Revision of Investing Lenders and Investing Mortgagees Requirements and Expansion of Government-Sponsored Enterprises Definition, 30272-30277 [2024-08648]
Download as PDF
<![CDATA[
ddrumheller on DSK120RN23PROD with RULES1
30272
Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules and Regulations
substantial changes in funding or
changes in primary sites of activity);
(viii) To facilitate the correction of
minor or technical infractions; and
(ix) To facilitate a reinstatement or
reinstatement update SEVIS status.
(b) Verification. (1) Prior to issuing
Forms DS–2019, sponsors must verify
that prospective exchange visitors:
(i) Are eligible for, qualified for, and
accepted into the programs in which
they will participate;
(ii) Possess adequate financial
resources to participate in and complete
their exchange visitor programs; and
(iii) Possess adequate financial
resources to support accompanying
spouses and dependents, if any.
(2) Sponsors must ensure that:
(i) Only Responsible Officers or
Alternate Responsible Officers who are
physically present in the United States
or in a U.S. territory may sign Forms
DS–2019 or print original Forms DS–
2019;
(ii) Only Responsible Officers or
Alternate Responsible Officers whose
names are printed on Forms DS–2019
are permitted to sign the forms; and
(iii) Responsible Officers or Alternate
Responsible Officers sign paper Forms
DS–2019 in ink or sign Forms DS–2019
using digital signature software.
(c) Transmission of Forms DS–2019.
(1) Sponsors may transmit Forms DS–
2019 either electronically (e.g., via
email) or by mailing them (e.g., via
postal or delivery service) to only the
following individuals or entities:
exchange visitors; accompanying
spouses and dependents, if any; legal
guardians of minor exchange visitors;
sponsor staff; Fulbright Commissions
and their staff; and Federal, State, or
local government agencies or
departments.
(2) Sponsors may mail signed paper
Forms DS–2019 via postal or delivery
service to third parties acting on their
behalf for distribution to prospective
exchange visitors.
(3) Sponsors may provide third
parties acting on their behalf with
password-protected access to the
sponsors’ computer network systems
and/or databases to retrieve Forms DS–
2019.
(4) Sponsors that allow third parties
to retrieve Forms DS–2019 from their
computer networks and/or databases
may not electronically transmit or
physically mail the same Forms DS–
2019 to individuals or entities identified
in paragraph (c)(1) of this section.
(d) Allotment requests. (1) Annual
Form DS–2019 allotment. Sponsors
must submit an electronic request via
SEVIS to the Department of State for an
annual allotment of Forms DS–2019
VerDate Sep<11>2014
16:26 Apr 22, 2024
Jkt 262001
based on the annual reporting cycle
(e.g., academic, calendar, or fiscal year)
stated in their letter of designation or
redesignation. The Department of State
has sole discretion to determine the
number of Forms DS–2019 it will issue
to sponsors.
(2) Expansion of program. Requests
for program expansion must include
information such as, but not limited to,
the justification for and source of
program growth, staff increases,
confirmation of adequately trained
employees, noted programmatic
successes, current financial information,
additional overseas affiliates, additional
third-party entities, explanations of how
the sponsor will accommodate the
anticipated program growth, and any
other information the Department of
State may request. The Department of
State will take into consideration the
current size of a sponsor’s programs and
the projected expansion of their
programs in the next 12 months and
may consult with the Responsible
Officer and/or Alternate Responsible
Officers prior to determining the
number of Forms DS–2019 it will issue.
(e) Safeguards and controls.
(1) Responsible Officers and Alternate
Responsible Officers must always secure
their SEVIS User Names and passwords
(i.e., not share User Names and
passwords with any other person or not
permit access to and use of SEVIS by
any person).
(2) Sponsors may transmit Forms DS–
2019 only to the parties listed in
paragraph (c) of this section. However,
sponsors must transmit Forms DS–2019
to the Department of State or the
Department of Homeland Security upon
request.
(3) Sponsors must use the reprint
function in SEVIS when exchange
visitors’ Forms DS–2019 are lost, stolen,
or damaged, regardless of whether they
are transmitting forms electronically or
mailing them.
(4) Sponsors must destroy any
damaged and/or unusable Forms DS–
2019 (e.g., forms with errors or forms
damaged by a printer).
Rebecca Pasini,
Deputy Assistant Secretary, Office of Private
Sector Exchange, Bureau of Educational and
Cultural Affairs, U.S. Department of State.
[FR Doc. 2024–08602 Filed 4–22–24; 8:45 am]
Frm 00014
Fmt 4700
24 CFR Parts 5 and 202
[Docket No. FR–6291–F–02]
RIN 2502–AJ60
Revision of Investing Lenders and
Investing Mortgagees Requirements
and Expansion of GovernmentSponsored Enterprises Definition
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, Department of Housing
and Urban Development (HUD).
ACTION: Final rule.
AGENCY:
This rule amends the
requirements for investing lenders and
investing mortgagees to gain or maintain
their status as a Federal Housing
Administration (FHA) approved lender
or mortgagee. This revision makes
FHA’s approval requirements consistent
with investing mortgagees’ and
investing lenders’ risk, reduces barriers
to FHA approval for new investing
mortgagees and investing lenders, and
increases access to capital for all FHAapproved mortgagees and lenders. HUD
is clarifying that the general annual
certification requirement for lenders and
mortgagees is applicable to investing
lenders and investing mortgagees. HUD
is also defining Government-Sponsored
Enterprises (GSEs) separately from other
governmental-type entities to ensure
that FHA requirements specific to loan
origination do not apply to GSEs.
Finally, HUD is eliminating obsolete
language related to lender and
mortgagee net worth requirements. This
final rule adopts HUD’s July 18, 2023,
proposed rule with minor revisions.
DATES: Effective: May 23, 2024.
FOR FURTHER INFORMATION CONTACT:
Volky Garcia, Division Director,
Department of Housing and Urban
Development, 451 7th Street SW,
Washington, DC 20410, telephone 202–
402–8229 (this is not a toll-free
number), email Volky.a.garcia@hud.gov.
HUD welcomes and is prepared to
receive calls from individuals who are
deaf or hard of hearing, as well as from
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.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
Current HUD regulations at 24 CFR
part 202, subpart A, establish minimum
standards and requirements for the
BILLING CODE 4710–05–P
PO 00000
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
Sfmt 4700
E:\FR\FM\23APR1.SGM
23APR1
ddrumheller on DSK120RN23PROD with RULES1
Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules and Regulations
Secretary to approve lenders and
mortgagees to participate in FHA’s Title
I and Title II programs. Subpart B
identifies the classes of lenders and
mortgagees eligible to participate in
FHA’s Title I and Title II programs and
outlines additional specific
requirements for participation in the
programs.
In 2010, HUD amended 24 CFR part
202, subpart A, to include investing
lenders and investing mortgagees as a
class of lenders and mortgagees subject
to HUD’s net worth requirements
currently found at § 202.5(n). At the
time the investing lender and investing
mortgagee net worth requirement
change was made in 2010, HUD also
incorporated new financial reporting,
audit, and quality control plan
requirements for investing lenders and
investing mortgagees into various HUD
handbooks; however, no corresponding
updates were made to 24 CFR part 202,
subpart B, to reflect the investing lender
and investing mortgagee requirements.
Additionally, FHA increased the
minimum net worth requirements
applicable to certain classes of lenders
and mortgagees in 24 CFR part 202 in
2010. These new net worth
requirements were phased in over a
period of three years, beginning on May
20, 2010, and becoming fully phased in
by May 20, 2013. The net worth
requirements during that three-year
transition period are now obsolete, but
the phased-in net worth requirements
language remains in HUD’s regulations.
Current HUD regulations at § 202.10
also define the classes of lenders and
mortgagees that qualify as governmental
institutions, Government-Sponsored
Enterprises, public housing agencies,
and State housing agencies. Currently,
various GSEs 1 are included in the
§ 202.10(a) definition along with
Federal, State, or municipal
governmental agencies and Federal
Reserve Banks at § 202.10(a). For several
years, certain GSEs have contended that
they do not have the infrastructure that
other lenders and mortgagees listed in
§ 202.10 have to ensure compliance
with FHA requirements related to loan
and mortgage origination because they
cannot and do not originate loans or
mortgages. FHA has reviewed the
mission and structure of the GSEs and
determined that they should not be
subject to FHA requirements specific to
loan and mortgage origination because
1 The GSEs are the Federal Home Loan Banks, the
Federal Home Loan Mortgage Corporation
(commonly known as Freddie Mac), and the Federal
National Mortgage Association (commonly known
as Fannie Mae).
VerDate Sep<11>2014
16:26 Apr 22, 2024
Jkt 262001
the GSEs do not originate loans or
mortgages.
II. The Proposed Rule
On July 18, 2023, HUD published for
public comment a proposed rule (88 FR
45863) to amend 24 CFR parts 5 and
202, which govern numerous
administrative requirements for
investing lenders and investing
mortgagees. The proposed rule sought to
add investing lenders and investing
mortgagees to the list of entities that
must comply with the uniform financial
reporting standards found in 24 CFR
5.801(a)(5). The rule proposed to adjust
audit and certification requirements for
investing lenders and investing
mortgagees, as well as to delete obsolete
language regarding phased-in net worth
requirements currently found at
§ 202.5(n)(2). In addition, the proposed
rule aimed to clarify that investing
lenders and investing mortgagees
without servicing authority do not have
to implement a written quality control
plan under § 202.5(h).
III. This Final Rule
The final rule adopts the proposed
rule with three changes. First, it makes
a clarifying edit to the language of
§ 202.5(h). In the proposed rule, HUD
sought to clarify existing regulatory
language and exempt investing lenders
and investing mortgagees from the
§ 202.5(h) requirement that they
implement a quality control plan. Public
comments stated that the proposed
language was unclear. In response, HUD
is amending the proposed text of
§ 202.5(h) to clarify the exception for
investing lenders and investing
mortgagees.
The second change adds the word
‘‘investing’’ before the phrase ‘‘lender or
mortgagee’’ throughout § 202.9(b)(4) to
ensure uniformity in § 202.9(b). This
change is not substantive because the
section is limited to investing lenders
and investing mortgagees by the existing
regulatory text and does not change any
auditing, compliance, or reporting
requirements. In addition, this change
will serve to clarify who must submit
audit reports under § 202.9(b)(4).
The third change is a non-substantive
change that revises the first sentence of
§ 202.9(a) to clarify the definition of
investing lender or investing mortgagee.
Specifically, the change adds specific
cross-references that more clearly
identify when an organization is not an
investing lender or investing mortgagee.
IV. Public Comments
The public comment period closed on
September 18, 2023, and HUD received
four distinct comments related to the
PO 00000
Frm 00015
Fmt 4700
Sfmt 4700
30273
proposed rule. The comments were from
Housing Finance Authorities (HFAs), a
nonprofit that works with HFAs, and an
interested individual. A detailed
breakdown of the comments and HUD
responses is provided below.
Support for the proposed annual
certification requirement language in
§ 202.5(m).
Two commenters supported the
proposed amendment to § 202.5(m),
which would require investing lenders
and investing mortgagees to certify that
they have not been refused a license and
have not been sanctioned by any State(s)
in which it will purchase, hold, sell, or
service FHA-approved loans or
mortgages.
HUD Response: HUD appreciates the
stakeholder feedback in support of the
proposed amendment to § 202.5(m).
No concerns with the proposed net
worth requirements in § 202.5(n).
One commenter stated that they have
no concerns with the proposed capital
standards that would require investing
lenders and investing mortgagees to
maintain a certain net worth based on
the size of their portfolios, as detailed
by the proposed language for § 202.5(n).
HUD Response: HUD appreciates the
stakeholder feedback; however, there is
no change to the net worth requirement.
Investing lenders and investing
mortgagees are already required to
comply with the general approval
requirements in § 202.5, including the
net worth requirements in § 202.5(n).
The rule deletes the phased-in net worth
requirements for years 2010 and 2011
currently found at § 202.5(n)(2) because
the requirements are fully phased-in.
The proposed rule could negatively
impact the availability of FHA-approved
mortgages.
One commenter stated that the
proposed rule would reduce the
incentives for investing lenders and
investing mortgagees to originate or
purchase FHA-insured mortgages
because GSEs or other entities that are
eligible to purchase or securitize FHAinsured mortgages would face ‘‘lower
requirements and fees’’ compared to
investing lenders and investing
mortgagees. The commenter stated that
the decrease in demand by investing
lenders and investing mortgagees could
hurt the viability of FHA’s programs and
increase the financial risk to FHA’s
portfolio by centralizing lower quality
loans within one institution. The
commenter suggested that HUD monitor
the impact of the rule on the availability
of FHA-supported mortgages or loans
after implementation and enact
adjustments as needed.
HUD Response: HUD appreciates the
commenter’s concerns but believes the
E:\FR\FM\23APR1.SGM
23APR1
ddrumheller on DSK120RN23PROD with RULES1
30274
Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules and Regulations
impact on availability will be minimal
given the provisions of the rule are
mostly clarifying in nature with limited
changes. This impact is minimal, in
part, because investing lenders and
investing mortgagees are not authorized
to originate Title I loans or Title II
mortgages as described in § 202.9(a). In
§ 202.9, HUD further clarifies the
definition of an investing lender and
investing mortgagee and updates and
clarifies the existing financial statement
and audit requirements. With respect to
revising the GSE definition, the
regulatory text now aligns with the
mission and structure of the GSEs. HUD
will continue to monitor the availability
of FHA-insured mortgages after this rule
becomes effective.
Increased risk to FHA’s portfolio and
the stability of the secondary market.
One commenter stated that the
investing requirements and redefinition
of the GSEs under the proposed rule,
when taken together, could shift many
of the loans and mortgages under Title
I and Title II to GSEs like Fannie Mae
and Freddie Mac. According to the
commenter, this centralization could
increase the risk to FHA’s portfolio as
well as reduce the stability and liquidity
in the secondary housing market. The
commenter recommended that HUD
analyze and more thoroughly consider
the impact of the proposed rule on the
stability and resilience of the secondary
mortgage market, as well as on
consumer protection.
HUD Response: The rule makes
clarifying edits and limited updates to
§§ 202.5, 202.9, and 202.10 with respect
to the definition of an investing lender
and investing mortgagee, investing
lender and investing mortgagee
financial statement and audit
requirements, annual certification
language, and the GSE definition. Given
that the rule is limited to clarifying edits
and minimal updates, HUD does not
foresee that the rule will lead to
investing lenders or investing
mortgagees exiting the secondary
market. Accordingly, HUD does not
anticipate that the rule will lead to a
shift of loans and mortgages to GSEs. In
addition, the rule removes obsolete
language that is no longer applicable
and updates current regulatory citations.
HUD will continue to monitor for any
secondary market impacts after this rule
becomes effective.
The proposed audit requirements are
burdensome and unnecessary.
The commenter said the proposed
rule would lead to HFAs, that are
approved as investing lenders and
investing mortgagees, drawing from
resources dedicated to substantive
projects to ensure compliance with the
VerDate Sep<11>2014
16:26 Apr 22, 2024
Jkt 262001
proposed audit requirement. According
to the commenter, this would occur
because many programs that HFAs
administer do not provide
administrative funds while others
provide insufficient administrative
funds or only enough to barely cover the
costs of administering the programs.
The commenter also said that these
requirements are unnecessary because
HFAs, as well as other State and local
programs, are subject to substantial
public oversight by State auditors, State
executives, and State legislatures. The
commenter stated that this oversight
renders the information sought by HUD
duplicative of existing, publicly
available information.
HUD Response: The Federal
regulations found at § 202.5 exempt
HFAs from the auditing requirements,
which make it unnecessary for HFAs to
draw from resources dedicated to
substantive projects to complete these
requirements. In addition, HFAs are
approved as government mortgagees
subject to the requirements of §§ 202.5
and 202.10, and the government
mortgagee requirements in the HUD
OIG’s HUD Consolidated Audit Guide
and the FHA Single Family Housing
Policy Handbook 4000.1.
HFAs with small portfolios should be
exempt from § 202.9(b)(4)(i).
One commenter requested that HUD
consider excluding from some or all of
the proposed rules HFAs which may
technically own FHA mortgages but
have a diminishing portfolio that is
serviced by an FHA approved
mortgagee. The commenter stated the
proposed § 202.9(b)(4)(i) requirement
that investing lenders and investing
mortgagees provide an analysis of
escrow funds would be difficult because
HFAs do not have access to the required
knowledge or information, which is a
problem that is amplified when the
portfolio is small. The commenter stated
that the information is instead
possessed by the original or underlying
FHA-approved mortgage and should be
provided to HUD under current
regulations.
HUD Response: The § 202.9(b)(4)(i)
requirement pertaining to an analysis of
escrow funds is only applicable to
investing lenders and investing
mortgagees. This section does not apply
to HFAs, which are classified as
government mortgagees. An HFA, as a
government mortgagee, must only
comply with the applicable
requirements in § 202.5, § 202.10, the
HUD Consolidated Audit Guide, and the
FHA Single Family Housing Policy
Handbook 4000.1. This final rule adds
language to the definition of investing
lender or investing mortgagee in to
PO 00000
Frm 00016
Fmt 4700
Sfmt 4700
§ 202.9(a) to more clearly identify
organizations that are not investing
lenders or investing mortgagees.
The proposed quality control plan
language is unclear in § 202.5(h).
Two commenters stated support for
exempting investing lenders and
investing mortgagees from the
requirement that they implement a
quality control plan to ensure
compliance with the regulation.
However, both commenters said the
proposed language was ‘‘difficult to
parse’’ because the clause containing the
phrase ‘‘unless approved under § 202.9
without servicing authority’’ does not
clearly identify that investing lenders
and investing mortgagees are exempt
from the quality control plan
requirement. The commenters suggested
the lack of clarity could be addressed by
moving the phrase ‘‘without servicing
authority’’ from its original clause and
placing it after the opening phrase of
‘‘lenders or mortgagees.’’ One
commenter provided a second solution,
stating the proposed rule could
implement the ‘‘eminently clear’’
language from the preamble.
HUD Response: HUD appreciates the
commenters’ suggested language
revisions to § 202.5(h) and has amended
the final rule to address the
commenters’ suggestions. Specifically,
HUD has moved the phrase ‘‘unless
approved under § 202.9 without
servicing authority’’ to the end of the
sentence. In addition, the sentence has
minor clarifying edits.
Lack of clarity on whether entities
would be regulated under a single GSE
definition and if so, how it would be
done.
A commenter said that the proposed
rule would expand the definition of
GSEs to include any entity that is
chartered by Congress to provide
secondary market liquidity regardless of
whether it is owned or controlled by the
Federal Government. Specifically, the
commenter stated that the proposed
expansion to the definition of GSEs
‘‘could include entities such as Ginnie
Mae or Farmer Mac’’ that currently have
different levels of Federal support than
Fannie Mae and Freddie Mac. The
commenter also stated that ‘‘the
proposed rule does not specify how
these entities would be regulated under
a single definition of GSEs, or whether
there would be a single regulator for all
of them.’’ The commenter said that this
is a problem because the rule does not
specify how these entities would be
regulated by HUD in a uniform manner
or whether there would be a single
regulator for all of them. According to
the commenter, these issues might
create confusion or inconsistency in the
E:\FR\FM\23APR1.SGM
23APR1
ddrumheller on DSK120RN23PROD with RULES1
Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules and Regulations
oversight and regulation of these
entities.
HUD Response: The final rule aims to
distinguish GSEs from all other
governmental institutions and does not
change which entities fall under the
GSE definition. HUD moved the
definition of GSE into § 202.10(b)
without changing the list of entities
meeting the definition. HUD’s definition
of GSE, which is located at § 202.10(a),
includes the Federal Home Loan Banks,
Federal Home Loan Mortgage
Corporation, and Federal National
Mortgage Association. The GSE
definition does not include the
Governmental National Mortgage
Association (Ginnie Mae) or The Federal
Agricultural Mortgage Corporation
(Farmer Mac). The rule will not change
how these entities are regulated but
does make clear that GSEs have limited
authorizations and are not subject to the
FHA requirements that are specific to
loan or mortgage origination.
The proposed GSE definition could
affect the accountability and
transparency of entities like Ginnie Mae
and Farmer Mac.
A commenter stated that the proposed
definition of GSEs could reduce the
accountability and transparency of
Ginnie Mae and Farmer Mac, as well as
their access to Federal subsidies and
support. The commenter said that this
could happen because ‘‘Ginnie Mae has
an explicit guarantee from the Federal
Government that its securities will be
paid, while Farmer Mac has no explicit
guarantee from the Federal Government
but has some tax exemptions and
borrowing privileges.’’ This concern led
the commenter to suggest that HUD
ensure that these entities are subject to
adequate oversight, supervision, and
disclosure by their regulators, Congress,
and the public.
HUD Response: Current regulation
combines governmental institutions and
GSEs in its definition, requiring GSEs to
follow policy specific to loan
origination even though they do not
originate FHA loans. The final rule
defines GSEs separate and apart from all
other governmental institutions and
reduces the administrative burden of
having to adhere to compliance
requirements that are not related to the
functions they are performing. The final
rule makes clear that GSEs have limited
authorizations and are not subject to the
FHA requirements that are specific to
loan or mortgage origination. Also, the
GSE definition does not include Ginnie
Mae and Farmer Mac. This exclusion
means that changes to the GSE
definition will not lead to transparency
issues with Ginnie Mae and Farmer
Mac. HUD does not foresee an impact
VerDate Sep<11>2014
16:26 Apr 22, 2024
Jkt 262001
on the secondary housing market but
will continue to monitor this after the
rule becomes effective.
The proposed GSE definition could
impact Fannie Mae’s and Freddie Mac’s
conservatorship reform.
One commenter stated that the
proposed rule would affect the role and
function of Fannie Mae and Freddie
Mac in the housing finance system,
which is currently undergoing a major
reform process. The commenter said the
reform process aims to end the
conservatorship of Fannie Mae and
Freddie Mac, which has been in place
since 2008, and to establish a more
competitive and efficient secondary
mortgage market. The commenter
warned the proposed rule could have
implications for the timing and outcome
of the reform process, as well as for the
future structure and governance of
Fannie Mae and Freddie Mac.’’ The
commenter suggested that HUD
coordinate with other Federal agencies
to ensure consistency and alignment of
policies and standards related to
housing finance reform.
HUD Response: Certain GSEs, unlike
many other lenders or mortgagees, do
not have the infrastructure available to
ensure compliance with FHA
requirements. The final rule relieves
GSEs of these requirements by defining
GSEs separate and apart from all other
governmental institutions. This
definition makes clear that GSEs have
limited authorizations and does not
amend the programs or services
provided by Fannie Mae and Freddie
Mac. Given that the final rule only
changes compliance requirements to
ensure appropriateness with the limited
nature of authorizations for GSEs, HUD
does not believe the change will impact
the role and function of Fannie Mae and
Freddie Mac in the housing finance
system or the Federal Housing Finance
Agency’s oversight of Fannie Mae and
Freddie Mac.
GSE exclusion based on origination
authority should apply to similarly
situated HFAs.
One commenter stated that the
reasoning provided in the proposed rule
for excluding GSEs from FHA
requirements specific to loan or
mortgage origination, which is that
GSEs cannot originate loans, is
applicable to many HFAs. The
commenter recommended that these
similarly situated HFAs be treated like
GSEs and be exempted from the loan or
mortgage origination requirements as
appropriate.
HUD Response: HUD notes that all
HFAs that currently participate in
FHA’s Title I and Title II programs are
approved as government mortgagees
PO 00000
Frm 00017
Fmt 4700
Sfmt 4700
30275
authorized to perform activities
associated with loan or mortgage
origination. While FHA understands
from the commenters that not all HFAs
currently originate, or are authorized to
originate, HFA lending activities and
authorizations can change over time.
HUD also lacks the information needed
to make an informed and reasoned
judgment on whether it is appropriate to
depart from the existing requirements
for HFAs, as well as how such a change
would be implemented, at this time.
Accordingly, FHA is maintaining the
current framework in § 202.10(a) for
HFAs.
V. Findings and Certifications
Regulatory Review—Executive Orders
12866, 13563, and 14094
Pursuant to 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 Regulation and Regulatory
Review) emphasizes the importance of
quantifying both costs and benefits,
reducing costs, harmonizing rules, and
promoting flexibility. The order also
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 further 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. Executive Order
14094 entitled ‘‘Modernizing Regulatory
Review’’ (hereinafter referred to as the
‘‘Modernizing E.O.’’) amends section
3(f) of Executive Order 12866, among
other things.
As discussed above, this rule defines
GSEs under a separate definition within
§ 202.10. It clarifies the audit, financial
statement, and certification
requirements of investing lenders and
investing mortgagees. It eliminates
obsolete net worth requirements for
investing lenders and investing
mortgagees. This rule was determined
not to be a ‘‘significant regulatory
action’’ as defined in section 3(f) of
Executive Order 12866 as amended by
Executive Order 14094.
E:\FR\FM\23APR1.SGM
23APR1
30276
Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules and Regulations
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 changes in
this rule are limited to defining GSEs
under a separate definition within
§ 202.10; clarifying the audit, financial
statement, and certification
requirements of investing lenders and
investing mortgagees; and eliminating
obsolete language within 24 CFR part
202 regarding lenders and mortgagees
net worth requirements. The minor
nature of changes led HUD to conclude
that the proposed rule was nonsignificant, a finding later affirmed by
OMB. HUD solicited comments from the
public at the proposed rule stage and
received no comments suggesting that it
would impose a significant economic
impact on a substantial number of small
entities. In addition, HUD is only
making a minor clarifying edit to the
final rule in response to public
comments. Accordingly, the
undersigned certifies that the rule will
not have a significant economic impact
on a substantial number of small
entities.
Environmental Impact
This rule is categorically excluded
from environmental review under the
National Environmental Policy Act of
1969 under 24 CFR 50.19(c)(1) because
it does not direct, provide for assistance
or loan and mortgage insurance for, or
otherwise govern or regulate, real
property acquisition, disposition,
rehabilitation, alteration, demolition, or
new construction, or establish, revise or
provide for standards for construction or
construction materials, manufactured
housing, or occupancy.
ddrumheller on DSK120RN23PROD with RULES1
Executive Order 13132, Federalism
Executive Order 13132 (Federalism)
prohibits an agency from publishing any
rule that has federalism implications if
the rule either: (i) imposes substantial
direct compliance costs on State and
local governments and is not required
by statute, or (ii) preempts State law,
unless the agency meets the
consultation and funding requirements
of section 6 of the Executive order. This
rule does not have federalism
implications and does not impose
substantial direct compliance costs on
State and local governments or preempt
State law within the meaning of the
Executive order.
VerDate Sep<11>2014
16:26 Apr 22, 2024
Jkt 262001
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (2 U.S.C. 1531–
1538) (UMRA) establishes requirements
for Federal agencies to assess the effects
of their regulatory actions on State,
local, and Tribal governments, and on
the private sector. This rule does not
impose any Federal mandates on any
State, local, or Tribal governments, or
on the private sector, within the
meaning of the UMRA.
List of Subjects
24 CFR Part 5
Administrative practice and
procedure, Aged, Claims, Crime,
Government contracts, Grant
programs—housing and community
development, Individuals with
disabilities, Intergovernmental relations,
Loan programs—housing and
community development, Low and
moderate income housing, Mortgage
insurance, Penalties, Pets, Public
housing, Rent subsidies, Reporting and
recordkeeping requirements, Social
security, Unemployment compensation,
Wages.
24 CFR Part 202
Administrative practice and
procedure, Home improvement,
Manufactured homes, Mortgage
insurance, Reporting and recordkeeping
requirements.
For the reasons stated in the
preamble, HUD amends 24 CFR parts 5
and 202 as follows:
PART 5—GENERAL HUD PROGRAM
REQUIREMENTS; WAIVERS
1. The authority citation for part 5
continues to read as follows:
■
Authority: 12 U.S.C. 1701x; 42 U.S.C.
1437a, 1437c, 1437f, 1437n, 3535(d); 42
U.S.C. 2000bb et seq.; 34 U.S.C. 12471 et seq.;
Sec. 327, Pub. L. 109–115, 119 Stat. 2396;
E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp.,
p. 258; E.O. 13559, 75 FR 71319, 3 CFR, 2010
Comp., p. 273; E.O. 14015, 86 FR 10007, 3
CFR, 2021 Comp., p. 517.
2. In § 5.801, revise paragraph (a)(5) to
read as follows:
■
§ 5.801 Uniform financial reporting
standards.
(a) * * *
(5) HUD-approved Title I and Title II
supervised, nonsupervised, and
investing lenders and investing
mortgagees.
*
*
*
*
*
PART 202—APPROVAL OF LENDING
INSTITUTIONS AND MORTGAGEES
3. The authority citation for part 202
continues to read as follows:
■
PO 00000
Frm 00018
Fmt 4700
Sfmt 4700
Authority: 12 U.S.C. 1703, 1709, and
1715b; 42 U.S.C. 3535(d).
4. In § 202.5, revise paragraph (h), (m)
introductory text, and (n)(1) and (2), and
remove paragraph (n)(3) to read as
follows:
■
§ 202.5
General approval standards.
*
*
*
*
*
(h) Quality control plan. Lenders or
mortgagees shall implement a written
quality control plan, acceptable to the
Secretary, that assures compliance with
the regulations of this chapter and other
issuances of the Secretary regarding
loan or mortgage origination and
servicing unless the lenders or
mortgagees were approved under
§ 202.9 without servicing authority.
*
*
*
*
*
(m) Reports. Each lender and
mortgagee must submit an annual
certification on a form prescribed by the
Secretary. Upon application for
approval and with each annual
recertification, each lender and
mortgagee must submit a certification
that it has not been refused a license
and has not been sanctioned by any
State or States in which it will originate,
purchase, hold, sell, or service insured
mortgages or Title I loans. In addition,
each mortgagee shall file the following:
*
*
*
*
*
(n) * * *
(1) Applicability. The requirements of
paragraph (n) of this section apply to
approved supervised and nonsupervised
lenders and mortgagees under §§ 202.6
and 202.7, and approved investing
lenders and investing mortgagees under
§ 202.9. For ease of reference, these
institutions are referred to as ‘‘approved
lenders or mortgagees’’ for purposes of
paragraph (n) of this section. These
requirements also apply to applicants
for FHA approval under §§ 202.6, 202.7,
and 202.9. For ease of reference, these
institutions are referred to as
‘‘applicants’’ for purposes of paragraph
(n) of this section.
(2) Requirements—(i) Single family
net worth requirements. Irrespective of
size, each applicant and each approved
lender or mortgagee for participation
solely under the FHA single family
programs shall have a net worth of not
less than $1 million, plus an additional
net worth of one percent of the total
volume, in excess of $25 million, of
FHA single family insured mortgages
originated, underwritten, purchased, or
serviced during the prior fiscal year, up
to a maximum required net worth of
$2.5 million. No less than 20 percent of
the applicant’s or approved lender’s or
mortgagee’s required net worth must be
liquid assets consisting of cash or its
equivalent acceptable to the Secretary.
E:\FR\FM\23APR1.SGM
23APR1
Federal Register / Vol. 89, No. 79 / Tuesday, April 23, 2024 / Rules and Regulations
(ii) Multifamily net worth
requirements. Irrespective of size, each
applicant for approval and each
approved lender or mortgagee for
participation solely under the FHA
multifamily programs shall have a net
worth of not less than $1 million. For
those multifamily approved lenders or
mortgagees that also engage in mortgage
servicing, an additional net worth of one
percent of the total volume, in excess of
$25 million, of FHA multifamily
mortgages originated, purchased, or
serviced during the prior fiscal year, up
to a maximum required net worth of
$2.5 million. For multifamily approved
lenders or mortgagees that do not
perform mortgage servicing, an
additional net worth of one half of one
percent of the total volume, in excess of
$25 million, of FHA multifamily
mortgages originated during the prior
fiscal year, up to a maximum required
net worth of $2.5 million. No less than
20 percent of the applicant’s or
approved lender’s or mortgagee’s
required net worth must be liquid assets
consisting of cash or its equivalent
acceptable to the Secretary.
(iii) Dual participation net worth
requirements. Irrespective of size, each
applicant for approval and each
approved lender or mortgagee that is a
participant in both FHA single family
and multifamily programs must meet
the net worth requirements as set forth
in paragraph (n)(2)(i) of this section.
*
*
*
*
*
6. In § 202.9:
a. Revise the section heading and
paragraph (a);
■ b. In paragraphs (b) introductory text
and (b)(1) and (2), remove the words
‘‘investing lender or mortgagee’’ and
add, in their place, the words ‘‘investing
lender or investing mortgagee’’; and
■ c. Revise paragraph (b)(3) and add
paragraph (b)(4).
The revisions and addition read as
follows:
■
■
ddrumheller on DSK120RN23PROD with RULES1
§ 202.9 Investing lenders and investing
mortgagees.
(a) Definition. An investing lender or
investing mortgagee is an organization
that is not approved as a supervised
lender or mortgagee under § 202.6, a
nonsupervised lender or mortgagee
under § 202.7, or a governmental or
similar institution under § 202.10. An
investing lender or investing mortgagee
may purchase, hold, or sell Title I loans
or Title II mortgages, respectively, but
may not originate Title I loans or Title
II mortgages in its own name or submit
applications for the insurance of
mortgages. An investing lender or
investing mortgagee may not service
VerDate Sep<11>2014
16:26 Apr 22, 2024
Jkt 262001
Title I loans or Title II mortgages
without prior approval of the Secretary.
(b) * * *
(3) Fidelity bond. An investing lender
or investing mortgagee shall maintain
fidelity bond coverage and errors and
omissions insurance acceptable to the
Secretary and in an amount required by
the Secretary, or alternative insurance
coverage approved by the Secretary, that
assures the faithful performance of the
responsibilities of the mortgagee.
(4) Audit report. An investing lender
or mortgagee must comply with the
financial reporting requirements in24
CFR part 5, subpart H. Audit reports
shall be based on audits performed by
a certified public accountant, or by an
independent public accountant licensed
by a regulatory authority of a State or
other political subdivision of the United
States on or before December 31, 1970.
Audit reports shall include:
(i) A financial statement in a form
acceptable to the Secretary, including a
balance sheet and a statement of
operations and retained earnings, a
statement of cash flows, an analysis of
the investing lender’s or mortgagee’s net
worth adjusted to reflect only assets
acceptable to the Secretary, and an
analysis of escrow funds; and
(ii) Such other financial information
as the Secretary may require to
determine the accuracy and validity of
the audit report.
■ 7. In § 202.10:
■ a. Revise paragraph (a);
■ b. Remove paragraph (c);
■ c. Redesignate paragraph (b) as
paragraph (c); and
■ d. Add new paragraphs (b) and (d).
The revision and additions read as
follows:
§ 202.10 Governmental institutions,
Government-Sponsored Enterprises, public
housing agencies and State housing
agencies.
(a) Federal, state, and municipal
governmental agencies and Federal
Reserve Banks. A Federal, State, or
municipal government agency or a
Federal Reserve Bank may be an
approved lender or mortgagee. A
mortgagee approved under this
paragraph (a) may submit applications
for Title II mortgage insurance. A lender
or mortgagee approved under this
paragraph (a) may originate, purchase,
service, or sell Title I loans and insured
mortgages, respectively. A mortgagee or
lender approved under this paragraph
(a) is not required to meet a net worth
requirement. A lender or mortgagee
shall maintain fidelity bond coverage
and errors and omissions insurance
acceptable to the Secretary and in an
amount required by the Secretary, or
PO 00000
Frm 00019
Fmt 4700
Sfmt 4700
30277
alternative insurance coverage approved
by the Secretary, that assures the
faithful performance of the
responsibilities of the mortgagee. There
are no additional requirements beyond
the general approval requirements in
§ 202.5 or as provided under paragraph
(c) of this section.
(b) Government-Sponsored
Enterprises. The Government-Sponsored
Enterprises are the Federal Home Loan
Banks, Federal Home Loan Mortgage
Corporation, and Federal National
Mortgage Association. A GovernmentSponsored Enterprise may be an
approved lender or mortgagee. A lender
or mortgagee approved under this
paragraph (b) may purchase, service, or
sell Title I loans and insured mortgages,
respectively. A mortgagee or lender
approved under this paragraph (b) is not
required to meet a net worth
requirement. There are no additional
requirements beyond the general
approval requirements in § 202.5.
*
*
*
*
*
(d) Audit requirements. The insuring
of loans and mortgages under the Act
constitutes ‘‘Federal financial
assistance’’ (as defined in 2 CFR 200.1)
for purposes of audit requirements set
out in 2 CFR part 200, subpart F. NonFederal entities (as defined in 2 CFR
200.1) that receive insurance as lenders
and mortgagees shall conduct audits in
accordance with 2 CFR part 200, subpart
F.
Julia R. Gordon,
Assistant Secretary for Housing—Federal
Housing Commissioner.
[FR Doc. 2024–08648 Filed 4–22–24; 8:45 am]
BILLING CODE 4210–67–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 180
[EPA–HQ–OPP–2023–0077; FRL–11855–01–
OCSPP]
Cyclaniliprole; Pesticide Tolerance
Environmental Protection
Agency (EPA).
ACTION: Final rule.
AGENCY:
This regulation establishes a
tolerance for residues of cyclaniliprole
in or on Vegetable, cucurbit, group 9.
Interregional Research Project Number 4
(IR–4) requested this tolerance under
the Federal Food, Drug, and Cosmetic
Act (FFDCA).
DATES: This regulation is effective April
23, 2024. Objections and requests for
hearings must be received on or before
June 24, 2024, and must be filed in
SUMMARY:
E:\FR\FM\23APR1.SGM
23APR1
]]>Agencies
[Federal Register Volume 89, Number 79 (Tuesday, April 23, 2024)]
[Rules and Regulations]
[Pages 30272-30277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08648]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5 and 202
[Docket No. FR-6291-F-02]
RIN 2502-AJ60
Revision of Investing Lenders and Investing Mortgagees
Requirements and Expansion of Government-Sponsored Enterprises
Definition
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, Department of Housing and Urban Development (HUD).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule amends the requirements for investing lenders and
investing mortgagees to gain or maintain their status as a Federal
Housing Administration (FHA) approved lender or mortgagee. This
revision makes FHA's approval requirements consistent with investing
mortgagees' and investing lenders' risk, reduces barriers to FHA
approval for new investing mortgagees and investing lenders, and
increases access to capital for all FHA-approved mortgagees and
lenders. HUD is clarifying that the general annual certification
requirement for lenders and mortgagees is applicable to investing
lenders and investing mortgagees. HUD is also defining Government-
Sponsored Enterprises (GSEs) separately from other governmental-type
entities to ensure that FHA requirements specific to loan origination
do not apply to GSEs. Finally, HUD is eliminating obsolete language
related to lender and mortgagee net worth requirements. This final rule
adopts HUD's July 18, 2023, proposed rule with minor revisions.
DATES: Effective: May 23, 2024.
FOR FURTHER INFORMATION CONTACT: Volky Garcia, Division Director,
Department of Housing and Urban Development, 451 7th Street SW,
Washington, DC 20410, telephone 202-402-8229 (this is not a toll-free
number), email [email protected]. HUD welcomes and is prepared to
receive calls from individuals who are deaf or hard of hearing, as well
as from 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.
SUPPLEMENTARY INFORMATION:
I. Background
Current HUD regulations at 24 CFR part 202, subpart A, establish
minimum standards and requirements for the
[[Page 30273]]
Secretary to approve lenders and mortgagees to participate in FHA's
Title I and Title II programs. Subpart B identifies the classes of
lenders and mortgagees eligible to participate in FHA's Title I and
Title II programs and outlines additional specific requirements for
participation in the programs.
In 2010, HUD amended 24 CFR part 202, subpart A, to include
investing lenders and investing mortgagees as a class of lenders and
mortgagees subject to HUD's net worth requirements currently found at
Sec. 202.5(n). At the time the investing lender and investing
mortgagee net worth requirement change was made in 2010, HUD also
incorporated new financial reporting, audit, and quality control plan
requirements for investing lenders and investing mortgagees into
various HUD handbooks; however, no corresponding updates were made to
24 CFR part 202, subpart B, to reflect the investing lender and
investing mortgagee requirements. Additionally, FHA increased the
minimum net worth requirements applicable to certain classes of lenders
and mortgagees in 24 CFR part 202 in 2010. These new net worth
requirements were phased in over a period of three years, beginning on
May 20, 2010, and becoming fully phased in by May 20, 2013. The net
worth requirements during that three-year transition period are now
obsolete, but the phased-in net worth requirements language remains in
HUD's regulations.
Current HUD regulations at Sec. 202.10 also define the classes of
lenders and mortgagees that qualify as governmental institutions,
Government-Sponsored Enterprises, public housing agencies, and State
housing agencies. Currently, various GSEs \1\ are included in the Sec.
202.10(a) definition along with Federal, State, or municipal
governmental agencies and Federal Reserve Banks at Sec. 202.10(a). For
several years, certain GSEs have contended that they do not have the
infrastructure that other lenders and mortgagees listed in Sec. 202.10
have to ensure compliance with FHA requirements related to loan and
mortgage origination because they cannot and do not originate loans or
mortgages. FHA has reviewed the mission and structure of the GSEs and
determined that they should not be subject to FHA requirements specific
to loan and mortgage origination because the GSEs do not originate
loans or mortgages.
---------------------------------------------------------------------------
\1\ The GSEs are the Federal Home Loan Banks, the Federal Home
Loan Mortgage Corporation (commonly known as Freddie Mac), and the
Federal National Mortgage Association (commonly known as Fannie
Mae).
---------------------------------------------------------------------------
II. The Proposed Rule
On July 18, 2023, HUD published for public comment a proposed rule
(88 FR 45863) to amend 24 CFR parts 5 and 202, which govern numerous
administrative requirements for investing lenders and investing
mortgagees. The proposed rule sought to add investing lenders and
investing mortgagees to the list of entities that must comply with the
uniform financial reporting standards found in 24 CFR 5.801(a)(5). The
rule proposed to adjust audit and certification requirements for
investing lenders and investing mortgagees, as well as to delete
obsolete language regarding phased-in net worth requirements currently
found at Sec. 202.5(n)(2). In addition, the proposed rule aimed to
clarify that investing lenders and investing mortgagees without
servicing authority do not have to implement a written quality control
plan under Sec. 202.5(h).
III. This Final Rule
The final rule adopts the proposed rule with three changes. First,
it makes a clarifying edit to the language of Sec. 202.5(h). In the
proposed rule, HUD sought to clarify existing regulatory language and
exempt investing lenders and investing mortgagees from the Sec.
202.5(h) requirement that they implement a quality control plan. Public
comments stated that the proposed language was unclear. In response,
HUD is amending the proposed text of Sec. 202.5(h) to clarify the
exception for investing lenders and investing mortgagees.
The second change adds the word ``investing'' before the phrase
``lender or mortgagee'' throughout Sec. 202.9(b)(4) to ensure
uniformity in Sec. 202.9(b). This change is not substantive because
the section is limited to investing lenders and investing mortgagees by
the existing regulatory text and does not change any auditing,
compliance, or reporting requirements. In addition, this change will
serve to clarify who must submit audit reports under Sec. 202.9(b)(4).
The third change is a non-substantive change that revises the first
sentence of Sec. 202.9(a) to clarify the definition of investing
lender or investing mortgagee. Specifically, the change adds specific
cross-references that more clearly identify when an organization is not
an investing lender or investing mortgagee.
IV. Public Comments
The public comment period closed on September 18, 2023, and HUD
received four distinct comments related to the proposed rule. The
comments were from Housing Finance Authorities (HFAs), a nonprofit that
works with HFAs, and an interested individual. A detailed breakdown of
the comments and HUD responses is provided below.
Support for the proposed annual certification requirement language
in Sec. 202.5(m).
Two commenters supported the proposed amendment to Sec. 202.5(m),
which would require investing lenders and investing mortgagees to
certify that they have not been refused a license and have not been
sanctioned by any State(s) in which it will purchase, hold, sell, or
service FHA-approved loans or mortgages.
HUD Response: HUD appreciates the stakeholder feedback in support
of the proposed amendment to Sec. 202.5(m).
No concerns with the proposed net worth requirements in Sec.
202.5(n).
One commenter stated that they have no concerns with the proposed
capital standards that would require investing lenders and investing
mortgagees to maintain a certain net worth based on the size of their
portfolios, as detailed by the proposed language for Sec. 202.5(n).
HUD Response: HUD appreciates the stakeholder feedback; however,
there is no change to the net worth requirement. Investing lenders and
investing mortgagees are already required to comply with the general
approval requirements in Sec. 202.5, including the net worth
requirements in Sec. 202.5(n). The rule deletes the phased-in net
worth requirements for years 2010 and 2011 currently found at Sec.
202.5(n)(2) because the requirements are fully phased-in.
The proposed rule could negatively impact the availability of FHA-
approved mortgages.
One commenter stated that the proposed rule would reduce the
incentives for investing lenders and investing mortgagees to originate
or purchase FHA-insured mortgages because GSEs or other entities that
are eligible to purchase or securitize FHA-insured mortgages would face
``lower requirements and fees'' compared to investing lenders and
investing mortgagees. The commenter stated that the decrease in demand
by investing lenders and investing mortgagees could hurt the viability
of FHA's programs and increase the financial risk to FHA's portfolio by
centralizing lower quality loans within one institution. The commenter
suggested that HUD monitor the impact of the rule on the availability
of FHA-supported mortgages or loans after implementation and enact
adjustments as needed.
HUD Response: HUD appreciates the commenter's concerns but believes
the
[[Page 30274]]
impact on availability will be minimal given the provisions of the rule
are mostly clarifying in nature with limited changes. This impact is
minimal, in part, because investing lenders and investing mortgagees
are not authorized to originate Title I loans or Title II mortgages as
described in Sec. 202.9(a). In Sec. 202.9, HUD further clarifies the
definition of an investing lender and investing mortgagee and updates
and clarifies the existing financial statement and audit requirements.
With respect to revising the GSE definition, the regulatory text now
aligns with the mission and structure of the GSEs. HUD will continue to
monitor the availability of FHA-insured mortgages after this rule
becomes effective.
Increased risk to FHA's portfolio and the stability of the
secondary market.
One commenter stated that the investing requirements and
redefinition of the GSEs under the proposed rule, when taken together,
could shift many of the loans and mortgages under Title I and Title II
to GSEs like Fannie Mae and Freddie Mac. According to the commenter,
this centralization could increase the risk to FHA's portfolio as well
as reduce the stability and liquidity in the secondary housing market.
The commenter recommended that HUD analyze and more thoroughly consider
the impact of the proposed rule on the stability and resilience of the
secondary mortgage market, as well as on consumer protection.
HUD Response: The rule makes clarifying edits and limited updates
to Sec. Sec. 202.5, 202.9, and 202.10 with respect to the definition
of an investing lender and investing mortgagee, investing lender and
investing mortgagee financial statement and audit requirements, annual
certification language, and the GSE definition. Given that the rule is
limited to clarifying edits and minimal updates, HUD does not foresee
that the rule will lead to investing lenders or investing mortgagees
exiting the secondary market. Accordingly, HUD does not anticipate that
the rule will lead to a shift of loans and mortgages to GSEs. In
addition, the rule removes obsolete language that is no longer
applicable and updates current regulatory citations. HUD will continue
to monitor for any secondary market impacts after this rule becomes
effective.
The proposed audit requirements are burdensome and unnecessary.
The commenter said the proposed rule would lead to HFAs, that are
approved as investing lenders and investing mortgagees, drawing from
resources dedicated to substantive projects to ensure compliance with
the proposed audit requirement. According to the commenter, this would
occur because many programs that HFAs administer do not provide
administrative funds while others provide insufficient administrative
funds or only enough to barely cover the costs of administering the
programs. The commenter also said that these requirements are
unnecessary because HFAs, as well as other State and local programs,
are subject to substantial public oversight by State auditors, State
executives, and State legislatures. The commenter stated that this
oversight renders the information sought by HUD duplicative of
existing, publicly available information.
HUD Response: The Federal regulations found at Sec. 202.5 exempt
HFAs from the auditing requirements, which make it unnecessary for HFAs
to draw from resources dedicated to substantive projects to complete
these requirements. In addition, HFAs are approved as government
mortgagees subject to the requirements of Sec. Sec. 202.5 and 202.10,
and the government mortgagee requirements in the HUD OIG's HUD
Consolidated Audit Guide and the FHA Single Family Housing Policy
Handbook 4000.1.
HFAs with small portfolios should be exempt from Sec.
202.9(b)(4)(i).
One commenter requested that HUD consider excluding from some or
all of the proposed rules HFAs which may technically own FHA mortgages
but have a diminishing portfolio that is serviced by an FHA approved
mortgagee. The commenter stated the proposed Sec. 202.9(b)(4)(i)
requirement that investing lenders and investing mortgagees provide an
analysis of escrow funds would be difficult because HFAs do not have
access to the required knowledge or information, which is a problem
that is amplified when the portfolio is small. The commenter stated
that the information is instead possessed by the original or underlying
FHA-approved mortgage and should be provided to HUD under current
regulations.
HUD Response: The Sec. 202.9(b)(4)(i) requirement pertaining to an
analysis of escrow funds is only applicable to investing lenders and
investing mortgagees. This section does not apply to HFAs, which are
classified as government mortgagees. An HFA, as a government mortgagee,
must only comply with the applicable requirements in Sec. 202.5, Sec.
202.10, the HUD Consolidated Audit Guide, and the FHA Single Family
Housing Policy Handbook 4000.1. This final rule adds language to the
definition of investing lender or investing mortgagee in to Sec.
202.9(a) to more clearly identify organizations that are not investing
lenders or investing mortgagees.
The proposed quality control plan language is unclear in Sec.
202.5(h).
Two commenters stated support for exempting investing lenders and
investing mortgagees from the requirement that they implement a quality
control plan to ensure compliance with the regulation. However, both
commenters said the proposed language was ``difficult to parse''
because the clause containing the phrase ``unless approved under Sec.
202.9 without servicing authority'' does not clearly identify that
investing lenders and investing mortgagees are exempt from the quality
control plan requirement. The commenters suggested the lack of clarity
could be addressed by moving the phrase ``without servicing authority''
from its original clause and placing it after the opening phrase of
``lenders or mortgagees.'' One commenter provided a second solution,
stating the proposed rule could implement the ``eminently clear''
language from the preamble.
HUD Response: HUD appreciates the commenters' suggested language
revisions to Sec. 202.5(h) and has amended the final rule to address
the commenters' suggestions. Specifically, HUD has moved the phrase
``unless approved under Sec. 202.9 without servicing authority'' to
the end of the sentence. In addition, the sentence has minor clarifying
edits.
Lack of clarity on whether entities would be regulated under a
single GSE definition and if so, how it would be done.
A commenter said that the proposed rule would expand the definition
of GSEs to include any entity that is chartered by Congress to provide
secondary market liquidity regardless of whether it is owned or
controlled by the Federal Government. Specifically, the commenter
stated that the proposed expansion to the definition of GSEs ``could
include entities such as Ginnie Mae or Farmer Mac'' that currently have
different levels of Federal support than Fannie Mae and Freddie Mac.
The commenter also stated that ``the proposed rule does not specify how
these entities would be regulated under a single definition of GSEs, or
whether there would be a single regulator for all of them.'' The
commenter said that this is a problem because the rule does not specify
how these entities would be regulated by HUD in a uniform manner or
whether there would be a single regulator for all of them. According to
the commenter, these issues might create confusion or inconsistency in
the
[[Page 30275]]
oversight and regulation of these entities.
HUD Response: The final rule aims to distinguish GSEs from all
other governmental institutions and does not change which entities fall
under the GSE definition. HUD moved the definition of GSE into Sec.
202.10(b) without changing the list of entities meeting the definition.
HUD's definition of GSE, which is located at Sec. 202.10(a), includes
the Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
and Federal National Mortgage Association. The GSE definition does not
include the Governmental National Mortgage Association (Ginnie Mae) or
The Federal Agricultural Mortgage Corporation (Farmer Mac). The rule
will not change how these entities are regulated but does make clear
that GSEs have limited authorizations and are not subject to the FHA
requirements that are specific to loan or mortgage origination.
The proposed GSE definition could affect the accountability and
transparency of entities like Ginnie Mae and Farmer Mac.
A commenter stated that the proposed definition of GSEs could
reduce the accountability and transparency of Ginnie Mae and Farmer
Mac, as well as their access to Federal subsidies and support. The
commenter said that this could happen because ``Ginnie Mae has an
explicit guarantee from the Federal Government that its securities will
be paid, while Farmer Mac has no explicit guarantee from the Federal
Government but has some tax exemptions and borrowing privileges.'' This
concern led the commenter to suggest that HUD ensure that these
entities are subject to adequate oversight, supervision, and disclosure
by their regulators, Congress, and the public.
HUD Response: Current regulation combines governmental institutions
and GSEs in its definition, requiring GSEs to follow policy specific to
loan origination even though they do not originate FHA loans. The final
rule defines GSEs separate and apart from all other governmental
institutions and reduces the administrative burden of having to adhere
to compliance requirements that are not related to the functions they
are performing. The final rule makes clear that GSEs have limited
authorizations and are not subject to the FHA requirements that are
specific to loan or mortgage origination. Also, the GSE definition does
not include Ginnie Mae and Farmer Mac. This exclusion means that
changes to the GSE definition will not lead to transparency issues with
Ginnie Mae and Farmer Mac. HUD does not foresee an impact on the
secondary housing market but will continue to monitor this after the
rule becomes effective.
The proposed GSE definition could impact Fannie Mae's and Freddie
Mac's conservatorship reform.
One commenter stated that the proposed rule would affect the role
and function of Fannie Mae and Freddie Mac in the housing finance
system, which is currently undergoing a major reform process. The
commenter said the reform process aims to end the conservatorship of
Fannie Mae and Freddie Mac, which has been in place since 2008, and to
establish a more competitive and efficient secondary mortgage market.
The commenter warned the proposed rule could have implications for the
timing and outcome of the reform process, as well as for the future
structure and governance of Fannie Mae and Freddie Mac.'' The commenter
suggested that HUD coordinate with other Federal agencies to ensure
consistency and alignment of policies and standards related to housing
finance reform.
HUD Response: Certain GSEs, unlike many other lenders or
mortgagees, do not have the infrastructure available to ensure
compliance with FHA requirements. The final rule relieves GSEs of these
requirements by defining GSEs separate and apart from all other
governmental institutions. This definition makes clear that GSEs have
limited authorizations and does not amend the programs or services
provided by Fannie Mae and Freddie Mac. Given that the final rule only
changes compliance requirements to ensure appropriateness with the
limited nature of authorizations for GSEs, HUD does not believe the
change will impact the role and function of Fannie Mae and Freddie Mac
in the housing finance system or the Federal Housing Finance Agency's
oversight of Fannie Mae and Freddie Mac.
GSE exclusion based on origination authority should apply to
similarly situated HFAs.
One commenter stated that the reasoning provided in the proposed
rule for excluding GSEs from FHA requirements specific to loan or
mortgage origination, which is that GSEs cannot originate loans, is
applicable to many HFAs. The commenter recommended that these similarly
situated HFAs be treated like GSEs and be exempted from the loan or
mortgage origination requirements as appropriate.
HUD Response: HUD notes that all HFAs that currently participate in
FHA's Title I and Title II programs are approved as government
mortgagees authorized to perform activities associated with loan or
mortgage origination. While FHA understands from the commenters that
not all HFAs currently originate, or are authorized to originate, HFA
lending activities and authorizations can change over time. HUD also
lacks the information needed to make an informed and reasoned judgment
on whether it is appropriate to depart from the existing requirements
for HFAs, as well as how such a change would be implemented, at this
time. Accordingly, FHA is maintaining the current framework in Sec.
202.10(a) for HFAs.
V. Findings and Certifications
Regulatory Review--Executive Orders 12866, 13563, and 14094
Pursuant to 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 Regulation and Regulatory Review) emphasizes the
importance of quantifying both costs and benefits, reducing costs,
harmonizing rules, and promoting flexibility. The order also 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 further 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. Executive Order 14094 entitled ``Modernizing
Regulatory Review'' (hereinafter referred to as the ``Modernizing
E.O.'') amends section 3(f) of Executive Order 12866, among other
things.
As discussed above, this rule defines GSEs under a separate
definition within Sec. 202.10. It clarifies the audit, financial
statement, and certification requirements of investing lenders and
investing mortgagees. It eliminates obsolete net worth requirements for
investing lenders and investing mortgagees. This rule was determined
not to be a ``significant regulatory action'' as defined in section
3(f) of Executive Order 12866 as amended by Executive Order 14094.
[[Page 30276]]
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 changes in this rule are limited to defining GSEs under a separate
definition within Sec. 202.10; clarifying the audit, financial
statement, and certification requirements of investing lenders and
investing mortgagees; and eliminating obsolete language within 24 CFR
part 202 regarding lenders and mortgagees net worth requirements. The
minor nature of changes led HUD to conclude that the proposed rule was
non-significant, a finding later affirmed by OMB. HUD solicited
comments from the public at the proposed rule stage and received no
comments suggesting that it would impose a significant economic impact
on a substantial number of small entities. In addition, HUD is only
making a minor clarifying edit to the final rule in response to public
comments. Accordingly, the undersigned certifies that the rule will not
have a significant economic impact on a substantial number of small
entities.
Environmental Impact
This rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 under 24 CFR 50.19(c)(1)
because it does not direct, provide for assistance or loan and mortgage
insurance for, or otherwise govern or regulate, real property
acquisition, disposition, rehabilitation, alteration, demolition, or
new construction, or establish, revise or provide for standards for
construction or construction materials, manufactured housing, or
occupancy.
Executive Order 13132, Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule
either: (i) imposes substantial direct compliance costs on State and
local governments and is not required by statute, or (ii) preempts
State law, unless the agency meets the consultation and funding
requirements of section 6 of the Executive order. This rule does not
have federalism implications and does not impose substantial direct
compliance costs on State and local governments or preempt State law
within the meaning of the Executive order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for Federal agencies to
assess the effects of their regulatory actions on State, local, and
Tribal governments, and on the private sector. This rule does not
impose any Federal mandates on any State, local, or Tribal governments,
or on the private sector, within the meaning of the UMRA.
List of Subjects
24 CFR Part 5
Administrative practice and procedure, Aged, Claims, Crime,
Government contracts, Grant programs--housing and community
development, Individuals with disabilities, Intergovernmental
relations, Loan programs--housing and community development, Low and
moderate income housing, Mortgage insurance, Penalties, Pets, Public
housing, Rent subsidies, Reporting and recordkeeping requirements,
Social security, Unemployment compensation, Wages.
24 CFR Part 202
Administrative practice and procedure, Home improvement,
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements.
For the reasons stated in the preamble, HUD amends 24 CFR parts 5
and 202 as follows:
PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS
0
1. The authority citation for part 5 continues to read as follows:
Authority: 12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437f,
1437n, 3535(d); 42 U.S.C. 2000bb et seq.; 34 U.S.C. 12471 et seq.;
Sec. 327, Pub. L. 109-115, 119 Stat. 2396; E.O. 13279, 67 FR 77141,
3 CFR, 2002 Comp., p. 258; E.O. 13559, 75 FR 71319, 3 CFR, 2010
Comp., p. 273; E.O. 14015, 86 FR 10007, 3 CFR, 2021 Comp., p. 517.
0
2. In Sec. 5.801, revise paragraph (a)(5) to read as follows:
Sec. 5.801 Uniform financial reporting standards.
(a) * * *
(5) HUD-approved Title I and Title II supervised, nonsupervised,
and investing lenders and investing mortgagees.
* * * * *
PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES
0
3. The authority citation for part 202 continues to read as follows:
Authority: 12 U.S.C. 1703, 1709, and 1715b; 42 U.S.C. 3535(d).
0
4. In Sec. 202.5, revise paragraph (h), (m) introductory text, and
(n)(1) and (2), and remove paragraph (n)(3) to read as follows:
Sec. 202.5 General approval standards.
* * * * *
(h) Quality control plan. Lenders or mortgagees shall implement a
written quality control plan, acceptable to the Secretary, that assures
compliance with the regulations of this chapter and other issuances of
the Secretary regarding loan or mortgage origination and servicing
unless the lenders or mortgagees were approved under Sec. 202.9
without servicing authority.
* * * * *
(m) Reports. Each lender and mortgagee must submit an annual
certification on a form prescribed by the Secretary. Upon application
for approval and with each annual recertification, each lender and
mortgagee must submit a certification that it has not been refused a
license and has not been sanctioned by any State or States in which it
will originate, purchase, hold, sell, or service insured mortgages or
Title I loans. In addition, each mortgagee shall file the following:
* * * * *
(n) * * *
(1) Applicability. The requirements of paragraph (n) of this
section apply to approved supervised and nonsupervised lenders and
mortgagees under Sec. Sec. 202.6 and 202.7, and approved investing
lenders and investing mortgagees under Sec. 202.9. For ease of
reference, these institutions are referred to as ``approved lenders or
mortgagees'' for purposes of paragraph (n) of this section. These
requirements also apply to applicants for FHA approval under Sec. Sec.
202.6, 202.7, and 202.9. For ease of reference, these institutions are
referred to as ``applicants'' for purposes of paragraph (n) of this
section.
(2) Requirements--(i) Single family net worth requirements.
Irrespective of size, each applicant and each approved lender or
mortgagee for participation solely under the FHA single family programs
shall have a net worth of not less than $1 million, plus an additional
net worth of one percent of the total volume, in excess of $25 million,
of FHA single family insured mortgages originated, underwritten,
purchased, or serviced during the prior fiscal year, up to a maximum
required net worth of $2.5 million. No less than 20 percent of the
applicant's or approved lender's or mortgagee's required net worth must
be liquid assets consisting of cash or its equivalent acceptable to the
Secretary.
[[Page 30277]]
(ii) Multifamily net worth requirements. Irrespective of size, each
applicant for approval and each approved lender or mortgagee for
participation solely under the FHA multifamily programs shall have a
net worth of not less than $1 million. For those multifamily approved
lenders or mortgagees that also engage in mortgage servicing, an
additional net worth of one percent of the total volume, in excess of
$25 million, of FHA multifamily mortgages originated, purchased, or
serviced during the prior fiscal year, up to a maximum required net
worth of $2.5 million. For multifamily approved lenders or mortgagees
that do not perform mortgage servicing, an additional net worth of one
half of one percent of the total volume, in excess of $25 million, of
FHA multifamily mortgages originated during the prior fiscal year, up
to a maximum required net worth of $2.5 million. No less than 20
percent of the applicant's or approved lender's or mortgagee's required
net worth must be liquid assets consisting of cash or its equivalent
acceptable to the Secretary.
(iii) Dual participation net worth requirements. Irrespective of
size, each applicant for approval and each approved lender or mortgagee
that is a participant in both FHA single family and multifamily
programs must meet the net worth requirements as set forth in paragraph
(n)(2)(i) of this section.
* * * * *
0
6. In Sec. 202.9:
0
a. Revise the section heading and paragraph (a);
0
b. In paragraphs (b) introductory text and (b)(1) and (2), remove the
words ``investing lender or mortgagee'' and add, in their place, the
words ``investing lender or investing mortgagee''; and
0
c. Revise paragraph (b)(3) and add paragraph (b)(4).
The revisions and addition read as follows:
Sec. 202.9 Investing lenders and investing mortgagees.
(a) Definition. An investing lender or investing mortgagee is an
organization that is not approved as a supervised lender or mortgagee
under Sec. 202.6, a nonsupervised lender or mortgagee under Sec.
202.7, or a governmental or similar institution under Sec. 202.10. An
investing lender or investing mortgagee may purchase, hold, or sell
Title I loans or Title II mortgages, respectively, but may not
originate Title I loans or Title II mortgages in its own name or submit
applications for the insurance of mortgages. An investing lender or
investing mortgagee may not service Title I loans or Title II mortgages
without prior approval of the Secretary.
(b) * * *
(3) Fidelity bond. An investing lender or investing mortgagee shall
maintain fidelity bond coverage and errors and omissions insurance
acceptable to the Secretary and in an amount required by the Secretary,
or alternative insurance coverage approved by the Secretary, that
assures the faithful performance of the responsibilities of the
mortgagee.
(4) Audit report. An investing lender or mortgagee must comply with
the financial reporting requirements in24 CFR part 5, subpart H. Audit
reports shall be based on audits performed by a certified public
accountant, or by an independent public accountant licensed by a
regulatory authority of a State or other political subdivision of the
United States on or before December 31, 1970. Audit reports shall
include:
(i) A financial statement in a form acceptable to the Secretary,
including a balance sheet and a statement of operations and retained
earnings, a statement of cash flows, an analysis of the investing
lender's or mortgagee's net worth adjusted to reflect only assets
acceptable to the Secretary, and an analysis of escrow funds; and
(ii) Such other financial information as the Secretary may require
to determine the accuracy and validity of the audit report.
0
7. In Sec. 202.10:
0
a. Revise paragraph (a);
0
b. Remove paragraph (c);
0
c. Redesignate paragraph (b) as paragraph (c); and
0
d. Add new paragraphs (b) and (d).
The revision and additions read as follows:
Sec. 202.10 Governmental institutions, Government-Sponsored
Enterprises, public housing agencies and State housing agencies.
(a) Federal, state, and municipal governmental agencies and Federal
Reserve Banks. A Federal, State, or municipal government agency or a
Federal Reserve Bank may be an approved lender or mortgagee. A
mortgagee approved under this paragraph (a) may submit applications for
Title II mortgage insurance. A lender or mortgagee approved under this
paragraph (a) may originate, purchase, service, or sell Title I loans
and insured mortgages, respectively. A mortgagee or lender approved
under this paragraph (a) is not required to meet a net worth
requirement. A lender or mortgagee shall maintain fidelity bond
coverage and errors and omissions insurance acceptable to the Secretary
and in an amount required by the Secretary, or alternative insurance
coverage approved by the Secretary, that assures the faithful
performance of the responsibilities of the mortgagee. There are no
additional requirements beyond the general approval requirements in
Sec. 202.5 or as provided under paragraph (c) of this section.
(b) Government-Sponsored Enterprises. The Government-Sponsored
Enterprises are the Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, and Federal National Mortgage Association. A Government-
Sponsored Enterprise may be an approved lender or mortgagee. A lender
or mortgagee approved under this paragraph (b) may purchase, service,
or sell Title I loans and insured mortgages, respectively. A mortgagee
or lender approved under this paragraph (b) is not required to meet a
net worth requirement. There are no additional requirements beyond the
general approval requirements in Sec. 202.5.
* * * * *
(d) Audit requirements. The insuring of loans and mortgages under
the Act constitutes ``Federal financial assistance'' (as defined in 2
CFR 200.1) for purposes of audit requirements set out in 2 CFR part
200, subpart F. Non-Federal entities (as defined in 2 CFR 200.1) that
receive insurance as lenders and mortgagees shall conduct audits in
accordance with 2 CFR part 200, subpart F.
Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2024-08648 Filed 4-22-24; 8:45 am]
BILLING CODE 4210-67-P
