81 FR 85997 - 60-Day Notice of Proposed Information Collection: FHA Single Family Model Mortgage Documents

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Federal Register Volume 81, Issue 229 (November 29, 2016)

This notice corrects the document HUD published at 81 FR 84608, November 23, 2016. HUD is amending both paragraphs on page 4. HUD is seeking approval from the Office of Management and Budget (OMB) for the information collection described below. In accordance with the Paperwork Reduction Act, HUD is requesting comment from all interested parties on the proposed collection of information. The purpose of this notice is to allow for 60 days of public comment.

[Federal Register Volume 81, Number 229 (Tuesday, November 29, 2016)]
[Notices]
[Pages 85997-85999]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-28756]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5913-C-34]


60-Day Notice of Proposed Information Collection: FHA Single 
Family Model Mortgage Documents

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

ACTION: Correction; notice.

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SUMMARY: This notice corrects the document HUD published at 81 FR 
84608, November 23, 2016. HUD is amending both paragraphs on page 4. 
HUD is seeking approval from the Office of Management and Budget (OMB) 
for the information collection described below. In accordance with the 
Paperwork Reduction Act, HUD is requesting comment from all interested 
parties on the proposed collection of information. The purpose of this 
notice is to allow for 60 days of public comment.

DATES: Comments Due Date: January 30, 2017.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposal. Comments should refer to the proposal by name and/or OMB 
Control Number and should be sent to: Colette Pollard, Reports 
Management Officer, QDAM, Department of Housing and Urban Development, 
451 7th Street SW., Room 4176, Washington, DC 20410-5000; telephone 
202-402-3400 (this is not a toll-free number) or email at 
[email protected] for a copy of the proposed forms or other 
available information. Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal Relay 
Service at (800) 877-8339.

FOR FURTHER INFORMATION CONTACT: Kevin Stevens, 451 7th Street SW., 
Washington, DC 20410; email [email protected]; or telephone 202-
402-2673. This is not a toll-free number. Persons with hearing or 
speech impairments may access this number through TTY by calling the 
toll-free Federal Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: This notice informs the public that HUD is 
seeking approval from OMB for the information collection described in 
Section A.

A. Overview of Information Collection

    Title of Information Collection: FHA Single Family Model Mortgage 
Documents.
    OMB Approval Number: 2502--New.
    Type of Request: Approval of a new collection of information.
    Form Number: N/A.
    Description of the need for the information and proposed use:
    This notice advises of FHA's review and proposed revisions to the 
Single Family Model Forward Mortgage document. Similar to FHA's review 
of its multifamily mortgage transactional documents, healthcare 
facilities transactional documents, and hospital transactional 
documents, FHA is reviewing its Single Family mortgage transactional 
documents to determine where revisions and updates may be needed. This 
notice presents one document that FHA has identified for

[[Page 85998]]

review and update, and additional documents may be the subject of 
future notices for comment.

Proposed Changes to the Model Forward Mortgage Document

    The following describes the changes proposed to be made to the 
Single Family Model Forward Mortgage document, which can be found, with 
the proposed changes to the document's terms highlighted, at HUD's Web 
site at http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/SFH_policy_drafts.

Forward Mortgage

    The majority of the proposed changes are conforming or technical in 
nature (e.g., correction of internal references and typographical 
errors). Included in this category is the proposed change to Section 
19. As provided in FHA's Instructions for Model Mortgages (located at 
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/model_documents) the FHA Model Forward Mortgage document is based 
largely on the Federal Home Loan Mortgage Corporation and Federal 
National Mortgage Association (the ``Government Sponsored Enterprises'' 
or ``GSEs'') security instrument covenants, with certain FHA-specific 
revisions. When incorporating the GSE covenants into the Model Forward 
Mortgage document, the second paragraph of Section 19 was 
unintentionally omitted, but reference to that paragraph was retained 
in the section heading, resulting in an apparent internal discrepancy 
in the Model Forward Mortgage. Because the omission of this paragraph 
was not identified as an FHA-Specific Modification (as that term is 
used in the Instructions for Model Mortgages), mortgagees have been 
free to adopt the analogous GSE covenant provision to resolve this 
discrepancy. Therefore, although the proposed change to Section 19 
appear substantive, it should bring the Model Forward Mortgage into 
closer conformity with current FHA-insured mortgages and industry 
standard.
    In addition to these technical changes, FHA is proposing one set of 
substantive changes to the Model Forward Mortgage, reflected in the 
judicial and non-judicial versions of Section 22 (hereinafter 
``Sections 22'') and Section 20. Prior to the September, 2014 
publication of the current Model Forward Mortgage, the former Model 
Forward Mortgage contained the following provision: ``[i]n many 
circumstances regulations issued by the Secretary will limit Lender 
rights, in the case of payment defaults, to require immediate payment 
in full and foreclose if not paid. This Security Instrument does not 
authorize acceleration or foreclosure if not permitted by regulations 
of the Secretary.'' (hereinafter ``Paragraph 9(d)''). Because Paragraph 
9(d) is not necessarily entailed by FHA regulatory or statutory 
authority, its omission was a natural consequence of the adoption of 
the GSE security instrument covenants. Mortgagees are obliged to 
fulfill their contractual and regulatory obligations to the Department, 
including commencing foreclosure upon satisfaction of certain 
regulatory preconditions, regardless of whether certain of those 
obligations are recited in or incorporated by reference into a separate 
mortgage contract with a borrower.
    Since publication of the current FHA Model Forward Mortgage, 
however, FHA has been informed that Paragraph 9(d) has been viewed by 
borrowers as providing certain defenses to foreclosure actions, and 
has, on occasion, been successfully used to assert such defenses under 
circumstances where mortgagees allegedly fail to satisfy certain 
preconditions to foreclosure reflected in the Department's regulations. 
The Department's regulations form the contract of mortgage insurance 
between FHA and the mortgagee, which has always been regarded as 
separate and distinct from the private mortgage contract between 
mortgagee and borrower. However, the Department also acknowledges the 
incidental benefits of incentivizing mortgagee compliance with FHA 
requirements by incorporation of a similar, separate contractual right 
in the private mortgage contract between the mortgagee and borrower. 
The reintroduction of language in the proposed change to Sections 22 
similar to that contained in the previous Paragraph 9(d) may serve to 
again further this goal.
    The Department is also proposing a revision to Section 20, which 
generally provides that the borrower is not a third-party beneficiary 
to the contract of mortgage insurance between the lender and FHA. 
Legally, FHA borrowers have never been deemed third-party beneficiaries 
of the mortgage insurance contract between FHA and the mortgagee, and 
therefore, have had no authority to enforce any provisions thereof. 
However, as reflected in the proposed changes to Sections 22, the 
borrower and lender will enjoy contractual rights and obligations under 
the private mortgage contract that happen to mirror elements of the 
mortgage insurance contract because they both separately rely on HUD's 
regulations. By asserting rights under the private mortgage contract, 
even those that incorporate elements of the regulations forming the 
mortgage insurance contract, borrowers would not be enforcing the 
contract of mortgage insurance and FHA regulations as such, but rather 
enforcing the private contractual terms incorporated into the mortgage 
contract that mirror those regulations.
    While aiming to clearly delineate the lines between the private 
mortgage contract and the contract of mortgage insurance through the 
language contained in Section 20, the Department does not wish to cause 
any confusion concerning the borrower's ability to enforce his or her 
rights that have been granted through the incorporation of certain 
regulatory provisions. Therefore, for clarity, the Department is 
proposing a revision to Section 20 that eliminates any confusion 
regarding the borrower's ability to assert rights under the private 
mortgage contract with the mortgagee as provided in the proposed 
changes to Section 22. The proposed revision to Section 20 does not 
jeopardize the settled fact that borrowers are not third-party 
beneficiaries of the mortgage insurance contract and do not have the 
authority to enforce any provisions thereof. This is a consequence of 
well-established legal principals governing contractual relationships 
and privity, which will remain unchanged notwithstanding the proposed 
revision. HUD expects, therefore, that the proposed change renders 
Section 20 more apparently consistent with the proposed changes to 
Sections 22, but does not intend to create third-party rights under the 
mortgage insurance contract.
    The following information regarding respondents and number of 
responses is based on information related to the actual legal mortgage 
document, not the model mortgage document.
    Affected Respondents: Businesses or other for-profit.
    Estimated Number of Respondents: 2,535.
    Estimated Number of Responses: 164,447.
    Frequency of Response: On Occasion.
    Average Hours per Response: .05.
    Total Estimated Burdens: 822 hours.

B. Solicitation of Public Comment

    This notice is soliciting comments from members of the public and 
affected parties concerning the collection of information described in 
Section A on the following:
    (1) Whether the proposed collection of information is necessary for 
the

[[Page 85999]]

proper performance of the functions of the agency, including whether 
the information will have practical utility;
    (2) The accuracy of the agency's estimate of the burden of the 
proposed collection of information;
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected; and
    (4) Ways to minimize the burden of the collection of information on 
those who are to respond; including through the use of appropriate 
automated collection techniques or other forms of information 
technology, e.g., permitting electronic submission of responses.
    HUD encourages interested parties to submit comment in response to 
these questions.

    Authority:  Section 3507 of the Paperwork Reduction Act of 1995, 
44 U.S.C. Chapter 35.

    Dated: November 23, 2016.
Janet M. Golrick,
Associate General Deputy Assistant, Secretary for Housing Associate 
Deputy Federal Housing Commissioner.
[FR Doc. 2016-28756 Filed 11-28-16; 8:45 am]
 BILLING CODE 4210-67-P