Single Family Mortgage Insurance: Revision of Section 203(k) Consultant Fee Schedule-Solicitation of Comment, 61709-61712 [2016-21226]
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Federal Register / Vol. 81, No. 173 / Wednesday, September 7, 2016 / Notices
A. Overview of Information Collection
Title of Information Collection:
Application and Recertification
Packages for Approval of Nonprofit
Organizations in FHA Activities.
OMB Approval Number: 2502–0540.
Type of Request: Extension without
change of a currently approved
collection.
Form Number: None.
Description of the need for the
information and proposed use: In order
for nonprofit organizations to
participate in FHA Nonprofit and
Government Entity Programs they must
submit an application and be approved
by FHA. The FHA Nonprofit programs
include: HUD Homes where a nonprofit
may be able to buy a FHA REO property
at the discount; FHA Mortgagor where
a nonprofit can qualify for an FHA
insured loan; and Secondary Financing
where a nonprofit can provide financial
assistance to low to-moderate- income
family in the purchase of a home. Once
a Nonprofit submits and application
that is approved, the Nonprofit is placed
on the FHA Nonprofit Organization
Roster. The Nonprofit must recertify
every two years and maintain
documentation for reporting purposes
and to permit FHA to monitor their
activities to ensure compliance with
program requirements.
Respondents: Nonprofit
Organizations.
Estimated Number of Respondents:
395.
Estimated Number of Responses: 731.
Frequency of Response: 1 to 4.
Average Hours per Response: 24.25.
Total Estimated Burdens: 8692.
mstockstill on DSK3G9T082PROD with NOTICES
B. Solicitation of Public Comment
This notice is soliciting comments
from members of the public and affected
parties concerning the collection of
information described in Section A on
the following:
(1) 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) The accuracy of the agency’s
estimate of the burden of the proposed
collection of information;
(3) Ways to enhance the quality,
utility, and clarity of the information to
be collected; and
(4) Ways to 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.
HUD encourages interested parties to
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submit comment in response to these
questions.
C. Authority
Section 3507 of the Paperwork
Reduction Act of 1995, 44 U.S.C.
Chapter 35.
Dated: September 1, 2016.
Colette Pollard,
Department Reports Management Officer,
Office of the Chief Information Officer.
[FR Doc. 2016–21482 Filed 9–6–16; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–5875–N–01]
Single Family Mortgage Insurance:
Revision of Section 203(k) Consultant
Fee Schedule—Solicitation of
Comment
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, HUD.
ACTION: Notice; solicitation of comment.
AGENCY:
The Section 203(k) Program is
HUD’s primary program for the
rehabilitation and repair of single family
properties. The Section 203(k) mortgage
program enables homebuyers and
homeowners to finance the purchase, or
refinance of a home and include the
rehabilitation costs through a single
mortgage. There are two types of 203(k)
rehabilitation mortgages: Standard
203(k) and Limited 203(k).
The Standard 203(k) mortgage may be
used for remodeling, rehabilitation and
repairs that may have structural
components, involve more complex
work and the total rehabilitation costs
must be greater than $5,000. The
Limited 203(k) mortgage may only be
used for minor remodeling and nonstructural repairs. The total
rehabilitation cost may not exceed
$35,000 and there is no minimum cost.
As part of the Section 203(k) program
requirements, the Federal Housing
Administration (FHA) maintains a list of
approved 203(k) Consultants on the
FHA 203(k) Consultant Roster in FHA
Connection. An FHA-approved 203(k)
Consultant is required for all Standard
203(k) mortgages. A 203(k) Consultant is
not required under the Limited 203(k)
program, but may be used. FHAapproved 203(k) Consultants are
required to perform responsibilities
during the processing and rehabilitation
phase of the 203(k) program. FHAapproved 203(k) Consultants who are
placed on FHA’s 203(k) Consultant
Roster are deemed qualified to complete
SUMMARY:
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61709
these duties and therefore permitted to
collect a fee for this service. In 1995,
HUD issued its current Section 203(k)
Consultant Fee Schedule and now seeks
to update the Section 203(k) Fee
Schedule to align with similarly
performed services and the
corresponding fees collected for such
services. As a result, this notice seeks
public comment on revising the current
structure of the fee and the maximum
amount of fees a 203(k) Consultant
would be permitted to charge on a
Section 203(k) mortgage.
DATES: Comment Due Date: November 7,
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. 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 notice.
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
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mstockstill on DSK3G9T082PROD with NOTICES
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 1–800–877–
8339 (this is a toll-free number). Copies
of all comments submitted are available
for inspection and downloading at
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Kevin L. Stevens, Director, Home
Mortgage Insurance Division, Office of
Single Family Program Development,
Office of Housing, Department of
Housing and Urban Development, 451
7th Street SW., Room 9266, Washington,
DC 20410–9000, telephone number 202–
402–4137 (this is not a toll-free
number). Persons with hearing or
speech impairments may access this
number by calling the Federal Relay
Service at 800–877–8339 (this is a tollfree number).
SUPPLEMENTARY INFORMATION:
I. Background
Section 203(k) of the National
Housing Act (12 U.S.C. 1709(k))
authorizes HUD to insure a purchase or
a refinance mortgage on an existing
1–4 unit single family structure and
include the rehabilitation costs through
a single mortgage. The Section 203(k)
Program is HUD’s primary program for
the rehabilitation and repair of single
family properties. The Section 203(k)
program is important for neighborhood
revitalization and homeownership
opportunities. The regulations
implementing the Section 203(k)
Program are codified at 24 CFR 203.50.
The Section 203(k) Program fills a
unique and important role for
homebuyers. In the conventional loan
market, a homebuyer who purchases a
home that is in need of repair or
modernization usually has to follow a
complicated and costly process. The
homebuyer must obtain financing to
purchase the dwelling, additional
financing for the rehabilitation work,
and a permanent mortgage after
rehabilitation is completed to pay off
the interim loans. The interim
acquisition and improvement loans
often have relatively high interest rates
and short repayment terms. The Section
203(k) Program addresses this by
permitting a homebuyer to obtain a
single loan, at a long-term fixed or
variable rate, to finance both the
acquisition and rehabilitation of the
property.
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17:30 Sep 06, 2016
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There are two types of 203(k)
rehabilitation mortgages: Standard
203(k) and Limited 203(k). The
Standard 203(k) mortgage may be used
for remodeling, rehabilitation and
repairs that may have structural
components involve complex work and
must have a total rehabilitation costs
greater than $5,000. The Limited 203(k)
mortgage may only be used for minor
remodeling and non-structural repairs,
the total rehabilitation cost may not
exceed $35,000 and there is no
minimum rehabilitation cost.
The extent of the rehabilitation
covered by the Section 203(k) mortgage
may range from relatively minor to
virtual reconstruction. For example, a
home that will be demolished as part of
rehabilitation is eligible, provided that
the existing foundation remains in
place. In addition to typical home
rehabilitation projects, the Section
203(k) Program can be used to convert
a property of any size to a one- to fourunit dwelling. Section 203(k) mortgage
insurance can also be used to augment
Energy Efficient Mortgages, Section
203(h) Mortgage Insurance for Victims
of a Presidentially-Declared Major
Disaster Area, and Mortgage Insurance
for Solar and Wind Technologies. All
improvements, renovations, or repairs
undertaken with Section 203(k)
mortgage insurance must comply with
the HUD Minimum Property
Requirements, HUD Minimum Property
Standards and all local codes and
ordinances.
II. Section 203(k) Consultants
An FHA-approved 203(k) Consultant
is required for all Standard 203(k)
mortgages and may be used for Limited
203(k) mortgages. As part of the Section
203(k) program requirements, the
Federal Housing Administration (FHA)
maintains a list of approved 203(k)
Consultants on the FHA 203(k)
Consultant Roster from which the
Mortgagee must select a 203(k)
Consultant and assign the 203(k)
Consultant to the transaction, if
required.
When a Section 203(k) Consultant is
required, the Consultant will enter into
a written agreement with the Borrower
that outlines the services that the
Consultant will perform. In some cases,
the Mortgagee or Borrower may require
the Consultant to conduct a Feasibility
Study to determine if the 203(k)
mortgage is achievable, based on the
costs of the rehabilitation project. The
203(k) Consultant conducts a Feasibility
Study by completing a preliminary
inspection of the property, and
estimates the material and labor costs
for the project.
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The 203(k) Consultant must inspect
the property to ensure:
• There are no rodents, dry rot,
termites and other infestation the
property;
• there are no defects that will affect
the health and safety of the occupants;
• there exists adequate structural,
heating, plumbing, electrical and
roofing systems; and
• there are upgrades to the structure’s
thermal proportion (when necessary).
The Consultant must prepare a report
on the current condition of the property
that categorically examines the structure
utilizing a 35 point checklist. The
Consultant must determine the repairs/
improvements that are required to meet
the U.S. Department of Housing and
Urban Development (HUD’s) Minimum
Property Requirements, Minimum
Property Standards and local
requirements. The report must address
any deficiencies that exist. The
Consultant is responsible for identifying
all required architectural exhibits. The
Consultant must prepare the exhibits,
or, if not qualified to prepare all of the
necessary exhibits, must obtain the
exhibits from a qualified subcontractor.
The Consultant must prepare an
unbiased Work Write-up and Cost
Estimate without using a contractor’s
estimate. The Work Write-Up and Cost
Estimate must be detailed as to the work
being performed based on the project
proposal, including all required reports.
The Consultant must physically
inspect the work for completion, quality
of workmanship, conformity to local
codes and ordinances, and ensure that
all building permits are onsite for the
work that was performed at each draw
request.
At the Borrower’s or Mortgagee’s
request, the Consultant must review
proposed changes to the Work Write-Up
and prepare a Change Order Form
HUD–95277. The Consultant must
inform the Mortgagee of the progress of
the rehabilitation and of any problems
that arise, including:
• Work stoppages for more than 30
consecutive days or work not
progressing;
• significant deviations from the
Work Write-Up without the Consultant’s
approval;
• any issues that could affect
adherence to the program requirements
or property eligibility; or
• any issues that could affect the
health and safety of the occupants or the
security of the structure.
The Borrower is responsible for the
fee charged by the Section 203(k)
Consultant. Under the Standard 203(k)
program, the Consultant fee charged for
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the Feasibility Study, Work Write-Up,
Mileage (not associated with a Draw
inspection) and Architectural Exhibit
preparation, may be included in the
mortgage as a part of the cost of
rehabilitation.
III. Section 203(k) Consultants Fee
Schedule
Under the existing structure, the fee is
based on a range of repair costs,
recognizing that more extensive repairs
would require more time and are
costlier for the Consultant to complete.
It also allows for some level of change
over time as repair costs increase. HUD
Maximum consultant fee
61711
establishes and monitors the maximum
fees that a Section 203(k) Consultant
may charge a Borrower to prepare the
Work Write-Up for repairs associated
with the Section 203(k) mortgage. The
Work Write-Up includes the initial
inspection, Architectural Exhibit
Review and Cost Estimate. The current
fee schedule, which HUD issued in
1995, is as follows:
Maximum
amount that
can be
financed
Cost of repairs
203(k) Consultant Fee Schedule for preparing the Work Write-up
$400 ...............................
$500 ...............................
$600 ...............................
$700 ...............................
$800 ...............................
$900 ...............................
$1,000 ............................
Less than $7,500 ....................................................................................................................................
Between $7,501 and $15,000 .................................................................................................................
Between $15,001 and $30,000 ...............................................................................................................
Between $30,001 and $50,000 ...............................................................................................................
Between $50,001 and $75,000 ...............................................................................................................
Between $75,001 and $100,000 .............................................................................................................
Above $100,000 ......................................................................................................................................
$400
500
600
700
800
900
1,000
Plus an additional $25 for each additional Dwelling Unit, not to exceed $75
The 203(k) Roster Consultant may charge a fee for additional services listed below
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$100 ...............................
$100 ...............................
$50 .................................
Feasibility Study (if one is performed) ....................................................................................................
For Preparing a Change Order Request ................................................................................................
For each Re-Inspection requested .........................................................................................................
The 203(k) Roster Consultant may
also charge a reasonable and customary
fee, not to exceed $350 for each draw
inspection request plus mileage at the
current Internal Revenue Service
mileage rate when the place of business
is more than 15 miles from the property.
HUD has determined that the existing
fee structure may discourage Consultant
participation in the Section 203(k)
Program and has the potential to limit
access to credit. Between 2012 and
2015, the volume of loans requiring the
use of a Consultant fell from 6,753 to
5,359. Based on the first two quarters of
2016, the projected volume of loans
requiring the use of a Consultant is
5,132, while the projected volume of
loans not requiring the use of a
Consultant is 14,224. This data suggests
that Borrowers are choosing the less
complicated repair work, not requiring
a Consultant. HUD believes that
establishing a fee structure that is more
in alignment with market rates would
increase Consultants’ participation in
the Section 203(k) program and expand
access to credit by encouraging and
enabling more Borrowers to purchase
properties that require substantial
rehabilitation. The willingness and
ability of Borrowers to purchase
properties involving substantial
rehabilitation would contribute to the
reduction in build-up of HUD’s Real
Estate Owned inventories, result in an
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Jkt 238001
increase in energy efficient homes and
assist in the stabilization of the housing
market.
As part of its policy consolidation
effort, HUD posted on the Single Family
Housing Policy Drafting Table 1 its draft
203(k) Consultant Product Sheet section
of the Single Family Policy Handbook
4000.1 and requested comments.2 The
feedback that HUD received was that the
fee schedule is not in alignment with
current market rates and needs to be
revised. Most commenters stated that
the fee schedule was out-of-date and did
not reflect the current cost of business.
For example, some commenters stated
that Consultants are dealing with issues
like mold, radon, and other
environmental hazards that were not
widely recognized as issues in 1995
when HUD issued the current fee
schedule. In addition, the feedback
questioned the structure of the current
fee schedule. For example, one
commenter stated that the Consultant is
limited to charging the same fee
whether the home is 4,100 square feet
with a crawlspace or 1,200 square feet
on a slab.
1 See, https://portal.hud.gov/hudportal/HUD?src=/
program_offices/housing/sfh/SFH_policy_drafts.
2 See, https://portal.hud.gov/hudportal/
documents/huddoc?id=SFH_POLI_203K_CSL.PDF.
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100
100
50
IV. Request for Public Comments on
Updating the Section 203(k) Consultant
Fee Schedule
In order to better inform HUD, this
notice seeks public comment on ways to
revise the fee schedule for 203(k)
Consultants. HUD is specifically seeking
information to determine whether
Consultant fees should continue to be
based on the total cost of repairs or on
some other metric. While all comments
on updating the Consultant fee schedule
are welcome, HUD is soliciting specific
comments on the following options:
1. Retain the current fee structure but
update maximum fees. Under this
option, HUD would continue to base
Consultant fees on the total cost of
repairs and continue to allow Borrowers
the ability to finance all fees into the
203(k) mortgage. If HUD uses this
option, should it continue to use the
current ranges for cost of repair, and if
not, how should HUD set these
thresholds and why? What should be
the maximum Consultant fee at each
threshold and why? Should the fees be
tied to Consumer Price Index to account
for regional differences in the cost of
services?
2. Allow Consultants to charge fees
that are reasonable and customary.
Under this option, Consultants would
be allowed to charge fees that are
reasonable and customary in the market
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Federal Register / Vol. 81, No. 173 / Wednesday, September 7, 2016 / Notices
for similar work performed by
professionals with similar
qualifications. If HUD uses this option,
how can it manage risk associated with
this concept? Should HUD continue to
permit all fees to be financed or should
it establish a maximum amount that can
be financed in the 203(k) loan? If HUD
uses this option what should be used to
establish the financeable portion of the
fee? Would requiring the Borrower to
pay the excess fees adversely limit the
number of Section 203(k) loan
origination? Would this method of
setting fees lead to an increase in the
number of loans with negative equity?
Would this method of setting fees lead
to an increase in the number of loans
with negative equity and how could
HUD protect against this?
3. Develop a different metric on which
to base Consultant fees. Under this
option, Consultants’ fees would be
based on a metric other than cost of
repairs. For example, HUD could set
fees based on a straight percentage of
the repair amount or a fixed fee plus a
percentage of the repair amount. If HUD
uses this option, at what level should
HUD set the amount? Would this option
allow for regional differences in the cost
of services or in the variation and
complexity of services provided in a
specific loan transaction? Are there
other metrics upon which HUD could
base Consultant fees? If so, what are the
pros and cons of each metric?
4. Index Section 203(k) Consultant
fees to another measure. Under this
option, Consultant fees could be tied to
Consumer Price Index or the Annual
Rate of Inflation. HUD could then revise
the fees under such measure and alert
the public by Mortgagee Letter or
Handbook publication. What are the
pros and cons of tying the 203(k)
Consultant fee schedule to either of
these two measures? Are there other
measures that would more accurately
establish maximum fees? Would there
be any reason for HUD to establish a
maximum amount of the fee that can be
financed into the 203(k) mortgage using
either of these measures?
Dated: August 26, 2016.
Edward L. Golding,
Principal Deputy Assistant Secretary for
Housing.
[FR Doc. 2016–21226 Filed 9–6–16; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
[Docket No. FR–5909–N–67]
30-Day Notice of Proposed Information
Collection: ConnectHome Use and
Benefits Telephone Survey
Office of the Chief Information
Officer, HUD.
ACTION: Notice.
AGENCY:
HUD has submitted the
proposed information collection
requirement described below to the
Office of Management and Budget
(OMB) for review, in accordance with
the Paperwork Reduction Act. The
purpose of this notice is to allow for an
additional 30 days of public comment.
DATES: Comments Due Date: October 7,
2016.
ADDRESSES: Interested persons are
invited to submit comments regarding
this proposal. Comments should refer to
the proposal by name and/or OMB
Control Number and should be sent to:
HUD Desk Officer, Office of
Management and Budget, New
Executive Office Building, Washington,
DC 20503; fax: 202–395–5806. Email:
OIRA_Submission@omb.eop.gov.
FOR FURTHER INFORMATION CONTACT:
Anna P. Guido, Reports Management
Officer, QDAM, Department of Housing
and Urban Development, 451 7th Street
SW., Washington, DC 20410; email
Anna P. Guido at Anna.P.Guido@
hud.gov or telephone 202–402–5535.
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
SUMMARY:
Service at (800) 877–8339. Copies of
available documents submitted to OMB
may be obtained from Ms. Guido.
SUPPLEMENTARY INFORMATION: This
notice informs the public that HUD is
seeking approval from OMB for the
information collection described in
Section A.
The Federal Register notice that
solicited public comment on the
information collection for a period of 60
days was published on February 4, 2016
at 81 FR 6036.
A. Overview of Information Collection
Title of Information Collection:
ConnectHome Use and Benefits
Telephone Survey.
OMB Approval Number: 2528–New.
Type of Request: New collection.
Form Number: Survey.
Description of the need for the
information and proposed use:
President Barack Obama and Secretary
´
Julian Castro announced ConnectHome
on July 15, 2015, as the next step in the
Obama Administration’s efforts to
increase access to high-speed Internet
access for all Americans. Through
public-private partnerships, nonprofits,
businesses, and Internet service
providers (ISPs) ConnectHome will offer
high-speed Internet service, devices,
technical training, and digital literacy
programs to residents of HUD assisted
housing in 28 pilot communities,
including the Choctaw Nation of
Oklahoma.
As communities begin to implement
ConnectHome in 2016 and connect
residents to internet within their homes,
this telephone survey will illuminate
how families are taking advantage of
ConnectHome. The telephone survey
will explore ConnectHome subscribers’
previous broadband access, current and
planned use patterns, and current and
anticipated benefits of their at-home
high-speed Internet access. The survey
will particularly focus on educational
Internet use such as completing
homework, connecting parents with
educators, and applying to college.
TABLE 1—DATA COLLECTION ACTIVITIES AND ANTICIPATED BURDEN
Information collection
(instruments)
Number of
respondents
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Telephone Survey Instrument (Appendix B).
Total Burden Hours
Frequency of
response
2,500
1
2,500
2,500
........................
........................
B. Solicitation of Public Comment
This notice is soliciting comments
from members of the public and affected
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17:30 Sep 06, 2016
Responses
per annum
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Burden hour
per response
Frm 00051
Fmt 4703
Hourly cost
per response
Annual cost
.33 (15–20
minutes).
825
$15.00
$12,375.00
.....................
825
15.00
12,375.00
parties concerning the collection of
information described in Section A on
the following:
PO 00000
Annual burden
hours
Sfmt 4703
(1) Whether the proposed collection
of information is necessary for the
proper performance of the functions of
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]]>Agencies
[Federal Register Volume 81, Number 173 (Wednesday, September 7, 2016)]
[Notices]
[Pages 61709-61712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21226]
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5875-N-01]
Single Family Mortgage Insurance: Revision of Section 203(k)
Consultant Fee Schedule--Solicitation of Comment
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice; solicitation of comment.
-----------------------------------------------------------------------
SUMMARY: The Section 203(k) Program is HUD's primary program for the
rehabilitation and repair of single family properties. The Section
203(k) mortgage program enables homebuyers and homeowners to finance
the purchase, or refinance of a home and include the rehabilitation
costs through a single mortgage. There are two types of 203(k)
rehabilitation mortgages: Standard 203(k) and Limited 203(k).
The Standard 203(k) mortgage may be used for remodeling,
rehabilitation and repairs that may have structural components, involve
more complex work and the total rehabilitation costs must be greater
than $5,000. The Limited 203(k) mortgage may only be used for minor
remodeling and non-structural repairs. The total rehabilitation cost
may not exceed $35,000 and there is no minimum cost.
As part of the Section 203(k) program requirements, the Federal
Housing Administration (FHA) maintains a list of approved 203(k)
Consultants on the FHA 203(k) Consultant Roster in FHA Connection. An
FHA-approved 203(k) Consultant is required for all Standard 203(k)
mortgages. A 203(k) Consultant is not required under the Limited 203(k)
program, but may be used. FHA-approved 203(k) Consultants are required
to perform responsibilities during the processing and rehabilitation
phase of the 203(k) program. FHA-approved 203(k) Consultants who are
placed on FHA's 203(k) Consultant Roster are deemed qualified to
complete these duties and therefore permitted to collect a fee for this
service. In 1995, HUD issued its current Section 203(k) Consultant Fee
Schedule and now seeks to update the Section 203(k) Fee Schedule to
align with similarly performed services and the corresponding fees
collected for such services. As a result, this notice seeks public
comment on revising the current structure of the fee and the maximum
amount of fees a 203(k) Consultant would be permitted to charge on a
Section 203(k) mortgage.
DATES: Comment Due Date: November 7, 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.
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
notice.
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
[[Page 61710]]
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 1-
800-877-8339 (this is a toll-free number). Copies of all comments
submitted are available for inspection and downloading at
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Kevin L. Stevens, Director, Home
Mortgage Insurance Division, Office of Single Family Program
Development, Office of Housing, Department of Housing and Urban
Development, 451 7th Street SW., Room 9266, Washington, DC 20410-9000,
telephone number 202-402-4137 (this is not a toll-free number). Persons
with hearing or speech impairments may access this number by calling
the Federal Relay Service at 800-877-8339 (this is a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
Section 203(k) of the National Housing Act (12 U.S.C. 1709(k))
authorizes HUD to insure a purchase or a refinance mortgage on an
existing 1-4 unit single family structure and include the
rehabilitation costs through a single mortgage. The Section 203(k)
Program is HUD's primary program for the rehabilitation and repair of
single family properties. The Section 203(k) program is important for
neighborhood revitalization and homeownership opportunities. The
regulations implementing the Section 203(k) Program are codified at 24
CFR 203.50.
The Section 203(k) Program fills a unique and important role for
homebuyers. In the conventional loan market, a homebuyer who purchases
a home that is in need of repair or modernization usually has to follow
a complicated and costly process. The homebuyer must obtain financing
to purchase the dwelling, additional financing for the rehabilitation
work, and a permanent mortgage after rehabilitation is completed to pay
off the interim loans. The interim acquisition and improvement loans
often have relatively high interest rates and short repayment terms.
The Section 203(k) Program addresses this by permitting a homebuyer to
obtain a single loan, at a long-term fixed or variable rate, to finance
both the acquisition and rehabilitation of the property.
There are two types of 203(k) rehabilitation mortgages: Standard
203(k) and Limited 203(k). The Standard 203(k) mortgage may be used for
remodeling, rehabilitation and repairs that may have structural
components involve complex work and must have a total rehabilitation
costs greater than $5,000. The Limited 203(k) mortgage may only be used
for minor remodeling and non-structural repairs, the total
rehabilitation cost may not exceed $35,000 and there is no minimum
rehabilitation cost.
The extent of the rehabilitation covered by the Section 203(k)
mortgage may range from relatively minor to virtual reconstruction. For
example, a home that will be demolished as part of rehabilitation is
eligible, provided that the existing foundation remains in place. In
addition to typical home rehabilitation projects, the Section 203(k)
Program can be used to convert a property of any size to a one- to
four-unit dwelling. Section 203(k) mortgage insurance can also be used
to augment Energy Efficient Mortgages, Section 203(h) Mortgage
Insurance for Victims of a Presidentially-Declared Major Disaster Area,
and Mortgage Insurance for Solar and Wind Technologies. All
improvements, renovations, or repairs undertaken with Section 203(k)
mortgage insurance must comply with the HUD Minimum Property
Requirements, HUD Minimum Property Standards and all local codes and
ordinances.
II. Section 203(k) Consultants
An FHA-approved 203(k) Consultant is required for all Standard
203(k) mortgages and may be used for Limited 203(k) mortgages. As part
of the Section 203(k) program requirements, the Federal Housing
Administration (FHA) maintains a list of approved 203(k) Consultants on
the FHA 203(k) Consultant Roster from which the Mortgagee must select a
203(k) Consultant and assign the 203(k) Consultant to the transaction,
if required.
When a Section 203(k) Consultant is required, the Consultant will
enter into a written agreement with the Borrower that outlines the
services that the Consultant will perform. In some cases, the Mortgagee
or Borrower may require the Consultant to conduct a Feasibility Study
to determine if the 203(k) mortgage is achievable, based on the costs
of the rehabilitation project. The 203(k) Consultant conducts a
Feasibility Study by completing a preliminary inspection of the
property, and estimates the material and labor costs for the project.
The 203(k) Consultant must inspect the property to ensure:
There are no rodents, dry rot, termites and other
infestation the property;
there are no defects that will affect the health and
safety of the occupants;
there exists adequate structural, heating, plumbing,
electrical and roofing systems; and
there are upgrades to the structure's thermal proportion
(when necessary).
The Consultant must prepare a report on the current condition of
the property that categorically examines the structure utilizing a 35
point checklist. The Consultant must determine the repairs/improvements
that are required to meet the U.S. Department of Housing and Urban
Development (HUD's) Minimum Property Requirements, Minimum Property
Standards and local requirements. The report must address any
deficiencies that exist. The Consultant is responsible for identifying
all required architectural exhibits. The Consultant must prepare the
exhibits, or, if not qualified to prepare all of the necessary
exhibits, must obtain the exhibits from a qualified subcontractor.
The Consultant must prepare an unbiased Work Write-up and Cost
Estimate without using a contractor's estimate. The Work Write-Up and
Cost Estimate must be detailed as to the work being performed based on
the project proposal, including all required reports.
The Consultant must physically inspect the work for completion,
quality of workmanship, conformity to local codes and ordinances, and
ensure that all building permits are onsite for the work that was
performed at each draw request.
At the Borrower's or Mortgagee's request, the Consultant must
review proposed changes to the Work Write-Up and prepare a Change Order
Form HUD-95277. The Consultant must inform the Mortgagee of the
progress of the rehabilitation and of any problems that arise,
including:
Work stoppages for more than 30 consecutive days or work
not progressing;
significant deviations from the Work Write-Up without the
Consultant's approval;
any issues that could affect adherence to the program
requirements or property eligibility; or
any issues that could affect the health and safety of the
occupants or the security of the structure.
The Borrower is responsible for the fee charged by the Section
203(k) Consultant. Under the Standard 203(k) program, the Consultant
fee charged for
[[Page 61711]]
the Feasibility Study, Work Write-Up, Mileage (not associated with a
Draw inspection) and Architectural Exhibit preparation, may be included
in the mortgage as a part of the cost of rehabilitation.
III. Section 203(k) Consultants Fee Schedule
Under the existing structure, the fee is based on a range of repair
costs, recognizing that more extensive repairs would require more time
and are costlier for the Consultant to complete. It also allows for
some level of change over time as repair costs increase. HUD
establishes and monitors the maximum fees that a Section 203(k)
Consultant may charge a Borrower to prepare the Work Write-Up for
repairs associated with the Section 203(k) mortgage. The Work Write-Up
includes the initial inspection, Architectural Exhibit Review and Cost
Estimate. The current fee schedule, which HUD issued in 1995, is as
follows:
------------------------------------------------------------------------
Maximum amount
Maximum consultant fee Cost of repairs that can be
financed
------------------------------------------------------------------------
203(k) Consultant Fee Schedule for preparing the Work Write-up
------------------------------------------------------------------------
$400........................... Less than $7,500....... $400
$500........................... Between $7,501 and 500
$15,000.
$600........................... Between $15,001 and 600
$30,000.
$700........................... Between $30,001 and 700
$50,000.
$800........................... Between $50,001 and 800
$75,000.
$900........................... Between $75,001 and 900
$100,000.
$1,000......................... Above $100,000......... 1,000
------------------------------------------------------------------------
Plus an additional $25 for each additional Dwelling Unit, not to exceed
$75
------------------------------------------------------------------------
The 203(k) Roster Consultant may charge a fee for additional services
listed below
------------------------------------------------------------------------
$100........................... Feasibility Study (if 100
one is performed).
$100........................... For Preparing a Change 100
Order Request.
$50............................ For each Re-Inspection 50
requested.
------------------------------------------------------------------------
The 203(k) Roster Consultant may also charge a reasonable and
customary fee, not to exceed $350 for each draw inspection request plus
mileage at the current Internal Revenue Service mileage rate when the
place of business is more than 15 miles from the property.
HUD has determined that the existing fee structure may discourage
Consultant participation in the Section 203(k) Program and has the
potential to limit access to credit. Between 2012 and 2015, the volume
of loans requiring the use of a Consultant fell from 6,753 to 5,359.
Based on the first two quarters of 2016, the projected volume of loans
requiring the use of a Consultant is 5,132, while the projected volume
of loans not requiring the use of a Consultant is 14,224. This data
suggests that Borrowers are choosing the less complicated repair work,
not requiring a Consultant. HUD believes that establishing a fee
structure that is more in alignment with market rates would increase
Consultants' participation in the Section 203(k) program and expand
access to credit by encouraging and enabling more Borrowers to purchase
properties that require substantial rehabilitation. The willingness and
ability of Borrowers to purchase properties involving substantial
rehabilitation would contribute to the reduction in build-up of HUD's
Real Estate Owned inventories, result in an increase in energy
efficient homes and assist in the stabilization of the housing market.
As part of its policy consolidation effort, HUD posted on the
Single Family Housing Policy Drafting Table \1\ its draft 203(k)
Consultant Product Sheet section of the Single Family Policy Handbook
4000.1 and requested comments.\2\ The feedback that HUD received was
that the fee schedule is not in alignment with current market rates and
needs to be revised. Most commenters stated that the fee schedule was
out-of-date and did not reflect the current cost of business. For
example, some commenters stated that Consultants are dealing with
issues like mold, radon, and other environmental hazards that were not
widely recognized as issues in 1995 when HUD issued the current fee
schedule. In addition, the feedback questioned the structure of the
current fee schedule. For example, one commenter stated that the
Consultant is limited to charging the same fee whether the home is
4,100 square feet with a crawlspace or 1,200 square feet on a slab.
---------------------------------------------------------------------------
\1\ See, https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/SFH_policy_drafts.
\2\ See, https://portal.hud.gov/hudportal/documents/huddoc?id=SFH_POLI_203K_CSL.PDF.
---------------------------------------------------------------------------
IV. Request for Public Comments on Updating the Section 203(k)
Consultant Fee Schedule
In order to better inform HUD, this notice seeks public comment on
ways to revise the fee schedule for 203(k) Consultants. HUD is
specifically seeking information to determine whether Consultant fees
should continue to be based on the total cost of repairs or on some
other metric. While all comments on updating the Consultant fee
schedule are welcome, HUD is soliciting specific comments on the
following options:
1. Retain the current fee structure but update maximum fees. Under
this option, HUD would continue to base Consultant fees on the total
cost of repairs and continue to allow Borrowers the ability to finance
all fees into the 203(k) mortgage. If HUD uses this option, should it
continue to use the current ranges for cost of repair, and if not, how
should HUD set these thresholds and why? What should be the maximum
Consultant fee at each threshold and why? Should the fees be tied to
Consumer Price Index to account for regional differences in the cost of
services?
2. Allow Consultants to charge fees that are reasonable and
customary. Under this option, Consultants would be allowed to charge
fees that are reasonable and customary in the market
[[Page 61712]]
for similar work performed by professionals with similar
qualifications. If HUD uses this option, how can it manage risk
associated with this concept? Should HUD continue to permit all fees to
be financed or should it establish a maximum amount that can be
financed in the 203(k) loan? If HUD uses this option what should be
used to establish the financeable portion of the fee? Would requiring
the Borrower to pay the excess fees adversely limit the number of
Section 203(k) loan origination? Would this method of setting fees lead
to an increase in the number of loans with negative equity? Would this
method of setting fees lead to an increase in the number of loans with
negative equity and how could HUD protect against this?
3. Develop a different metric on which to base Consultant fees.
Under this option, Consultants' fees would be based on a metric other
than cost of repairs. For example, HUD could set fees based on a
straight percentage of the repair amount or a fixed fee plus a
percentage of the repair amount. If HUD uses this option, at what level
should HUD set the amount? Would this option allow for regional
differences in the cost of services or in the variation and complexity
of services provided in a specific loan transaction? Are there other
metrics upon which HUD could base Consultant fees? If so, what are the
pros and cons of each metric?
4. Index Section 203(k) Consultant fees to another measure. Under
this option, Consultant fees could be tied to Consumer Price Index or
the Annual Rate of Inflation. HUD could then revise the fees under such
measure and alert the public by Mortgagee Letter or Handbook
publication. What are the pros and cons of tying the 203(k) Consultant
fee schedule to either of these two measures? Are there other measures
that would more accurately establish maximum fees? Would there be any
reason for HUD to establish a maximum amount of the fee that can be
financed into the 203(k) mortgage using either of these measures?
Dated: August 26, 2016.
Edward L. Golding,
Principal Deputy Assistant Secretary for Housing.
[FR Doc. 2016-21226 Filed 9-6-16; 8:45 am]
BILLING CODE 4210-67-P
