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Proposed Rule

Federal Housing Administration (FHA): Suspension of Section 238(c) Single-Family Mortgage Insurance in Military Impacted Areas

Action

Proposed Rule.

Summary

This proposed rule would suspend FHA's mortgage insurance program for military impacted areas under section 238(c) of the National Housing Act (Act). This single-family mortgage insurance program, established by regulation in 1977, has been significantly underutilized for the past several years. Additionally, these mortgage loans are insured under comparable terms and conditions as loans insured under HUD's primary single-family mortgage insurance program under section 203(b) of the National Housing Act. Accordingly, those borrowers who would be served under section 238(c) of the Act are served equally well under the section 203(b) mortgage insurance program. The suspension of this mortgage insurance program is consistent with the President's budget request for Fiscal Year 2012.

Unified Agenda

Federal Housing Administration (FHA): Suspension of Section 238(c) Single Family Mortgage Insurance in Military Impacted Areas (FR-5461)

3 actions from August 30th, 2011 to December 2011

  • August 30th, 2011
  • October 31st, 2011
    • NPRM Comment Period End
  • December 2011
    • Final Action
 

Table of Contents Back to Top

DATES: Back to Top

Comment Due Date: October 31, 2011.

ADDRESSES: Back to Top

Interested persons are invited to submit comments regarding this proposed rule to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street, SW., Room 10276, Washington, DC 20410-0500. Communications must refer to the above docket number and title. There are two methods for submitting public comments.

1. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street, SW., Room 10276, Washington, DC 20410-0001.

2. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at http://www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows the commenter maximum time to prepare and submit a comment, ensures timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments submitted electronically through the http://www.regulations.gov Web site can be viewed by other commenters and interested members of the public. Commenters should follow the instructions provided on that site to submit comments electronically.

Note:

To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the rule. No Facsimile Comments. Facsimile (FAX) comments are not acceptable.

Public Inspection of Public Comments. All properly submitted comments and communications submitted to HUD will be available for public inspection and copying between 8 a.m. and 5 p.m. weekdays at the above address. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at 202-708-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the toll-free Federal Relay Service at 800-877-8339. Copies of all comments submitted are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Back to Top

Karin Hill, Director, Office of Single Family Program Development, Office of Housing, Department of Housing and Urban Development, 451 7th Street, SW., Room 9278, Washington, DC 20410-8000; telephone number 202-708-2121 (this is not a toll-free number). Persons with hearing or speech impairments may access this number via TTY by calling the Federal Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: Back to Top

I. Background Back to Top

Section 238(c) of the National Housing Act (12 U.S.C. 1715z-3(c)) (Act) was added by the Housing and Community Development Act of 1977 (95) to authorize HUD to insure mortgages executed in connection with the construction, repair, rehabilitation, or purchase of property located near any installation of the Armed Forces of the United States in federally impacted areas in which conditions are such that one or more of the applicable insuring requirements under another single-family mortgage insurance program cannot be met. In addition, insurance may only be provided under section 238(c) if: (1) HUD finds that the benefits to be derived from providing the insurance outweigh the risk of probable costs to the government; and (2) the Secretary of the Department of Defense certifies that there is no present intention to curtail substantially the personnel assigned or to be assigned to the installation. HUD is authorized to establish premiums and other charges to assure that the mortgage insurance program authorized under section 238(c) of the Act is actuarially sound, and to prescribe terms and conditions relating to the insurance found to be necessary and appropriate to the implementation of section 238(c). HUD's regulation implementing section 238(c) is codified at 24 CFR 203.43e. The regulation, promulgated in 1977, closely tracks the language of section 238(c) of the Act, and the section 238(c) mortgage insurance program is not subject to any regulatory requirements different from HUD's principal single-family mortgage insurance program authorized under section 203(b) of the Act. [1]

Although established to ensure the availability of affordable housing in military impacted areas, the program has been minimally utilized by eligible borrowers. Section 238(c) mortgage insurance has been available in only six counties throughout the country, three in Georgia and three in New York. From January 1, 2005, to June 30, 2010, FHA insured 4,542 single-family home loans in these six counties, and only 2,309 were endorsed under section 238(c) of the Act. The 2,309 loans endorsed since 2005 represent only .05 percent of all FHA-insured loans endorsed during that span.

The President's budget request for Fiscal Year (FY) 2011 acknowledged the underutilization of the section 238(c) program and advised that HUD would take action to halt the availability of the program in light of the significant underutilization. The FY 2011 budget request found at http://www.gpoaccess.gov/usbudget/fy11/index.html states the following:

The Budget assumes that HUD will administratively suspend the Section 238(c) program in 2011. The Section 238(c) program provides single family mortgage insurance similar to MMI for a small number of families in areas affected by military installations. The elimination of Section 238(c) will not negatively impact the availability of FHA insured financing in the six counties currently covered under this program. (See HUD Appendix to the Budget at page 620 at http://www.gpoaccess.gov/usbudget/fy11/appendix.html). [2]

II. This Proposed Rule Back to Top

Consistent with the President's budget request, HUD proposes to suspend the section 238(c) program and remove § 203.43e from its codified regulations. HUD's proposed removal of the regulations at § 203.43e is not inconsistent with suspension of the section 238(c) mortgage insurance program. As noted in Section I of this preamble, the regulatory language tracks the statutory language. As also noted earlier in this preamble, section 238(c) mortgage insurance operates in a comparable manner as HUD's primary single-family mortgage insurance. If HUD subsequently determines that there is a demand for this program and that military families would be better served by this program, HUD can reactivate the program on the basis of the statutory language and does not need a regulation to make insurance available under this program. If such a situation occurs, HUD would notify the public through Federal Register notice that the program has been activated, so that eligible borrowers would be able to inquire about the availability of insurance under this program from their lenders. HUD notes that the removal of the regulations at § 203.43e would have no impact on loans already endorsed for FHA insurance under the section 238(c) program.

The proposed suspension of this underutilized mortgage insurance program, and the proposed removal of the regulations at 24 CFR 203.43e, is not only consistent with the President's budget requests for FY 2011 and 2012, but with the President's Executive Order (EO) 13563, entitled “Improving Regulation and Regulatory Review,” signed by the President on January 18, 2011, and published on January 21, 2011, at 76 FR 3821. This EO requires 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.” For the reasons discussed in the Background section of this preamble, HUD has determined that the underutilization of the section 238(c) mortgage insurance program renders the program and its regulations outmoded and HUD, therefore, proposes to suspend the program and remove the regulations.

III. Findings and Certification Back to Top

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 proposed rule would not modify or add any new regulatory burdens on FHA-approved mortgage lenders. Rather, the proposed rule would remove § 203.43e from HUD's regulations, in conformity to HUD's (and the Administration's) decision to no longer exercise its authority to insure mortgages under section 238(c) of the Act. As more fully discussed above in the preamble to this rule, the mortgage insurance authority provided by section 238(c) of the Act has been minimally sought by eligible borrowers and consequently minimally utilized by lenders and other small entities participating in the FHA programs. Further, as noted above, section 238(c) mortgage insurance operated in a manner comparable to FHA's mortgage insurance program under section 203(b) of the Act, HUD's primary single-family mortgage insurance program.

Accordingly, for the above reasons, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities. Notwithstanding HUD's determination that this rule will not have a significant effect on a substantial number of small entities, HUD specifically invites comments regarding any less burdensome alternatives to this rule that will meet HUD's objectives as described in the preamble to this rule.

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This rule will not have federalism implications and would 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 proposed rule does not impose any federal mandates on any state, local, or tribal governments, or on the private sector, within the meaning of UMRA.

Environmental Impact

This proposed rule does not direct, provide for assistance or loan and 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 rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Catalogue of Federal Domestic Assistance

The Catalogue of Federal Domestic Assistance Number for the principal FHA single-family mortgage insurance program is 14.117.

List of Subjects in 24 CFR Part 203 Back to Top

Accordingly, for the reasons discussed in the preamble, HUD proposes to amend 24 CFR part 203 to read as follows:

begin regulatory text

PART 203—SINGLE FAMILY MORTGAGE INSURANCE Back to Top

1. The authority citation for part 203 continues to read as follows:

Authority:

12 U.S.C. 1709, 1710, 1715b, 1715z-16, and 1715u; 42 U.S.C. 3535(d).

§ 203.43e [Removed]

2. Remove § 203.43e.

Dated: August 24, 2011.

Carol J. Galante,

Acting Assistant Secretary for Housing—Federal Housing Commissioner.

end regulatory text

[FR Doc. 2011-22189 Filed 8-29-11; 8:45 am]

BILLING CODE 4210-67-P

Footnotes Back to Top

1. From 1977 to 1983, mortgages insured under section 238(c) were subject to a higher mortgage insurance premium than other FHA single-family mortgage insurance programs (0.5 percent vs. 1.0 percent). In 1983, HUD reduced the mortgage insurance premium for section 238(c) mortgages to conform to other FHA programs because HUD determined that “the actuarial experience under Section 238(c) provides no basis for charging a higher mortgage insurance premium in federally impacted areas” (see 48 FR 35088-01).

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2. The President's Budget for FY 2012, found at http://www.whitehouse.gov/omb/budget/Overview, contains identical language to the paragraph cited above in the HUD Appendix to the FY 2012 Budget at page 591.

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