Uniform Financial Reporting Standards for HUD Housing Programs, Additional Entity Filing Requirements

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[Federal Register: November 30, 2001 (Volume 66, Number 231)]
[Proposed Rules]
[Page 60131-60134]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30no01-52]

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 5 and 202
[Docket No. FR-4681-P-01]
RIN 2501-AC80

Uniform Financial Reporting Standards for HUD Housing Programs,
Additional Entity Filing Requirements

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

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SUMMARY: This proposed rule would amend HUD's regulation on Uniform
Financial Reporting Standards by adding HUD Approved Title I and Title
II nonsupervised lenders, nonsupervised mortgagees, and loan
correspondents to the covered entities required to electronically
submit annual financial information to HUD prepared in accordance with
generally accepted accounting principles. Under long-standing
regulatory and contractual requirements, these entities already submit
financial information to HUD on an annual basis.

DATES: Comment Due Date: January 29, 2002.

ADDRESSES: Interested persons are invited to submit comments to the
Rules Docket Clerk, Office of the 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) responses are not acceptable.
A copy of each response will be available for public inspection and
copying during regular business hours (7:30 a.m. to 5:30 p.m. Eastern
Time at the above address.)

FOR FURTHER INFORMATION CONTACT: For further information about the
entities covered by this proposed rule, Lynn Herbert, the Office of
Housing, U.S. Department of Housing and Urban Development, 451 Seventh
Street, SW., Washington, DC 20410, telephone 202-708-3976 (this is not
a toll-free number). For general information about this proposed rule,
Stacey Kniff, Real Estate Assessment Center, U.S. Department of Housing
and Urban Development, 1280 Maryland Avenue, SW., Suite 800,
Washington, DC 20024; telephone Technical Assistance Center, 1-888-245-
4860 (this is a toll free number). Persons with hearing or speech
impairments may access that number via TTY by calling the Federal
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: HUD's Uniform Financial Reporting Standards
(``UFRS'') regulations, codified at 24 CFR part 5, subpart H establish
uniform annual financial reporting standards for the following
entities: public housing agencies (``PHAs'') administering traditional
public housing; PHAs administering Section 8 project-based housing
assistance payments programs and Section 8 project-based certificate
programs; owners of housing assisted under any Section 8 project-based
program (except for the Moderate Rehabilitation and project-based
certificates programs, for which the reporting requirement applies to
the administering PHAs); and multifamily housing programs receiving
assistance or mortgage insurance from HUD. The regulations provide that
the financial information required to be submitted to HUD on an annual
basis under these programs generally must be submitted electronically
and must be prepared in accordance with GAAP.
The move to uniform financial reporting standards in HUD programs
was initiated to bring consistency and efficiency in financial
reporting. In addition, the electronic submission of financial
reporting standards, as a substitute for paper submissions, is in
accordance with the Government Paperwork Elimination Act, 44 U.S.C.
3504.
Since the implementation of the UFRS rule, HUD believes that the
transition to electronic reporting of financial information using
uniform accounting principles has proceeded well. HUD has worked
closely with the entities currently subject to these standards
(``covered entities'') to assist them in becoming familiar with GAAP
and reporting information electronically. The electronic submission of
information results in significant benefits, such as increasing the
speed of information preparation and exchange, cost savings from
reduced need for storage space, fewer errors than occur with paper
submissions, and faster HUD review and analysis.
This proposed rule adds participants under another program to the
programs covered under the UFRS rule, 24 CFR part 5, subpart H. The new
covered participants are the Title I and Title II nonsupervised
lenders, nonsupervised mortgagees, and loan correspondents who are
approved by HUD under 24 CFR part 202 to originate, purchase, hold,
service and/or sell loans. In addition to revisions to part 5 to add
these participants, this rule makes conforming changes to 24 CFR 202.5,
202.7, and 202.8.
HUD believes that the transition from paper to electronic filing
for these entities will also proceed well, and will benefit the
industry, the Department and taxpayers. This progression to electronic
reporting will be further facilitated by the fact that these Title I
and Title II nonsupervised lenders, nonsupervised mortgagees, and loan
correspondents currently receive all loan authorizations exclusively
through the HUD electronic secure on-line Internet system. Accordingly,
these entities are familiar with HUD's electronic secure systems.
This rule when issued as a final rule would be effective for the
covered Title I and Title II nonsupervised lenders, nonsupervised
mortgagees, and loan correspondents after December 31, 2001. Audited
financial statements submitted by the covered entities on or after
January 1, 2002, must be submitted electronically. Audited financial
statements submitted prior to January 1, 2002, may either be submitted
in paper or electronically at the lenders' option.

Findings and Certifications

Paperwork Reduction Act

The proposed new information collection requirements contained in
this rule have been submitted to the Office of Management and Budget
(OMB) for review under the Paperwork Reduction Act of 1995 (44 U.S.C.
3501-3520). Under this 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 valid control number.
The public reporting burden for this new collection of information
is estimated to include the time for reviewing the instructions,
searching existing data sources, gathering and maintaining the data
needed, and completing and reviewing the collection of information.
Information on the estimated public reporting burden is provided in the
following table.

[[Page 60133]]

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Number of Responses per Total annual Hours per
Information collection respondents respondent responses response Total hours
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Sec. 5.801(c)(3).................................................. 7,000 1 7,000 3.0 21,000
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In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning the
proposed collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) 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.
Interested persons are invited to submit comments regarding the
information collection requirements in this proposal. Comments must be
received by January 29, 2002. Comments must refer to the proposal by
name and docket number (FR-4552-P-01) and must be sent to: Joseph F.
Lackey, Jr., HUD Desk Officer, Office of Management and Budget, New
Executive Office Building, Washington, DC 20503 and Rules Docket Clerk,
Office of the General Counsel, Room 10276, U.S. Department of Housing
and Urban Development, 451 Seventh Street, SW, Washington, DC 20410.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 establishes
requirements for Federal agencies to assess the effects of their
regulatory actions on State, local, and tribal governments and the
private sector. This rule will not impose any Federal mandates on any
State, local, or tribal governments or the private sector within the
meaning of the Unfunded Mandates Reform Act of 1995.

Environmental Impact

This proposed rule does not direct, provide for assistance or loan
or 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).

Impact on Small Entities

The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this proposed rule before publication and
by approving it certifies that this rule is not anticipated to have a
significant economic impact on a substantial number of small entities.
This rule does not create a new reporting requirement. The annual
reporting of certain financial information is a preexisting HUD program
requirement. This rule adds HUD approved Title I and Title II
nonsupervised lenders, nonsupervised mortgagees, and loan
correspondents to the covered entities that must submit financial data
electronically. The rule standardizes, to the extent possible, the
content of the information and the preparation of the information (in
accordance with GAAP). HUD anticipates that these changes will bring
consistency, simplicity and reduced administrative burden to the
reporting process. With respect to costs, the audit costs paid by Title
I and Title II nonsupervised lenders, nonsupervised mortgagees, and
loan correspondents are a recognized part of operating and
administrative expenses. HUD anticipates no or very little monetary
impact. The Federal Housing Commissioner has required GAAP-based
accounting for a number of years and the majority of these lenders
already adhere to its tenets.
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.

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 proposed
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.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance program numbers
applicable to 24 CFR part 202 are: 14.110 Manufactured Home Loan
Insurance--Financing Purchase of Manufactured Homes as Principal
Residences of Borrowers; 14.142 Structures and Building of New
Nonresidential Structures; and 14.162 Mortgage Insurance--Combination
and Manufactured Home Lot Loans.

List of Subjects

24 CFR Part 5

Administrative practice and procedure, Aged, Claims, Drug abuse,
Drug traffic control, Grant programs--housing and community
development, Grant programs--Indians, Individuals with disabilities,
Loan programs--housing and community development, Low- and moderate-
income housing, Mortgage insurance, Pets, Public housing, Rent
subsidies, Reporting and recordkeeping requirements.

24 CFR Part 202

Administrative practice and procedure, Home improvement,
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements.
Accordingly, for the reasons stated in the preamble, HUD proposes
to amend title 24 of the Code of Federal Regulations to read as
follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENT; WAIVERS

1. The authority citation for 24 CFR part 5 continues to read as
follows:

Authority: 42 U.S.C. 3535(d), unless otherwise noted.
2. Amend Sec. 5.801 by adding paragraphs (a)(5), (c)(3), and (d)(3)
to read as follows:

[[Page 60134]]

Sec. 5.801 Uniform financial reporting standards.

(a) * * *
* * * * *
(5) HUD-approved Title I and Title II nonsupervised lenders,
nonsupervised mortgagees, and loan correspondents.
* * * * *
(c) * * *
* * * * *
(3) For those entities listed in paragraph (a)(5) of this section,
the financial information to be submitted to HUD in accordance with
paragraph (b) of this section must be submitted to HUD annually, no
later than 90 days after the end of the fiscal year (or within an
extended time if an extension is granted at the sole discretion of the
Secretary). An extension request must be received no earlier than 45
days and no later than 15 days prior to the submission deadline.
(d) * * *
* * * * *
(3) The requirements of this section will go into effect with
respect to those entities listed in paragraph (a)(5) of this section.
Audited financial statements submitted before June 1, 2002, may either
be submitted in paper or electronically at the lenders' option. Audited
financial statements submitted by lenders on and after June 1, 2002,
must be submitted electronically.

PART 202--APPROVAL OF LENDING INSTITUTIONS AND MORTGAGEES

3. The authority citation for 24 CFR part 202 continues to read as
follows:

Authority: 12 U.S.C. 1703, 1709, and 1715b; 42 U.S.C. 3535(d).

4. In Sec. 202.5, revise paragraph (n)(1) introductory text to read
as follows:

Sec. 202.5 General approval standards.

* * * * *
(n) Net Worth. (1) Each supervised or nonsupervised lender or
mortgagee approved under Secs. 202.6 and 202.7 shall have a net worth
of not less than $250,000 in assets acceptable to the Secretary. Each
Title II supervised or nonsupervised mortgagee, except a multifamily
mortgagee, shall have additional net worth in excess of $250,000 of not
less than one percent of the mortgage volume exceeding $25,000,000 in
value, but total net worth is not required to exceed $1,000,000.
Mortgage volume is calculated as of the end of the fiscal year being
audited and equals the sum of:
* * * * *
5. In Sec. 202.7, revise paragraphs (b)(4)(i) introductory text and
(b)(4)(i)(A) to read as follows:

Sec. 202.7 Nonsupervised lenders and mortgagees.

* * * * *
(b) * * *
(4) Audit report. (i) A lender or mortgagee must comply with the
financial reporting requirements in 24 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 and shall include:
(A) 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 mortgagee's net
worth adjusted to reflect only assets acceptable to the Secretary, and
an analysis of escrow funds; and
* * * * *
6. In Sec. 202.8, revise paragraphs (b)(3) introductory text and
(b)(3)(i) to read as follows:

Sec. 202.8 Loan correspondent lenders and mortgagees.

* * * * *
(b) * * *
(3) Audit report. A loan correspondent lender or mortgagee must
comply with the financial reporting requirements in 24 CFR part 5,
subpart H except that a loan correspondent mortgagee meeting the
definition of a supervised lender or mortgagee in Sec. 202.6(a) need
not file annual audit reports. 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 and shall include:
(i) A financial statement in a form acceptable to the Secretary,
including a balance sheet, statement of operations and retained
earnings, a statement of cash flows, an analysis of the net worth
adjusted to reflect only assets acceptable to the Secretary and an
analysis of escrow funds; and
* * * * *

Dated: October 30, 2001.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 01-29680 Filed 11-29-01; 8:45 am]
BILLING CODE 4210-27-P

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