Changes in Certain Multifamily Mortgage Insurance Premiums, 4926-4930 [2016-01511]

Agencies

[Federal Register Volume 81, Number 18 (Thursday, January 28, 2016)]
[Notices]
[Pages 4926-4930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01511]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5876-N-02]


Changes in Certain Multifamily Mortgage Insurance Premiums

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

ACTION: Notice.

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SUMMARY: On October 2, 2015, HUD published a notice in the Federal 
Register announcing the mortgage insurance premiums (MIPs) for Federal 
Housing Administration (FHA) Multifamily, Health Care Facilities, and 
Hospital mortgage insurance programs that have commitments to be issued 
or reissued in Fiscal Year (FY) 2016. In the October 2, 2015, notice, 
HUD stated that the FY 2016 MIPs would be the same as those published 
for FY 2015. Today's notice announces proposed changes to the FY 2016 
MIPs for certain FHA Multifamily Housing Insurance programs for 
commitments issued or reissued beginning April 1, 2016. MIP rates for 
mortgage insurance programs under FHA's Office of Healthcare Programs, 
including health care facilities and hospital insurance programs, will 
not change. These proposed MIP changes reflect the health of the FHA 
Multifamily portfolio, an effort to simplify the rate structure, and 
HUD's commitment to promote its mission initiatives.

DATES: Comment Due Date: February 17, 2016.

ADDRESSES: Interested persons are invited to submit comments regarding 
this Notice to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title and should contain the information 
specified in the ``Request for Comments'' section. There are two 
methods for submitting public comments.
    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

[[Page 4927]]

7th Street SW., Room 10276, Washington, DC 20410-0500. Due to security 
measures at all federal agencies, however, submission of comments by 
mail often results in delayed delivery. To ensure timely receipt of 
comments, HUD recommends that comments submitted by mail be submitted 
at least two weeks in advance of the public comment deadline.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://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 
http://www.regulations.gov Web site can be viewed by other commenters 
and interested members of the public. Commenters should follow 
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 
notice.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications regarding this notice submitted to HUD will 
be available for public inspection and copying between 8 a.m. and 5 
p.m. weekdays at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number through TTY by calling the 
Federal Relay Service at 800-877-8339. Copies of all comments submitted 
are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Theodore Toon, Director, Office of 
Multifamily Production, Office of Housing, Department of Housing and 
Urban Development, 451 7th Street SW., Washington, DC 20410-8000; 
telephone: 202-402-8386 (this is not a toll-free number). Hearing- or 
speech-impaired individuals may access these numbers through TTY by 
calling the Federal Relay Service at 800-877-8339 (this is a toll-free 
number).

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 203(c)(1) of the National Housing Act authorizes the 
Secretary to set the premium charge for insurance of mortgages under 
the various programs in Title II of the National Housing Act. The range 
within which the Secretary may set such charges must be between one-
fourth of one percent per annum and one percent per annum of the amount 
of the principal obligation of the mortgage outstanding at any time. 
(See 12 U.S.C. 1709(c)(1)).
    On October 2, 2015, HUD published a notice in the Federal Register 
(80 FR 59809) announcing the MIPs for FHA Multifamily, Health Care 
Facilities, and Hospital mortgage insurance programs that have 
commitments to be issued or reissued in FY 2016. Rate reductions are 
now proposed to promote two of HUD's mission priorities: Affordable 
housing, and energy efficiency. Multiple, recent studies, including the 
December, 2015, Harvard Joint Center for Housing Studies' ``America's 
Rental Housing'' report \1\, and the Center for American Progress 
report, ``An Opportunity Agenda for Renters'' from December, 2015 \2\, 
illustrate the unprecedented rental affordability crisis facing the 
country. In response, the proposed MIP rates will promote the 
preservation and production of affordable housing. In response to the 
President's Climate Action Plan, the recent global agreement to combat 
climate change, and in line with the Department's and Administration's 
goals to reduce energy consumption and utility costs throughout the 
building sector, rate reductions are also proposed to promote energy 
efficient housing.
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    \1\ The America's Rental Housing'' report is available at: 
http://www.jchs.harvard.edu/americas-rental-housing.
    \2\ The An Opportunity Agenda for Renters report is available at 
https://www.americanprogress.org/issues/poverty/report/2015/12/16/126966/an-opportunity-agenda-for-renters/.
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    HUD's Multifamily Housing Mortgage Insurance regulation at 24 CFR 
207.254 provides as follows:

    Notice of future premium changes will be published in the 
Federal Register. The Department will propose MIP changes for 
multifamily mortgage insurance programs and provide a 30-day public 
comment period for the purpose of accepting comments on whether the 
proposed changes are appropriate.

    Pursuant to this 30-day comment procedure, this Notice announces 
proposed changes for FY 2016 in the MIP for certain programs authorized 
under the National Housing Act (the Act) (12 U.S.C. 1709(c)(1)), and 
certain other multifamily programs. These changes would be effective on 
April 1, 2016.

II. This Notice

    HUD is proposing to change MIPs for FHA-insured loans on properties 
under specific Multifamily Mortgage Insurance programs. In FY 2013, FHA 
increased MIPs to compensate for increased risk to the FHA fund after 
the housing market crisis. Over the last several years, HUD has 
implemented underwriting standards for FHA insured mortgage insurance 
applications in an effort to mitigate risk to the FHA portfolio, and 
undertaken organizational changes to facilitate risk-based underwriting 
and asset management.
    These proposed MIP changes reflect the health of the FHA 
Multifamily portfolio, an effort to simplify the rate structure, and 
HUD's commitment to promote its mission initiatives. The proposed 
annual multifamily mortgage insurance rates will be structured as four 
categories, as follows, and as illustrated on the table below. This 
Notice proposes MIP reductions focused on strategic mission areas: 
Affordable housing, and green and energy efficient housing. Under this 
proposed rate structure, portfolio and actuarial analysis demonstrates 
that premium revenues will exceed losses for the foreseeable future.

A. Market Rate Housing

    Upfront and annual MIP rates will remain unchanged for all FHA-
insured multifamily loan types on market rate properties, except 
properties that meet the criteria for green and energy efficient 
housing, below.

B. Broadly Affordable Housing

    Annual MIP will change from the current rates generally between 45 
and 50 basis points,\3\ to 25 basis points for all multifamily FHA-
insured loan types that meet the criteria in this section.
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    \3\ Except in the case of a 207/223(f) refinance or purchase 
that has a current upfront capitalized MIP basis points of 100.
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    All loans originated by Housing Finance Agencies under FHA's 
Section 542(c) Risk Share program, and by Qualified Participating 
Entities including Fannie Mae and Freddie Mac under FHA's Section 
542(b) Risk Share program, will be eligible for this proposed 25 basis 
points rate, multiplied by the percentage risk assumed by FHA (see 
table below). For all others to qualify, the property must have Section 
8 assistance or another

[[Page 4928]]

recorded affordability restriction, and/or Low Income Housing Tax 
Credits.
    These projects must either:
     Have at least 90 percent of units covered by a Section 8 
Project Based Rental Assistance (PBRA) contract or other federal rental 
assistance program contract serving very low income residents, with a 
remaining term of at least 15 years; or
     Have at least 90 percent of its units covered by an 
affordability use restriction under the Low Income Housing Tax Credit 
program or similar state or locally sponsored program, with achievable 
and underwritten tax credit rents at least 10 percent below comparable 
market rents, and with a recorded regulatory agreement in effect for at 
least 15 years after final endorsement and monitored by a public 
entity.
    To ensure that the benefits of these MIP rates directly benefit the 
affordable housing properties and residents, lenders submitting 
applications for loans using this MIP rate are limited in the total 
loan fees they may charge on any loan greater than $2 million, to no 
more than 5 percent of the insured loan amount. Loan fees include (a) 
origination and placement fees as permitted by the Multifamily 
Accelerated Processing (MAP) Guide \4\, plus (b) trade profit, trade 
premium or marketing gain earned on the sale of the Government National 
Mortgage Association (GNMA) security at a value above par, even if the 
security sale is delayed until after endorsement, minus (c) loan fees 
applied by the Mortgagee to its legal expenses incurred in connection 
with loan closing.
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    \4\ http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
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C. Affordable Housing

    Annual MIP will change from current rates generally between 45 and 
70 basis points,\5\ to 35 basis points for all multifamily FHA-insured 
loan types. To qualify, the property must provide a set-aside of 
affordable units as defined below, and agree to accept voucher holders:
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    \5\ Except in the case of a 207/223(f) refinance or purchase 
that has a current upfront capitalized MIP basis points of 100.
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     Inclusionary Zoning, Density Bonus Set-asides, and Other 
Local Affordability Restrictions: Property owners shall submit with the 
FHA mortgage insurance application evidence of a deed covenant or 
housing ordinance on ``inclusionary zoning'' at the subject property to 
evidence the requirement for affordable unit set-asides. A minimum of 
10 percent of the units must be affordable to, at most, a family at 80 
percent AMI, with rents sized to be affordable at 30 percent of the 
income at that level. The affordability set-aside must be on site, in 
effect for at least 30 years after final endorsement of the FHA-insured 
mortgage, be monitored by public authority, and be recorded in a 
regulatory agreement; or
     Project has between 10 percent and 90 percent of units 
covered by a Section 8 PBRA contract or other state or federal rental 
assistance program contract serving very low income residents, with a 
remaining term of at least 15 years; or
     Project has between 10 percent and 90 percent of its units 
covered by an affordability use restriction under the Low Income 
Housing Tax Credit program or similar state or locally sponsored 
program, with rents sized at no greater than 30 percent of the income 
eligible for occupancy under the Low Income Housing Tax Credit program, 
with a recorded regulatory agreement in effect for at least 15 years 
after final endorsement and monitored by a public entity.
    To qualify for this MIP rate:
     The project owner must also agree to accept voucher 
holders under the Section 8 Housing Choice Voucher program or other 
federal program voucher holders as residents for vacancies in units not 
covered by project based Section 8, and execute a Rider to the FHA 
regulatory agreement acceptable to HUD evidencing the owner's agreement 
to accept Section 8 vouchers for the life of the regulatory agreement.

D. Green and Energy Efficient Housing

    Annual MIP will change from current rates generally between 45 and 
70 basis points,\6\ to 25 basis points for all multifamily FHA-insured 
loan types. Projects will access this rate to encourage owners to adopt 
higher standards for construction, rehabilitation, repairs, 
maintenance, and property operations that are more energy efficient and 
sustainable than traditional approaches to such activities. The lower 
rate will incentivize owners to implement measures that result in 
projects with greater energy and water efficiency, reduced operating 
costs, improved indoor air quality and resident comfort, and reduced 
overall impact on the environment. It is anticipated that mortgage 
proceeds will be used to retrofit properties to meet the stringent 
efficiency standards required to access this lower MIP premium. For 
properties that have already achieved a green building standard and 
that are refinancing with this lower MIP premium, proceeds may be used 
to complete further efficiency upgrades, and/or to retrofit to the 
next-level green certification standards. To qualify:
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    \6\ Except in the case of a 207/223(f) refinance or purchase 
that has a current upfront capitalized MIP basis points of 100.
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     Upon application for FHA mortgage insurance, the owner 
must evidence that the project has achieved, or the owner must certify 
that it will pursue, achieve and maintain, an industry-recognized 
standard for green building. Acceptable, independently verified 
standards include the Enterprise Green Communities Criteria, U.S. Green 
Building Council's LEED-H, LEED-H Midrise, LEED-NC, ENERGY STAR 
Certification, EarthCraft House, EarthCraft Multifamily, Earth 
Advantage New Homes, Greenpoint Rated New Home, Greenpoint Rated 
Existing Home (Whole House or Whole Building label), and the National 
Green Building Standard (NGBS), or other industry-recognized green 
building standards in HUD's sole discretion. Further, the owner must 
certify that it has achieved, or will pursue and achieve a score of 75 
or better on the 1-100 ENERGY STAR score, using EPA's Portfolio Manager 
(the minimum score required to be recognized as ENERGY STAR). The 
reasonableness of achieving and maintaining the specified, independent 
green building standard, and the score of 75 or better in Portfolio 
Manager, must be verified by the independent conclusion of the 
qualified assessor preparing the physical condition assessment, and 
supported by the physical condition assessment report and 
recommendations, ASHRAE level II energy audit, and plans for new 
construction, or rehabilitation, repairs, and operations and 
maintenance. The physical condition assessment report submitted with 
the mortgage insurance application must include a certification from 
the architect, engineer, energy auditor, or CNA provider that the 
planned scope of work is reasonably sufficient to achieve and maintain 
the specified certification. Additionally, the owner must submit to HUD 
evidence that the specified, independent green building standard has 
been achieved, and provide a copy of the Portfolio Manager report 
showing building performance at or above 75, when those standards have 
been achieved, and no more than 12 months after completion of new 
construction, substantial rehabilitation or renovations. If not 
achieved, HUD may impose protocols to ensure the owner brings the 
property into compliance, similar to protocols

[[Page 4929]]

used by REAC for unacceptable property standards.
    To ensure that the benefits of these MIP rates directly benefit the 
affordable housing properties and residents, lenders submitting 
applications for loans using this MIP rate are limited in the total 
loan fees they may charge on any loan greater than $2 million, to no 
more than 5 percent of the insured loan amount. Loan fees include (a) 
origination and placement fees as permitted by the MAP Guide, plus (b) 
trade profit, trade premium or marketing gain earned on the sale of the 
GNMA security at a value above par, even if the security sale is 
delayed until after endorsement, minus (c) loan fees applied by the 
Mortgagee to its legal expenses incurred in connection with loan 
closing.

IV. MIPs for FHA's Multifamily Mortgage Insurance Programs for April 1, 
2016

    HUD is proposing to change MIPs for FHA-insured loans on properties 
under specific Multifamily Mortgage Insurance programs. The chart below 
details the proposed MIP rates for each rate category, and each type of 
FHA multifamily mortgage insurance covered under this Notice. These 
programs are administered by FHA's Office of Multifamily Housing 
Programs. This Notice does not change MIP rates for programs under 
FHA's Office of Healthcare Programs, including health care facilities 
and the hospital insurance programs.

                          FHA Multifamily Mortgage Insurance Premiums by Rate Category
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                                                                   Proposed Apr
                                                      Current         1, 2016                      Proposed Apr
                                                      upfront         upfront     Current annual  1, 2016 annual
   FHA Multifamily mortgage insurance program       capitalized     capitalized      MIP basis       MIP basis
                                                    MIP * basis     MIP * basis       points          points
                                                      points          points
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MARKET RATE HOUSING                               ..............    Unchanged     ..............    Unchanged
207 Multifamily New Constr/Sub Rehab w/o LIHTC..              70              70              70              70
207 Manufactured Home Parks without LIHTC.......              70              70              70              70
221(d)(4) NC/SR without LIHTC...................              65              65              65              65
220 Urban Renewal Housing without LIHTC.........              70              70              70              70
213 Cooperative.................................              70              70              70              70
207/223(f) Refinance or Purchase for Apts w/o                100             100              60              60
 LIHTC..........................................
223(a)(7) Refinance of Apartments without LIHTC.              50              50              50              50
231 Elderly Housing without LIHTC...............              70              70              70              70
241(a) Supplemental Loans for Apts/coop w/o                   95              95              95              95
 LIHTC..........................................
BROADLY AFFORDABLE HOUSING                        ..............              25  ..............              25
207 New Constr/Sub Rehab w 90%+ LIHTC, or 90%+                45              25              45              25
 Section 8......................................
207 Manufactured Home Parks with 90%+ LIHTC, or               45              25              45              25
 90%+ Section 8.................................
221(d)(4) NC/SR with 90%+ LIHTC, or 90%+ Section              45              25              45              25
 8..............................................
220 Urban Renewal Housing with 90%+ LIHTC, or                 45              25              45              25
 90%+ Section 8.................................
207/223(f) Refi or Purchase with 90%+ LIHTC, or              100              25              45              25
 90%+ Section 8.................................
223(a)(7) Refi with 90%+ LIHTC, or 90%+ Section               50              25              45              25
 8..............................................
231 Elderly Housing with 90%+ LIHTC, or 90%+                  45              25              45              25
 Section 8......................................
241(a) for Apartments/coop with 90%+ LIHTC, or                45              25              45              25
 90%+ Section 8.................................
Section 542(b) Risk Share **....................              50              25              50              25
Section 542(c ) Risk Share **...................              50              25              50              25
AFFORDABLE: INCLUSIONARY/VOUCHERS                 ..............              35  ..............              35
207 New Constr/Sub Rehab with Inclusionary                 45-70              35           45-70              35
 Zoning, or 10%-90% LIHTC, or 10%-90% Section 8.
207 Manufactured Home Parks w Inclusionary                 45-70              35           45-70              35
 Zoning, or 10%-90% LIHTC, or 10%-90% Section 8.
221(d)(4) NC/SR with Inclusionary Zoning, or 10%-          45-65              35           45-65              35
 90% LIHTC, or 10%-90% Section 8................
220 Urban Renewal Housing with Inclusionary                45-70              35           45-70              35
 Zoning, or 10%-90% LIHTC, or 10%-90% Section 8.
207/223(f) Refinance or Purchase with                        100              35           45-60              35
 Inclusionary Zoning, or 10%-90% LIHTC, or 10%-
 90% Section 8..................................
223(a)(7) Refinance of Apts with Inclusionary                 50              35           45-50              35
 Zoning, or 10%-90% LIHTC, or 10%-90% Section 8.
231 Elderly Housing with Inclusionary Zoning, or           45-70              35           45-70              35
 10%-90% LIHTC, or 10%-90% Section 8............
241(a) Supplementals for Apts/coop with                    45-95              35           45-95              35
 Inclusion Zoning, or 10%-90% LIHTC, or 10%-90%
 Section 8......................................
GREEN/ENERGY EFFICIENT HOUSING                    ..............              25  ..............              25
207 Multifamily New Construction/Sub Rehab with            45-70              25           45-70              25
 Green..........................................
207 Manufactured Home Parks with Green..........           45-70              25           45-70              25
221(d)(4) NC/SR with Green......................           45-65              25           45-65              25
220 Urban Renewal Housing with Green............           45-70              25           45-70              25
207/223(f) Refinance or Purchase for Apts with               100              25           45-60              25
 Green..........................................
223(a)(7) Refinance of Apartments with Green....              50              25           45-50              25
231 Elderly Housing with Green..................           45-70              25           45-70              25
241(a) Supplemental Loans for Apts/coop with               45-95              25           45-95              25
 Green..........................................
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* Proposed upfront premiums for Multifamily refinancing programs are capitalized and based on the first year's
  annual MIP. Upfront premiums for Multifamily new construction and substantial rehabilitation programs insuring
  advances are capitalized and based on the annual MIP for the entire construction period.

[[Page 4930]]

 
** Under the Sections 542(b) and 542(c) Risk Share programs, the MIP collected by HUD is currently, and will
  continue to be under the proposed structure, proportionate to the percentage of risk assumed by FHA, as
  follows:


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                                                      Proposed upfront
             Program               FHA % of risk    capitalized MIP basis     Proposed annual MIP basis points
                                       share               points
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542(b)..........................              50  12.5 (25 bps x 50%).....  12.5 (25 bps x 50%).
542(c)..........................              50  12.5 (25 bps x 50%).....  12.5 (25 bps x 50%).
                                              75  18.75 (25 bps x 75%)....  18.75 (25 bps x 75%).
                                              90  22.5 (25 bps x 90%).....  22.5 (25 bps x 90%).
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    The proposed MIP rates would become effective for FHA firm 
commitments issued or reissued on or after April 1, 2016. MIP rates 
will not be modified for any loans that close or reach initial 
endorsement prior to March 31, 2016.

    Dated: January 8, 2016.
Edward L. Golding,
Principal Deputy Assistant Secretary for Housing.
[FR Doc. 2016-01511 Filed 1-27-16; 8:45 am]
BILLING CODE 4210-67-P