[Federal Register Volume 60, Number 158 (Wednesday, August 16, 1995)]
[Rules and Regulations]
[Pages 42754-42762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20221]
[[Page 42753]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Housing; Federal Housing
Commissioner
_______________________________________________________________________
24 CFR Parts 203 and 206
Home Equity Conversion Mortgage Insurance Demonstration: Streamlining
the Demonstration and Allowing Use of the Direct Endorsement Program;
Interim Rule
Federal Register / Vol. 60, No. 158 / Wednesday, August 16, 1995 /
Rules and Regulations
[[Page 42754]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner
24 CFR Parts 203 and 206
[Docket No. FR-2958-I-01]
RIN 2502-AF32
Home Equity Conversion Mortgage Insurance Demonstration:
Streamlining the Demonstration and Allowing Use of the Direct
Endorsement Program
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Interim rule.
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SUMMARY: This interim rule amends HUD's regulations in 24 CFR parts 203
and 206 to simplify the Home Equity Conversion Mortgage (HECM)
Insurance Demonstration, and to expedite the processing of HECMs by
permitting use of the Direct Endorsement program. The rule implements
the statutory disclosure amendments in section 334 of the Cranston-
Gonzalez National Affordable Housing Act. The rule also makes other
changes, including technical and clarifying changes, to improve and
streamline the program based on the first five years of the
demonstration.
DATES: Effective Date: September 15, 1995.
Comment Due Date: October 16, 1995.
ADDRESSES: Interested persons are invited to submit comments regarding
this interim rule to the Rules Docket Clerk, Office of General Counsel,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410-0500. Communications should refer to
the above docket number and title. Facsimile (FAX) comments are not
acceptable. A copy of each communication submitted will be available
for public inspection and copying between 7:30 a.m. and 5:30 p.m.
weekdays at the above address.
FOR FURTHER INFORMATION CONTACT: Richard K. Manuel, Acting Director,
Single Family Development Division, Office of Insured Single Family
Housing, Room number 9272, Department of Housing and Urban Development,
451 Seventh Street, SW, Washington, DC 20410, telephone (202) 708-2700;
TDD (202) 708-9300. (These are not toll-free telephone numbers.)
SUPPLEMENTARY INFORMATION:
Background
The Home Equity Conversion Mortgage (HECM) Insurance Demonstration
was authorized by Section 417 of the Housing and Community Development
Act of 1987 (42 U.S.C. 5301), which amended Section 255 of the National
Housing Act (12 U.S.C. 1715z-20) to permit elderly homeowners to borrow
against the equity in their homes. HUD published final regulations on
June 9, 1989, at 54 FR 24823, issued HUD Handbook 4235.1 for the
program in August 1989, and immediately began processing applications
for commitments to insure. The regulations are codified at 24 CFR part
206. Revision 1 to HUD Handbook 4235.1 was issued in November 1994.
This interim rule reflects ideas for improving the program
regulations based on experience from the first five years of the
demonstration. It also reflects HUD's implementation of section 334 of
the Cranston-Gonzalez National Affordable Housing Act (NAHA) (42 U.S.C.
12701). An explanation of the interim changes follows with a list of
purely technical amendments at the end of this section.
Changes to HECM Regulations
Section 334 of NAHA
Section 334 of NAHA amended subsections (d), (e), and (g) 1 of
section 255 of the National Housing Act (NHA). Section 255(e) was
amended to require additional disclosures to the mortgagor before loan
closing, including projections of future loan balances and information
that the mortgagor's liability is limited. Existing Sec. 206.43(a)
requires the mortgagee to identify and explain to the mortgagor the
principal provisions of the mortgage, which include the limitations on
liability. HUD provided mortgagees with instructions on these new
disclosures through Mortgagee Letter 91-1 and by making a software
package available to mortgagees.
\1\ Section 255(g) was amended to raise the limit on HECM's
insured under section 255 from 2,500 mortgages to 25,000 mortgages,
and to permit HUD to insure mortgages through September 30, 1995
instead of September 30, 1991. In response to these changes, HUD
eliminated the reservations system that had been adopted to insure
nationwide allocation of the small number of mortgages that had been
initially authorized (56 FR 16002, April 19, 1991.) No further
rulemaking is needed to implement this amendment.
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Section 154 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (Pub.L. 103-325, September 23, 1994) imposes a
very similar disclosure requirement for all reverse mortgages. HUD has
concluded that Congress does not expect HECM mortgagees to attempt to
comply with the disclosure requirements of both the NAHA and the new
law, and that there is no need for HECM mortgagees to be exempted from
the new law. The new law will become mandatory when the Federal Reserve
Board's implementing regulations, published on March 24, 1995, at 57 FR
15463, become mandatory on October 1, 1995. At that time, HECM
mortgagees will be expected to comply with the Federal Reserve Board
regulations instead of the current HUD instructions on disclosures.
Until then, mortgagees may choose the option of compliance with the
Federal Reserve Board regulations as a means of complying with HUD's
instructions.
Section 255(d)(7) of the NHA was amended to permit a procedure for
the mortgagor to reserve a portion of the equity in the property for
the benefit of the mortgagor or the mortgagor's heirs. This interim
rule does not implement section 255(d)(7).
HUD has concluded that two of the amendments to section 255 of the
NHA by section 334 of NAHA that are mandatory do not require any change
to the current part 206. New section 255(d)(9) of the NHA requires that
an insured mortgage provide for payments under one of six payment plans
selected by the mortgagor: (1) Payments based on a line of credit, (2)
monthly payments over a term, (3) monthly payments over the mortgagor's
tenure in the home, (4) a combination of (1) and (2), (5) a combination
of (1) and (3), and (6) ``or any other basis that the Secretary
considers appropriate.'' In addition, new section 255(d)(10) of the NHA
requires that an insured mortgage provide for conversion by the
mortgagor from one payment plan to any other payment plan except that
HUD may limit conversion for fixed rate mortgages by regulation. The
payment plans designated above as (1) through (5) and the mortgagor's
ability to convert from one plan to another are currently authorized by
part 206. HUD has no current plans to alter this regulatory scheme.
HUD does not interpret the statutory reference to conversion by the
mortgagor as barring all HUD restrictions on conversions for adjustable
rate mortgages, if the restrictions do not have the effect of
substantially interfering with the general right to choose payment
plans. For example, the existing Sec. 206.26(b)(3) requires conversion
to a line of credit with restricted draws if required post-closing
repairs are not completed on schedule. Restrictions on convertability
[[Page 42755]]
end with completion of the required repairs. Another specific
restriction on conversion is in the existing Sec. 206.26(d), which
permits the mortgagee to charge a processing fee for changes in payment
plans, not to exceed twenty dollars. HUD is not making any change to
these provisions.
Section 206.26(e) of the existing regulations also generally
authorizes HUD to restrict changes in payment plans including a
limitation on the frequency of payment changes and a minimum notice
period for a mortgagor request for change. HUD has not adopted any
restrictions under this section. No change is being made to this
section, although any future restrictions adopted under the section
will be carefully scrutinized to ensure that they do not unduly limit
the mortgagor's ability to change payment plans in violation of the
statute. HUD has no current plans to include in the regulations any
limitations on convertability of fixed rate mortgages.
Direct Endorsement
Sections 203.3, 203.5, and 203.255
The interim rule makes the HECM program an eligible program for
Direct Endorsement processing. In order for a mortgagee to be approved
for Direct Endorsement processing of HECMs, the mortgagee will have to
initially submit 5 HECMs as test cases to the Secretary for review
prior to endorsement for insurance in addition to complying with the
other requirements of Sec. 203.3. This requirement for 5 test cases
will not apply to any mortgagee that is otherwise approved for Direct
Endorsement and that has closed 50 HECMs that were insured by HUD prior
to the effective date of the interim rule.
A Direct Endorsement mortgagee will have to submit the
documentation and certifications listed at Sec. 203.255 as well as the
certificate of counseling, the title insurance commitment, and the
mortgagee's election of the assignment or shared premium options as
required by Sec. 206.15. Paragraphs (c), (d) and (e) of Sec. 203.255,
regarding pre- and post-endorsement review and submission for
endorsement by a mortgagee other than the originating mortgagee, will
apply to HECMs. Sections 203.3, 203.5 and 203.255 of the current
regulations are amended and conforming amendments are made to
Sec. 206.3 defining maximum claim amount, Sec. 206.7 regarding
regulatory amendments, and Sec. 206.13 on ineligible programs.
Section 206.15
Section 206.15 of the current regulations, which pertains to the
insurance application process, is revised to conform to the decision to
make HECMs eligible for Direct Endorsement processing. Paragraph (a) of
Sec. 206.15 is removed because it refers to the old system of
reservations of insurance authority which was eliminated after the HECM
demonstration was expanded by section 334 of NAHA (See final rule
published on April 19, 1991, at 56 FR 16002). Paragraph (b) is removed
because the concept of applying for mortgage insurance prior to
execution of the mortgage is obsolete under the Direct Endorsement
program. Most of paragraph (c) is retained, except references to
application for insurance and conditional commitments will be replaced
with the Direct Endorsement requirements. The list of documentation in
Sec. 206.15(c) is amended to incorporate the Direct Endorsement
certifications at Sec. 203.255. The last sentence in Sec. 206.15(c)
concerning the General Insurance Fund is moved to a new Sec. 206.102 in
subpart C.
Other Program Amendments
Section 206.5
Section 206.5 of the current regulations is amended to include
waiver authority for subpart D regarding servicing to conform to the
1991 adoption of 24 CFR 203.685 permitting waivers of servicing
requirements for other single family mortgage insurance programs.
Section 206.19(f)
A new paragraph (f) is added to Sec. 206.19 to clarify that loan
advances cannot exceed any maximum mortgage amount stated in a
mortgage. The HECM program does not require that a maximum mortgage
amount be used, but some State laws require mortgages to contain a
maximum amount. This change will ensure that a mortgagee could comply
both with State law and its contractual obligation to make loan
advances and conforms to existing provisions in the approved mortgage
instruments.
Section 206.21
Section 206.21 is amended to make two corrections to paragraph (d).
Paragraph (d) as amended, provides that post-loan disclosures for
adjustments must be made 25 days before a change in the interest rate,
not a change in mortgage balance, and that disclosure be made of the
new interest rate rather than of the new mortgage balance. Paragraph
(d), as amended, also requires disclosure of the date of the index used
to calculate the new interest rate. These changes will conform the rule
to actual program operations as reflected in the program handbook and
mortgage instruments.
Sections 206.25 and 206.26
The provisions of Secs. 206.25 and 206.26 regarding payment
calculations and amounts set aside from the principal limit are revised
to eliminate differences between the regulations and the HECM Loan
Agreement. Section 206.25(b)(1) of the current regulation is
reorganized to describe the payments calculation in a manner to better
reflect the description in the Loan Agreement (Sec. 2.5 of the Loan
Agreement) required by HUD Handbook 4265.1 and the operations of the
HECM payments model software. Another change to Sec. 206.25(d) will
more accurately reflect the size of the amount set aside for servicing
charges.
Technical changes are made to the ``repair set aside'' provisions
at Sec. 206.26(b) to clarify repair set aside procedures as was done in
the Loan Agreement (Sec. 2.9 of the Loan Agreement). The mortgagee will
not be required to recalculate monthly payments when the repairs are
completed. Instead, excess funds in the repair set-aside will be
automatically transferred to a new or existing line of credit. In this
way mortgagors will only be charged a fee for changing payments if the
mortgagor requested an increase to monthly payments requiring a
recalculation. If the amount of funds in the repair set-aside will be
insufficient to complete the repairs, monthly payments will be
recalculated only if there are insufficient funds in a line of credit
to cover the repair charges.
Section 206.27(b)
Section 206.27(b) will be amended to clarify that any lien, in
addition to the tax deferral liens specified in the regulation, may be
recorded so long as those liens are subordinate to the first HECM and
any second HECM held by the Secretary.
Section 206.40
Section 206.40 of the current regulation is amended to reflect
statutory changes made by section 165 of the Housing and Community
Development Act of 1987 (Pub. L. 100-242, approved February 5, 1988)
which requires applicants and participants in any HUD program to
disclose to HUD their Social Security Numbers (SSNs) or Employer
Identification Numbers (EINs). To be eligible for mortgage insurance
under part 206, the mortgagor must meet the requirements for disclosure
and verification of SSNs and EINs as provided by part 200, subpart U.
This conforms part 206 to changes
[[Page 42756]]
previously made in regulations for other mortgage insurance programs.
Sections 206.45(a) and 206.15
The interim rule amends Secs. 206.45(a) and 206.15 to adjust the
time frame for submission to HUD of a title insurance commitment, and
to permit the mortgagee to retain its mortgagee's title insurance
policy in the loan servicing file. The requirement for a title policy
before endorsement has caused delay in endorsing mortgages. Section
206.45(a), as interim to be amended, would require the Direct
Endorsement mortgagee to obtain a title insurance commitment before
closing a loan and to obtain a title insurance policy satisfactory to
the Secretary. Section 206.15 will be amended to remove the requirement
to submit the title insurance policy to HUD, but mortgagees will still
be expected to obtain the title insurance policy, based on the
commitment obtained before closing, as soon as possible and to retain
the policy in the servicing file so that it is available for inspection
during HUD monitoring.
These requirements will still serve HUD's objective of ensuring
that any special problems regarding validity of a HECM in the
jurisdiction are known prior to insurance endorsement. HUD is
particularly interested in independent assurance of the validity of
title because HUD may be required to become the mortgagee upon
mortgagee default and the mortgage is non-recourse. HUD concludes that
it is still necessary to depart from its practice in other single
family programs which do not require any title evidence prior to
endorsement for mortgage insurance because of HUD's unique exposure in
the event of title problems, but there is no need to delay endorsement
if a title insurance commitment has been obtained by the mortgagee
before loan closing.
Section 206.45
Three other changes are made to Sec. 206.45 by this rule. Paragraph
(b) of that section, which currently requires the mortgaged property to
include a dwelling designed principally as a one-family residence, is
amended to permit a dwelling for such number of families as the
Secretary determines. Such a determination will need to be consistent
with statutory constraints. Although current section 255(d)(3) of the
NHA does not permit an HECM on a dwelling designed principally as a
residence for more than one family, HUD anticipates the possibility of
future statutory authority to insure an HECM secured by a dwelling
designed principally as a residence for up to four families. HUD
therefore has removed the unnecessary regulatory restriction that will
bar the Secretary from taking immediate advantage of any liberalization
in the size of dwellings eligible for the HECM program.
Paragraph (d) is amended to permit the HECM program to be used for
pre-1978 dwellings with defective paint surfaces if no child less than
six years of age is expected to reside in the dwelling. This change
conforms to a provision of the Residential Lead-Based Paint Hazard
Reduction Act of 1992 which changed the childhood age of concern for
exposure to lead-based paint hazards from less than seven years of age
to less than six years of age.
Section 206.107(a)(1)
Section 206.107(a)(1) of the current regulation is amended to
conform to the operating procedure announced in Handbook 4235.1, Rev.
1, Ch. 10-2 A.1. The Handbook was issued with the intent that HUD would
make this conforming rule change at the earliest opportunity and before
the balances of many mortgages would reach the maximum claim amount.
Under the current rule, mortgagees have expressed concern that they may
be obligated to make loan advances to the mortgagor in excess of the
maximum claim amount that HUD is permitted to pay to the mortgagee,
while not being able to assign the mortgage to HUD until the debt
reached the maximum claim amount. The rule will make clear that this
was not HUD's intent by providing mortgagees with a window period for
assignment. The mortgage could be assigned when the balance is equal to
or greater than 98 percent of the maximum claim amount, or when the
mortgagor has requested a payment that will result in the mortgage
balance exceeding the maximum claim amount.
A new paragraph (a)(1)(v) is added to Sec. 206.107 which will
require that the mortgage assigned to HUD under the mortgagee's
assignment option be a first lien and that the underlying security have
good and marketable title. The regulation incorporates Sec. 203.353
(mortgagee certification as to lien status, mortgage amount and
offsets), Sec. 203.387 (definition of good and marketable title) and
Sec. 203.389 (title objections which will not destroy marketability).
This clarifies that HUD may refuse assignment of a mortgage on a
property if some or all of the loan advances made after the mortgage
was closed are not secured by a first lien under the applicable state
law governing lien priority for funds advanced after closing. These
changes expressly adopt policies that apply to assignments of mortgages
to HUD under other authorities.
Section 206.116
A new Sec. 206.116 is added to codify the policy that the initial
Mortgage Insurance Premium (MIP) paid for an HECM is not refundable.
This policy was explained in the preamble to the HECM final rule
published on June 8, 1989, at 54 FR 24823. The non-refundable MIP is a
key factor in the payment model and in determination of risk under the
program.
Section 206.125
Three paragraphs of Sec. 206.125 are amended. First, paragraph (a)
will relieve the mortgagee from notifying the mortgagor when the
mortgage is due and payable because the mortgagor is deceased. While
HUD expects the mortgagee to attempt to provide adequate notice to an
executor or other party responsible for the property before a
foreclosure action is commenced, the term ``mortgagor'' is used in the
HECM regulations as referring only to the original mortgagor or
mortgagors, not to their successors in interest, so that notice to the
mortgagor after death will be an impossibility.
Second, paragraph (b) is revised to require an appraisal of the
property within 30 days of the date when the mortgagee is notified that
the mortgage is due and payable, or within 30 days of the date the
mortgagee becomes aware of the mortgagor's death, instead of permitting
the mortgagee to wait until 15 days before the foreclosure sale as in
the current rule. An appraisal will be needed in any event--either to
support a pre-foreclosure sale or in connection with the mortgagee's
bidding at foreclosure--and the early availability of an appraisal will
enable the mortgagor or the mortgagor's estate to offer the property
for sale at realistic terms in an attempt to avoid foreclosure. The
mortgagor may request an appraisal at any time if the property is being
sold. The mortgagee would no longer have to request the Secretary to
make an appraisal of the property. To be consistent with the change to
Direct Endorsement processing, which involves greater reliance on
mortgagees, the appraisal for this purpose would be ordered by the
mortgagee.
Paragraph (b) is also revised so that the current requirement for
the mortgagor to bear the expense applies only when the mortgage is not
due and payable. After the mortgage has been accelerated, the mortgagor
may not have funds available to pay for the appraisal or there may be a
substantial period of time before costs related to the property
[[Page 42757]]
can be paid by the mortgagor's estate. The revised paragraph (b)
therefore provides for the mortgagee to pay for the appraisal if the
mortgage is due and payable, with a right of reimbursement from any
proceeds from the sale of the home. If there are insufficient sales
proceeds, a related change in Sec. 206.129(d)(iv) will permit the
mortgagee to include the cost of the appraisal in its claim for
insurance benefits.
Third, paragraph (d) is amended to extend the time to foreclose
that is allowed without specific approval by HUD. The time is extended
to six months from the date of notice to the mortgagor that the
mortgage is due and payable, or from the date of the mortgagor's death
if applicable, or from the date that State law or Federal bankruptcy
law will permit the commencement of foreclosure. Such an extension will
provide additional time for the mortgagor or the mortgagor's estate to
sell the property. It is foreseen that the additional time may be
especially necessary where the property is being sold by the
mortgagor's estate or through probate proceedings.
Section 206.129
Several technical amendments are made to Sec. 206.129. Paragraph
(d) is amended to conform the HECM claim requirements to the updated
claim requirements for other insured single-family mortgages issued at
57 FR 47967, October 20, 1992. A claim payment under paragraph (d),
made when a mortgagee acquires title or is an unsuccessful bidder at
foreclosure, will include the items listed in paragraphs (p) and (q) of
Sec. 203.402 (HUD-approved amount paid to mortgagor for a deed-in-lieu
of foreclosure, and reasonable costs of evicting occupants), as well as
the items currently listed in the HECM regulation. The last sentence of
Sec. 206.129(d)(2)(ii) is removed because it is repetitive of
Sec. 203.402(p), which will be added, as noted above. The claim also
will include a certification that the property is undamaged by
incorporating the certification provisions of Sec. 203.380. Section
206.129(d)(3)(ii) will incorporate the inspection and preservation
requirements of Sec. 203.377.
Paragraph (e)(1) of Sec. 206.129 is amended with respect to claims
made in connection with the assignment option. Claims will be
calculated by starting with the mortgage balance at the time of
assignment instead of the maximum claim amount. This amendment is
related to the change previously discussed that will permit assignments
before the mortgage balance has reached the maximum claim amount.
Paragraph (e)(2) also will be amended to provide authority to reimburse
mortgagees for certain costs and attorney fees incurred in connection
with the assignment of mortgages to the Secretary as is currently
provided for under Sec. 203.404(a)(3) for Section 203(b) mortgages.
Section 206.203
A technical amendment is made to Sec. 206.203 to clarify that
mortgagees need only send a statement of account for line of credit
payments. Statements of account are not required for monthly payments.
New payment plans are required when payments are recalculated.
Section 206.207
Section 206.207 is amended to add title search costs to the list of
allowable post-endorsement charges by mortgagees in the case where the
mortgage was extended under Sec. 206.27(d)(10) for an additional amount
of debt or additional number of years beyond the debt or term
originally covered by the mortgage. Some State laws do not permit a
lien to be established for an indefinite amount or for advance over an
indefinite number of years, and later extension of the mortgage is
necessary because of the characteristics of the HECM program. The
section also is amended to permit a mortgagee to charge a mortgagor for
property preservation expenses incurred by a mortgagee in connection
with vacant or abandoned properties.
Technical Amendments
In addition to the foregoing amendments, certain minor technical
amendments are made to the following sections in 24 CFR part 206.
Section 206.9
This section is amended to correct the heading of paragraph (b).
Section 206.43(a)
The section is amended to include a cross reference to
Sec. 206.207(b).
Section 206.47(a)
This section is amended to replace the phrase ``minimum property
standards'' with ``the applicable property standards of the
Secretary''.
Section 206.102
This section is added to include language currently in Sec. 206.15,
stating that insured HECMs are obligations of the General Insurance
Fund.
Section 206.113
This section is amended to reflect a name change from the Treasury
Fiscal Requirements Manual to Treasury Financial Manual.
Section 206.121
This section is amended to correct a cross-reference citation.
Section 206.123(a)(4)
This section is amended to include a cross reference to
Sec. 206.127(a)(2).
Section 206.125(g)(3)
This section is amended to include the full text of Sec. 204.305(b)
from the coinsurance regulations in lieu of incorporation by reference,
because of HUD's recent rule that terminated the single family
coinsurance program.
Section 206.129(d)(2)
This section is amended to include the full text of Sec. 204.322(l)
from the coinsurance regulations. Some language from the related
Sec. 204.305(a) is now included in Sec. 206.125(g)(1).
Section 206.205(a)
This section is amended to add the word ``special'' before
``assessments''.
Other Matters
Justification for Interim Rule
In general, the Department 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 does
provide for exceptions from that general rule where the Department
finds good cause to omit advance notice and participation. The good
cause required is satisfied when prior public procedure is
``impracticable, unnecessary, or contrary to the public interest.'' (24
CFR 10.1) The Department finds that good cause exists to publish this
interim rule for effect without first soliciting public comment in that
prior public procedure is both contrary to the public interest and
unnecessary.
Of the numerous changes made by the interim rule, the greatest
immediate impact is expected to be the change to Direct Endorsement
(DE) processing for HECM loans. DE processing permits the lender to
close the loan without prior approval from the Department. It is used
nearly exclusively for single family mortgage insurance programs other
than the HECM program, and has proven to be an effective method of
reducing the time needed for loan approval while permitting reduced HUD
field office staffs to deal with other matters that cannot be assigned
to mortgagees. The potential borrowers will clearly benefit by
elimination of processing through the HUD offices. Lenders will no
longer have a legal commitment for insurance
[[Page 42758]]
at the time they close the loan. However, HUD will always endorse the
loan under Direct Endorsement if it has been processed by the lender in
accordance with all applicable requirements. Lenders that follow all
HUD requirements are under no greater risk under Direct Endorsement
than if they closed a HECM loan in reliance on a HUD commitment. HUD
has received numerous informal communications from lenders endorsing a
conversion to Direct Endorsement processing for the HECM program as
soon as possible.
The many other changes included in this interim rule fall into
several general categories. Many are clarifications that reflect actual
program operation during the years the HECM program has been in effect.
Others are conforming changes that eliminate some unneeded and
unintended small discrepancies between part 206 and comparable
provisions in part 203. Another category of changes reflects changes in
other laws that have occurred since the original publication of part
206. Finally, some changes are simple wording changes to remove
possibility of confusion in meaning. In all of these cases, HUD has
determined that there is no public benefit to a delay in effectiveness
pending a public notice and comment period. There is no expansion of
regulatory burden for lenders or borrowers.
Regulatory Reinvention
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, the Department is reviewing all
its regulations to determine whether certain regulations can be
eliminated, streamlined, or consolidated with other regulations. As
part of this review, this interim rule, at the final rule stage, may
undergo revisions in accordance with the President's regulatory reform
initiatives. In addition to comments on the substance of these
regulations, the Department welcomes comments on how this interim rule
may be made more understandable and less burdensome.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50,
which implements section 102(2)(C) of the National Environmental Policy
Act of 1969 (NEPA). This 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, SW, Washington, DC 20410.
Executive Order 12866
This interim rule was reviewed by the Office of Management and
Budget (OMB) under Executive Order 12866 on Regulatory Planning and
Review, issued by the President on September 30, 1993. Any changes made
in this interim rule as a result of that review are clearly identified
in the docket file, which is available for public inspection in the
office of the Department's Rules Docket Clerk, Room 10276, 451 Seventh
Street, SW, Washington, DC.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this interim rule before publication and
by approving it certifies that this interim rule will not have a
significant economic impact on a substantial number of small entities.
The interim rule is limited to revision of the Home Equity Conversion
Mortgage Demonstration. Specifically, the requirements of the interim
rule are directed to making the program more efficient for
participating mortgagees, mortgagors and the Department.
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 interim 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 interim rule is not subject to review under the Order.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this interim rule will 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 significant change in existing HUD policies or programs will
result from promulgation of this interim rule, as those policies and
programs relate to family concerns.
Regulatory Agenda
This interim rule was listed as sequence number 1414 in the
Department's Semiannual Agenda of Regulations published on May 8, 1995
(60 FR 23368, 23383) in accordance with Executive Order 12866 and the
Regulatory Flexibility Act.
List of Subjects
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 206
Aged, Condominiums, Loan programs--housing and community
development, Mortgage insurance, Reporting and recordkeeping
requirements.
Accordingly, 24 CFR parts 203 and 206 are amended as follows:
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
1. The authority citation for 24 CFR part 203 is revised to read as
follows:
Authority: 12 U.S.C. 1709, 1710, 1715b, and 1715u; 42 U.S.C.
3535(d). In addition, subpart C is also issued under 12 U.S.C.
1715u.
2. In Sec. 203.3, paragraph (b)(4) is revised to read as follows:
Sec. 203.3 Approval of mortgagees for Direct Endorsement.
* * * * *
(b) * * *
(4) The mortgagee must submit initially 15 mortgages processed in
accordance with Secs. 203.5 and 203.255. Separate approval is required
to originate mortgages under part 206 of this chapter through the
Direct Endorsement program unless at least 50 mortgages closed by the
mortgagee have been insured under part 206 of this chapter prior to
September 15, 1995. Other mortgagees who have not closed at least 50
mortgages under part 206 of this chapter must submit five (5) Home
Equity Conversion Mortgages, processed in accordance with Secs. 203.3
and 203.255. The documents required by Sec. 203.255 will be reviewed by
the Secretary and, if acceptable, commitments will be issued prior to
endorsement of the mortgages for insurance. If the underwriting and
processing of these 15 mortgages (or the 5 Home Equity Conversion
Mortgages) is satisfactory, then the mortgagee may be approved to close
subsequent mortgages
[[Page 42759]]
and submit them directly for endorsement for insurance in accordance
with the process set forth in Sec. 203.255. Unsatisfactory performance
by the mortgagee at this stage constitutes grounds for denial of
participation in the program, or for continued pre-endorsement review
of a mortgagee's submissions. If participation in the program is
denied, such denial is effective immediately and may be appealed in
accordance with the procedures set forth in paragraph (d)(2) of this
section. Unsatisfactory performance solely with respect to mortgages
under 24 CFR part 206 may, at the option of the Secretary, be grounds
for denial of participation or for continued pre-endorsement review for
24 CFR part 206 mortgages without affecting the mortgagee's processing
of mortgages under other parts.
* * * * *
3. In Sec. 203.5, paragraph (b) is revised to read as follows:
Sec. 203.5 Direct Endorsement process.
* * * * *
(b) Eligible programs. All single family mortgages authorized for
insurance under the National Housing Act shall be originated through
the Direct Endorsement program, except mortgages authorized under
sections 203(n), 203(p), 213(d), 221(h), 221(i), 225, 233, 237, 809 or
810 of the National Housing Act, or any other insurance programs
announced by Federal Register notice or as provided in Sec. 203.1. The
provision contained in Sec. 221.55 of this chapter regarding deferred
sales to displaced families is not available in the Direct Endorsement
program.
* * * * *
4. Section 203.255 is amended by:
a. Revising the last sentence of paragraph (b)(11);
b. Redesignating the existing paragraph (b)(12) as paragraph
(b)(13);
c. Adding a new paragraph (b)(12); and
d. Revising paragraph (c) introductory text and paragraph (c)(3),
to read as follows:
Sec. 203.255 Insurance of mortgages.
* * * * *
(b) * * *
(11) * * * The certification shall incorporate each of the
mortgagee certification items which 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) For a Home Equity Conversion Mortgage under part 206 of this
chapter, the additional documents required by Sec. 206.15 of this
chapter; and
* * * * *
(c) Pre-endorsement review for Direct Endorsement. Upon submission
by an approved mortgagee of the documents required by paragraph (b) of
this section, the Secretary will review the documents and determine
that:
* * * * *
(3) The stated mortgage amount does not exceed the maximum mortgage
amount for the area as most recently announced by the Secretary, except
for mortgages under 24 CFR part 206;
* * * * *
PART 206--HOME EQUITY CONVERSION MORTGAGE INSURANCE
5. The authority citation for part 206 is revised to read as
follows:
Authority: 12 U.S.C. 1715b, 1715z-1720; 42 U.S.C. 3535(d).
6. In Sec. 206.3, the definition of ``Maximum claim amount'' is
revised to read as follows:
Sec. 206.3 Definitions.
* * * * *
Maximum claim amount means the lesser of the appraised value of the
property or maximum dollar amount for an area established by the
Secretary for a one-family residence under section 203(b)(2) of the
National Housing Act (as adjusted where applicable under section 214 of
the National Housing Act). Both the appraised value and the maximum
dollar amount for the area shall be as of the date the Direct
Endorsement underwriter receives the appraisal report. Closing costs
shall not be taken into account in determining appraised value.
Appraised value shall be determined by an appraisal performed in
accordance with part 267 of this chapter.
* * * * *
7. Section 206.5 is amended by revising the first sentence, to read
as follows:
Sec. 206.5 Waivers.
The Secretary, in an individual case, may waive any requirement of
subparts B and D of this part not required by statute if the Secretary
finds that application of such requirement will adversely affect
achievement of the purposes of this program. * * *
8. Section 206.7 is revised to read as follows:
Sec. 206.7 Effect of amendments.
The regulations in this part may be amended by the Secretary at any
time and from time to time, in whole or in part, but amendments to
subparts B and C of this part shall not adversely affect the interests
of a mortgagee on any mortgage to be insured for which either the
Direct Endorsement mortgagee has approved the mortgagor and all terms
and conditions of the mortgage or the Secretary has made a commitment
to insure. Such amendments shall not adversely affect the interests of
a mortgagor in the case of a default by a mortgagee where the Secretary
makes payments to the mortgagor.
9. In Sec. 206.9, the paragraph heading of paragraph (b), is
revised to read as follows:
Sec. 206.9 Eligible mortgagees.
* * * * *
(b) HUD approved mortgagees.
* * * * *
10. The title of subpart B is revised to read ``Subpart B--
Eligibility; Endorsement.''
Sec. 206.13 [Removed]
11. Section 206.13 is removed.
12. Section 206.15 is revised to read as follows:
Sec. 206.15 Endorsement for insurance.
Mortgages originated under this part must be endorsed through the
Direct Endorsement program under Sec. 203.5 of this chapter, except as
provided in Sec. 203.1 of this chapter. The mortgagee shall submit to
the Secretary, within 60 days after the date of closing of the loan or
such additional time as permitted by the Secretary, properly completed
documentation and certifications as listed in Sec. 203.255 of this
chapter and the certificate received by the mortgagor from the
counseling entity that the mortgagor has received counseling as
required under Sec. 206.41, a copy of the title insurance commitment
satisfactory to the Secretary (or other acceptable title evidence if
the Secretary has determined not to require title insurance under
Sec. 206.45(a)), the mortgagee's election of either the assignment or
shared premium option under Sec. 206.107, and any other documentation
required by the Secretary. Sections 203.255(c), (d) and (e) of this
chapter, pertaining to pre-endorsement review, submission for
endorsement by purchasing mortgagee, and post-endorsement review for
Direct Endorsement, apply to mortgages under this part. If the
mortgagee has complied with the Direct Endorsement requirements of
Secs. 203.3, 203.5 and 203.255 of this chapter and the requirements of
this part, and the mortgage is determined to be eligible, the Secretary
will endorse the mortgage
[[Page 42760]]
for insurance by issuance of a Mortgage Insurance Certificate.
13. In Sec. 206.19, a new paragraph (f) is added to read as
follows:
Sec. 206.19 Payment options.
* * * * *
(f) Payments limited by lien amount. No payments shall be made
under any of the payment options, notwithstanding anything to the
contrary in this section or in Sec. 206.25, in an amount which shall
cause the mortgage balance after the payment to exceed any maximum
mortgage amount stated in the security instruments or to otherwise
exceed the amount secured by a first lien.
14. In Sec. 206.21, paragraphs (c)(2) and (d) are revised to read
as follows:
Sec. 206.21 Interest rate.
* * * * *
(c) * * *
(2) Compliance with pre-loan disclosure provisions of 12 CFR part
226 (Truth in Lending) shall constitute full compliance with paragraph
(c)(1) of this section.
(d) Post-loan disclosure. At least 25 days before any adjustment to
the interest rate may occur, the mortgagee must advise the mortgagor of
the following:
(1) The current index amount;
(2) The date of publication of the index; and
(3) The new interest rate.
* * * * *
15. In Sec. 206.25, paragraph (b)(1) is revised to read as follows:
Sec. 206.25 Calculation of payments.
* * * * *
(b) Monthly payments--term option. (1) Using factors provided by
the Secretary, the mortgagee shall calculate the monthly payment so
that the sum of paragraphs (b)(1)(i) or (b)(1)(ii) of this section
added to paragraphs (b)(1)(iii), (b)(1)(iv), (b)(1)(v) and (b)(1)(vi)
of this section shall be equal to the principal limit at the end of the
payment term:
(i) An initial payment under paragraph (a) of this section plus any
initial servicing charge set aside under Sec. 206.19(d); or
(ii) The mortgage balance at the time of a change in payments
option in accordance with Sec. 206.26, plus any remaining servicing
charge set aside under Sec. 206.19(d); and
(iii) The portion of the principal limit set aside as a line of
credit including any set asides for repairs and first year property
charges under Sec. 206.19(d); and
(iv) All monthly payments due through the payment term, including
funds withheld for payment of property charges under Sec. 206.205; and
(v) All MIP, or monthly charges due to the Secretary in lieu of
mortgage insurance premiums due through the payment term; and
(vi) All interest through the remainder of the payment term. The
expected average mortgage interest rate shall be used for this purpose.
* * * * *
16. In Sec. 206.26, paragraphs (b)(1) and (b)(2) are revised to
read as follows:
Sec. 206.26 Change in payment option.
* * * * *
(b) * * *
(1) If initial repairs after closing under Sec. 206.47 are
completed without using all of the funds set aside for repairs, the
mortgagee shall transfer the remaining amount to a line of credit and
inform the mortgagor of the sum available to be drawn.
(2) If repairs after closing under Sec. 206.47 cannot be completed
with the funds set aside for repairs, the mortgagee may advance
additional funds to complete repairs from an existing line of credit.
If a line of credit is not sufficient to make the advance or if no line
of credit exists, future monthly payments shall be recalculated for use
as a line of credit in accordance with Sec. 206.25.
* * * * *
17. In Sec. 206.27, paragraph (b)(3) is revised to read as follows:
Sec. 206.27 Mortgage provisions.
* * * * *
(b) * * *
(3) The mortgagor shall not participate in a real estate tax
deferral program or permit any liens to be recorded against the
property, unless such liens are subordinate to the insured mortgage and
any second mortgage held by the Secretary.
* * * * *
18. A new Sec. 206.40 is added to read as follows:
Sec. 206.40 Disclosure and verification of Social Security and
Employer Identification Numbers.
The mortgagor must meet the requirements for the disclosure and
verification of Social Security and Employer Identification Numbers, as
provided by part 200, subpart U, of this chapter.
19. In Sec. 206.43, paragraph (a) is revised, and a new paragraph
(c) is added, to read as follows:
Sec. 206.43 Information to mortgagor.
(a) Explanation of mortgage terms. At the time the mortgagee
provides the mortgagor with a loan application, the mortgagee shall
provide each mortgagor with a copy of the mortgage forms. At that time
the mortgagee shall identify and explain to the mortgagor the principal
provisions of the mortgage, including the fact that the liability of
the homeowner is limited under the mortgage to the value of the
property and whether the mortgagee will collect servicing fees under
Sec. 206.207(b).
* * * * *
(c) Disclosure. The mortgagee must comply with any regulations
issued by the Federal Reserve Board to implement section 154 of the
Riegle Community Development and Regulatory Improvement Act of 1994 (15
U.S.C. 1648).
* * * * *
20. In Sec. 206.45, paragraphs (a), (b), and (d) are revised to
read as follows:
Sec. 206.45 Eligible properties.
(a) Title. A mortgage must be on real estate held in fee simple, or
on a leasehold under a lease for not less than 99 years which is
renewable, or under a lease having a remaining period of not less than
50 years beyond the date of the 100th birthday of the youngest
mortgagor. The mortgagee shall obtain a mortgagee's title insurance
policy satisfactory to the Secretary. If the Secretary determines that
title insurance for reverse mortgages is not available for reasonable
rates in a State, then the Secretary may specify other acceptable forms
of title evidence in lieu of title insurance.
(b) Type of property. The property shall include a dwelling
designed principally as a residence for one family or such additional
families as the Secretary shall determine.
* * * * *
(d) Lead-based paint poisoning prevention. If the appraiser of a
dwelling constructed prior to 1978 finds defective paint surfaces,
Sec. 200.810(d) of this chapter shall apply unless the mortgagor
certifies that no child who is less than six years of age resides or is
expected to reside in the dwelling.
* * * * *
21. In Sec. 206.47, paragraph (a) is revised to read as follows:
Sec. 206.47 Property standards; repair work.
(a) Need for repairs. Properties must meet the applicable property
standards of the Secretary in order to be eligible. Properties which do
not meet the property standards must be repaired in order to ensure
that the repaired property will serve as adequate security for the
insured mortgage.
* * * * *
22. A new Sec. 206.102 is added under the undesignated center
heading ``Sale,
[[Page 42761]]
Assignment and Pledge'' to read as follows:
Sec. 206.102 General Insurance Fund.
Mortgages insured under this part shall be obligations of the
General Insurance Fund.
23. In Sec. 206.107, paragraph (a)(1) introductory text is revised
and a new paragraph (a)(1)(v) is added, to read as follows:
Sec. 206.107 Mortgagee election of assignment or shared premium
option.
(a) * * *
(1) Under the assignment option, the mortgagee shall have the
option of assigning the mortgage to the Secretary if the mortgage
balance is equal to or greater than 98 percent of the maximum claim
amount, or the mortgagor has requested a payment which exceeds the
difference between the maximum claim amount and the mortgage balance
and:
* * * * *
(v) The mortgage is a first lien of record and title to the
property securing the mortgage is good and marketable. The provisions
of Sec. 203.353 of this chapter pertaining to mortgagee certifications,
Sec. 203.387 of this chapter pertaining to title evidence, and
Sec. 203.389 of this chapter pertaining to waived title objections also
apply.
* * * * *
24. In Sec. 206.113, paragraph (b) is revised to read as follows:
Sec. 206.113 Late charge and interest.
* * * * *
(b) Interest. In addition to any late charge provided in paragraph
(a) of this section, the mortgagee shall pay interest on any initial
MIP remitted to the Secretary more than 30 days after closing, and
interest on any monthly MIP remitted to the Secretary more than 30 days
after the payment date prescribed in Sec. 206.111(b). Such interest
rate shall be paid at a rate set in conformity with the Treasury
Financial Manual.
* * * * *
25. A new Sec. 206.116 is added before the undesignated center
heading ``HUD RESPONSIBILITY TO MORTGAGORS'', to read as follows:
Sec. 206.116 Refunds.
No amount of the initial MIP shall be refundable.
26. Section 206.121 is amended by revising the first sentence of
paragraph (c), to read as follows:
Sec. 206.121 Secretary authorized to make payments.
* * * * *
(c) Second mortgage. If the contract of insurance is terminated as
provided in Sec. 206.133(c) and if a second mortgage has been recorded
when required by Sec. 206.27(d), all payments to the mortgagor by the
Secretary (except late charges) will be secured by the second mortgage.
* * *
27. In Sec. 206.123, paragraph (a)(4) is revised to read as
follows:
Sec. 206.123 Claim procedures in general.
(a) * * *
(4) The mortgagee acquires title to the property by foreclosure or
a deed in lieu of foreclosure and sells the property as provided in
Sec. 206.125(g) for an amount which does not satisfy the mortgage
balance or fails to sell the property as provided in
Sec. 206.127(a)(2); or
* * * * *
28. Section 206.125 is amended by revising the first sentence of
paragraph (a)(2) and paragraphs (b), (d)(1), (d)(2), (g)(1), and
(g)(3), to read as follows:
Sec. 206.125 Acquisition and sale of the property.
(a) * * *
(2) After notifying the Secretary, and receiving approval of the
Secretary when needed, the mortgagee shall notify the mortgagor that
the mortgage is due and payable, unless the mortgage is due and payable
by reason of the mortgagor's death. * * *
* * * * *
(b) Appraisal. The mortgagee shall obtain an appraisal of the
property no later than 30 days after the mortgagor is notified that the
mortgage is due and payable, or no later than 30 days after the
mortgagee becomes aware of the mortgagor's death, or upon the
mortgagor's request in connection with a pending sale. The property
shall be appraised no later than 15 days before a foreclosure sale. The
appraisal shall be at the mortgagor's expense unless the mortgage is
due and payable. If the mortgage is due and payable, the appraisal
shall be at the mortgagee's expense but the mortgagee shall have a
right to be reimbursed out of the proceeds of any sale by the
mortgagor.
* * * * *
(d) Initiation of foreclosure. (1) The mortgagee shall commence
foreclosure of the mortgage within six months of giving notice to the
mortgagor that the mortgage is due and payable, or six months from the
date of the mortgagor's death if applicable, or within such additional
time as may be approved by the Secretary.
(2) If the laws of the State in which the mortgaged property is
located or if Federal bankruptcy law does not permit the commencement
of the foreclosure within six months from the date of the notice to the
mortgagor that the mortgage is due and payable, the mortgagee shall
commence foreclosure within six months after the expiration of the time
during which such foreclosure is prohibited by such laws.
* * * * *
(g) Sale of the acquired property. (1) Upon acquisition of the
property by foreclosure or deed in lieu of foreclosure, the mortgagee
shall take possession of, preserve and repair the property and shall
make diligent efforts to sell the property within six months from the
date the mortgagee acquired the property. Repairs shall not exceed
those required by local law and, in cases where the sale is made with a
mortgage insured by the Secretary or guaranteed by the Secretary of
Veterans Affairs, those necessary to meet the objectives of the
property standards required for mortgages insured by the Secretary. No
other repairs shall be made without the specific advance approval of
the Secretary. The mortgagee shall sell the property for an amount not
less than the appraised value (as provided under paragraph (b) of this
section) unless written permission is obtained from the Secretary
authorizing a sale at a lower price.
* * * * *
(3) The mortgagee shall not enter into a contract for the
preservation, repair or sale of the property with any officer,
employee, owner of ten percent or more interest in the mortgagee or
with any other person or organization having an identity of interest
with the mortgagee or with any relative of such officer, employee,
owner or person.
* * * * *
29. Section 206.129 is amended by revising paragraphs (d)(2)(i),
(d)(2)(ii), (d)(2)(iv), (d)(3)(ii), (e)(1), and (e)(2), and by adding
paragraphs (d)(2)(v) and (d)(2)(vi) to read as follows:
Sec. 206.129 Payment of claim.
* * * * *
(d) * * *
(2) The claim shall include the following items:
(i) Items listed in Sec. 203.402(a), (b), (c), (d), (e), (g), (j),
(p) and (q) of this chapter.
(ii) Foreclosure costs or costs of acquiring the property actually
paid by the mortgagee and approved by the Secretary, in an amount not
in excess of two-thirds of such costs or $75.00, which ever is greater.
* * * * *
(iv) Costs of any appraisal obtained under Secs. 206.125 or
206.127, provided that the appraisal was obtained after the mortgage
became due and payable and that the mortgagee is not otherwise
reimbursed for such costs.
[[Page 42762]]
(v) Reasonable payments made by the mortgagee for:
(A) Preservation and maintenance of the property;
(B) Repairs necessary to meet the objectives of the property
standards required for mortgages insured by the Secretary, those
required by local law, and such additional repairs as may be
specifically approved in advance by the Commissioner; and
(C) Expenses in connection with the sale of the property including
a sales commission at the rate customarily paid in the community and,
if the sale to the buyer involves a mortgage insured by the Secretary
or guaranteed by the Secretary of Veterans Affairs, a discount at a
rate not to exceed the maximum allowable by the Commissioner, as of the
date of execution of the discounted loan, on sales of properties
acquired by the Commissioner pursuant to Secs. 203.295 through 203.426
of this chapter.
(vi) A certification that the property is undamaged in accordance
with Sec. 203.380 of this chapter.
(3) * * *
(ii) Any adjustment for damage or neglect to the property pursuant
to Secs. 203.377, 203.378, and 203.379 of this chapter.
(e) * * *
(1) When a mortgagee assigns a mortgage which is eligible for
assignment under Sec. 206.107(a)(1), the amount of payment shall be
computed by subtracting from the mortgage balance on the date of
assignment the items set forth in Sec. 203.404(b) of this chapter and
any adjustments for damage or neglect to the property pursuant to
Secs. 203.377, 203.378 and 203.379 of this chapter.
(2) The claim shall also include:
(i) Reimbursement for such costs and attorney's fees as the
Secretary finds were properly incurred in connection with the
assignment of the mortgage to the Secretary, and
(ii) An amount equivalent to the interest allowance which will have
been earned from the date the mortgage was assigned to the Secretary to
the date the claim is paid, if the claim had been paid in debentures,
except that if the mortgagee fails to meet any of the requirements of
Sec. 206.127(c), or Sec. 206.131 if applicable, within the specified
time and in a manner satisfactory to the Secretary (or within such
further time as the secretary may approve in writing), the interest
allowance in the payment of the claim shall be computed only to the
date on which the particular required action should have been taken or
to which it was extended. The provisions of Secs. 203.405 through
203.411 of this chapter pertaining to debentures are incorporated by
reference.
* * * * *
30. In Sec. 206.203, paragraph (b) is revised to read as follows:
Sec. 206.203 Providing information.
* * * * *
(b) Line of credit and payment change statements. The mortgagee
shall provide the mortgagor with a statement of the account every time
it makes a line of credit payment. The mortgagee shall provide the
mortgagor with a new payment plan every time it recalculates monthly
payments.
* * * * *
31. In Sec. 206.205, paragraph (a) is revised to read as follows:
Sec. 206.205 Property charges.
(a) General. The mortgagor shall pay all property charges
consisting of taxes, ground rents, flood and hazard insurance premiums,
and special assessments in a timely manner and shall provide evidence
of payment to the mortgagee as required in the mortgage.
* * * * *
32. In Sec. 206.207, paragraph (a) is revised to read as follows:
Sec. 206.207 Allowable charges and fees after endorsement.
(a) Reasonable and customary charges. The mortgagee may collect
reasonable and customary charges and fees from the mortgagor after
insurance endorsement by adding them to the mortgage balance, but only
for: items listed in Sec. 203.552(a)(6), (9), (11), (13) and (14) of
this chapter; items authorized by the Secretary under
Sec. 203.552(a)(12) of this chapter, or as provided at Sec. 206.26(d);
or charges and fees related to additional documents described in
Sec. 206.27(b)(10) and related title search costs.
* * * * *
Dated: July 13, 1995.
Jeanne K. Engel,
General Deputy, Assistant Secretary for Housing--Federal Housing
Commissioner.
[FR Doc. 95-20221 Filed 8-15-95; 8:45 am]
BILLING CODE 4210-27-P