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Home Equity Conversion Mortgages (HECMs): Determination of Maximum Claim Amount; and Eligibility for Discounted Mortgage Insurance Premium for Certain Refinanced HECM Loans

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Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD.


Final rule.


This final rule adopts, without change, an interim rule that made two technical changes to HUD's Home Equity Conversion Mortgage (HECM) program. First, the interim rule extended the date for calculating the maximum claim amount in the HECM program from the date of the underwriter's receipt of the appraisal report to the date of closing. This change provides a more easily verifiable and more easily identifiable date. Second, the interim rule corrected an unintended consequence that results in a situation where HECM loans that are not in default but have been assigned pursuant to regulatory provisions, and remain in effect, are not eligible to be refinanced with a discounted initial mortgage insurance premium (MIP). The interim rule permitted such HECM loans to be eligible for the discounted initial MIP upon refinancing, in accordance with the purpose of the HECM program, which is to improve the financial situation of elderly homeowners. HUD received one public comment in response to a solicitation of comments on the interim rule, which was supportive of the interim rule.


Effective Date: October 6, 2008.

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James Beavers, Deputy Director, Single Family Program Development, Office of Single Family Housing, Department of Housing and Urban Development, 451 Seventh Street, SW., 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 through TTY by calling the toll-free Federal Information Relay Service at 1-800-877-8339.

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I. Background

The statutory and regulatory background to this rule is fully discussed in the preamble to the January 8, 2008, interim rule at 73 FR 1434-1435. HUD's Home Equity Conversion Mortgage (HECM) statute is at section 255 of the National Housing Act, 12 U.S.C. 1715z-20.

The January 2008 interim rule revised the point in time at which the appraised value of the property and the maximum dollar amount for an area under 12 U.S.C. 1709(b)(2) are compared to determine the maximum claim amount. The definition of “maximum claim amount” currently codified in HUD's regulations in 24 CFR 206.3 provides that both of these values “must be as of the date the Direct Endorsement Lender or Lender Insurance Underwriter receives the appraisal report.” For reasons described in the January 8, 2008, interim rule, however, the date is changed to the date of loan closing.

The interim rule also addressed an issue in the HECM program in which refinanced HECM notes assigned to HUD under assignment provisions at § 206.107(a)(1) (election of assignment or shared premium option) and § 206.121(b) (assignment to HUD when the mortgagee is unable or unwilling to make payments to mortgagor), but not in default, could not be insured at the reduced initial mortgage insurance premium (MIP) rates applicable to refinanced HECM loans. The interim rule clarified that refinanced HECM loans in these categories are also eligible for mortgage insurance at the reduced rate.

II. This Final Rule

This final rule adopts the interim rule without change. The following provides a summary of the regulatory amendments made by the interim rule, and adopted without change by the final rule.

  • The interim rule removed the second sentence of 24 CFR 206.3, and revised the first sentence to read:

Maximum claim amount means the lesser of the appraised value of the property, as determined by the appraisal used in underwriting the loan, or the maximum dollar amount for an area established by the Secretary for a one-family residence under section 203(b)(2) of the National Housing Act (as adjusted where applicable under section 214 of the National Housing Act) as of the date of loan closing.

  • The interim rule revised the last sentence of § 206.53(a) to remove the term “presently” and clarify that the refinancing provisions apply to “existing” HECM loans, including those assigned under §§ 206.107(a)(1) and 206.121(b).

III. Discussion of Public Comments

The public comment period on the January 8, 2008, interim rule closed on March 10, 2008. HUD received one comment, which supported the change made by the rule, and urged HUD to make other changes to the program regulations that would especially assist elderly minority homeowners. With no other issues for consideration at the final rule stage, HUD is adopting the interim rule without change.

IV. Findings and Certifications

Environmental Impact

The final rule involves external administrative or fiscal requirements or procedures that are related to loan limits and rate or cost determinations and that do not constitute a development decision affecting the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

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 would not have a significant impact on entities, because the establishment of a date of maximum claim amount is an automated process and merely changing the date as of which the calculation is made imposes no additional burden on any entity. Allowing for discounted MIPs for refinancings provides a benefit to borrowers and presents no impact on any business entities.

Accordingly, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities.

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 would not have federalism Start Printed Page 51597implications 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 final rule will not impose any federal mandates on any state, local, or tribal governments, or on the private sector, within the meaning of UMRA.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance (CFDA) program number is 14.183.

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List of Subjects in 24 CFR Part 206

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Accordingly, the interim rule amending

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Dated: August 22, 2008.

Brian D. Montgomery,

Assistant Secretary for Housing—Federal Housing Commissioner.

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[FR Doc. E8-20471 Filed 9-3-08; 8:45 am]