Schedule for Submission of One-Time and Up-Front Mortgage
Insurance Premiums
[Federal Register: August 21, 2002 (Volume 67, Number 162)]
[Proposed Rules]
[Page 54311-54313]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21au02-26]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 203
[Docket No. FR-4690-P-01]
RIN 2502-AH64
Schedule for Submission of One-Time and Up-Front Mortgage
Insurance Premiums
AGENCY: Office of Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
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SUMMARY: Mortgage insurance premiums (``MIPs'') in many of HUD's single
family mortgage insurance programs are paid at the beginning of the
mortgage, as either a ``one-time'' or ``up-front'' payment. Since 1993,
HUD has required that all up-front MIPs be paid electronically through
automated clearinghouses. One-time MIPs are also paid electronically.
Given the electronic processing of payments, which requires only a
short time period, a 15 calendar day period in which to remit the funds
is no longer necessary, and shortening the period would result in
increased efficiencies within the mortgage insurance programs. In
addition, some lenders have misused MIP funds during the 15-day period.
Therefore, this rule proposes to shorten the remittance period from 15
calendar days to three business days (Monday through Friday, exclusive
of Federal holidays) for both one-time and up-front MIPs.
In addition, there is some confusion about when the remittance time
period begins. Therefore, this rule proposes a more precise definition
of when the remittance period begins.
DATES: Comment Due Date: October 21, 2002.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Rules Docket Clerk, Office of General Counsel, Room
10276, Department of Housing and Urban Development, 451 Seventh Street,
SW, Washington, DC 20410-0500. Communications should refer to the above
docket number and title. Facsimile (FAX) comments are not acceptable. A
copy of each communication submitted will be available for public
inspection and copying between 7:30 a.m. and 5:30 p.m. weekdays at the
above address.
FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Office of
Single Family Program Development, U.S. Department of Housing and Urban
Development, 451 Seventh Street, SW, Washington, DC 20410, at (202)
708-2121. Persons with hearing or speech impairments may access these
numbers via TTY by calling the Federal Information Relay Service at
(800) 877-8339.
SUPPLEMENTARY INFORMATION:
A. Background
Section 203(c)(1) of the National Housing Act authorizes the
Secretary to set the premium charge for insurance of mortgages under
Title II of the National Housing Act. In a June 23, 1983, final rule
(48 FR 28804) that followed a proposed rule and public comment, HUD
established the one-time MIP for single-family programs, citing
improved cash management for HUD without increased burdens on
borrowers. The specific programs affected by this one-time MIP are
listed in 24 CFR 203.259a, and include loans for refinancing loans
insured under the National Housing Act (see 24 CFR 203.43(c));
mortgages in Hawaiian Home Lands (see 24 CFR 203.43i); and loans which
are obligations of the Mutual Mortgage Insurance fund, which were
executed before July 1, 1991.
Under the implementing rule for the one-time MIP, at 24 CFR
203.280--203.283, mortgagees in the affected programs pay the entire
premium for the borrower within 15 days of closing. The rule generally
contemplates that borrowers would amortize the mortgage insurance
premium over the life of the loan, and that the premium amount would be
calculated based on actuarial factors including the mortgage term and
the costs projected by HUD discounted at a rate based on the expected
rate of return of the mortgage insurance fund's investments. (See 48 FR
28795.)
Section 203(c)(2) of the National Housing Act authorizes the up-
front MIP, implemented at 24 CFR 203.284, which applies to all other
mortgages executed on or after July 1, 1991 that are obligations of the
Mutual Mortgage Insurance Fund. The up-front MIP requires the payment
of a single premium of up to 2.25 percent of the original insured
principal balance of the mortgage, and annual payments of .50 percent
of the remaining insured principal balance for stated periods of time
that vary depending on the original principal obligation of the
mortgage.
HUD's regulations at 24 CFR 203.280 state that, for mortgages in
which a one-time MIP is charged, the payment shall be made within 15
days of closing. In addition, up-front MIPs under 24 CFR 203.284 and
203.285 are subject to the same 15-day requirement. See 24 CFR
203.284(f) and 203.285(c), incorporating 24 CFR 203.280 by cross-
reference.
Since April 7, 1993, it has been mandatory for lenders to make up-
front MIP payments in the single-family insurance program through an
electronic system. (See, e.g., Mortgagee Letter 94-25.) The one-time
MIP is remitted electronically as well. (See, e.g., Mortgagee Letter
96-33.) In such an environment, where the funds are transmitted within
a few moments rather than by mailing, it is no longer necessary for the
lender to retain the funds beyond a brief period for accounting
purposes. Furthermore, there have been some instances of MIP premium
monies being misused by some lenders during the 15-day period, and
earlier remittance should eliminate this problem while improving the
cash flow of the insurance fund.
B. This Proposed Rule
This proposed rule would amend 24 CFR 203.280 and 203.282 to reduce
the remittance period for the up-front and one-time MIP in affected
single-family programs from 15 calendar days to 3 business days, and to
adjust the late charge provisions accordingly. Business days are Monday
through Friday, excluding Federal holidays. In addition, the rule
provides that in the case of refinancings, the three-day period will be
counted from the date of disbursement of the mortgage proceeds rather
than the loan closing.
Findings and Certifications
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this proposed rule, and in so
doing certifies that this rule will not have a significant economic
impact on a substantial number of small entities. This rule imposes no
new obligations of any kind, but only shortens the timing of an
existing obligation to remit one-time and up-front mortgage insurance
premiums. Because these premiums are remitted electronically, very
little remittance time is actually required. This rule should impose no
significant burdens on business.
Notwithstanding HUD's determination that this rule does not have a
significant economic impact on a substantial number of small entities,
HUD specifically invites comment regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in the preamble.
Environmental Impact
This proposed rule does not direct, provide for assistance of loan
and
[[Page 54313]]
mortgage insurance for, or otherwise govern or regulate, real property
acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise, or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this
proposed rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on State and local governments and
is not required by statute, or preempts State law, unless the relevant
requirements of section 6 of the Executive Order are met. 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 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal
agencies to assess the effects of their regulatory actions on State,
local, and tribal governments, and on the private sector. This proposed
rule does not impose any Federal mandates on any State, local, or
tribal governments, or on the private sector, within the meaning of the
UMRA.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number applicable to
this rule is 14.117.
List of Subjects for 24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and
recordkeeping requirements, Solar energy.
For the reasons stated in the preamble, HUD amends 24 CFR part 203
as follows:
PART 203--SINGLE FAMILY HOUSING MORTGAGE INSURANCE
1. The authority citation for 24 CFR part 203 continues to read as
follows:
Authority: 12 U.S.C. 1709, 1710, 1715b, and 1715u; 42 U.S.C.
3535(d).
Subpart B--Contract Rights and Obligations
2. Revise 24 CFR 203.280 to read as follows:
Sec. 203.280 One-time or up-front MIP.
(a) For mortgages for which a one-time or up-front MIP is to be
charged in accordance with Secs. 203.259a, 203.284, or Sec. 203.285,
the mortgagee shall, as a condition to the endorsement of the mortgage
for insurance, pay to the Commissioner for the account of the
mortgagor, in a manner prescribed by the Commissioner, a premium
representing the total obligation for the insuring of the mortgage by
the Commissioner or the up-front portion of the total obligation, as
applicable, within three business days of the date of closing, or, in
the case of a refinancing transaction, within three business days from
the date of disbursement of the mortgage proceeds.
(b) For purposes of this section, ``business days'' means Monday
through Friday, exclusive of Federal holidays.
3. Revise 24 CFR 203.282 to read as follows:
Sec. 203.282 Mortgagee's late charge and interest.
(a) Payment of a one-time or up-front MIP is late if not received
by HUD within three business days after the closing, or the
disbursement of the loan funds in a refinancing transaction. Late
payments shall include a late charge of four percent of the amount of
the MIP.
(b) If payment of the MIP is not received by HUD within 30 days
after the closing, or the disbursement of the loan funds in a
refinancing transaction, the mortgagee will be charged additional late
fees until payment is received at an interest rate set in conformity
with the Treasury Fiscal Requirements Manual.
Dated: July 8, 2002.
John C. Weicher,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 02-21227 Filed 8-20-02; 8:45 am]
BILLING CODE 4210-27-P
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