferred to a subsequent also issued under 12 U.S.C. 1707(a). the mortgagor’s regular monthly payments of no more than $50. In the purchaser. 61. Section 234.1 is amended by case of a graduated payment mortgage, * * * * * revising paragraph (n) to read as the reduction in regular monthly follows: payments means a reduction from the PART 291ÐDISPOSITION OF HUD- ACQUIRED SINGLE FAMILY § 234.1 Definitions used in this subpart. payment due under the existing mortgage for the month in which the PROPERTY * * * * * refinancing mortgage is executed; 72. The authority for 24 CFR part 291 (n) State includes the several States, * * * * * continues to read as follows: Puerto Rico, the District of Columbia, 66. Section 234.54 is added, under the Guam, the Commonwealth of the Authority: 12 U.S.C. 1790 and 1715(b); 42 undesignated center heading ‘‘ELIGIBLE U.S.C. 1441, 1441a, 1551a, and 3535(d). Northern Mariana Islands, American MORTGAGES,’’ to read as follows: Samoa, and the Virgin Islands. 73. Section 291.100 is amended by * * * * * § 234.54 Eligibility of assigned mortgages revising the first sentence of paragraph and mortgages covering acquired property. (a)(3) and the introductory text in 62. Section 234.11 is added to read as paragraph (a)(4) to read as follows: follows: The Commissioner may insure under this part, without regard to any § 291.100 General policy. § 234.11 Disclosure regarding interest due limitation upon eligibility contained in upon mortgage prepayment. this subpart, any mortgage assigned to (a) * * * the Commissioner in connection with (3) Except as provided in paragraph Each mortgagee with respect to a (a)(4) of this section, tenants in mortgage under this part shall, at or payment under a contract of mortgage insurance, or executed in connection occupancy will not be offered the right before closing with respect to any such of first refusal to purchase the property. mortgage, provide the mortgagor with with a sale by the Commissioner of any property acquired in the settlement of *** written notice in a form prescribed by (4) HUD tenants in occupancy will be the Commissioner describing any an insurance claim under any section or title of the National Housing Act. offered the right of first refusal to requirements the mortgagor must fulfill purchase property where: upon prepayment of the principal § 234.67 [Removed and reserved] * * * * * amount of the mortgage to prevent the 67. Section 234.67 is removed and 74. Section 291.105 is amended by accrual of any interest on the principal reserved. revising the first sentence of paragraph amount after the date of such 68. The undesignated center heading (e) and the first sentence of paragraph prepayment. ‘‘OPEN-END ADVANCES’’ immediately (h)(2), to read as follows: 63. Section 234.16 is amended by preceding § 234.70 is removed. adding a new paragraph (d) to read as 69. Section 234.70 is revised to read § 291.105 Competitive sales procedure. follows: as follows: * * * * * 36268 Federal Register / Vol. 61, No. 132 / Tuesday, July 9, 1996 / Rules and Regulations

(e) Full price offers. HUD field offices properties eligible for insured financing bid price for one-unit properties, and 85 that operate under a ‘‘full price offer’’ are offered for direct sale, at a discount percent for two- to four-unit properties, program open offers at specified times of 10 percent off the list price, to up to local maximum mortgage during the 10-day bidding period. * ** displaced persons who will occupy the amounts. Pre-paids, financing or closing * * * * * properties. * ** costs may not be included in the (h) * * * * * * * * mortgage amount for such investor (2) All bids must be accompanied by 76. Section 291.115 is amended by purchasers. For investor purchasers earnest money deposits in the form of a revising paragraph (b)(2) to read as with rehabilitation loans insured under cash equivalent as prescribed by the follows: § 203.50 of this chapter, the mortgage Secretary, or a certification from the real § 291.115 Insured sales. amount is calculated as provided in estate broker that the earnest money has § 203.50(f) of this chapter and the bid been deposited in the broker’s escrow * * * * * price is used as the Commissioner’s account. * * * (b) * * * (2) For an owner-occupant purchaser, estimate of the value of the property * * * * * before rehabilitation. 75. Section 291.110 is amended by the mortgage amount is based on the bid revising the first sentence of paragraph price plus any allowable pre-paids (e.g., Dated: June 13, 1996. (b)(1) to read as follows: taxes) and financing or closing costs, up Nicolas P. Retsinas, to local maximum mortgage amounts. Assistant Secretary for Housing-Federal § 291.110 Other sales procedures. For investor purchasers without Housing Commissioner. * * * * * rehabilitation loans insured under (b) Direct sales to displaced persons. § 203.50 of this chapter, the mortgage [FR Doc. 96–17305 Filed 7–8–96; 8:45 am] (1) At the discretion of the Field Office, amount is limited to 75 percent of the BILLING CODE 4210±27±P