Federal Housing Administration (FHA) Approval of Lending Institutions and Mortgagees: Streamlined Reporting Requirements for Small Supervised Lenders and Mortgagees, 57058-57061 [2013-22583]
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57058
Federal Register / Vol. 78, No. 180 / Tuesday, September 17, 2013 / Rules and Regulations
List of Subjects in 21 CFR Part 520
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
Animal drugs.
Therefore, under the Federal Food,
Drug, and Cosmetic Act and under
authority delegated to the Commissioner
of Food and Drugs and redelegated to
the Center for Veterinary Medicine, 21
CFR part 520 is amended as follows:
PART 520—ORAL DOSAGE FORM
NEW ANIMAL DRUGS
2. In § 520.100, revise paragraph (b)(2)
to read as follows:
■
Amprolium.
*
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*
(b) * * *
(2) No. 066104 for use of product
described in paragraph (a)(1) of this
section as in paragraph (d) of this
section.
*
*
*
*
*
[Redesignated as § 520.1367]
3. Redesignate § 520.1350 as
§ 520.1367.
■
4. Amend newly redesignated
§ 520.1367 by revising paragraphs (a)
and (b) to read as follows:
■
§ 520.1367
Meloxicam.
(a) Specifications—(1) Each milliliter
of suspension contains 0.5 milligrams
(mg) meloxicam.
(2) Each milliliter of suspension
contains 1.5 mg meloxicam.
(b) Sponsors. See sponsors in
§ 510.600(c) of this chapter for uses as
in paragraph (c) of this section:
(1) No. 000010 for use of the products
described in paragraph (a) of this
section; and
(2) No. 013744 for use of the product
described in paragraph (a)(2) of this
section.
*
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*
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Dated: September 11, 2013.
Bernadette Dunham,
Director, Center for Veterinary Medicine.
[FR Doc. 2013–22523 Filed 9–16–13; 8:45 am]
BILLING CODE 4160–01–P
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RIN 2502–AJ00
Federal Housing Administration (FHA)
Approval of Lending Institutions and
Mortgagees: Streamlined Reporting
Requirements for Small Supervised
Lenders and Mortgagees
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, HUD.
ACTION: Final rule.
Authority: 21 U.S.C. 360b.
§ 520.1350
[Docket No. FR–5536–F–02]
AGENCY:
1. The authority citation for 21 CFR
part 520 continues to read as follows:
■
§ 520.100
24 CFR Parts 5 and 202
This rule streamlines the FHA
financial statement reporting
requirements for lenders and mortgagees
who are supervised by federal banking
agencies and whose consolidated assets
do not meet the thresholds set by their
supervising federal banking agencies for
submission of audited financial
statements (currently set at $500 million
in consolidated assets). HUD’s
regulations currently require all
supervised lenders and mortgagees to
submit annual audited financial
statements as a condition of FHA lender
approval and recertification. Through
this rule, in lieu of the annual audited
financial statements, small supervised
lenders and mortgagees would be
required to submit their unaudited
financial regulatory reports that align
with their fiscal year ends and are
required to be submitted to their
supervising federal banking agencies.
Small supervised lenders and
mortgagees would only be required to
submit audited financial statements if
HUD determines that the supervised
lenders or mortgagees pose heightened
risk to the FHA insurance fund.
This rule does not impact FHA’s
annual audited financial statements
submission requirement for
nonsupervised and large supervised
lenders and mortgagees. The rule also
does not impact those supervised
lenders and mortgagees with
consolidated assets in an amount that
requires that lenders or mortgagees
submit audited financial statements to
their respective supervising federal
banking agencies. Additionally, this
final rule, consistent with the proposed
rule, makes three technical changes to
current regulations regarding reporting
requirements for FHA-approved
supervised lenders and mortgagees.
DATES: Effective Date: October 17, 2013.
FOR FURTHER INFORMATION CONTACT:
Richard Toma, Deputy Director, Office
of Lender Activities and Program
SUMMARY:
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Compliance, Office of Housing,
Department of Housing and Urban
Development, 490 L’Enfant Plaza East
SW., Room P3214, Washington, DC
20024–8000; telephone number 202–
708–1515 (this is not a toll-free
number). Persons with hearing or
speech impairments may access this
number through TTY by calling the tollfree Federal Relay Service at 800–877–
8339.
SUPPLEMENTARY INFORMATION:
I. Background
On April 18, 2013 (78 FR 23178),
HUD published for public comment a
proposed rule that would streamline
reporting requirements and relieve
burden on small supervised lenders and
mortgagees.1 HUD’s regulations, at 24
CFR 202.5(g), require that all lenders
and mortgagees provide annual audited
financial statements within 90 days of
their fiscal year ends. Small supervised
lenders and mortgagees, however, are
not required by their supervising federal
banking agencies to submit audited
financial statements, but are permitted
to submit unaudited financial regulatory
reports. These unaudited financial
regulatory reports currently include a
consolidated or fourth quarter Report of
Condition and Income (Federal
Financial Institutions Examination
Council forms 031 and 041, also known
as the ‘‘Call Report’’), a consolidated or
fourth quarter Thrift Financial Report,
and a consolidated or fourth quarter
NCUA Call Report (NCUA Form 5300 or
5310). The HUD requirement is
therefore inconsistent with that of the
federal banking agencies, and has the
potential to impose a potentially
financially prohibitive requirement on
small supervised lenders and
mortgagees who wish to participate in
FHA programs. While HUD takes its
counterparty risk management
responsibilities seriously, HUD also
seeks to balance its management of risk
with the execution of its mission.
Upon reconsideration, HUD has
determined that the financial regulatory
reports required by the federal banking
agencies contain sufficient information
for HUD to ensure that small supervised
lenders and mortgagees are suitably
capitalized to meet potential needs
associated with their participation in
1 The term ‘‘small supervised lenders and
mortgagees’’ refers to those lenders and mortgagees
supervised by the Board of Governors of the Federal
Reserve System; the Federal Deposit Insurance
Corporation (FDIC); and the National Credit Union
Administration (NCUA) (collectively, the ‘‘federal
banking agencies’’) whose consolidated assets do
not meet the thresholds set by their supervising
federal banking agencies for submission of audited
financial statements (currently set at $500 million
in consolidated assets).
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Federal Register / Vol. 78, No. 180 / Tuesday, September 17, 2013 / Rules and Regulations
FHA lending programs. Accordingly,
HUD issued the April 18, 2013,
proposed rule to bring its reporting
requirements for small supervised
lenders mortgagees into alignment with
that of the federal banking agencies. In
addition to the streamlined reporting
requirements, HUD proposed to make
three conforming amendments to
current regulations, which are also
made final by this rule. Interested
readers should refer to the preamble of
the April 18, 2013, proposed rule for
additional information on the proposed
regulatory change.
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II. This Final Rule
This final rule follows publication of
the April 18, 2013, proposed rule and
takes into consideration the public
comments received on the proposed
rule. The public comment period on the
proposed rule closed on June 17, 2013.
HUD received 6 public comments.
Commenters included a savings bank,
banker and home builder associations,
and credit unions. All public comments
supported the proposed rule. Section III
of this preamble discusses the
comments received on the proposed
rule. HUD has decided to adopt the
proposed rule as final with no
substantive changes. HUD, however, has
taken the opportunity afforded by this
final rule to reorganize § 202.5(g), for
clarity purposes only.
A. Streamlined Reporting Requirements
for Small Supervised Lenders and
Mortgagees
This final rule amends § 202.5(g) and
adds a new (c) to § 202.6, Supervised
Lenders and Mortgagees, that exempts
small supervised lenders and
mortgagees from submitting a copy of an
audited financial statement. Small
supervised lenders and mortgagees are
instead required, within 90 days of their
fiscal year end, to furnish to HUD the
unaudited financial regulatory report
that aligns with the small supervised
lender’s or mortgagee’s fiscal year end
and that the small supervised lender or
mortgagee is required to submit to their
respective federal banking agency. In
order to manage the risk to the FHA
insurance fund, HUD retains the right to
request additional financial
documentation, up to and including
audited financial statements, if HUD
determines that a small supervised
lender or mortgagee poses a heightened
risk to the FHA insurance fund.
HUD may determine that a small
supervised lender or mortgagee poses a
heightened risk to the FHA insurance
fund based upon, but not limited to, one
or more of the following factors: (1)
Failing to provide required financial
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submissions under § 202.6(c)(2) within
the required 90-day period following the
lender’s or mortgagee’s fiscal year end;
(2) maintaining insufficient adjusted net
worth or unrestricted liquid assets as
required by § 202.5(n); (3) reporting
opening cash and equity balances that
do not agree with the prior year’s
reported cash and equity balances; (4)
experiencing an operating loss of 20
percent or greater of the lender’s or
mortgagee’s net worth for the annual
reporting period as governed by
§ 202.5(m)(1); (5) experiencing an
increase in loan volume over the prior
12-month period, determined by the
Secretary to be significant; (6)
undertaking significant changes to
business operations, such as a merger or
acquisition; and (7) other factors that the
Secretary considers appropriate in
indicating a heightened risk to the FHA
insurance fund.
B. Technical Amendments
As noted earlier in this preamble, the
April 18, 2013, proposed rule contained
three conforming amendments to
current regulations regarding reporting
requirements for FHA-approved
supervised lenders and mortgagees.
These nonsubstantive amendments,
which are adopted without change by
this final rule, will codify existing
requirements and correct a regulatory
citation. The amendments are as
follows:
1. Audited financial statement for
large supervised lenders and
mortgagees. This rule adds
subparagraph (b)(4) to § 202.6 to clarify
that annual audited financial statements
required to be submitted by supervised
lenders and mortgagees are to be
submitted in accordance with the same
requirements as those applicable to
nonsupervised institutions under
§ 202.7(b)(4). Additionally, as
referenced above, it exempts small
supervised lenders and mortgagees from
the requirement to submit audited
financial statements.
2. Technical correction to uniform
financial reporting standards. This rule
makes a conforming amendments to
§ 5.801(a)(5) by removing loan
correspondents and adding supervised
lenders and mortgagees. Section 5.801
requires conformance with the uniform
financial reporting requirements if HUD
requires the submission of financial
information.
3. Technical correction to § 202.3(b).
This rule replaces an incorrect citation
in § 202.3(b) by removing the reference
to § 202.5(n)(2) and inserting the correct
citation to § 202.5(m).
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57059
III. Discussion of Public Comments
The following section presents a
summary of the public comments in
response to the April 18, 2013, proposed
rule, and HUD’s response.
All commenters supported HUD’s
proposed rule permitting small
supervised lenders and mortgagees to
submit their financial regulatory reports
required by their respective federal
banking agencies in place of annual
audited financial statements.
Commenters also supported HUD’s
decision to retain the right to require
audited financial statements when they
determine, based on the proposed list of
relevant factors, that an entity poses a
heightened risk to the FHA insurance
fund. A number of commenters
emphasized the important role of
community banks in the communities
they serve that may not have access to
larger lenders and mortgagees. In
addition, the commenters noted that
community bank residential mortgage
lending activities have posed very little
risk to the insurance fund, but requiring
community banks to finance annual
audited financial statements may result
in community banks no longer offering
homebuyers FHA loans.
One commenter requested that in
addition to no longer requiring the
submission of annual audited financial
statements for small supervised lenders
and mortgagees, HUD no longer require
costly internal control and compliance
audit requirement imposed on small
supervised lenders and mortgagees.
In response to the comment, HUD
clarifies that small supervised lenders
and mortgagees, as a result of this rule,
are no longer required to submit internal
control and compliance reports. Internal
control and compliance reports are a
part of the annual audit report.
Therefore, exempting small supervised
lenders and mortgagees from submitting
annual financial audits required by
§ 202.5(g) and § 202.6(b)(4) means they
are also not subject to the internal
control and compliance report
requirement. If, however, the Secretary
determines that a small supervised
lender or mortgagee poses a heightened
risk to the FHA insurance fund under
§ 202.6(c)(3), the Secretary can require
the submission of additional
information, including internal control
and compliance reports.
IV. Findings and Certifications
Public Reporting Burden
The information collection
requirements contained in this rule have
been approved by the Office of
Management and Budget (OMB) under
the Paperwork Reduction Act of 1995
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Federal Register / Vol. 78, No. 180 / Tuesday, September 17, 2013 / Rules and Regulations
(44 U.S.C. 3501–3520) and assigned
OMB control number 2506–0085. 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.
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 significant
economic impact on a substantial
number of small entities. This rule
would not have a significant economic
impact on a substantial number of small
entities because the rule is specifically
intended to ease the regulatory burden
on small entities. The current
regulations require full independent
audited financial statements, over and
above what is required by federal
banking agencies in their oversight of
these small supervised lenders and
mortgagees. This rule would bring
HUD’s reporting practices in line with
that of the federal banking agencies and
reduce the cost of participating in FHA
programs by releasing small supervised
lenders and mortgagees from the
requirement to submit annual audited
financial statements. Instead, the rule
would require the submission of the
unaudited financial regulatory report
already required by the small
supervised lender’s or mortgagee’s
supervising federal banking agency.
Therefore, the undersigned certifies that
this rule will not have a significant
impact on a substantial number of small
entities.
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Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits an agency from
publishing any rule that has federalism
implications if the rule either (1)
imposes substantial direct compliance
costs on state and local governments
and is not required by statute, or (2)
preempts state law, unless the agency
meets the consultation and funding
requirements of section 6 of the
Executive Order. This rule would 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.
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Environmental Impact
This 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. Nor does it establish,
revise, or provide for standards for
construction or construction materials,
manufactured housing, or occupancy.
This rule is limited to the procedures
governing the submission of financial
reports by small supervised lenders and
mortgagees applying to participate, or
recertifying for participation, in FHA’s
single-family programs. 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).
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 would not
impose any federal mandates on any
state, local, or tribal governments, or on
the private sector, within the meaning of
the UMRA.
Catalogue of Federal Domestic
Assistance
List of Subjects
24 CFR Part 5
Administrative practice and
procedure, Aged, Claims, Crime,
Government contracts, Grant
programs—housing and community
development, Individuals with
disabilities, Intergovernmental relations,
Loan programs—housing and
community development, Low and
moderate income housing, Mortgage
insurance, Penalties, Pets, Public
housing, Rent subsidies, Reporting and
recordkeeping requirements, Social
security, Unemployment compensation,
Wages.
24 CFR Part 202
Administrative practice and
procedure, Home improvement,
Manufactured homes, Mortgage
insurance, Reporting and recordkeeping
requirements.
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PART 5—GENERAL HUD PROGRAM
REQUIREMENTS; WAIVERS
1. The authority citation for part 5
continues to read as follows:
■
Authority: 42 USC 3535, 1437a, 1437c,
1437d, 1437f, 1437n, 3535(d), Sec. 327, Pub.
L. 109–115, 119 Stat. 2936, and Sec. 607,
Pub. L. 109–162, 119 Stat. 3051.
2. Revise § 5.801 paragraph (a)(5) to
read as follows:
■
§ 5.801 Uniform financial reporting
standards.
(a) * * *
(5) HUD-approved Title I and Title II
supervised and nonsupervised lenders
and mortgagees.
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PART 202—APPROVAL OF LENDING
INSTITUTIONS AND MORTGAGEES
3. The authority citation for part 202
continues to read as follows:
■
Authority: 12 U.S.C. 1703, 1709 and 1715b;
42 U.S.C. 3535(d).
§ 202.3
[Amended]
4. In § 202.3 paragraph (b), remove the
citation ‘‘§ 202.5(n)(2)’’ and add in its
place ‘‘§ 202.5(m)’’.
■ 5. Revise § 202.5 paragraph (g) to read
as follows:
■
§ 202.5
The Catalogue of Federal Domestic
Assistance Number for the principal
FHA single-family mortgage insurance
program is 14.117.
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Accordingly, for the reasons stated in
the preamble, HUD amends 24 CFR
parts 5 and 202 to read as follows:
General approval standards.
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(g) Financial statements. The lender
or mortgagee shall:
(1) Furnish to the Secretary a copy of
its audited financial statements within
90 days of its fiscal year end, except as
provided in § 202.6(c);
(2) Furnish such other information as
the Secretary may request; and
(3) Submit to an examination of that
portion of its records that relates to its
Title I and/or Title II program activities.
*
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■ 6. In § 202.6, add new paragraphs
(b)(4) and (c) to read as follows:
§ 202.6 Supervised lenders and
mortgagees.
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*
(b) * * *
(4) Audit report. Except as provided
in paragraph (c) of this section, a lender
or mortgagee must:
(i) Comply with the financial
reporting requirements in 24 CFR part 5,
subpart H. Audit reports shall be based
on audits performed by a certified
public accountant, or by an independent
public accountant licensed by a
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Federal Register / Vol. 78, No. 180 / Tuesday, September 17, 2013 / Rules and Regulations
regulatory authority of a State or other
political subdivision of the United
States on or before December 31, 1970,
and shall include:
(A) Financial statements in a form
acceptable to the Secretary, including a
balance sheet and a statement of
operations and retained earnings, a
statement of cash flows, an analysis of
the lender’s or mortgagee’s net worth
adjusted to reflect only assets acceptable
to the Secretary, and an analysis of
escrow funds; and
(B) Such other financial information
as the Secretary may require to
determine the accuracy and validity of
the audit report.
(ii) Submit a report on compliance
tests prescribed by the Secretary.
(c) Financial statement requirements
for small supervised lenders and
mortgagees.
(1) Definitions. For the purposes of
this section, the following definitions
apply:
(i) Federal banking agency means the
Board of Governors of the Federal
Reserve System; the Federal Deposit
Insurance Corporation; and the National
Credit Union Administration; or any
successor agency thereof.
(ii) Small supervised lender or
mortgagee means a supervised lender or
mortgagee possessing consolidated
assets below the threshold for required
audited financial reporting as
established by the federal banking
agency that is responsible for the
oversight of that supervised lender or
mortgagee.
(2) Financial statement requirements.
Small supervised lenders and
mortgagees shall not be subject to the
requirement to submit a copy of an
audited financial statement under
§ 202.5(g) and the audit report
requirements under paragraph (b)(4) of
this section. Small supervised lenders
and mortgagees are required, within 90
days of their fiscal year end, to furnish
to the Secretary the unaudited financial
regulatory report—a consolidated or
fourth quarter Report of Condition and
Income (Federal Financial Institutions
Examination Council forms 031 and
041, also known as the ‘‘Call Report’’),
a consolidated or fourth quarter Thrift
Financial Report, or a consolidated or
fourth quarter NCUA Call Report
(NCUA Form 5300 or 5310), or such
other financial regulatory report as may
be required—that aligns with the small
supervised lender’s or mortgagee’s fiscal
year end and that the small supervised
lender or mortgagee is required to
submit to their respective federal
banking agency.
(3) Requirement for audited financial
statement and other information based
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on determination of heightened risk to
the FHA insurance fund. If the Secretary
determines that a small supervised
lender or mortgagee poses a heightened
risk to the FHA insurance fund, the
lender or mortgagee must provide, upon
request, additional financial
documentation, up to and including an
audited financial statement, and other
information as the Secretary determines
necessary. The Secretary may determine
that a small supervised lender or
mortgagee poses a heightened risk to the
FHA insurance fund based upon, but
not limited to, one or more of the
following factors:
(i) Failing to provide required
financial submissions under
§ 202.6(c)(2) within the required 90-day
period following the lender’s or
mortgagee’s fiscal year end;
(ii) Maintaining insufficient adjusted
net worth or unrestricted liquid assets
as required by § 202.5(n);
(iii) Reporting opening cash and
equity balances that do not agree with
the prior year’s reported cash and equity
balances;
(iv) Experiencing an operating loss of
20 percent or greater of the lender’s or
mortgagee’s net worth for the annual
reporting period as governed by
§ 202.5(m)(1);
(v) Experiencing an increase in loan
volume over the prior 12-month period,
determined by the Secretary to be
significant;
(vi) Undertaking significant changes
to business operations, such as a merger
or acquisition; and
(vii) Other factors that the Secretary
considers appropriate in indicating a
heightened risk to the FHA insurance
fund.
57061
DEPARTMENT OF HOMELAND
SECURITY
The Coast Guard is
establishing a special local regulation on
the waters of Biscayne Bay, east of
Bayfront Park, in Miami, Florida, during
the Red Bull Flugtag. The Red Bull
Flugtag is scheduled to take place on
September 21, 2013. The event consists
of approximately 100 participants
launching 30 self-propelled flying
objects from a 30 foot ramp to the water
below. Approximately 100 spectator
vessels are anticipated to be at the
event. The special local regulation is
necessary to provide for the safety of the
participants, participant vessels,
spectators, and the general public on the
navigable waters of the United States
during the event. The special local
regulation will establish an event area,
where non-participant persons and
vessels are prohibited from entering,
transiting, anchoring, or remaining
within.
DATES: This rule will be enforced from
9:30 a.m. until 6:30 p.m. on September
21, 2013.
ADDRESSES: Documents mentioned in
this preamble are part of docket [USCG–
2013–0180]. To view documents
mentioned in this preamble as being
available in the docket, go to https://
www.regulations.gov, type the docket
number in the ‘‘SEARCH’’ box and click
‘‘SEARCH.’’ Click on Open Docket
Folder on the line associated with this
rulemaking. You may also visit the
Docket Management Facility in Room
W12–140 on the ground floor of the
Department of Transportation West
Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays.
FOR FURTHER INFORMATION CONTACT: If
you have questions on this rule, call or
email Petty Officer John K. Jennings,
Sector Miami Prevention Department,
Coast Guard; telephone (305) 535–4317,
email john.k.jennings@uscg.mil. If you
have questions on viewing or submitting
material to the docket, call Barbara
Hairston, Program Manager, Docket
Operations, telephone (202) 366–9826.
SUPPLEMENTARY INFORMATION:
Coast Guard
Table of Acronyms
33 CFR Part 100
DHS Department of Homeland Security
FR Federal Register
NPRM Notice of Proposed Rulemaking
Dated: September 9, 2013.
Carol J. Galante,
Assistant Secretary for Housing—Federal
Housing Commissioner.
[FR Doc. 2013–22583 Filed 9–16–13; 8:45 am]
BILLING CODE 4210–67–P
[Docket Number USCG–2013–0180]
RIN 1625–AA08
Special Local Regulation; Red Bull
Flugtag Miami, Biscayne Bay; Miami,
FL
Coast Guard, DHS.
Temporary final rule.
AGENCY:
ACTION:
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SUMMARY:
A. Regulatory History and Information
On July 3, 2013, the Coast Guard
published a Notice of Proposed
Rulemaking (NPRM) entitled USCG–
2013–0180 Special Local Regulation;
Red Bull Flugtag Miami, Biscayne Bay;
Miami, FL in the Federal Register (78
FR 40079). We received no comments
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]]>Agencies
[Federal Register Volume 78, Number 180 (Tuesday, September 17, 2013)]
[Rules and Regulations]
[Pages 57058-57061]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22583]
=======================================================================
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5 and 202
[Docket No. FR-5536-F-02]
RIN 2502-AJ00
Federal Housing Administration (FHA) Approval of Lending
Institutions and Mortgagees: Streamlined Reporting Requirements for
Small Supervised Lenders and Mortgagees
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule streamlines the FHA financial statement reporting
requirements for lenders and mortgagees who are supervised by federal
banking agencies and whose consolidated assets do not meet the
thresholds set by their supervising federal banking agencies for
submission of audited financial statements (currently set at $500
million in consolidated assets). HUD's regulations currently require
all supervised lenders and mortgagees to submit annual audited
financial statements as a condition of FHA lender approval and
recertification. Through this rule, in lieu of the annual audited
financial statements, small supervised lenders and mortgagees would be
required to submit their unaudited financial regulatory reports that
align with their fiscal year ends and are required to be submitted to
their supervising federal banking agencies. Small supervised lenders
and mortgagees would only be required to submit audited financial
statements if HUD determines that the supervised lenders or mortgagees
pose heightened risk to the FHA insurance fund.
This rule does not impact FHA's annual audited financial statements
submission requirement for nonsupervised and large supervised lenders
and mortgagees. The rule also does not impact those supervised lenders
and mortgagees with consolidated assets in an amount that requires that
lenders or mortgagees submit audited financial statements to their
respective supervising federal banking agencies. Additionally, this
final rule, consistent with the proposed rule, makes three technical
changes to current regulations regarding reporting requirements for
FHA-approved supervised lenders and mortgagees.
DATES: Effective Date: October 17, 2013.
FOR FURTHER INFORMATION CONTACT: Richard Toma, Deputy Director, Office
of Lender Activities and Program Compliance, Office of Housing,
Department of Housing and Urban Development, 490 L'Enfant Plaza East
SW., Room P3214, Washington, DC 20024-8000; telephone number 202-708-
1515 (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
On April 18, 2013 (78 FR 23178), HUD published for public comment a
proposed rule that would streamline reporting requirements and relieve
burden on small supervised lenders and mortgagees.\1\ HUD's
regulations, at 24 CFR 202.5(g), require that all lenders and
mortgagees provide annual audited financial statements within 90 days
of their fiscal year ends. Small supervised lenders and mortgagees,
however, are not required by their supervising federal banking agencies
to submit audited financial statements, but are permitted to submit
unaudited financial regulatory reports. These unaudited financial
regulatory reports currently include a consolidated or fourth quarter
Report of Condition and Income (Federal Financial Institutions
Examination Council forms 031 and 041, also known as the ``Call
Report''), a consolidated or fourth quarter Thrift Financial Report,
and a consolidated or fourth quarter NCUA Call Report (NCUA Form 5300
or 5310). The HUD requirement is therefore inconsistent with that of
the federal banking agencies, and has the potential to impose a
potentially financially prohibitive requirement on small supervised
lenders and mortgagees who wish to participate in FHA programs. While
HUD takes its counterparty risk management responsibilities seriously,
HUD also seeks to balance its management of risk with the execution of
its mission.
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\1\ The term ``small supervised lenders and mortgagees'' refers
to those lenders and mortgagees supervised by the Board of Governors
of the Federal Reserve System; the Federal Deposit Insurance
Corporation (FDIC); and the National Credit Union Administration
(NCUA) (collectively, the ``federal banking agencies'') whose
consolidated assets do not meet the thresholds set by their
supervising federal banking agencies for submission of audited
financial statements (currently set at $500 million in consolidated
assets).
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Upon reconsideration, HUD has determined that the financial
regulatory reports required by the federal banking agencies contain
sufficient information for HUD to ensure that small supervised lenders
and mortgagees are suitably capitalized to meet potential needs
associated with their participation in
[[Page 57059]]
FHA lending programs. Accordingly, HUD issued the April 18, 2013,
proposed rule to bring its reporting requirements for small supervised
lenders mortgagees into alignment with that of the federal banking
agencies. In addition to the streamlined reporting requirements, HUD
proposed to make three conforming amendments to current regulations,
which are also made final by this rule. Interested readers should refer
to the preamble of the April 18, 2013, proposed rule for additional
information on the proposed regulatory change.
II. This Final Rule
This final rule follows publication of the April 18, 2013, proposed
rule and takes into consideration the public comments received on the
proposed rule. The public comment period on the proposed rule closed on
June 17, 2013. HUD received 6 public comments. Commenters included a
savings bank, banker and home builder associations, and credit unions.
All public comments supported the proposed rule. Section III of this
preamble discusses the comments received on the proposed rule. HUD has
decided to adopt the proposed rule as final with no substantive
changes. HUD, however, has taken the opportunity afforded by this final
rule to reorganize Sec. 202.5(g), for clarity purposes only.
A. Streamlined Reporting Requirements for Small Supervised Lenders and
Mortgagees
This final rule amends Sec. 202.5(g) and adds a new (c) to Sec.
202.6, Supervised Lenders and Mortgagees, that exempts small supervised
lenders and mortgagees from submitting a copy of an audited financial
statement. Small supervised lenders and mortgagees are instead
required, within 90 days of their fiscal year end, to furnish to HUD
the unaudited financial regulatory report that aligns with the small
supervised lender's or mortgagee's fiscal year end and that the small
supervised lender or mortgagee is required to submit to their
respective federal banking agency. In order to manage the risk to the
FHA insurance fund, HUD retains the right to request additional
financial documentation, up to and including audited financial
statements, if HUD determines that a small supervised lender or
mortgagee poses a heightened risk to the FHA insurance fund.
HUD may determine that a small supervised lender or mortgagee poses
a heightened risk to the FHA insurance fund based upon, but not limited
to, one or more of the following factors: (1) Failing to provide
required financial submissions under Sec. 202.6(c)(2) within the
required 90-day period following the lender's or mortgagee's fiscal
year end; (2) maintaining insufficient adjusted net worth or
unrestricted liquid assets as required by Sec. 202.5(n); (3) reporting
opening cash and equity balances that do not agree with the prior
year's reported cash and equity balances; (4) experiencing an operating
loss of 20 percent or greater of the lender's or mortgagee's net worth
for the annual reporting period as governed by Sec. 202.5(m)(1); (5)
experiencing an increase in loan volume over the prior 12-month period,
determined by the Secretary to be significant; (6) undertaking
significant changes to business operations, such as a merger or
acquisition; and (7) other factors that the Secretary considers
appropriate in indicating a heightened risk to the FHA insurance fund.
B. Technical Amendments
As noted earlier in this preamble, the April 18, 2013, proposed
rule contained three conforming amendments to current regulations
regarding reporting requirements for FHA-approved supervised lenders
and mortgagees. These nonsubstantive amendments, which are adopted
without change by this final rule, will codify existing requirements
and correct a regulatory citation. The amendments are as follows:
1. Audited financial statement for large supervised lenders and
mortgagees. This rule adds subparagraph (b)(4) to Sec. 202.6 to
clarify that annual audited financial statements required to be
submitted by supervised lenders and mortgagees are to be submitted in
accordance with the same requirements as those applicable to
nonsupervised institutions under Sec. 202.7(b)(4). Additionally, as
referenced above, it exempts small supervised lenders and mortgagees
from the requirement to submit audited financial statements.
2. Technical correction to uniform financial reporting standards.
This rule makes a conforming amendments to Sec. 5.801(a)(5) by
removing loan correspondents and adding supervised lenders and
mortgagees. Section 5.801 requires conformance with the uniform
financial reporting requirements if HUD requires the submission of
financial information.
3. Technical correction to Sec. 202.3(b). This rule replaces an
incorrect citation in Sec. 202.3(b) by removing the reference to Sec.
202.5(n)(2) and inserting the correct citation to Sec. 202.5(m).
III. Discussion of Public Comments
The following section presents a summary of the public comments in
response to the April 18, 2013, proposed rule, and HUD's response.
All commenters supported HUD's proposed rule permitting small
supervised lenders and mortgagees to submit their financial regulatory
reports required by their respective federal banking agencies in place
of annual audited financial statements. Commenters also supported HUD's
decision to retain the right to require audited financial statements
when they determine, based on the proposed list of relevant factors,
that an entity poses a heightened risk to the FHA insurance fund. A
number of commenters emphasized the important role of community banks
in the communities they serve that may not have access to larger
lenders and mortgagees. In addition, the commenters noted that
community bank residential mortgage lending activities have posed very
little risk to the insurance fund, but requiring community banks to
finance annual audited financial statements may result in community
banks no longer offering homebuyers FHA loans.
One commenter requested that in addition to no longer requiring the
submission of annual audited financial statements for small supervised
lenders and mortgagees, HUD no longer require costly internal control
and compliance audit requirement imposed on small supervised lenders
and mortgagees.
In response to the comment, HUD clarifies that small supervised
lenders and mortgagees, as a result of this rule, are no longer
required to submit internal control and compliance reports. Internal
control and compliance reports are a part of the annual audit report.
Therefore, exempting small supervised lenders and mortgagees from
submitting annual financial audits required by Sec. 202.5(g) and Sec.
202.6(b)(4) means they are also not subject to the internal control and
compliance report requirement. If, however, the Secretary determines
that a small supervised lender or mortgagee poses a heightened risk to
the FHA insurance fund under Sec. 202.6(c)(3), the Secretary can
require the submission of additional information, including internal
control and compliance reports.
IV. Findings and Certifications
Public Reporting Burden
The information collection requirements contained in this rule have
been approved by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995
[[Page 57060]]
(44 U.S.C. 3501-3520) and assigned OMB control number 2506-0085. 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.
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
significant economic impact on a substantial number of small entities.
This rule would not have a significant economic impact on a substantial
number of small entities because the rule is specifically intended to
ease the regulatory burden on small entities. The current regulations
require full independent audited financial statements, over and above
what is required by federal banking agencies in their oversight of
these small supervised lenders and mortgagees. This rule would bring
HUD's reporting practices in line with that of the federal banking
agencies and reduce the cost of participating in FHA programs by
releasing small supervised lenders and mortgagees from the requirement
to submit annual audited financial statements. Instead, the rule would
require the submission of the unaudited financial regulatory report
already required by the small supervised lender's or mortgagee's
supervising federal banking agency. Therefore, the undersigned
certifies that this rule will not have a significant 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 (1) imposes substantial direct compliance costs on state and
local governments and is not required by statute, or (2) preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This rule would 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.
Environmental Impact
This 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. Nor does it establish, revise, or
provide for standards for construction or construction materials,
manufactured housing, or occupancy. This rule is limited to the
procedures governing the submission of financial reports by small
supervised lenders and mortgagees applying to participate, or
recertifying for participation, in FHA's single-family programs.
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).
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 would not
impose any federal mandates on any state, local, or tribal governments,
or on the private sector, within the meaning of the UMRA.
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
24 CFR Part 5
Administrative practice and procedure, Aged, Claims, Crime,
Government contracts, Grant programs--housing and community
development, Individuals with disabilities, Intergovernmental
relations, Loan programs--housing and community development, Low and
moderate income housing, Mortgage insurance, Penalties, Pets, Public
housing, Rent subsidies, Reporting and recordkeeping requirements,
Social security, Unemployment compensation, Wages.
24 CFR Part 202
Administrative practice and procedure, Home improvement,
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements.
Accordingly, for the reasons stated in the preamble, HUD amends 24
CFR parts 5 and 202 to read as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
0
1. The authority citation for part 5 continues to read as follows:
Authority: 42 USC 3535, 1437a, 1437c, 1437d, 1437f, 1437n,
3535(d), Sec. 327, Pub. L. 109-115, 119 Stat. 2936, and Sec. 607,
Pub. L. 109-162, 119 Stat. 3051.
0
2. Revise Sec. 5.801 paragraph (a)(5) to read as follows:
Sec. 5.801 Uniform financial reporting standards.
(a) * * *
(5) HUD-approved Title I and Title II supervised and nonsupervised
lenders and mortgagees.
* * * * *
PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES
0
3. The authority citation for part 202 continues to read as follows:
Authority: 12 U.S.C. 1703, 1709 and 1715b; 42 U.S.C. 3535(d).
Sec. 202.3 [Amended]
0
4. In Sec. 202.3 paragraph (b), remove the citation ``Sec.
202.5(n)(2)'' and add in its place ``Sec. 202.5(m)''.
0
5. Revise Sec. 202.5 paragraph (g) to read as follows:
Sec. 202.5 General approval standards.
* * * * *
(g) Financial statements. The lender or mortgagee shall:
(1) Furnish to the Secretary a copy of its audited financial
statements within 90 days of its fiscal year end, except as provided in
Sec. 202.6(c);
(2) Furnish such other information as the Secretary may request;
and
(3) Submit to an examination of that portion of its records that
relates to its Title I and/or Title II program activities.
* * * * *
0
6. In Sec. 202.6, add new paragraphs (b)(4) and (c) to read as
follows:
Sec. 202.6 Supervised lenders and mortgagees.
* * * * *
(b) * * *
(4) Audit report. Except as provided in paragraph (c) of this
section, a lender or mortgagee must:
(i) Comply with the financial reporting requirements in 24 CFR part
5, subpart H. Audit reports shall be based on audits performed by a
certified public accountant, or by an independent public accountant
licensed by a
[[Page 57061]]
regulatory authority of a State or other political subdivision of the
United States on or before December 31, 1970, and shall include:
(A) Financial statements in a form acceptable to the Secretary,
including a balance sheet and a statement of operations and retained
earnings, a statement of cash flows, an analysis of the lender's or
mortgagee's net worth adjusted to reflect only assets acceptable to the
Secretary, and an analysis of escrow funds; and
(B) Such other financial information as the Secretary may require
to determine the accuracy and validity of the audit report.
(ii) Submit a report on compliance tests prescribed by the
Secretary.
(c) Financial statement requirements for small supervised lenders
and mortgagees.
(1) Definitions. For the purposes of this section, the following
definitions apply:
(i) Federal banking agency means the Board of Governors of the
Federal Reserve System; the Federal Deposit Insurance Corporation; and
the National Credit Union Administration; or any successor agency
thereof.
(ii) Small supervised lender or mortgagee means a supervised lender
or mortgagee possessing consolidated assets below the threshold for
required audited financial reporting as established by the federal
banking agency that is responsible for the oversight of that supervised
lender or mortgagee.
(2) Financial statement requirements. Small supervised lenders and
mortgagees shall not be subject to the requirement to submit a copy of
an audited financial statement under Sec. 202.5(g) and the audit
report requirements under paragraph (b)(4) of this section. Small
supervised lenders and mortgagees are required, within 90 days of their
fiscal year end, to furnish to the Secretary the unaudited financial
regulatory report--a consolidated or fourth quarter Report of Condition
and Income (Federal Financial Institutions Examination Council forms
031 and 041, also known as the ``Call Report''), a consolidated or
fourth quarter Thrift Financial Report, or a consolidated or fourth
quarter NCUA Call Report (NCUA Form 5300 or 5310), or such other
financial regulatory report as may be required--that aligns with the
small supervised lender's or mortgagee's fiscal year end and that the
small supervised lender or mortgagee is required to submit to their
respective federal banking agency.
(3) Requirement for audited financial statement and other
information based on determination of heightened risk to the FHA
insurance fund. If the Secretary determines that a small supervised
lender or mortgagee poses a heightened risk to the FHA insurance fund,
the lender or mortgagee must provide, upon request, additional
financial documentation, up to and including an audited financial
statement, and other information as the Secretary determines necessary.
The Secretary may determine that a small supervised lender or mortgagee
poses a heightened risk to the FHA insurance fund based upon, but not
limited to, one or more of the following factors:
(i) Failing to provide required financial submissions under Sec.
202.6(c)(2) within the required 90-day period following the lender's or
mortgagee's fiscal year end;
(ii) Maintaining insufficient adjusted net worth or unrestricted
liquid assets as required by Sec. 202.5(n);
(iii) Reporting opening cash and equity balances that do not agree
with the prior year's reported cash and equity balances;
(iv) Experiencing an operating loss of 20 percent or greater of the
lender's or mortgagee's net worth for the annual reporting period as
governed by Sec. 202.5(m)(1);
(v) Experiencing an increase in loan volume over the prior 12-month
period, determined by the Secretary to be significant;
(vi) Undertaking significant changes to business operations, such
as a merger or acquisition; and
(vii) Other factors that the Secretary considers appropriate in
indicating a heightened risk to the FHA insurance fund.
Dated: September 9, 2013.
Carol J. Galante,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2013-22583 Filed 9-16-13; 8:45 am]
BILLING CODE 4210-67-P
