Changes in Branch Office Registration Requirements, 12906-12908 [2023-04191]
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12906
Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Proposed Rules
medical record which includes, at a
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treatment of the patient prior to the
prescribing practitioner issuing the
prescription; and
(C) Has issued the written referral
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in the course of maintenance or
detoxification treatment via a
telemedicine encounter under this
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prescriptions issued pursuant to
§§ 1304.03 and 1304.04 of this chapter
indicating the following:
(i) Whether the telemedicine
encounter was conducted using audiovideo or audio-only technology;
(ii) If the telemedicine encounter was
conducted using audio-only technology,
the patient’s reason for requesting the
audio-only encounter;
(iii) All efforts to comply with
paragraph (b)(2) of this section when the
practitioner is able to obtain the PDMP
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Department of Veterans Affairs, the data
from the Department of Veterans Affairs
internal prescription database);
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the PDMP (or, if employed by the
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practitioner attempted to obtain the
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(v) If a prescribing practitioner
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practitioner) pursuant to paragraph
(b)(5)(ii) of this section, the full name,
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[FR Doc. 2023–04217 Filed 2–27–23; 2:30 pm]
BILLING CODE 4410–09–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 202
[Docket No. FR–6321–P–01]
Changes in Branch Office Registration
Requirements
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
AGENCY:
The U.S. Department of
Housing and Urban Development (HUD)
is publishing this proposed rule to
revise HUD’s regulations for branch
office registration requirements. To
make mortgage industry standards more
flexible and modernized, the proposed
rule would remove the requirement that
lenders and mortgagees register with
HUD each branch office where they
conduct Federal Housing
Administration (FHA) business.
DATES: Comment Due Date: May 1,
2023.
SUMMARY:
Interested persons are
invited to submit comments regarding
this proposed rule. 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.
Members of the public may submit
comments 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.
Due to security measures at all Federal
agencies, however, submission of
comments by standard mail often results
in delayed delivery. To ensure timely
receipt of comments, HUD recommends
that comments submitted by standard
mail be submitted at least two weeks in
advance of the deadline. HUD will make
all comments received by mail available
ADDRESSES:
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to the public at https://
www.regulations.gov.
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 website 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. All submissions must refer to the
docket number and title of the proposed rule.
No Facsimile Comments. Facsimile
(FAX) comments are not acceptable.
Public Inspection of Public
Comments. All properly submitted
comments and communications
submitted to HUD are 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).
HUD welcomes and is prepared to
receive calls from individuals who are
deaf or hard of hearing, as well as
individuals with speech or
communication disabilities. To learn
more about how to make an accessible
telephone call, please visit https://
www.fcc.gov/consumers/guides/
telecommunications-relay-service-trs.
Copies of all comments submitted are
available for inspection and
downloading at www.regulations.gov.
FOR FURTHER INFORMATION CONTACT:
Timothy Laramie, Mortgagee Approval
Analyst, U.S. Department of Housing
and Urban Development, 451 7th Street
SW, Washington, DC 20410, telephone
number 202–402–6814 (this is not a tollfree number). HUD welcomes and is
prepared to receive calls from
individuals who are deaf or hard of
hearing, as well as individuals with
speech or communication disabilities.
To learn more about how to make an
accessible telephone call, please visit
https://www.fcc.gov/consumers/guides/
telecommunications-relay-service-trs.
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Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Proposed Rules
SUPPLEMENTARY INFORMATION:
I. Background
ddrumheller on DSK120RN23PROD with PROPOSALS
Prior to 1995, HUD required each
mortgagee office to get approval from
the HUD field office(s) located where
the mortgagee intended to submit
mortgages for insurance endorsement,
with the exception of refinance cases.1
After 1995, HUD expanded the
geographic areas where mortgagees were
allowed to originate FHA-insured
mortgages. This combined HUD field
offices that were geographically close
together into a ‘‘lending area’’ and
permitted mortgagees to conduct
business with several field offices
within that area. HUD required that
mortgagees ‘‘maintain at least one
approved branch office within a
‘lending area’ from which loans are
submitted to the FHA Field Offices
within the lending area.’’ 2
In 2005, HUD announced three
changes to the geographic areas where
mortgagees originated loans.3 The first
change expanded the geographic areas
where a registered office can conduct
FHA business to all HUD field office
jurisdictions within groups of States.
The second change reduced the number
of branches required to conduct FHA
business nationwide from 25 to 13 using
the revised lending areas. The third
change allowed mortgagees to have a
single office approved to do nationwide
‘‘direct’’ lending via the internet and/or
a call center.
Currently, HUD follows its policy
from HUD Handbook 4000.1 that was
established in September of 2015. This
policy calls a geographic area where a
branch office is permitted to conduct
FHA business an ‘‘Area Approved for
Business’’ (AAFB).4 HUD Handbook
4000.1 states that all branch offices that
are registered with HUD will initially be
granted a nationwide AAFB to conduct
FHA business; however, the registered
branch ‘‘may only exercise its authority
to originate or underwrite FHA
mortgages in those states where the
mortgagee fully complies with state
1 See HUD, Mortgagee Letter 95–36: Mortgagee
Approval—Single Family Loan Production—
Revised Mortgagee/Program Requirements, Aug. 2,
1995, https://www.hud.gov/sites/documents/DOC_
20554.TXT.
2 See also HUD Handbook 4060.1 REV–1,
Mortgagee Approval Handbook I (4060.1)—Chapter
5 Part A. Branch Offices, https://www.hud.gov/
sites/documents/40601C5HSGH.PDF.
3 HUD, Mortgagee Letter 05–40: Revisions to
Single Family Origination Lending Areas and
Nationwide Lending, Oct. 20, 2005, https://
www.hud.gov/sites/documents/DOC_20553.doc.
4 See HUD Handbook 4000.1 I.A.4b, Single
Family Lending Area (4000.1), https://
www.hud.gov/sites/dfiles/OCHCO/documents/
4000.1hsgh-062022.pdf.
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origination and/or underwriting
licensing and approval requirements.’’
Under 24 CFR 202.5(k), approved
FHA mortgagees and lenders can, upon
approval by the Secretary, maintain
branch offices to originate Title I or Title
II loans 5 or submit applications for
mortgage insurance; however, the
branch office must be registered with
HUD. Under 24 CFR 202.5(m), to retain
FHA approval, a mortgagee or lender
must complete FHA’s recertification
process annually. The recertification
process requires submission of financial
data that includes details about total
FHA activity conducted during the
fiscal year, as well as a certification that
each lender and mortgagee has not been
refused a license and has not been
sanctioned by any state or states in
which it will originate insured
mortgages or Title I loans.
II. Proposed Rule
In this proposed rule, HUD seeks to
update its regulations by eliminating the
requirement that a lender or mortgagee
must register with HUD all branch
offices where it conducts FHA business.
This proposed rule would revise 24 CFR
202.5(k) to instead give mortgagees and
lenders the option to register and
maintain branch offices with HUD,
which would allow them to be placed
on HUD’s Lender List Search page.6 In
addition, the proposed rule would
revise 24 CFR 202.5(i) to make fees
applicable to each branch office that a
mortgagee or lender registers with HUD
rather than applying fees to each branch
office where they are authorized to
conduct FHA business. This proposed
change is based on the mortgage
industry’s evolution over time and the
advancement of technology. Today,
there is no longer a need to maintain
several branch offices to conduct FHA
business nationwide. While the
mortgage industry has evolved, the
regulations for branch office registration
requirements have remained the same.
Prior to the COVID–19 pandemic, the
mortgage industry experienced an
upward trend in the use of remote
service delivery and use of technology
to complete loan applications.7 During
5 Title I and Title II loans are mortgages or fixedrate loans issued by the Federal Housing
Administration (FHA) for home improvements and
buying property.
6 See https://www.hud.gov/program_offices/
housing/sfh/lender/lenderlist.
7 See e.g. Fiserv, Inc., Expectations & Experiences:
Borrowing and Wealth Management (2019) (One
consumer trend survey found that 65 percent of
recent mortgage applicants reported using
computers or mobile devices to complete at least a
portion of the application). https://www.fiserv.com/
en/about-fiserv/resource-center/consumer-research/
expectations-experiences-borrowing-and-wealthmanagement-fall-2019.html.
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the COVID–19 pandemic, remote service
delivery and the use of technology
became the norm and furthered the shift
away from in-person, face-to-face
interactions. As the mortgage industry
has evolved, HUD has found it
necessary to update its regulations to
become more modernized and less
antiquated, which would increase
homeownership opportunities in
underserved urban and rural areas.
Additionally, mortgagees, lenders,
banks, and credit unions have expressed
dissatisfaction with the requirement to
register branch offices and have asked
HUD what can be done to make the FHA
process more flexible. The industry
views the branch office requirement as
burdensome and a hinderance to
entities wanting to participate in FHA
programs. HUD agrees that the
requirement to register branch offices
has become cumbersome and no longer
aligns with the way the industry
operates. Additionally, the requirement
is somewhat redundant as branch
offices will still need to be licensed by
the state according to the Secure and
Fair Enforcement for Mortgage
Licensing Act of 2008 (SAFE Act).8 The
SAFE Act instructs states to adopt loan
originator licensing and registration
requirements that meet the minimum
standards determined by the SAFE Act.9
This proposed rule would provide less
of an administrative burden for existing
mortgagees and lenders and eliminate
barriers for entities interested in FHA
programs. In addition to providing relief
for the mortgage industry, it may also
encourage more mortgagees and lenders
to originate FHA-insured mortgages.
Removing the requirement to register
branch offices would not affect HUD’s
monitoring of mortgagees and lenders.
HUD would continue to maintain
oversight and risk management of
mortgagees and lenders who would
remain responsible to FHA for the
actions of its branch offices and
employees. As always, branch office
employees would need to work through
a mortgagee or lender to conduct FHA
business. When an FHA loan is
originated, enough information is
collected to monitor the performance of
mortgagees and lenders such as the
underwriters, originators, and location
of the loan. HUD can monitor
mortgagees and lenders even without
the specific branch office identification.
Additionally, HUD would continue to
monitor the origination and
underwriting authority for each
8 HOUSING AND ECONOMIC RECOVERY ACT
OF 2008, Public Law 110–289, July 30, 2008, 122
Stat 2654.
9 12 U.S.C. 5701–5710 and 24 CFR part 3400.
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Federal Register / Vol. 88, No. 40 / Wednesday, March 1, 2023 / Proposed Rules
mortgagee and lender under 81 Areas
Approved for Business that correspond
to HUD field office jurisdictions.10
Furthermore, HUD’s Office of Lender
Activities and Program Compliance—
Quality Assurance Division (QAD)
would continue to monitor FHA lenders
quarterly to determine if Credit Watch
Termination is warranted against a
lender.11
HUD does not foresee any negative
impacts to risk management and
oversight caused by this proposed rule
change. The regulation would be
updated to evolve along with the
mortgage industry and reflect its
business practices, mortgagees and
lenders would be given more flexibility
when conducting FHA business, and
HUD would be able to address concerns
expressed by banks, credit unions and
banking industry trade associations.
Moreover, the proposed changes would
remove an operational and regulatory
burden, which could result in more
banks and credit unions participating in
FHA programs. Ultimately, this would
benefit homebuyers, who would have
increased access to FHA-insured
mortgage products as the number of
banks and credit unions participating in
FHA programs increased.
III. Findings and Certifications
ddrumheller on DSK120RN23PROD with PROPOSALS
Regulatory Review—Executive Orders
12866 and 13563
Under Executive Order 12866
(Regulatory Planning and Review), a
determination must be made whether a
regulatory action is significant and,
therefore, subject to review by the Office
of Management and Budget (OMB) in
accordance with the requirements of the
order. Executive Order 13563
(Improving Regulations and Regulatory
Review) directs executive agencies to
analyze regulations that are ‘‘outmoded,
ineffective, insufficient, or excessively
burdensome, and to modify, streamline,
expand, or repeal them in accordance
with what has been learned.’’ Executive
Order 13563 also directs that, where
relevant, feasible, and consistent with
regulatory objectives, and to the extent
permitted by law, agencies are to
identify and consider regulatory
approaches that reduce burdens and
maintain flexibility and freedom of
choice for the public.
10 See 24 CFR 202.3(c)(2)(i) stating that HUD ‘‘will
review, on an ongoing basis, the number of defaults
and claims on mortgages originated, underwritten,
or both, by each mortgagee in the geographic area
served by a HUD field office.’’
11 FHA may terminate a lender’s authority to
underwrite FHA-insured loans in any HUD field
office jurisdiction where the lender has an
excessive rate of early defaults and claims. See 24
CFR 202.3(c)(2).
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This proposed rule was determined to
be a ‘‘significant regulatory action’’ as
defined in Section 3(f) of the order
(although not an economically
significant regulatory action under the
order). The proposed rule would revise
24 CFR 202.5(i) and (k) to update HUD’s
regulation to conform with the mortgage
industry’s evolving business practices.
Additionally, the proposed rule would
lessen the administrative burden on
mortgagees and lenders.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104–4;
approved March 22, 1995) (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 proposed rule does not
impose any Federal mandates on any
state, local, or tribal government, or on
the private sector, within the meaning of
the UMRA.
Environmental Review
This proposed rule does not direct,
provide for assistance or loan and
mortgage insurance for, or otherwise
govern or regulate real property
acquisition, disposition, leasing,
rehabilitation, alteration, demolition, or
new construction, or establish, revise, or
provide for standards for construction or
construction materials, manufactured
housing, or occupancy. Accordingly,
under 24 CFR 50.19(c)(1), this proposed
rule is categorically excluded from
environmental review under the
National Environmental Policy Act of
1969 (42 U.S.C. 4321).
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. The proposed
rule would remove the requirement that
lenders and mortgagees register with
HUD each branch office where they
conduct FHA business. This would not
create an undue burden on small
entities, instead it would eliminate the
burden for all mortgagees and lenders of
having to register branch offices with
HUD and pay the associated fees. HUD
has determined that this proposed rule
will not have a significant economic
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 imposes
substantial direct compliance costs on
state and local governments or is not
required by statute, or the rule preempts
state law, unless the agency meets the
consultation and funding requirements
of section 6 of the Executive Order. This
proposed 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.
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501–
3520), 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 Office of Management
and Budget (OMB) control number. The
information collection requirements
contained in this proposed rule have
been approved by OMB under the
Paperwork Reduction Act and assigned
OMB control number 2502–0059.
List of Subjects in 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 above, HUD proposes to
amend 24 CFR part 202 as follows:
PART 202—APPROVAL OF LENDING
INSTITUTIONS AND MORTGAGEES
1. 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).
§ 202.5
[Amended]
2. In § 202.5:
a. In paragraph (i), remove the words
‘‘authorized to originate Title I loans or
submit applications for mortgage
insurance’’ and add in their place the
words ‘‘that the lender or mortgagee
registers with the Department’’;
■ b. In paragraph (k), add the words ‘‘or
mortgagee’’ after ‘‘A lender’’ in the first
sentence, and remove the second
sentence.
■
■
Julia R. Gordon,
Assistant Secretary of Office of Housing—
Federal Housing Administration.
[FR Doc. 2023–04191 Filed 2–28–23; 8:45 am]
BILLING CODE 4210–67–P
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Agencies
[Federal Register Volume 88, Number 40 (Wednesday, March 1, 2023)]
[Proposed Rules]
[Pages 12906-12908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04191]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 202
[Docket No. FR-6321-P-01]
Changes in Branch Office Registration Requirements
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Department of Housing and Urban Development (HUD) is
publishing this proposed rule to revise HUD's regulations for branch
office registration requirements. To make mortgage industry standards
more flexible and modernized, the proposed rule would remove the
requirement that lenders and mortgagees register with HUD each branch
office where they conduct Federal Housing Administration (FHA)
business.
DATES: Comment Due Date: May 1, 2023.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule. 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. Members of the public may submit
comments 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. Due to security measures at
all Federal agencies, however, submission of comments by standard mail
often results in delayed delivery. To ensure timely receipt of
comments, HUD recommends that comments submitted by standard mail be
submitted at least two weeks in advance of the deadline. HUD will make
all comments received by mail available to the public at https://www.regulations.gov.
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 website 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. All
submissions must refer to the docket number and title of the
proposed rule.
No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD are 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). HUD welcomes and is prepared to receive calls from
individuals who are deaf or hard of hearing, as well as individuals
with speech or communication disabilities. To learn more about how to
make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs. Copies of all
comments submitted are available for inspection and downloading at
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Timothy Laramie, Mortgagee Approval
Analyst, U.S. Department of Housing and Urban Development, 451 7th
Street SW, Washington, DC 20410, telephone number 202-402-6814 (this is
not a toll-free number). HUD welcomes and is prepared to receive calls
from individuals who are deaf or hard of hearing, as well as
individuals with speech or communication disabilities. To learn more
about how to make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
[[Page 12907]]
SUPPLEMENTARY INFORMATION:
I. Background
Prior to 1995, HUD required each mortgagee office to get approval
from the HUD field office(s) located where the mortgagee intended to
submit mortgages for insurance endorsement, with the exception of
refinance cases.\1\ After 1995, HUD expanded the geographic areas where
mortgagees were allowed to originate FHA-insured mortgages. This
combined HUD field offices that were geographically close together into
a ``lending area'' and permitted mortgagees to conduct business with
several field offices within that area. HUD required that mortgagees
``maintain at least one approved branch office within a `lending area'
from which loans are submitted to the FHA Field Offices within the
lending area.'' \2\
---------------------------------------------------------------------------
\1\ See HUD, Mortgagee Letter 95-36: Mortgagee Approval--Single
Family Loan Production--Revised Mortgagee/Program Requirements, Aug.
2, 1995, https://www.hud.gov/sites/documents/DOC_20554.TXT.
\2\ See also HUD Handbook 4060.1 REV-1, Mortgagee Approval
Handbook I (4060.1)--Chapter 5 Part A. Branch Offices, https://www.hud.gov/sites/documents/40601C5HSGH.PDF.
---------------------------------------------------------------------------
In 2005, HUD announced three changes to the geographic areas where
mortgagees originated loans.\3\ The first change expanded the
geographic areas where a registered office can conduct FHA business to
all HUD field office jurisdictions within groups of States. The second
change reduced the number of branches required to conduct FHA business
nationwide from 25 to 13 using the revised lending areas. The third
change allowed mortgagees to have a single office approved to do
nationwide ``direct'' lending via the internet and/or a call center.
---------------------------------------------------------------------------
\3\ HUD, Mortgagee Letter 05-40: Revisions to Single Family
Origination Lending Areas and Nationwide Lending, Oct. 20, 2005,
https://www.hud.gov/sites/documents/DOC_20553.doc.
---------------------------------------------------------------------------
Currently, HUD follows its policy from HUD Handbook 4000.1 that was
established in September of 2015. This policy calls a geographic area
where a branch office is permitted to conduct FHA business an ``Area
Approved for Business'' (AAFB).\4\ HUD Handbook 4000.1 states that all
branch offices that are registered with HUD will initially be granted a
nationwide AAFB to conduct FHA business; however, the registered branch
``may only exercise its authority to originate or underwrite FHA
mortgages in those states where the mortgagee fully complies with state
origination and/or underwriting licensing and approval requirements.''
---------------------------------------------------------------------------
\4\ See HUD Handbook 4000.1 I.A.4b, Single Family Lending Area
(4000.1), https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-062022.pdf.
---------------------------------------------------------------------------
Under 24 CFR 202.5(k), approved FHA mortgagees and lenders can,
upon approval by the Secretary, maintain branch offices to originate
Title I or Title II loans \5\ or submit applications for mortgage
insurance; however, the branch office must be registered with HUD.
Under 24 CFR 202.5(m), to retain FHA approval, a mortgagee or lender
must complete FHA's recertification process annually. The
recertification process requires submission of financial data that
includes details about total FHA activity conducted during the fiscal
year, as well as a certification that each lender and mortgagee has not
been refused a license and has not been sanctioned by any state or
states in which it will originate insured mortgages or Title I loans.
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\5\ Title I and Title II loans are mortgages or fixed-rate loans
issued by the Federal Housing Administration (FHA) for home
improvements and buying property.
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II. Proposed Rule
In this proposed rule, HUD seeks to update its regulations by
eliminating the requirement that a lender or mortgagee must register
with HUD all branch offices where it conducts FHA business. This
proposed rule would revise 24 CFR 202.5(k) to instead give mortgagees
and lenders the option to register and maintain branch offices with
HUD, which would allow them to be placed on HUD's Lender List Search
page.\6\ In addition, the proposed rule would revise 24 CFR 202.5(i) to
make fees applicable to each branch office that a mortgagee or lender
registers with HUD rather than applying fees to each branch office
where they are authorized to conduct FHA business. This proposed change
is based on the mortgage industry's evolution over time and the
advancement of technology. Today, there is no longer a need to maintain
several branch offices to conduct FHA business nationwide. While the
mortgage industry has evolved, the regulations for branch office
registration requirements have remained the same.
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\6\ See https://www.hud.gov/program_offices/housing/sfh/lender/lenderlist.
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Prior to the COVID-19 pandemic, the mortgage industry experienced
an upward trend in the use of remote service delivery and use of
technology to complete loan applications.\7\ During the COVID-19
pandemic, remote service delivery and the use of technology became the
norm and furthered the shift away from in-person, face-to-face
interactions. As the mortgage industry has evolved, HUD has found it
necessary to update its regulations to become more modernized and less
antiquated, which would increase homeownership opportunities in
underserved urban and rural areas.
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\7\ See e.g. Fiserv, Inc., Expectations & Experiences: Borrowing
and Wealth Management (2019) (One consumer trend survey found that
65 percent of recent mortgage applicants reported using computers or
mobile devices to complete at least a portion of the application).
https://www.fiserv.com/en/about-fiserv/resource-center/consumer-research/expectations-experiences-borrowing-and-wealth-management-fall-2019.html.
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Additionally, mortgagees, lenders, banks, and credit unions have
expressed dissatisfaction with the requirement to register branch
offices and have asked HUD what can be done to make the FHA process
more flexible. The industry views the branch office requirement as
burdensome and a hinderance to entities wanting to participate in FHA
programs. HUD agrees that the requirement to register branch offices
has become cumbersome and no longer aligns with the way the industry
operates. Additionally, the requirement is somewhat redundant as branch
offices will still need to be licensed by the state according to the
Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE
Act).\8\ The SAFE Act instructs states to adopt loan originator
licensing and registration requirements that meet the minimum standards
determined by the SAFE Act.\9\ This proposed rule would provide less of
an administrative burden for existing mortgagees and lenders and
eliminate barriers for entities interested in FHA programs. In addition
to providing relief for the mortgage industry, it may also encourage
more mortgagees and lenders to originate FHA-insured mortgages.
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\8\ HOUSING AND ECONOMIC RECOVERY ACT OF 2008, Public Law 110-
289, July 30, 2008, 122 Stat 2654.
\9\ 12 U.S.C. 5701-5710 and 24 CFR part 3400.
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Removing the requirement to register branch offices would not
affect HUD's monitoring of mortgagees and lenders. HUD would continue
to maintain oversight and risk management of mortgagees and lenders who
would remain responsible to FHA for the actions of its branch offices
and employees. As always, branch office employees would need to work
through a mortgagee or lender to conduct FHA business. When an FHA loan
is originated, enough information is collected to monitor the
performance of mortgagees and lenders such as the underwriters,
originators, and location of the loan. HUD can monitor mortgagees and
lenders even without the specific branch office identification.
Additionally, HUD would continue to monitor the origination and
underwriting authority for each
[[Page 12908]]
mortgagee and lender under 81 Areas Approved for Business that
correspond to HUD field office jurisdictions.\10\ Furthermore, HUD's
Office of Lender Activities and Program Compliance--Quality Assurance
Division (QAD) would continue to monitor FHA lenders quarterly to
determine if Credit Watch Termination is warranted against a
lender.\11\
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\10\ See 24 CFR 202.3(c)(2)(i) stating that HUD ``will review,
on an ongoing basis, the number of defaults and claims on mortgages
originated, underwritten, or both, by each mortgagee in the
geographic area served by a HUD field office.''
\11\ FHA may terminate a lender's authority to underwrite FHA-
insured loans in any HUD field office jurisdiction where the lender
has an excessive rate of early defaults and claims. See 24 CFR
202.3(c)(2).
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HUD does not foresee any negative impacts to risk management and
oversight caused by this proposed rule change. The regulation would be
updated to evolve along with the mortgage industry and reflect its
business practices, mortgagees and lenders would be given more
flexibility when conducting FHA business, and HUD would be able to
address concerns expressed by banks, credit unions and banking industry
trade associations. Moreover, the proposed changes would remove an
operational and regulatory burden, which could result in more banks and
credit unions participating in FHA programs. Ultimately, this would
benefit homebuyers, who would have increased access to FHA-insured
mortgage products as the number of banks and credit unions
participating in FHA programs increased.
III. Findings and Certifications
Regulatory Review--Executive Orders 12866 and 13563
Under Executive Order 12866 (Regulatory Planning and Review), a
determination must be made whether a regulatory action is significant
and, therefore, subject to review by the Office of Management and
Budget (OMB) in accordance with the requirements of the order.
Executive Order 13563 (Improving Regulations and Regulatory Review)
directs executive agencies to analyze regulations that are ``outmoded,
ineffective, insufficient, or excessively burdensome, and to modify,
streamline, expand, or repeal them in accordance with what has been
learned.'' Executive Order 13563 also directs that, where relevant,
feasible, and consistent with regulatory objectives, and to the extent
permitted by law, agencies are to identify and consider regulatory
approaches that reduce burdens and maintain flexibility and freedom of
choice for the public.
This proposed rule was determined to be a ``significant regulatory
action'' as defined in Section 3(f) of the order (although not an
economically significant regulatory action under the order). The
proposed rule would revise 24 CFR 202.5(i) and (k) to update HUD's
regulation to conform with the mortgage industry's evolving business
practices. Additionally, the proposed rule would lessen the
administrative burden on mortgagees and lenders.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (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 proposed
rule does not impose any Federal mandates on any state, local, or
tribal government, or on the private sector, within the meaning of the
UMRA.
Environmental Review
This proposed rule does not direct, provide for assistance or loan
and mortgage insurance for, or otherwise govern or regulate real
property acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise, or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this
proposed rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
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.
The proposed rule would remove the requirement that lenders and
mortgagees register with HUD each branch office where they conduct FHA
business. This would not create an undue burden on small entities,
instead it would eliminate the burden for all mortgagees and lenders of
having to register branch offices with HUD and pay the associated fees.
HUD has determined that this proposed rule will not have a significant
economic impact on a substantial number of small entities.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments or is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This proposed 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.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3520), 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 Office of Management and Budget
(OMB) control number. The information collection requirements contained
in this proposed rule have been approved by OMB under the Paperwork
Reduction Act and assigned OMB control number 2502-0059.
List of Subjects in 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 above, HUD
proposes to amend 24 CFR part 202 as follows:
PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES
0
1. 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. 202.5 [Amended]
0
2. In Sec. 202.5:
0
a. In paragraph (i), remove the words ``authorized to originate Title I
loans or submit applications for mortgage insurance'' and add in their
place the words ``that the lender or mortgagee registers with the
Department'';
0
b. In paragraph (k), add the words ``or mortgagee'' after ``A lender''
in the first sentence, and remove the second sentence.
Julia R. Gordon,
Assistant Secretary of Office of Housing--Federal Housing
Administration.
[FR Doc. 2023-04191 Filed 2-28-23; 8:45 am]
BILLING CODE 4210-67-P