[Federal Register Volume 78, Number 25 (Wednesday, February 6, 2013)]
[Notices]
[Pages 8551-8552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02667]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5680-N-01]


Federal Housing Administration (FHA) Risk Management Initiatives: 
Changes to Maximum Loan-to-Value Financing Solicitation of Comment

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: This proposed notice would make changes to the loan-to-value 
(LTV) financing available to qualified borrowers of FHA-insured loans. 
This notice proposes to set a 95 percent maximum LTV for FHA-insured 
loans over $625,500, with certain exemptions. FHA's annual Fiscal Year 
2012 report to Congress on the financial status of the FHA Mutual 
Mortgage Insurance Fund (MMIF, or Fund), reported a decline from Fiscal 
Year 2011 in the Fund's statutorily mandated capital reserve ratio and 
cited FHA's decision to continue taking steps to improve the MMIF's 
short- and long-term outlook. HUD has determined that this proposed 
change to the LTV requirements is necessary to improve the health of 
the MMIF, while ensuring continued access to mortgage credit for 
American families.

DATES: Comment Due Date: March 8, 2013.

ADDRESSES: Interested persons are invited to submit comments regarding 
this notice to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule. No Facsimile Comments. Facsimile (FAX) comments are not 
acceptable.

    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-708-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the toll-free Federal Relay 
Service at 800-877-8339. Copies of all comments submitted are available 
for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Karin Hill, Director, Office of Single 
Family Program Development, Office of Housing, Department of Housing 
and Urban Development, 451 7th Street SW., Room 9278, Washington, DC, 
20410; telephone number 202-708-4308 (this is not a toll-free number). 
Persons with hearing or speech impairments may access this number via 
TTY by calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    During times of economic volatility, the FHA has maintained its 
countercyclical influence, supporting the private sector when access to 
housing finance capital is otherwise constrained. FHA played this role 
in the recent housing crisis, and the volume of FHA insurance increased 
rapidly during the housing crisis as private sources of mortgage 
finance retreated from the market. However, the growth of the MMIF 
portfolio over the period of time during the housing crisis has 
contributed significantly to the projected losses to, and a 
corresponding decrease in the financial soundness of, the Fund. 
Consistent with the Secretary's responsibility under the National 
Housing Act (12 U.S.C. 1701 et seq.) to ensure that the MMIF remains 
financially sound, FHA has taken a number of steps to improve the 
health of the Fund, while ensuring continued access to mortgage credit 
for American families.
    FHA's annual Fiscal Year 2012 report to Congress on the financial 
status of the MMIF reported a decline in the Fund's statutory capital 
reserve ratio and cited FHA's plans to continue taking action to 
improve the Fund's financial soundness.\1\ The report estimated that 
implementing a number of changes to FHA policy since 2009 has improved 
the economic value of the Fund by at least $20 billion.\2\
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    \1\ U.S. Department of Housing and Urban Development, Annual 
Report to Congress Regarding the Financial Status of the FHA Mutual 
Mortgage Insurance Fund, Fiscal Year 2012. (Fiscal 2012 Report) See 
http://portal.hud.gov/hudportal/documents/huddoc?id=F12MMIFundRepCong111612.pdf
    \2\ Id. at 52.
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II. This Notice--Proposed Changes to Maximum LTV for Loans in Excess of 
$625,500

    Although the steps taken since 2009 have had a positive effect on 
the financial soundness of the Fund, the projected levels of default, 
foreclosure, and claims within the existing MMIF portfolio and a number 
of predicted economic factors have resulted in a lower statutory 
capital reserve ratio for the MMIF for Fiscal Year 2012 compared to 
Fiscal Year 2011. In order to further protect the financial soundness 
of the MMIF, FHA must be vigilant in monitoring the performance of the 
portfolio, and adjust its standards to effectively manage financial 
risk. As a result, FHA has been continually evaluating its portfolio to 
identify and respond to risks in ways that benefit the Fund and, 
ultimately, consumers and taxpayers. During its evaluation, FHA has 
determined that the MMIF is subject to greater risk when FHA insures 
loan amounts in excess of $625,500. In response to this risk, the 
maximum LTV

[[Page 8552]]

will be limited to 95 percent for loans in excess of $625,500.\3\ LTV 
limits do not include the addition of the Up-Front Mortgage Insurance 
Premium (UFMIP).\4\
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    \3\ Id. at 17. The FHA Actuarial Report advises that the 
majority of FHA endorsements have historically had LTV ratios above 
95 percent.
    \4\ HUD Handbook 4.155.2, (Lender's Guide to the Single Family 
Mortgage Insurance Process) at Chapter 7, pertaining to Mortgage 
Insurance Premiums, notes that in most of the FHA mortgage insurance 
programs, FHA collects an UFMIP and an annual insurance premium, 
which is collected in monthly installments. The total FHA-insured 
first mortgage on a property is limited to 100 percent of the 
appraised value and the UFMIP is required to be included within that 
limit. However, the UFMIP is otherwise not considered when 
determining compliance with statutory loan limits or LTV limits in 
accordance with Section 203(d) of the National Housing Act. See 
http://portal.hud.gov/FHA-Handbooks/collections/current/print/4155-2_7.pdf
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    Certain FHA-insured loans will be exempted from this notice. Loans 
made pursuant to the FHA Streamline Refinance without an appraisal 
program, which has no LTV calculation, and the 203(k) Rehabilitation 
Mortgage Insurance Program, which utilizes two different LTV 
calculations in addition to the cost of improvements, are exempted. The 
Secretary may, as he deems necessary, exempt from this notice loans 
from other programs by publishing a Federal Register notice for 
comment.

III. Solicitation of Public Comments

    FHA welcomes comments on the proposals set forth in this notice, 
including whether there may be additional FHA programs that should be 
exempted from this notice, for a period of 30 calendar days. FHA also 
welcomes comments on the economic effects in the proposals set forth in 
this notice. All comments will be considered in the development of the 
Federal Register notice that will follow this proposed notice and that 
will establish the maximum LTV for loans over a specified amount. The 
final notice will address any significant issues raised by the public 
comments, and may include changes to the LTV requirements proposed in 
this notice. The final notice will also announce the effective date for 
the LTV requirements.

IV. Environmental Review

    This notice involves discretionary establishment and review of loan 
limits which do not constitute a development decision affecting the 
physical condition of specific project areas or building sites. 
Accordingly, under 24 CFR 50.19(c)(6), this notice is categorically 
excluded from environmental review under the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321).

    Dated: January 30, 2013.
Carol J. Galante,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2013-02667 Filed 2-5-13; 8:45 am]
BILLING CODE 4210-67-P