Federal Housing Administration (FHA): Multifamily Accelerated Processing-Enhancing and Strengthening Multifamily Accelerated Processing, 21880-21890 [2012-8705]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 77, Number 71 (Thursday, April 12, 2012)]
[Proposed Rules]
[Pages 21880-21890]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8705]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-5444-P-01]
RIN 2502-AJ09


Federal Housing Administration (FHA): Multifamily Accelerated 
Processing--Enhancing and Strengthening Multifamily Accelerated 
Processing

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

ACTION: Proposed rule.

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SUMMARY: Multifamily Accelerated Processing (MAP) is a processing 
system introduced in 2000 as a pilot program to facilitate the 
accelerated processing of loan applications for FHA multifamily 
mortgage insurance, which generally involve the refinance, purchase, 
new construction, or rehabilitation of multifamily properties. These 
transactions are costly, complicated, and time-consuming to process. 
Prior to MAP, HUD field offices were encouraged to develop and test 
individual fast-track processing systems for use by qualified FHA-
approved lenders that were experienced in processing loan applications 
for multifamily mortgages. The intent was to considerably reduce the 
processing time of applications. These test procedures included 
providing qualified lenders with the option of preparing FHA forms and 
undertaking preliminary underwriting for certain types of loan 
applications. Fast-track processing procedures developed by individual 
HUD offices that facilitated processing applications without 
sacrificing quality or increasing risk were consolidated into a 
national test of fast-track style processing of multifamily mortgage 
insurance applications under the name ``MAP.'' MAP has been 
administered to date through direct instructions to FHA-approved 
lenders under a MAP Guide. Given its experience to date with MAP, HUD 
believes the MAP accelerated processing procedures have been 
successful. To ensure the continued quality and efficiency of MAP 
procedures, HUD is codifying in regulations key provisions of MAP and 
introducing new provisions to strengthen MAP, to assure the integrity 
and competency of FHA-approved lenders as directed by the Helping 
Families Save Their Homes Act of 2009.

DATES: Comment Due Date: June 11, 2012.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule 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 appointment to review the public comments must be 
scheduled in advance 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 
Federal Relay Service at 800-877-

[[Page 21881]]

8339. Copies of all comments submitted are available for inspection and 
downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Terry W. Clark, Office of Multifamily 
Development, Office of Housing, Department of Housing and Urban 
Development, 451 7th Street SW., Room 6134, Washington, DC 20410; 
telephone number 202-402-2663 (this is not a toll-free number). Persons 
with hearing or speech impairments may access this number through TTY 
by calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

A. MAP

    The purpose of MAP is to have in place an accelerated system for 
processing FHA multifamily mortgage insurance applications that is 
consistent at each HUD multifamily processing office, and that 
significantly reduces the amount of time that HUD staff spends 
reviewing those applications. Under MAP, the lender is responsible for 
preparation of most of the application exhibits, such as the appraisal, 
and for making a recommendation to HUD based upon the lender's 
processing and underwriting. This results in a considerable time 
savings for the lender. For example, under MAP, FHA-approved lenders 
are provided an earlier review of the application for insurance on new 
construction and substantial rehabilitation. Therefore, if the 
application is rejected at a pre-application stage, the lender and 
borrower do not spend the time and money required to prepare the more 
extensive exhibits and analysis for the application for an FHA firm 
commitment. While considerable responsibility for preparation of 
documents and initial review is placed with the lender, FHA still 
reviews a lender's exhibits and makes the final underwriting decision.
    MAP is not automatically available to all FHA-approved lenders. To 
use MAP, an FHA-approved lender must apply for approval and be approved 
as a MAP lender by HUD's Office of Multifamily Housing Development, 
Lender Qualification and Monitoring Division (LQMD). The appraisers and 
MAP-approved underwriters of the FHA-approved lender seeking MAP-lender 
designation must also attend a MAP training session. Lenders that are 
approved as MAP lenders are determined by HUD to be skilled in 
underwriting multifamily housing loans and in the preparation of 
applications for FHA multifamily mortgage insurance. Approval is on a 
nationwide basis; consequently, the MAP lender may submit applications 
using MAP regardless of where the property is located or which 
Multifamily Hub or Program Center will be processing the loan. As a 
condition of the opportunity to use MAP, a MAP lender's MAP loans are 
subject to post-endorsement review by LQMD. MAP-lender approval will be 
for a defined period, and may be renewed, denied renewal, or terminated 
by FHA as provided in this proposed rule. For example, if the MAP 
lender fails to meet HUD standards for underwriting loans, its MAP 
designation also may be terminated.
    Under the current MAP system, MAP may be used for the following 
FHA-insured multifamily programs: Section 220 (apartments in urban 
renewal areas), Sections 221(d)(3) and 221(d)(4) (apartments), Section 
223(a)(7) (refinance of existing insured properties), Section 223(f) 
(acquisition or refinancing of existing apartments), and Section 231 
(housing for the elderly) new construction or substantial 
rehabilitation. MAP may be used for such other FHA-insured multifamily 
programs as may be announced by FHA.
    From the outset, through MAP, FHA has strived to strike a careful 
balance between expedited processing and ensuring an acceptable level 
of risk for HUD's multifamily mortgage insurance programs. Based on 
HUD's experience to date with MAP, this proposed rule strives not only 
to maintain that balance but to enhance the quality, competency, and 
integrity of FHA-approved lenders that are approved as MAP lenders and 
to manage risk to a level that is acceptable to FHA.

B. MAP Today

    The MAP program has changed significantly in recent years. Since 
its commencement in 2000, there are now more than 100 FHA-approved MAP 
lenders. Multifamily loan volume has increased seven-fold, while the 
number of HUD multifamily housing staff has declined. Transactions are 
larger and more complex than in the past, and mixed-use projects with 
commercial components are more common. Most projects have market rents 
and fewer than in the past are supported by rental assistance. The 
insured portfolio is growing quickly, but with some concentrations in 
markets that have experienced soft or deteriorating conditions, and 
with repeat borrowers in some markets. MAP is increasingly used for 
affordable housing construction and preservation projects with tax 
credits and other subsidies, and these transactions require special 
expertise to process.

C. Strengthening the Quality of FHA-Approved Lenders and Underwriters

    Part of the impetus to review the MAP system, particularly the 
qualifications of an FHA-approved lender to engage in MAP, and to 
codify lender qualifications and the core requirements of MAP, is the 
Helping Families Save Their Homes Act of 2009 (HFSH Act). The HFSH Act 
(Division A of Pub. L. 111-22, approved May 20, 2009), among other 
things, directs FHA to strengthen the existing FHA lender approval 
process, including by ensuring that only lenders of integrity are 
approved by FHA as approved mortgagees.
    FHA responded to this statutory direction by taking several steps. 
Shortly following enactment of the HFSH Act, FHA issued Mortgagee 
Letter 2009-31, entitled ``Strengthening Counterparty Risk 
Management,'' which advised FHA-lenders of the additional ineligibility 
criteria established by the HFSH Act, and the immediate applicability 
of such criteria. FHA also issued Mortgagee Letter 2009-41, which 
addressed Appraisal Performance Standards and Sanctions, and that 
reminded FHA-approved lenders of their responsibility, along with the 
appraisers, for the quality and accuracy of appraisals. By final rule 
issued on April 20, 2010 (75 FR 20718), FHA increased the net worth 
requirements of FHA-approved lenders, both single family and 
multifamily lenders. These increases were the first since 1993, and 
were adopted to ensure that FHA-approved lenders are sufficiently 
capitalized for the financial transactions occurring, and the 
concomitant risks present, in today's economy. On May 2, 2011, at 76 FR 
24507, FHA announced the update of 36 multifamily rental project loan-
closing documents, the majority of which had not been updated in more 
than two decades. The updated closing documents reflected the greater 
flexibility provided to lenders to address problems that arise in 
management of the property, but also greater responsibility to 
undertake increased due diligence to assure sound underwriting in 
insured multifamily projects.
    All these steps that have been taken are directed to raising the 
level of competency and integrity of participating lenders, and 
ensuring the continued viability and availability of FHA mortgage 
insurance programs. This proposed rule, which addresses the MAP system, 
is another such step to strengthen FHA, its programs, and participants, 
and is consistent with

[[Page 21882]]

recent Congressional direction for FHA to focus on minimize risk in its 
multifamily housing programs. In the Senate Committee Report that 
accompanied the Senate bill, S.1596, which provides Fiscal Year (FY) 
2012 appropriations for HUD, the Committee noted that as a result of 
the housing crisis, the demand for FHA multifamily housing loans has 
increased, and stated: ``In an effort to respond to this increased 
demand, HUD is streamlining its multifamily processes and updating its 
programs to address current market conditions. The Committee also 
expects FHA to increase its attention to the additional risk this 
volume brings, and expects FHA to dedicate the same level of attention 
to risks in the multifamily program as it has to risks in its single 
family program.'' (See Senate Report 113-83, issued September 21, 2011, 
at page 135.) The changes proposed by this rule, as discussed in the 
following sections of this preamble, will not only improve the MAP 
system, by increasing efficiency in the system, but also reduce risk to 
FHA.

II. This Proposed Rule

    This rule proposes to establish codified regulations for lender and 
underwriter eligibility and tier qualification criteria for MAP 
participation, and for FHA's process for approving MAP lenders and 
underwriters. Currently, HUD's MAP regulations, codified in 24 CFR part 
200, subpart Y, address only the enforcement actions that FHA may take 
against a MAP lender. As the following discussion will highlight, 
enforcement actions remain a key part of the regulations, but HUD 
proposes, through this rule, to add new provisions to 24 CFR part 200, 
subpart Y, to provide for a tiered approval system, the periodic 
expiration of approval, and lender application for reapproval under the 
MAP system.
    New regulatory section, Sec.  200.1401, entitled ``Purpose of MAP 
and this Subpart,'' reflects the broader scope of the MAP regulations 
as proposed to be revised to this rule, and new section Sec.  200.1403, 
the definition section, defines terms used in the proposed revised 
regulations. New regulatory section, Sec.  200.1407, sets out the 
responsibilities of the MAP lender. These responsibilities reflect the 
obligation of the MAP lender to not only ensure the skill and 
competency of the lender's principal staff members, but to also ensure 
that the MAP lender is operating with the integrity contemplated by the 
HFSH Act.

A. Tiered MAP Lender and Underwriter Approval

    The MAP approval tiers, set out in Sec.  200.1411(b) and Sec.  
200.1413(b), are based on HUD's experience in administering the MAP 
program, which has shown that the most difficult programs to underwrite 
are those for new construction and substantial rehabilitation or that 
involve various sources of government assistance. HUD recognizes that 
all MAP lenders and underwriters do not necessarily have the skills and 
experience to competently handle all the MAP programs. Tiered approval 
will assure that MAP programs with greater underwriting demands and 
higher risk will require participants to have greater expertise. Both 
new and existing lenders and underwriters must comply with tier 
requirements to submit an application under MAP and must be approved by 
tier based upon meeting the tier qualifications. Section 200.1413 of 
the proposed rule set outs the lender eligibility and application 
process for MAP approval.
    Section 200.1415 of the proposed rule establishes the MAP 
eligibility and application approval process for underwriters. The 
addition of a separate MAP eligibility and approval process for 
underwriters underscores the significance of having an experienced and 
skilled underwriter for MAP processing. Consistent with Sec.  200.1415 
concerning underwriter eligibility, Sec.  200.1425 provides for post-
approval training for underwriters, and Sec.  200.1427 provides that 
HUD may terminate the approval of an underwriter that has not submitted 
a pre-application or application for Firm Commitment for a period of 2 
years.
    The tier approval designation for which MAP lenders and 
underwriters will be approved will be based on their multifamily 
transaction experience, as evidenced by recently closed loans and each 
loan's performance. As provided in Sec.  200.1411(b), HUD will 
establish four approval tiers:
    Tier 1: Market-rate refinancing under Section 223(f) or 223(a)(7);
    Tier 2: Refinancing under Section 223(f) or Section 223(a)(7) of 
affordable housing properties with government subsidies;
    Tier 3: Market-rate new construction or substantial rehabilitation 
under Section 220, 221(d), 231 or 241;
    Tier 4: New construction or substantial rehabilitation under 
Sections 220, 221(d), 231, or 241 of affordable housing properties with 
government subsidies. Government subsidies refer to such programs as 
the Low-Income Housing Tax Credit (LIHTC) program, tax-exempt bond 
financing, HUD's Section 8 Project-Based Rental Assistance program, and 
HUD's Section 236 Interest Reduction Payments and similar forms of 
rental subsidy for affordable housing.
    As provided in the accompanying notice, published elsewhere in 
today's Federal Register, HUD will from time to time issue the 
quantity, specific characteristics, and recentness of transactions that 
a lender or underwriter must have underwritten in order to have the 
adequate recent experience required for each tier. Each issuance will 
be preceded by notice and the opportunity for public comment. The 
relevant lending experience that HUD will recognize need not be 
exclusively with FHA programs, but may also be with those of Fannie 
Mae, Freddie Mac, state housing finance agencies, conventional lenders, 
or commercial banks. Non-FHA loan program experience must be equivalent 
to the programs offered under MAP and to the underwriting functions 
required under MAP, to be given credit. For current MAP lenders and 
underwriters, relevant lending activity involving MAP programs will be 
given the most weight. Consistent with HUD's commitment to notify MAP 
lenders or prospective MAP lenders of changes to the requisite 
experience needed, Sec.  200.1417(a)(1)(iii) provides for HUD to limit 
the size of a loan that an approved MAP lender may process, with such 
limitation established either by the number of units for which a loan 
can be made or by the dollar amount of the loan. Although an applicant 
may meet the criteria for approval as a MAP lender at a requested tier 
or at a lower tier, HUD may decide, based on the applicant's MAP 
application and experience to date, or based on the conditions of the 
housing market at the time, that limitations should be placed on the 
size of loans processed by a MAP lender or lenders.
    With respect to tier approval, Sec.  200.1423 permits an approved 
MAP lender or underwriter to submit an application at any time 
requesting approval at a higher tier than originally assigned to the 
MAP lender or underwriter. In determining whether the MAP lender or 
underwriter meets the criteria for a higher tier, HUD will follow the 
procedures in Sec. Sec.  200.1413, 200.1415, and 200.1417.

B. Periodic Renewal of MAP Lender Approval

    A key goal of this proposed rule is to assure a high level of 
quality and integrity of FHA-approved lenders that are approved to be 
MAP lenders. As provided in Sec.  200.1407, a MAP-

[[Page 21883]]

approved lender is given considerable authority and responsibility in 
the processing of multifamily mortgage transactions. Given the trust 
and responsibility that FHA places in these lenders, it is important 
for FHA to ensure that these lenders, not only at the time of initial 
MAP lender approval but throughout the lenders' tenure as MAP lenders, 
remain lenders of competency and integrity, and are up-to-date on 
changes in multifamily transactions and skilled and experienced in 
underwriting and processing loan applications for these transactions. 
The expiration of MAP lender approval and the requirement to apply 
periodically for renewal of MAP-approval designation will help ensure 
that MAP lenders remain competent to fast-track multifamily mortgage 
insurance applications through the MAP system.
    Currently, MAP approval designation does not expire unless there is 
an enforcement action that results in termination, or there is an 
eligibility requirement that the FHA-approved lender no longer meets. 
As provided in Sec.  200.1417(b), this rule proposes to change the 
existing MAP system by requiring MAP approved lenders to apply to renew 
their approval every 4 years. At such time, the MAP lender's 
performance will be reviewed and FHA will determine whether the MAP-
approval designation should be renewed. This proposed rule provides in 
Sec.  200.1421, that no later than 90 days before the date of the end 
of the 4-year period of a MAP lender's approval, the MAP lender must 
reapply for approval. The requirement to renew MAP-lender designation 
allows FHA to assess the lender's 4-year performance as a MAP lender, 
and determine whether the FHA-approved lender's designation as a MAP 
lender should be renewed or disapproved, and if it should be renewed at 
the tier for which the FHA-approved lender was previously approved or 
at a lower tier, if so warranted.
    For example, FHA may determine that the MAP lender's experience 
during the preceding 4 years is not sufficient or at a level of 
performance for the FHA-approved MAP lender to maintain its current 
tier approval; however, the FHA-approved MAP lender can be renewed 
under a lower tier at which its performance has been satisfactory. The 
proposed period for MAP approval is based on HUD's experience that MAP 
lenders' performance, underwriting practices, and business processes 
typically evolve over time as changes in personnel, management, and 
market conditions occur. As a result, the capacity of the institution 
may be markedly different from when it was originally approved and 
assigned to a tier by HUD. HUD has determined that a 4 year approval 
period appropriately balances the need to protect the FHA insurance 
fund with HUD's desire to minimize inconvenience to lenders. Upon 
application for renewal, the lender's record, including any sanctions 
or enforcement actions taken against the lender, its default and claim 
rates, and the overall performance of its underwritten or closed loans 
will be taken into account when determining whether MAP approval should 
be renewed or disapproved. Although a lender's initial and ongoing MAP 
approval period will normally be for 4 years, the term of approval may 
be shorter based upon a review of the lender's application and record.

C. Conditional MAP Approval and Expiration of Existing MAP Approvals

    The proposed rule provides, in Sec.  200.1417(b)(3), that FHA may 
also grant conditional MAP lender or underwriter approval if the lender 
or underwriter lacks experience in processing or underwriting FHA loan 
applications. If the lender or underwriter satisfies the conditions 
imposed by FHA, for example, by undertaking additional training within 
a specified period of time or completing a predetermined number of 
acceptably underwritten closings, then full approval may be granted 
upon completion of the condition. Conditional approval, however, will 
not be indefinite. FHA will impose a deadline for the completion of the 
conditions for which full approval is necessary, usually one year from 
the date on which conditional approval is granted. Conditional approval 
may be granted for initial MAP approval, or may be granted in cases 
where a currently approved MAP lender requests an upgrade in tier 
approval.
    The proposed rule provides, in Sec.  200.1419, that MAP lender and 
underwriter approvals issued prior to the effective date of the final 
rule under this rulemaking will expire 45 days following the lender's 
or underwriter's receipt of a letter from HUD inviting the lender or 
underwriter to apply for tier approval. HUD anticipates that it will 
send such letters to approximately 25 percent of lenders and 
underwriters with existing approvals per year, for 4 years, and that 
this pace may vary depending upon HUD's resources for processing 
applications. If the lender or underwriter submits a timely application 
for tier approval, the existing approval will continue to be valid 
until HUD notifies the applicant of the action it is taking on the 
application for tier approval. A lender or underwriter that fails to 
respond in a timely manner to the letter will be eligible for approval 
at Tier 1 for a period of time as provided for conditional approvals in 
Sec.  200.1417(b).

D. Other Provisions of the Proposed Rule

Additional New Regulatory Sections
    In addition to the new sections discussed above in this preamble, 
new Sec.  200.1405 addresses the multifamily programs eligible for MAP 
processing, which will be posted on HUD's Web site; such postings will 
ensure that the most up-to-date list of eligible MAP multifamily 
programs is available to the public. As noted earlier, Sec.  200.1407 
lists the responsibilities of a MAP lender. As also noted earlier, 
Sec.  200.1413(b) addresses the tier-specific criteria that lenders 
must meet. Paragraph (a) of this section, Sec.  200.1413(a), addresses 
the general requirements for MAP-lender approval. Section 200.1419 
addresses appeals, and provides that an applicant may submit a written 
appeal of any HUD decision regarding the applicant under Sec. Sec.  
200.1411 through 200.1427. This section provides that the appeal must 
be submitted to HUD within 30 days of the date of the applicant's 
receipt of HUD's written notification to the applicant of its decision. 
This section also provides that HUD will respond to the applicant's 
appeal within 60 days of HUD's receipt of the applicant's appeal, and 
that if HUD's appeal decision confirms HUD's original decision, no 
further appeals will be accepted.
Existing Regulatory Sections
    As noted earlier in this preamble, this proposed rule builds upon 
the existing regulations in 24 CFR part 200, subpart Y, which currently 
address MAP enforcement and sanctions. The enforcement provisions 
remain in place with certain organization revisions. For example, the 
proposed rule would eliminate provisions vesting existing authorities 
to undertake certain enforcement and corrective actions against MAP 
lenders and underwriters in a MAP Lender Review Board. HUD has found 
that it is unnecessary to create and maintain such a board because it 
is duplicative of other offices within HUD, such as the Lender 
Qualifications and Monitoring Division that are responsible for 
monitoring and ensuring compliance with MAP requirements. This change 
would not alter the existing authorities to take such actions, nor the 
procedural protections,

[[Page 21884]]

including notice and opportunity to be heard, that are provided in 
Sec.  200.1535. Rather, it would merely revise provisions that 
currently specify that it is the MAP Lender Review Board that is vested 
with the authorities. Accordingly, existing references to the MAP 
Lender Review Board in 24 CFR part 200, subpart Y, would be replaced 
simply with references to HUD. HUD would specify the office or official 
that would carry out these functions through its ordinary delegations 
process. At the final rule stage, HUD will include amendatory 
instructions that will make a nomenclature change throughout subpart Y 
to substitute ``HUD'' wherever the terms ``the MAP Lender Review 
Board'' and ``Board'' appear.

E. Proposed MAP Rule--Increasing Efficiency and Reducing Burden

    Since its inception, MAP has been shown to increase efficiency in 
processing multifamily mortgage applications without increasing risk to 
FHA. Under the current structure, an approved lender or underwriter can 
originate any qualifying multifamily mortgage. This rule proposes to 
further increase efficiency by approving lenders and underwriters for 
one of four tiers based on their origination experience.
    The primary benefit of changes proposed by this rule is to further 
increase the efficiency and processing of multifamily mortgage 
applications. The tiered structure will decrease the number of rejected 
applications, reducing time spent by lenders and FHA staff in reviewing 
applications. This change will be accomplished by better aligning 
lenders and underwriters with the programs with which they are most 
experienced. FHA does not expect a change in volume of their 
multifamily originations as a result of the creation of tiers within 
the MAP program or a significant shift of business between lenders 
within MAP. Instead, HUD expects that the number of unsuccessful 
applications will decrease.
    In FY 2011, approximately 230 multifamily mortgage applications 
were not approved. FHA staff spent approximately 400 hours processing 
MAP mortgage applications. The Bureau of Labor Statistics reports 
almost $40 per hour as the median wage for government employees in 
financial operations. Meanwhile, lenders spent about 450 hours of staff 
time preparing applications for new construction or substantial 
rehabilitation and approximately 300 hours of staff time on mortgage 
applications for refinance. Based on HUD's knowledge of the industry, 
the hourly rate for staff preparing applications is approximately $75. 
If implementation of the changes proposed by this rule is successful in 
eliminating 75 percent of these unapproved applications, FHA would save 
$2.772 million in staff time and lenders would save $5.003 million in 
staff time. In sum, this proposed rule can be expected to produce 
benefits totaling $7.775 million.

                    Table 1--Avoided Staff Time Preparing Unsuccessful Mortgage Applications
----------------------------------------------------------------------------------------------------------------
                                                     Number of       Hours per                     Total annual
                                                  applications *     response       Hourly cost        cost
----------------------------------------------------------------------------------------------------------------
FHA:
    New Construction/Substantial Rehabilitation.              98             400             $40      $1,572,000
    Refinance...................................              75             400              40       1,200,000
                                                 ---------------------------------------------------------------
        FHA Subtotal............................  ..............  ..............  ..............       2,772,000
Lenders:
    New Construction/Substantial Rehabilition...              98             450              75       3,315,938
    Refinance...................................              75             300              75       1,687,500
                                                 ---------------------------------------------------------------
        Lender Subtotal.........................  ..............  ..............  ..............       5,003,478
                                                 ---------------------------------------------------------------
            Total Costs.........................  ..............  ..............  ..............       7,775,489
----------------------------------------------------------------------------------------------------------------
* Number of Applications is approximately 75 percent of the number of unapproved MAP mortgage applications in FY
  2011.

    In addition to creating tiers, this rule proposes to require 
renewal as a MAP lender every 4 years.\1\ This new requirement will 
increase costs to participating lenders as additional staff time will 
be spent preparing the MAP renewal application. There are currently 92 
approved MAP lenders. FHA estimates that lenders spend about 40 hours 
preparing documents for each MAP approval. Following the initial tier 
placement, lenders may subsequently decide to apply for adjustment to a 
higher tier (before the 4-year period ends). FHA expects about ten 
underwriters and five lenders to apply for adjustment to a higher tier, 
requiring about 20 hours per application. Finally, although FHA 
currently receives several appeals each year, the number could increase 
slightly as a lender could appeal not only a rejection but also the 
tier in which the lender is placed. In FY 2011, only two appeals were 
filed for denied applications. FHA does not expect an increase of more 
than three appeals annually as a result of the change to a tiered 
system. Preparation of each appeal by a lender or underwriter is 
expected to require one hour of applicant time.
---------------------------------------------------------------------------

    \1\ Currently approved lenders will be required to submit an 
application of renewal, with about one-quarter renewing annually 
over a 4-year period.
---------------------------------------------------------------------------

    Based on knowledge of industry wages, the estimated hourly wage of 
lenders and underwriters that prepare these types of documents is 
approximately $100. The table below shows the total cost estimate per 
category. The total cost to lenders and underwriters as a result of 
this rule would be $398,300.

[[Page 21885]]



                               Table 2--Costs of Renewal, Adjustment, and Appeals
----------------------------------------------------------------------------------------------------------------
                                                                     Hours per                     Total annual
                      Type                            Number         response       Hourly cost        cost
----------------------------------------------------------------------------------------------------------------
Lender renewal..................................              92              40            $100        $368,000
Adjustment to Higher Tier.......................              15              20             100          30,000
Appeals.........................................               3               1             100             300
                                                 ---------------------------------------------------------------
    Total Costs.................................  ..............  ..............  ..............         398,300
----------------------------------------------------------------------------------------------------------------

    As a processing system, much of the processes of MAP as the above 
tables reflect pertain to information collection (that is, submission 
of documentation to HUD and HUD review of the documentation) or 
recordkeeping. The MAP information collection requirements are subject 
to the notice and comment procedures of the Paperwork Reduction Act of 
1995 (PRA). The requirements are currently approved under PRA and 
reflect OMB approval numbers. Consistent with the requirements of the 
PRA, these requirements must be published for notice and comment every 
3 years. The changes that this rule would make to the current 
information collection requirements are set out in the table provided 
in the following section of the preamble, Section IV, and the public 
comment that this rule solicits also solicits comment on the reporting 
and recordkeeping burden.

III. Regulatory Review

    Executive Order (EO) 13563, entitled ``Improving Regulation and 
Regulatory Review,'' was signed by the President on January 18, 2011, 
and published on January 21, 2011 (76 FR 3821). This EO requires 
executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned.'' Section 4 of the EO, entitled ``Flexible Approaches,'' 
provides, in relevant part, that where relevant, feasible, and 
consistent with regulatory objectives, and to the extent permitted by 
law, each agency shall identify and consider regulatory approaches that 
reduce burdens and maintain flexibility and freedom of choice for the 
public. HUD submits that the changes proposed by this rule to the MAP 
system are consistent with the EO's directions. As the preceding 
section discussed, the changes proposed by this rule will increase 
efficiency in the MAP system both for HUD and MAP approved lenders.

IV. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In accordance 
with the Paperwork Reduction Act, an agency may not conduct or sponsor, 
and a person is not required to respond to, a collection of 
information, unless the collection displays a currently valid OMB 
control number.
    The burden of the information collections in this rule is estimated 
as follows:

                                       Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
                                                     Response                      Burden hours
    Information collection         Number of        frequency      Total annual    per response    Total annual
                                  respondents       (average)        responses      (in hours)         hours
----------------------------------------------------------------------------------------------------------------
Sec.   200.1413(c)             10 new            Annually.......              10              40             400
 (application for approval of   applicants.
 tier qualification).
Sec.   200.1415(b)             60 underwriters.  Annually.......              60              20           1,200
 (underwriter's application
 for MAP approval).
Sec.   200.1421 (renewal of    23 lenders        Annually.......              23              20             460
 MAP lender approval).          renewing
                                annually.
Sec.   200.1421 (adjustment    10 underwriters   Annually.......              15              20             300
 of approval to a higher        and 5 lenders
 tier).                         applying
                                annually.
Sec.   200.1429 (appeals)....  5 appeals.......  Annually.......               5               1               5
                              ----------------------------------------------------------------------------------
    Total....................  113.............  ...............             113             101           2,365
----------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology; e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Comments must refer 
to the proposal by name and docket number (FR-444-P-01) and must be 
sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building,

[[Page 21886]]

Washington, DC 20503, Fax: (202) 395-6947, and
Reports Liaison Officer, Office of Housing, Department of Housing and 
Urban Development, 451 7th Street SW., Room 9116, Washington, DC 20410.

    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at https://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 https://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.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (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 significant economic 
impact on a substantial number of small entities. MAP lenders consist 
of both small and large FHA-approved lenders that have the skill and 
experience to take on responsibilities that would otherwise be handled 
by FHA staff in the processing of applications. The system commenced as 
a demonstration to determine whether multifamily mortgage insurance 
applications could be processed on an accelerated basis without risking 
the quality of processing and without increasing risk to the FHA 
insurance fund. Overall, the MAP system has been effective, and HUD is 
proposing to codify, in regulation, key requirements of the MAP system.
    Through this rule, HUD is proposing improved oversight of the MAP 
system, to meet the statutory directive that HUD ensure that only 
lenders of integrity are approved by FHA as FHA-approved mortgagees, 
and remain lenders of integrity, competency, and skill after FHA 
approval is granted. HUD is not proposing significant changes to 
participation in the MAP system. The eligibility requirements 
essentially remain the same, with only minor adjustment to ensure that 
the lenders have experience in processing the more complex 
transactions. However, HUD is proposing that MAP lenders have their MAP 
approval designation renewed every 4 years. This renewal-approval 
process will improve the quality of monitoring of MAP lenders by HUD, 
because the renewal process provides for a minimum performance review 
of the MAP lender by HUD every 4 years. The new requirements introduced 
by HUD through this proposed rule pertain to a MAP lender's 
performance, regardless of whether the MAP lender is small or large.
    The codification of the eligibility criteria, together with HUD's 
oversight requirements, which are already codified, will provide a 
convenient location for FHA-approved lenders and other interested 
parties to reference the key features and requirements of the MAP 
system. For these reasons, the undersigned certifies that this rule 
will not have a significant economic impact on a substantial number of 
small entities.
    Notwithstanding HUD's determination that this rule would not have a 
significant economic effect on a substantial number of small entities, 
HUD specifically invites comments regarding less burdensome 
alternatives to this rule that would meet HUD's objectives as described 
in this preamble.

Environmental Impact

    This rule does not direct, provide for assistance or loan and 
mortgage insurance 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. The rule is, therefore, categorically excluded 
under 24 CFR 50.19(c)(k1) and a Finding of No Significant Impact 
(FONSI) does not need to be prepared for this document.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the executive order are met. This rule 
does not have federalism implications and does 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 (UMRA) (2 
U.S.C. 1531-1538) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This rule does not impose 
any federal mandate on any state, local, or tribal government or the 
private sector within the meaning of UMRA.

List of Subjects in 24 CFR Part 200

    Administrative practice and procedure, Claims, Equal employment 
opportunity, Fair housing, Housing standards, Lead poisoning, Loan 
programs--housing and community development, Mortgage insurance, 
Organization and functions (Government agencies), Penalties, Reporting 
and recordkeeping requirements, Social Security, Unemployment 
compensation, Wages.

    For the reasons stated in the preamble, HUD proposes to amend 24 
CFR part 200, as follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

    1. The authority citation for 24 CFR part 200 continues to read as 
follows:

    Authority:  12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).

    2. Revise the heading of subpart Y and add Sec. Sec.  200.1401, 
200.1403, 200.1405, 200.1407, 200.1409, 200.1411, 200.1413, 200.1415, 
200.1417, 200.1419, 200.1421, 200.1423, 200.1425, 200.1427, and 
200.1429, and undesignated headings, and revise the subpart table of 
contents to read as follows:

Subpart Y--Multifamily Accelerated Processing (MAP): Eligibility, 
Approval, Quality Assurance, and Enforcement for MAP Lenders and 
Underwriters

General

Sec.
200.1401 Purpose of MAP and this subpart.
200.1403 Definitions.
200.1405 FHA programs eligible for MAP processing.
200.1407 MAP lender responsibilities.

Approval of Lenders and Underwriters

200.1411 Approval required.
200.1413 Lender eligibility and application for MAP approval.
200.1415 Underwriter eligibility and application for MAP approval.
200.1417 HUD's review of MAP lender and underwriter approval 
applications.
200.1419 Expiration of previously granted MAP approvals.
200.1421 Renewal of lender approval.
200.1423 Adjustment of approval to a higher tier.

[[Page 21887]]

200.1425 Post-approval underwriter training requirement.
200.1427 Inactive underwriters.
200.1429 Appeals.

Map Lender Quality Assurance Enforcement

200.1500 Sanctions against a MAP lender.
200.1505 Warning letter.
200.1510 Probation.
200.1515 Suspension of MAP privileges.
200.1520 Termination of MAP privileges.
200.1525 Settlement agreements.
200.1530 Bases for sanctioning a MAP lender.
200.1535 MAP Lender Review Board.
200.1540 Imminent harm notice of action.
200.1545 Appeals of sanction decisions.

General


Sec.  200.1401  Purpose of MAP and this subpart.

    (a) MAP is a national accelerated processing system for the FHA 
multifamily mortgage insurance programs. An FHA-approved lender that is 
approved to process multifamily mortgage insurance applications under 
MAP is responsible for preparation of the majority of the exhibits 
involved in the processing of a multifamily mortgage insured by FHA, 
such as the appraisal required for an application for mortgage 
insurance, and for making a recommendation to HUD based upon the 
lender's processing and underwriting. HUD, however, reviews the 
lender's exhibits and makes the final underwriting decision.
    (b) This subpart establishes the criteria by which a new or 
existing FHA-approved lender or underwriter receives and maintains MAP 
approval, the basic responsibilities of a MAP lender, the manner in 
which FHA will monitor a MAP Lender's performance, the enforcement 
actions that FHA may take against a MAP lender for violation of 
requirements, and the due process procedures available to a MAP lender. 
Unless superseded by the requirements of this part, the MAP processing 
instructions, submission, and reporting requirements issued through 
supplemental guidance remain applicable to the MAP system.


Sec.  200.1403  Definitions.

    The definitions in 24 CFR 200.3 are applicable to this subpart. 
Additionally, as used in this subpart:
    Government subsidy means one or more of the following: Low-Income 
Housing Tax Credits, Section 8 Project-Based Rental Assistance, Rent-
restricted bond financing, Section 236 Interest Reduction Payments, and 
any other similar form of affordable housing subsidy, as identified by 
HUD.
    In good standing means being in compliance with all applicable FHA 
and MAP requirements, not being in inactive status (in accordance with 
Sec.  200.1427, as applicable), not being subject to or under 
consideration for MAP approval, suspension, or termination and, in the 
case of a lender, being approved to participate in FHA Multifamily 
Mortgage Insurance programs as a supervised lender or mortgagee or 
nonsupervised lender or mortgagee.
    Principal means a primary participant of the lender entity, who is 
empowered to act as the lender's representative.
    Principal staff members refer to those persons designated by the 
lender as approved MAP underwriter(s), construction loan 
administrator(s), and other authorized signatory(s) with authority to 
bind the lender on MAP loan applications.


Sec.  200.1405  FHA programs eligible for MAP processing.

    FHA-insured multifamily programs that are eligible for processing 
under MAP are listed on HUD's Web site at www.hud.gov.


Sec.  200.1407  MAP lender responsibilities.

    (a) A MAP lender shall comply with such processing instructions, 
submission, and reporting requirements through the regulations of this 
subpart and as may be otherwise specified by HUD through supplemental 
guidance.
    (b) A MAP lender must submit to the HUD office, as designated by 
HUD, the qualifications of the MAP lender's principal staff members or 
consultants who will be reviewing or preparing the lender's application 
for mortgage loan insurance.
    (c) MAP lenders must establish and maintain separation between the 
underwriting and origination functions to ensure that individuals 
performing underwriting functions do not face any incentive to approve 
a loan that does not meet applicable underwriting standards. Minimum 
standards for establishing and maintaining such separation include, but 
are not limited to, the following:
    (1) An individual may not underwrite or participate in underwriting 
a loan if the individual will receive or expects to receive either 
directly or indirectly any compensation that is contingent upon 
origination of that loan;
    (2) Underwriting staff are not evaluated by origination staff, and 
compensation of underwriting staff shall not be tied to loan production 
levels;
    (3) Underwriters must be full-time, salaried employees of the 
lender and may not be independent contractors or temporary workers;
    (4) Origination staff shall be precluded from hiring contractors, 
such as appraisers or market analysts, on behalf of underwriters; and
    (5) MAP lenders shall ensure that origination staff does not have 
management authority over or influence on the duties or conclusions of 
underwriting staff.
    (d)(1) A MAP lender must submit annually to HUD, in accordance with 
procedures specified by HUD, including, but not limited to, the 
requirements of 24 CFR 200.62, an update of MAP lender status, 
certified by an individual who is authorized to bind the MAP lender. 
The certified update must be submitted no later than June 30 of each 
year and must:
    (i) List the names of the following individuals:
    (A) The MAP lender's MAP-approved underwriters and the tiers at 
which they are approved;
    (B) The MAP lender's construction loan administrators (if 
applicable); and
    (C) Individuals who are authorized to bind the MAP lender by 
signing FHA mortgage insurance applications; and
    (ii) State that all of the MAP lender's MAP-approved underwriters 
have received tier approval and have attended the training required 
under Sec.  200.1425.
    (2) False claims and statements may result in criminal and civil 
penalties pursuant to 12 U.S.C. 1735f-14, 18 U.S.C. 1001, 1010, 1012, 
and 31 U.S.C. 3729, 3802.

Approval of Lenders and Underwriters


Sec.  200.1411  Approval required.

    (a) General. A lender may not process and an underwriter may not 
underwrite a loan application utilizing MAP unless:
    (1) The lender is approved by and is in good standing with HUD as a 
MAP lender for the loan transaction for which the application is 
submitted; and
    (2) The underwriter who will underwrite the loan and sign the 
underwriter's narrative is approved by and is in good standing with HUD 
as a MAP underwriter for that lender and for the tier designation and 
loan program under which the application is submitted. Approval as a 
MAP underwriter does not entitle an underwriter to underwrite loans for 
a lender other than for the MAP-approved lender that submitted the 
underwriter application approved by HUD. A MAP-approved lender that 
employs an underwriter previously approved as an underwriter for 
another MAP-approved lender must submit an application for underwriter 
approval in accordance with Sec.  200.1415(b), and HUD will evaluate 
the application and take action in accordance with Sec.  200.1417.

[[Page 21888]]

    (b) Tiered approval. HUD will provide approvals and renewals of 
approvals of new and existing MAP lenders and underwriters on a tiered 
basis in accordance with a lender's or underwriter's experience and 
qualifications at the time of application. A MAP lender or underwriter 
may not use MAP to process or underwrite loan transactions that are not 
covered by the lender's or underwriter's approval tier (``covered loan 
transactions''), which are as follows:
    (1) Tier 1: MAP-eligible acquisition and refinancing programs 
without government subsidies;
    (2) Tier 2: MAP-eligible acquisition and refinancing programs with 
or without government subsidies;
    (3) Tier 3: All MAP-eligible programs without government subsidies; 
and
    (4) Tier 4: All MAP-eligible programs, with or without government 
subsidies.
    (c) Nationwide validity. Approval as a MAP lender or underwriter, 
which includes approval at a particular tier, is valid for transactions 
nationwide, regardless of where the property that will serve as the 
security for the mortgage is located or which HUD office will process a 
transaction. Approved lenders and their approval tier will be posted on 
HUD's Web site, which will be regularly updated to reflect any change 
in the lender's tier or MAP-approval status.


Sec.  200.1413  Lender eligibility and application for MAP approval.

    To be eligible for designation as a MAP lender, a lender must meet 
the general requirements under paragraph (a) of this section and the 
applicable tier-specific requirements under paragraph (b) of this 
section. HUD will not approve the application of a lender that does not 
meet the Tier 1 requirements.
    (a) General requirements. The lender:
    (1) Must be approved as an FHA-approved lender under parts 202 of 
this chapter;
    (2) Must not be subject to judgments arising from lawsuits or 
administrative proceedings that would adversely impact its ability to 
conduct business as a lender, or subject to any of the ineligibility 
criteria specified in 24 CFR 202.5(j); and
    (3) Must have an employee who is approved by HUD as a MAP 
underwriter. Application for the qualifying MAP underwriter approval 
may be submitted prior to or simultaneously with a lender's application 
for MAP-lender approval.
    (b) Tier-specific requirements. For a lender to obtain approval at 
a specific tier:
    (1) The lender must have adequate capacity and experience in 
processing and in underwriting covered loan transactions for that tier 
using FHA insurance programs, or non-FHA transactions that are 
equivalent to covered transactions for that tier.
    (i) A non-FHA transaction will be deemed the equivalent of using 
FHA insurance programs for a covered transaction for a tier if HUD 
determines that the quality and scope of underwriting and processing 
required and actually performed for the non-FHA transaction are 
equivalent to that required using FHA insurance programs for the 
covered transaction. Non-FHA transactions that may be used to 
demonstrate tier qualifications include those of Fannie Mae, Freddie 
Mac, state housing finance agencies, conventional lenders, and 
commercial banks;
    (ii) HUD will from time to time issue the quantity, specific 
characteristics, and recentness of transactions that a lender must have 
processed or underwritten in order to have the adequate recent 
experience required for each tier. Each issuance will be preceded by 
notice and the opportunity for public comment.
    (2) The lender must have a satisfactory record processing and 
underwriting covered transactions for the tier at which approval is 
requested. In reviewing the lender's record, HUD will consider 
enforcement actions taken against the lender, warning letters issued to 
the lender, the lender's default and claim rates, and the overall 
performance of its previously underwritten or closed loans.
    (c) Application. (1) The lender must submit an application for MAP 
approval or for tier qualification in such form as required by HUD, 
demonstrating that the lender meets the applicable eligibility 
requirements under this section.
    (2) HUD may from time to time announce its suspension of acceptance 
of applications under this section. The announcement shall specify the 
reasons for the suspension of acceptance of applications.
    (3) An FHA-approved lender that has had its MAP lender designation 
terminated may not submit an application for MAP lender designation for 
a period of one year following the date of termination of the prior MAP 
lender designation.


Sec.  200.1415  Underwriter eligibility and application for MAP 
approval.

    (a) To be eligible for designation as a MAP underwriter, an 
individual must be a full-time employee of the lender that is seeking 
or has received approval as a MAP Lender, and must have adequate 
experience in underwriting covered loan transactions using FHA 
insurance programs for the specific tier for which the underwriter 
seeks designation, or non-FHA transactions that are equivalent to 
covered transactions for that tier.
    (1) A non-FHA transaction will be deemed the equivalent of using 
FHA insurance programs for a covered transaction for a tier if HUD 
determines that the quality and scope of underwriting and processing 
required and actually performed for the non-FHA transaction are 
equivalent to that required using FHA insurance programs for the 
covered transaction. Non-FHA transactions that may be used to 
demonstrate tier qualifications include those of Fannie Mae, Freddie 
Mac, state housing finance agencies, conventional lenders, and 
commercial banks.
    (2) HUD will from time to time issue the quantity, specific 
characteristics, and recentness of transactions that an underwriter 
must have underwritten in order to have the adequate recent experience 
required for each tier. Each issuance will be preceded by notice and 
the opportunity for public comment.
    (b) A lender must submit an underwriter's application for MAP-
underwriter approval or for underwriter-tier qualification in such form 
as required by HUD that demonstrates that the underwriter meets the 
applicable eligibility requirements under this section.


Sec.  200.1417  HUD's review of MAP lender and underwriter approval 
applications.

    (a) HUD will review a MAP lender or underwriter approval 
application, along with any information from HUD offices where the 
applicant's prior loan applications or exhibits have been submitted 
within the preceding time period specified by HUD.
    (1)(i) If HUD determines that the applicant meets the criteria for 
approval in Sec.  200.1413 or Sec.  200.1415, as applicable, the 
applicant is eligible for approval for the requested tier and HUD will 
notify the applicant of its decision to designate the lender or 
underwriter as a MAP lender or underwriter under the tier for which the 
lender or underwriter applied.
    (ii) If HUD determines that the applicant does not meet the 
criteria for the requested tier but the applicant meets the criteria 
for approval at a lower tier, HUD may approve the application at the 
lower tier. In such a case, HUD will notify the applicant of its 
eligibility for approval at a lower tier and advise the applicant of 
the reasons that HUD

[[Page 21889]]

did not approve the applicant at the requested tier.
    (iii) Whether HUD approves an applicant at a requested tier under 
paragraph (a)(1)(i) of this section or at a lower tier under paragraph 
(a)(1)(ii) of this section, HUD reserves the right to limit the number 
of units or the dollar amount per loan application that an approved 
applicant may process, when HUD determines that there is a necessity to 
limit the loans being processed to such amount or size, as HUD may 
specify by notice.
    (2) If HUD determines that the applicant does not meet the criteria 
for approval in Sec.  200.1413 or Sec.  200.1415, as applicable, HUD 
will disapprove the application and notify the applicant of its 
decision and of the reason for the disapproval.
    (3) If HUD is unable to determine the eligibility of an applicant, 
HUD may, at its discretion, disapprove the application and notify the 
applicant of the reason for its decision or ask the applicant to 
correct identified deficiencies in the application and resubmit it.
    (b) Period of approval. Unless an approval is affected by an 
enforcement action under this part, an approval granted under this 
section shall be valid, as follows:
    (1) Except as provided under paragraph (b)(3) of this section and 
under Sec.  200.1427, the approval of an underwriter will not expire so 
long as the underwriter remains active and in the employment of the 
lender under which approval was granted, and without interruption.
    (2) Except as provided in paragraphs (b)(3) of this section, or for 
reasons otherwise specified by HUD in writing, the approval of a lender 
as a MAP lender is valid for a period of 4 years from the date on which 
HUD notifies the lender of the approval;
    (3)(i) A lender or underwriter without prior experience in 
processing or underwriting FHA loan applications may be eligible for 
conditional approval. Conditional approval will be valid for a period 
of one year from the date on which HUD notifies the applicant of the 
approval, unless HUD decides to allow an extension of the period of 
conditional approval for an additional one-year period. During the 
conditional approval period, HUD may impose limits on the number of 
loan applications that may be submitted, or the number of units or 
dollar amount per loan application, or any combination of these limits.
    (ii) To be eligible for conversion to full MAP approval status, the 
lender or underwriter must, during the period of conditional approval:
    (A) Underwrite and submit to HUD loan applications that result in 
Firm Commitments from HUD, in a minimum number as specified by HUD at 
the time conditional approval is granted, in accordance with the 
applicant's experience;
    (B) Satisfy any additional conditions that HUD has imposed on the 
lender or underwriter at the time the conditional approval was granted; 
and
    (C) Demonstrate acceptable capacity to process and underwrite loan 
applications using FHA insurance programs for covered loan transactions 
for the tier for which conditional approval has been granted.
    (iii) The approval of a lender or underwriter that is converted 
from conditional to full MAP approval status is valid, unless otherwise 
specified by HUD, for the remainder of the 4-year period beginning on 
the date that HUD notified the applicant of its initial conditional 
approval.
    (iv) If a lender or underwriter does not comply with the 
requirements under paragraphs (b)(3)(ii)(A) through (C) of this 
section, HUD may extend the term of conditional approval or terminate 
the conditional approval.


Sec.  200.1419  Expiration of previously granted MAP approvals.

    (a) Expiration. A MAP lender or underwriter approval that was 
granted by HUD prior to [effective date of final rule to be inserted at 
the final rule stage] shall expire upon the later of the following:
    (1) Four years following the date on which the approval was 
granted;
    (2) Forty-five days following the lender's or underwriter's receipt 
of a letter from HUD inviting the lender or underwriter to apply for 
tier approval, if by such date the lender or underwriter has not 
submitted an application in accordance with Sec.  200.1413(c) or 
1415(b); or
    (3) Upon HUD's notification of the lender or underwriter of the 
action HUD has taken on the lender or underwriter's application 
submitted in accordance with Sec.  200.1413(c) or Sec.  200.1415(b), 
provided that the lender or underwriter submitted the application 
within 45 days of the date of the lender or underwriter's receipt of a 
letter from HUD inviting the lender or underwriter to apply for tier 
approval.
    (b) One-time approval at Tier 1 in absence of submission. A lender 
whose MAP approval was granted by HUD prior to [effective date of final 
rule to be inserted at final rule stage] and that does not submit an 
application in accordance with Sec.  200.1413(c) within 45 days 
following the lender's receipt of a letter from HUD inviting the lender 
to apply for tier approval, shall be eligible for approval at Tier 1 
for a period of time as provided in Sec.  200.1417(b).


Sec.  200.1421  Renewal of lender approval.

    (a) No later than 90 days before the date of the expiration of MAP-
lender approval, the MAP lender may submit an application, in such form 
as required by HUD, for renewal of MAP-lender approval. The application 
for renewal must demonstrate that the lender continues to meet the 
applicable eligibility requirements under Sec.  200.1411 and Sec.  
200.1413 of this part.
    (b) HUD will review a lender's application for renewal of MAP 
approval, along with any information provided by HUD offices to which 
the applicant's loan applications or exhibits have been submitted 
within the previous approval period or periods, up to a maximum of 4 
years. HUD may determine that the lender's experience or the 
performance of the lender's loans endorsed during the preceding 4 years 
is not sufficient for the lender to renew its approval at the current 
tier. In considering an application for renewal of MAP approval, HUD 
will follow the procedures and may take any action described in Sec.  
200.1417.


Sec.  200.1423  Adjustment of approval to a higher tier.

    (a) An approved lender or underwriter may submit an application, in 
such form as required by HUD, for approval at a higher tier. The lender 
or underwriter must demonstrate that it meets the applicable 
eligibility requirements for the tier of approval that the lender or 
underwriter is seeking.
    (b) HUD will review a lender or underwriter's application for MAP 
approval at a higher tier, along with any information provided by HUD 
offices where the applicant's loan applications or exhibits have been 
submitted within the previous approval period or periods, up to a total 
period of time as published by HUD for public comment. In considering 
an application for MAP approval at a higher tier, HUD will follow the 
procedures and may take any action described in Sec.  200.1417. 
Approval of a MAP lender at a higher tier shall be valid as provided in 
Sec.  200.1417(a)(1).


Sec.  200.1425  Post-approval underwriter training requirement.

    Newly approved MAP underwriters must attend a MAP training session 
provided or approved by HUD in order to be eligible to satisfy the 
underwriter requirement at Sec.  200.1411(a)(2).

[[Page 21890]]

Sec.  200.1427  Inactive underwriters.

    An underwriter who at the time of the lender's annual certification 
to HUD pursuant to Sec.  200.1407(d) has not submitted a pre-
application or application for Firm Commitment for a period of 2 years 
will be designated as inactive. Inactive underwriters may be terminated 
from the MAP program because of inactivity and, if so, must reapply for 
approval to participate in MAP programs.


Sec.  200.1429  Appeals.

    (a) An applicant may submit a written appeal of any HUD decision 
regarding the applicant under Sec. Sec.  200.1411 through 200.1427 of 
this subpart. Any such appeal must be submitted to the designated HUD 
appeal official within 30 days of the date of receipt of HUD's written 
notification to the applicant of HUD's decision. HUD's written 
notification will advise who is the designated HUD appeal official and 
provide the address for such official. The written appeal may set forth 
the reasons why the HUD decision should be reconsidered or changed, or 
may request an informal conference, or both.
    (b) HUD will respond to an applicant's appeal within 60 days from 
the date of HUD's receipt of the written appeal. If HUD's response to 
the appeal is to confirm HUD's original decision, no further appeal 
will be accepted from the applicant.
    3. Immediately before Sec.  200.1500, add an undesignated heading, 
to read as follows:

Map Lender Quality Assurance Enforcement

    4. In Sec.  200.1505, revise paragraph (c) to read as follows:


Sec.  200.1505  Warning letter.

* * * * *
    (c) Relationship to other sanctions. The issuance of a warning 
letter is not subject to the procedures in Sec.  200.1535, and is not a 
prerequisite to the probation, or suspension, or termination of MAP 
privileges.
    5. In Sec.  200.1510, revise paragraphs (a) and (b)(1) to read as 
follows:


Sec.  200.1510  Probation.

    (a) In general. HUD may place a lender on probation, in accordance 
with the procedures of Sec.  200.1535.
    (b) Effect of probation. (1) Probation is intended to be corrective 
in nature and not punitive. As a result, release from probation is 
conditioned upon the lender meeting a specific requirement or 
requirements, such as replacement of a staff member. A lender's failure 
to take prompt corrective action after being placed on probation may be 
the basis for a recommendation of either suspension or termination.
* * * * *
    6. In Sec.  200.1515, revise paragraph (a) to read as follows:


Sec.  200.1515  Suspension of MAP privileges.

    (a) In general. HUD may suspend a lender's eligibility for MAP, in 
accordance with the procedures of Sec.  200.1535.
* * * * *
    7. In Sec.  200.1520, revise paragraph (a) to read as follows:


Sec.  200.1520  Termination of MAP privileges.

    (a) In general. Except as provided in paragraph (b) of this 
section, HUD may terminate a lender's MAP privileges in accordance with 
the procedures of Sec.  200.1535.
* * * * *
    8. In Sec.  200.1525, revise paragraph (a) to read as follows:


Sec.  200.1525  Settlement agreements.

    (a) HUD staff, as authorized, may negotiate a settlement agreement 
with a MAP lender before or after the issuance of a warning letter or 
referral to HUD.
* * * * *
    9. In Sec.  200.1535, revise the heading and paragraphs (a)(1) and 
(a)(2), paragraph (b) introductory text, and (f)(1) to read as follows:


Sec.  200.1535  Procedures for imposition of sanctions.

    (a) Authority. (1) Sanctions. HUD may impose appropriate sanctions 
on a MAP lender after:
    (i) Conducting an impartial review of all information and 
documentation submitted to HUD; and
    (ii) Making factual determinations that there has been a violation 
of MAP requirements.
    (2) Settlement agreements. HUD is authorized to approve settlement 
agreements in accordance with Sec.  200.1525 of any pending matter.
* * * * *
    (b) Notice of violation. Before HUD reviews a matter for 
consideration of a sanction, HUD will issue written notice of violation 
to the MAP lender's contact person as listed on the Multifamily MAP Web 
site. The notice is sent by overnight delivery and must be signed for 
by an employee of the MAP lender upon receipt. The notice:
* * * * *
    (f) HUD action. (1) HUD will consider the evidence included in the 
administrative record and make a final decision concerning the matter. 
Any record of confidential communications within HUD at this stage of 
the proceedings is privileged from disclosure and will not be regarded 
as a part of the administrative record of any matter.
* * * * *
    10. Revise the heading of Sec.  200.1545 to read as follows:


Sec.  200.1545  Appeals of sanction decisions.

* * * * *

    Dated: March 16, 2012.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2012-8705 Filed 4-11-12; 8:45 am]
BILLING CODE 4210-67-P