[Federal Register Volume 77, Number 32 (Thursday, February 16, 2012)]
[Rules and Regulations]
[Pages 9177-9178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-3667]



24 CFR Part 203

[Docket No. FR-5461-F-02]
RIN 2502-AJ01

Federal Housing Administration (FHA): Suspension of Section 
238(c) Single-Family Mortgage Insurance in Military Impacted Areas

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

ACTION: Final rule.


SUMMARY: On August 30, 2011, HUD published a proposed rule to suspend 
FHA's mortgage insurance program for military impacted areas under 
section 238(c) of the National Housing Act. This single-family mortgage 
insurance program, established by regulation in 1977, has been 
significantly underutilized for the past several years. Additionally, 
these mortgage loans are insured under comparable terms and conditions 
as loans insured under HUD's primary single-family mortgage insurance 
program under section 203(b) of the National Housing Act. Accordingly, 
those borrowers who would be served under section 238(c) of the 
National Housing Act are served equally well under the section 203(b) 
mortgage insurance program. The suspension of this mortgage insurance 
program is consistent with the President's budget requests for Fiscal 
Years (FYs) 2011 and 2012. In this final rule, HUD is adopting the 
proposed rule without change.

DATES: Effective Date: March 19, 2012.

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 
20410-8000; 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 Federal Relay Service at 1-800-877-8339.


I. Background--The Proposed Rule

    On August 30, 2011, HUD published a proposed rule in the Federal 
Register (76 FR 53851) to suspend FHA's mortgage insurance program for 
military impacted areas under section 238(c) of the National Housing 
Act (Act). Section 238(c) of the Act (12 U.S.C. 1715z-3(c)) was added 
by the Housing and Community Development Act of 1977 (Pub. L. 95-128) 
to authorize HUD to insure mortgages executed in connection with the 
construction, repair, rehabilitation, or purchase of property located 
near any installation of the Armed Forces of the United States in 
federally impacted areas in which conditions are such that one or more 
of the applicable insuring requirements under another single-family 
mortgage insurance program cannot be met.
    HUD's current regulation implementing section 238(c) is codified at 
24 CFR 203.43e. The regulation, promulgated in 1977, closely tracks the 
language of section 238(c) of the Act. Although established to ensure 
the availability of affordable housing in military impacted areas, the 
program has been minimally utilized by eligible borrowers. Section 
238(c) mortgage insurance has been available in only six counties 
throughout the country, three in Georgia and three in New York. From 
January 1, 2005, to June 30, 2010, FHA insured 4,542 single-family home 
loans in these six counties, and only 2,309 were endorsed under section 
238(c) of the Act. The 2,309 loans endorsed since 2005 represent only 
.05 percent of all FHA-insured loans endorsed during that span.
    The President's budget requests for FYs 2011 and 2012 acknowledged 
the underutilization of the section 238(c) program and advised that HUD 
would take action to halt the availability of the program in light of 
the significant underutilization. The FY 2011 budget request found at 
http://www.gpoaccess.gov/usbudget/fy11/index.html states the following:

    The Budget assumes that HUD will administratively suspend the 
Section 238(c) program in 2011. The Section 238(c) program provides 
single family mortgage insurance similar to MMI for a small number 
of families in areas affected by military installations. The 
elimination of Section 238(c) will not negatively impact the 
availability of FHA insured financing in the six counties currently 
covered under this program. (See HUD Appendix to the Budget at page 
620 at http://www.gpoaccess.gov/usbudget/fy11/appendix.html).\1\

    \1\ The President's Budget for FY 2012, found at http://www.whitehouse.gov/omb/budget/Overview, contains identical language 
to the paragraph cited above; see the HUD Appendix to the FY 2012 
Budget on page 591.

II. This Final Rule

    This final rule follows publication of the August 30, 2011, 
proposed rule. The proposed rule provided for a 60-day public comment 
period, which closed on October 31, 2011. HUD did not receive any 
public comments, and HUD is adopting as final the proposed August 30, 
2011, rule without change.
    Consistent with the President's budget request and Executive Order 
(EO) 13563, entitled ``Improving Regulation and Regulatory Review,'' 
signed by the President on January 18, 2011, and published on January 
21, 2011, at 76 FR 3821, this final rule suspends the section 238(c) 
program and removes Sec.  203.43e from HUD's codified regulations. 
HUD's removal of the regulations at Sec.  203.43e is not inconsistent 
with suspension of the section 238(c) mortgage insurance program. If 
HUD subsequently determines that there is a demand for this program and 
that military families would be better served by this program, HUD can 
reactivate it on the basis of the statutory language and does not need 
a regulation to make insurance available under this program. If such a 
situation occurs, HUD would notify the public through Federal Register 
notice that the program has been activated, so that eligible borrowers 
would be able to inquire about the availability of insurance under this 
program from their lenders. HUD notes that the removal of the 
regulations at Sec.  203.43e would have no impact on loans already 
endorsed for FHA insurance under the section 238(c) program.

III. Findings and Certification

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 

[[Page 9178]]

economic impact on a substantial number of small entities.
    The final rule would not modify or add any new regulatory burdens 
on FHA-approved mortgage lenders. Rather, the final rule would remove 
Sec.  203.43e from HUD's regulations, in conformity to HUD's (and the 
Administration's) decision to no longer exercise its authority to 
insure mortgages under section 238(c) of the Act. As more fully 
discussed above in the preamble to this rule, the mortgage insurance 
authority provided by section 238(c) of the Act has been minimally 
sought by eligible borrowers and consequently minimally utilized by 
lenders and other small entities participating in the FHA programs. 
Further, as noted above, section 238(c) mortgage insurance operated in 
a manner comparable to FHA's mortgage insurance program under section 
203(b) of the Act, HUD's primary single-family mortgage insurance 
    Accordingly, for the above reasons, the undersigned certifies that 
this rule will not have a significant economic impact on a substantial 
number of small entities.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This rule will not have federalism 
implications and would not impose substantial direct compliance costs 
on state and local governments or preempt state law within the meaning 
of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.1531-
1538) (UMRA) establishes requirements for federal agencies to assess 
the effects of their regulatory actions on state, local, and tribal 
governments, and on the private sector. This rule does not impose any 
federal mandates on any state, local, or tribal governments, or on the 
private sector, within the meaning of UMRA.

Environmental Impact

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this rule 
is categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).

Catalogue of Federal Domestic Assistance

    The Catalogue of Federal Domestic Assistance Number for the 
principal FHA single-family mortgage insurance program is 14.117.

List of Subjects in 24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and 
recordkeeping requirements, Solar energy.

    Accordingly, for the reasons discussed in the preamble, 24 CFR part 
203 is amended as follows:


1. The authority citation for part 203 continues to read as follows:

    Authority:  12 U.S.C. 1709, 1710, 1715b, 1715z-16, and 1715u; 42 
U.S.C. 3535(d).

2. Remove and reserve Sec.  203.43e.

    Dated: February 10, 2012.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2012-3667 Filed 2-15-12; 8:45 am]