80 FR 51466 - Federal Housing Administration (FHA): Standardizing Method of Payment for FHA Insurance Claims

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 80, Issue 164 (August 25, 2015)

This final rule is a cost-savings measure to update HUD's regulations regarding the payment of FHA insurance claims in debentures. Section 520(a) of the National Housing Act grants the Secretary discretion to pay insurance claims in cash or debentures. Although some sections of HUD's regulations have provided mortgagees the option to elect payment of FHA insurance claims in debentures, HUD has not paid an FHA insurance claim in debentures under these regulations in approximately 5 years. This final rule amends applicable FHA regulations to bring consistency in determining the method of payment for FHA insurance claims. This final rule follows publication of the February 20, 2015, proposed rule and adopts the proposed rule without change.

[Federal Register Volume 80, Number 164 (Tuesday, August 25, 2015)]
[Rules and Regulations]
[Pages 51466-51469]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-20827]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 203, 207, 220, 221, 232, 236 and 241

[Docket No. FR-5805-F-02]
RIN 2502-AJ26


Federal Housing Administration (FHA): Standardizing Method of 
Payment for FHA Insurance Claims

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

ACTION: Final rule.

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SUMMARY: This final rule is a cost-savings measure to update HUD's 
regulations regarding the payment of FHA insurance claims in 
debentures. Section 520(a) of the National Housing Act grants the 
Secretary discretion to pay insurance claims in cash or debentures. 
Although some sections of HUD's regulations have provided mortgagees 
the option to elect payment of FHA insurance claims in debentures, HUD 
has not paid an FHA insurance claim in debentures under these 
regulations in approximately 5 years. This final rule amends applicable 
FHA regulations to bring consistency in determining the method of 
payment for FHA insurance claims. This final rule follows publication 
of the February 20, 2015, proposed rule and adopts the proposed rule 
without change.

DATES: Effective Date: September 24, 2015.

FOR FURTHER INFORMATION CONTACT: For information about: HUD's Single 
Family Housing program, contact Ivery Himes, Director, Office of Single 
Family Asset Management, Office of Housing, Department of Housing and 
Urban Development, 451 7th Street SW., Room 9172, Washington, DC 20410; 
telephone number 202-708-1672; HUD's Multifamily Housing program, 
contact Sivert Ritchie, Multifamily Claims Branch, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
6252, Washington, DC 20410-8000; telephone number 202-708-2510. The 
telephone numbers listed above are not toll-free numbers. Persons with 
hearing or speech impairments may access these numbers through TTY by 
calling the Federal Relay Service at 800-877-8339 (this is a toll-free 
number).

SUPPLEMENTARY INFORMATION: 

I. Background--the February 20, 2015, Proposed Rule

    On February 20, 2015, HUD published a rule in the Federal Register, 
at 80 FR

[[Page 51467]]

9253, proposing to bring consistency and uniformity to the payment of 
FHA insurance claims among FHA programs. Under section 520(a) of the 
National Housing Act, the Secretary has the discretion to pay insurance 
claims in either cash or debentures.\1\ HUD pursued this proposed rule 
because some of FHA's regulations provided mortgagees with the ability 
to request and receive payment of an insurance claim on a loan insured 
under the National Housing Act in debentures. As a result of these 
regulations, HUD was required to maintain an interagency agreement with 
the United States Department of the Treasury (Treasury), which is the 
agency responsible for issuing and servicing debentures, costing HUD 
over $206,000 per year, despite the fact that there are no current 
debentures being serviced by Treasury for HUD, and HUD has not paid an 
FHA insurance claim in debentures in approximately 5 years.
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    \1\ 12 U.S.C. 1735d.
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    The February 20, 2015, rule proposed amending FHA's regulations to 
bring uniformity and consistency in the payment of FHA insurance claims 
among FHA programs in the following sections: Sec. Sec.  203.400, 
203.476, 203.478, 207.259, 220.751, 220.760, 220.822, 221.762, 232.885, 
236.265, 241.261, 241.885, and 241.1205. As a result of these changes, 
Sec.  220.760 was proposed to be removed because it was unnecessary. 
Please see the February 20, 2015, proposed rule for a more detailed 
description of the proposed changes.

II. This Final Rule

    The public comment period for the proposed rule closed on April 21, 
2015, and HUD did not receive any public comments. As a result, this 
final rule adopts the proposed rule without change.

III. Findings and Certifications

Regulatory Review--Executive Order 13563

    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.
    Consistent with Executive Order 13563, the purposes of the reform 
to FHA's regulations regarding Secretarial discretion of the type of 
FHA insurance claim payment are to eliminate unnecessary spending and 
to bring consistency regarding the payment of insurance claims across 
FHA programs. As discussed in the preamble, the interagency agreement 
with Treasury costs HUD over $206,000 per year, even though HUD 
currently does not have any debentures for payment of FHA insurance 
claims in circulation, and has not made a payment in debentures in 
approximately 5 years for these insurance claims. In addition, 
different FHA programs treat payment of FHA insurance claims 
differently, and this final rule simplifies the regulations so that the 
authority to determine the method of claim payment rests with the 
Secretary who can determine whether it is fiscally prudent to offer FHA 
insurance claim payments in debentures, cash, or both.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
This final rule only changes the party which has the authority to 
determine the method of payment of FHA single family, multifamily, and 
healthcare insurance claims. Accordingly, the undersigned certifies 
that this final rule will not have a significant economic impact on a 
substantial number of small entities.

Environmental Impact

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate the following: 
real property acquisition, disposition, leasing, rehabilitation, 
alteration, demolition, or new construction. Furthermore, the rule does 
not establish, revise, or provide for standards for construction or 
construction materials, manufactured housing, or occupancy. 
Accordingly, under 24 CFR 50.19(c)(1), this final rule is categorically 
excluded from environmental review under the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``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 final 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 final 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.

Paperwork Reduction Act

    This final rule reduces information collection requirements already 
submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In accordance 
with the Paperwork Reduction Act, an agency may not conduct or sponsor, 
and a person is not required to respond to, a collection of information 
unless the collection displays a currently valid OMB control number.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for Mortgage 
Insurance-Homes is 14.117; Mortgage Insurance Nursing Homes, 
Intermediate Care Facilities, Board and Care Homes, and Assisted Living 
Facilities is 14.129; Mortgage Insurance-Rental Housing is 14.134; and 
Mortgage Insurance for the Purchase or Refinancing of Existing 
Multifamily Housing Projects is 14.155.

List of Subjects

24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development; Mortgage insurance; Reporting and 
recordkeeping requirements; Solar energy.

24 CFR Part 207

    Manufactured homes, Mortgage insurance, Reporting and recordkeeping 
requirements, Solar energy.

[[Page 51468]]

24 CFR Part 220

    Home improvement, Loan programs--housing and community development, 
Mortgage insurance, Reporting and recordkeeping requirements, Urban 
renewal.

24 CFR Part 221

    Low and moderate income housing, Mortgage insurance, Reporting and 
recordkeeping requirements.

24 CFR Part 232

    Fire prevention, Health facilities, Loan programs--health, Loan 
programs--housing and community development, Mortgage insurance, 
Nursing homes, Reporting and recordkeeping requirements.

24 CFR Part 236

    Grant programs--housing and community development, Low and moderate 
income housing, Mortgage insurance, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 241

    Home improvement, Loan programs--housing and community development, 
Mortgage insurance, Reporting and recordkeeping requirements, Solar 
energy.

    Accordingly, for the reasons stated above, HUD amends 24 CFR parts 
203, 207, 220, 221, 232, 236, and 241 as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

0
1. The authority citation for part 203 is revised to read as follows:

     Authority:  12 U.S.C. 1709, 1710, 1715b, 1715z-16, 1715u, 
1717z-21, and 1735d; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).

0
2. Revise Sec.  203.400 to read as follows:


Sec.  203.400  Method of payment.

    (a) If the application for insurance benefits is acceptable to the 
Commissioner, payment of the insurance claim shall be made in cash, in 
debentures, or in a combination of both, as determined by the 
Commissioner either at, or prior to, the time of payment.
    (b) An insurance claim paid on a mortgage insured under section 
223(e) of the National Housing Act shall be paid in cash from the 
Special Risk Insurance Fund.

0
3. Revise Sec.  203.476(g) to read as follows:


Sec.  203.476  Claim application and items to be filed.

* * * * *
    (g) All property of the borrower held by the lender or to which it 
is entitled and, if the Commissioner elects to make payments in 
debentures, all cash held by the lender or to which it is entitled, 
including deposits made for the account of the borrower and which have 
not been applied in reduction of the principal loan indebtedness;
* * * * *

0
4. Revise Sec.  203.478(c) to read as follows:


Sec.  203.478  Payment of insurance benefits.

* * * * *
    (c) Method of payment. Payment of an insurance claim shall be made 
in cash, in debentures, or in a combination of both, as determined by 
the Commissioner either at, or prior to, the time of payment.
* * * * *

PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE

0
5. The authority citation for part 207 is revised to read as follows:

    Authority:  12 U.S.C. 1701z-11(e), 1709(c)(1), 1713, 1715(b), 
and 1735d; 42 U.S.C. 3535(d).


0
6. Amend Sec.  207.259 by revising paragraph (a), to read as follows:


Sec.  207.259  Insurance Benefits.

    (a) Method of payment. (1) Upon either an assignment of the 
mortgage to the Commissioner or a conveyance of the property to the 
Commissioner in accordance with requirements in Sec.  207.258, payment 
of an insurance claim shall be made in cash, in debentures, or in a 
combination of both, as determined by the Commissioner either at, or 
prior to, the time of payment.
    (2) An insurance claim paid on a mortgage insured under section 
223(e) of the National Housing Act shall be paid in cash from the 
Special Risk Insurance Fund.
* * * * *

PART 220--MORTGAGE INSURANCE AND INSURED IMPROVEMENT LOANS FOR 
URBAN RENEWAL AND CONCENTRATED DEVELOPMENT

0
7. The authority citation for part 220 is revised to read as follows:

    Authority:  12 U.S.C. 1713, 1715b, 1715k, and 1735d; 42 U.S.C. 
3535(d).


0
8. Revise Sec.  220.751(a) to read as follows:


Sec.  220.751  Cross-reference.

    (a) All of the provisions of subpart B, part 207, of this chapter, 
covering mortgages insured under section 207 of the National Housing 
Act, apply with full force and effect to multifamily project mortgages 
insured under section 220 of the National Housing Act, except Sec.  
207.256b Modification of mortgage terms.
* * * * *


Sec.  220.760  [Removed]

0
9. Remove Sec.  220.760.


Sec.  220.822  [Amended]

0
10. In Sec.  220.822 remove and reserve paragraph (b).

PART 221--LOW COST AND MODERATE INCOME MORTGAGE INSURANCE--SAVINGS 
CLAUSE

0
11. The authority citation for part 221 is revised to read as follows:

    Authority:  12 U.S.C. 1715b, 1715l, and 1735d; 42 U.S.C. 
3535(d).


Sec.  221.762  [Amended]

0
12. In Sec.  221.762 remove and reserve paragraph (a).

PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE 
FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES

0
13. The authority citation for part 232 is revised to read as follows:

    Authority:  12 U.S.C. 1715b, 1715w, 1735d, and 1735f-19; 42 
U.S.C. 3535(d).


0
14. Revise Sec.  232.885(a) to read as follows:


Sec.  232.885  Insurance benefits.

    (a) Method of payment. Payment of an insurance claim shall be made 
in cash, in debentures, or in a combination of both, as determined by 
the Commissioner either at, or prior to, the time of payment.
* * * * *

PART 236--MORTGAGE INSURANCE AND INTEREST REDUCTION PAYMENT FOR 
RENTAL PROJECTS

0
15. The authority citation for part 236 is revised to read as follows:

    Authority: 12 U.S.C. 1715b, 1715z-1, and 1735d; 42 U.S.C. 
3535(d).


Sec.  236.265  [Amended]

0
16. In Sec.  236.265, remove and reserve paragraph (a).

PART 241--SUPPLEMENTARY FINANCING FOR INSURED PROJECT MORTGAGES

0
17. The authority citation for part 241 is revised to read as follows:


[[Page 51469]]


     Authority:  12 U.S.C. 1715b, 1715z-6, and 1735d; 42 U.S.C. 
3535(d).


0
18. Revise Sec.  241.261 to read as follows:


Sec.  241.261  Payment of insurance benefits.

    All of the provisions of Sec.  207.259 of this chapter relating to 
insurance benefits shall apply to multifamily loans insured under this 
subpart.

0
19. Revise Sec.  241.885(a) to read as follows:


Sec.  241.885  Insurance benefits.

    (a) Method of payment. Payment of insurance claims shall be made in 
cash, in debentures, or in a combination of both, as determined by the 
Commissioner either at, or prior to, the time of payment.
* * * * *

0
20. Revise Sec.  241.1205 to read as follows:


Sec.  241.1205  Payment of insurance benefits.

    All the provisions of Sec.  207.259 of this chapter relating to 
insurance benefits shall apply to an equity or acquisition loan insured 
under subpart F of this part.

    Dated: August 12, 2015.
Edward L. Golding,
Principal Deputy, Assistant Secretary for Housing.
    Approved: August 12, 2015.
Nani A. Coloretti,
Deputy Secretary.
[FR Doc. 2015-20827 Filed 8-24-15; 8:45 am]
 BILLING CODE 4210-67-P