# GNMA Requests for Full Insurance on Coinsurance Loans > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A94-35 ## Record - **Collection:** Federal Register - **Document type:** Uncategorized Document - **Published:** January 11, 1994 ## Text DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of the Assistant Secretary for Housing-Federal Housing Commissioner 24 CFR Parts 251, 252 and 255 [Docket No. R-934-1589; FR-2951-F-02] RIN 2502-AF09 GNMA Requests for Full Insurance on Coinsurance Loans AGENCY: Office of the Assistant Secretary for Housing-Federal Housing Commissioner, HUD. ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: This rule revises currently applicable multifamily and health facility coinsurance regulations to eliminate the requirement that the Government National Mortgage Association (GNMA), in every case, first attempt to assign issuer-servicer responsibility on current coinsured mortgages held by a defaulting lender-issuer before requesting full insurance endorsement by the Federal Housing Administration (FHA). The purpose of the rule is to eliminate a current regulatory requirement which has proved to be time-consuming and, in most cases, unnecessary. EFFECTIVE DATE: February 10, 1994. FOR FURTHER INFORMATION CONTACT: Albert B. Sullivan, Director, Office of Multifamily Housing Management, room 6160, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410, voice (202) 708-3730, TDD (202) 708-4594. (These are not toll-free numbers.) SUPPLEMENTARY INFORMATION: The Department's former regulations concerning GNMA's right to assignment of coinsured mortgages were found at 24 CFR 251.827 (Multifamily Coinsurance--New Construction and Substantial Rehabilitation), Sec. 252.827 (Coinsurance of Nursing Homes and Related Facilities), and Sec. 255.827 (Coinsurance of Mortgages Covering Existing Multifamily Projects), before their recent removal as part of the termination of the Coinsurance program sections on right to assignment provided that, for any Coinsured Mortgage that is not in default and is held by a defaulting lender-issuer, GNMA will first attempt to have the Mortgage assigned to another eligible coinsuring lender by soliciting offers to assume the defaulting lender-issuer's rights and obligations under the Mortgage from those eligible coinsuring lenders that are indicated on a periodically updated listing furnished to GNMA by the Commissioner and that are also GNMA issuers. If GNMA rejects all offers or no offers are received, GNMA will then have the right to perfect an assignment of the Mortgage to itself. The Commissioner will endorse any Mortgage assigned to GNMA as provided by this section for full insurance effective as of the date of assignment in accordance with the appropriate provisions of title 24 of the Code of Federal Regulations. On October 10, 1990, a final rule was published (55 FR 41312) terminating the FHA multifamily coinsurance programs and revising parts 251, 252 and 255. As a result of the final rule, parts 251, 252 and 255 each now consist of a single section dealing with the program phase-out process. However, while the former rule's provisions are no longer included in the Code of Federal Regulations, those regulations in effect before November 12, 1990 continue to govern the rights and obligations of mortgagors, coinsuring lenders and HUD in existence before the termination of the coinsurance programs. The effect of this rule is to revise those regulations as they relate to the handling of mortgage assignments to GNMA. On December 15, 1992 the Department published a proposed rule (57 FR 59314) identical in text to this final rule. No comments were received from the public concerning this proposed rule. In lieu of the above-quoted paragraphs (a)(1) and (a)(2), this rule provides that ``For any Coinsured Mortgage that is not in default and is held by a defaulting lender-issuer, GNMA will have the right to perfect an assignment of the mortgage to itself. However, before exercising this right, GNMA will attempt to have the Mortgage assigned to another eligible coinsuring lender (unless it determines, with the agreement of the Commissioner, that the attempt would prove ineffectual because of market or other conditions). The assignment will be attempted by soliciting offers to assume the defaulting lender-issuer's rights and obligations under the Mortgage from those eligible coinsuring lenders that are also GNMA issuers and that are indicated on a periodically updated listing furnished to GNMA by the Commissioner.'' Given the facts that (a) the authority to coinsure mortgages has been terminated; (b) for the most part, no market exists for the purchase of coinsurance servicing rights; and (c) none of the few remaining approved coinsuring lenders has shown any interest to date in assuming additional coinsuring risk by assignment of loans from GNMA, implementation of the regulatory requirement earlier set forth in paragraphs (a)(1) and (a)(2) has proved to be a time-consuming, burdensome and fruitless process. Therefore, this rule amends parts 251, 252 and 255 to eliminate the requirement that GNMA, in every case, first attempt to assign issuer-servicer responsibility on current coinsured mortgages before perfecting assignment of the Coinsured Mortgage to itself and requesting full insurance endorsement by FHA. Procedural Matters Executive Order 12866 This final rule was reviewed and approved by the Office of Management and Budget as a significant regulatory action under Executive Order 12866, Regulatory Planning and Review, which was signed by the President on September 30, 1993. Any changes made to the rule as a result of that review are a part of the public docket file in the office of the Rules Docket Clerk listed at the beginning of this preamble. In accordance with 5 U.S.C. 605(b) (the Regulatory Flexibility Act), the undersigned hereby certifies that this rule does not have a significant economic impact on a substantial number of small entities. This rule is procedural in nature. It effects no substantive changes in HUD programs or policies. This rule was listed as item number 1540 in the Department's Semiannual Agenda of Regulations published on October 25, 1993 (58 FR 56402, 56431) under Executive order 12291 and the Regulatory Flexibility Act. Executive Order 12612, Federalism The General Counsel, as the Designated Official under section 6(a) of Executive order 12612, Federalism, has determined that the policies contained in this rule do not have Federalism implications and, thus, are not subject to review under the Order. No programmatic or policy changes result from this rule's promulgation which would affect existing relationships between the Federal Government and State and local governments. Executive Order 12606, The Family The General Counsel, as the Designated Official under Executive order 12606, The Family, has determined that this rule does not have potential for significant impact on family formation, maintenance, and general well-being, and, thus, is not subject to review under the Order. The rule is procedural in nature and no significant change in existing HUD policies or programs impacting on the family result from promulgation of this rule. Environment An environmental assessment is unnecessary, since internal administrative procedures whose content does not constitute a development decision affecting the physical condition of specific project areas or building sites are categorically excluded from the Department's National Environmental Policy Act procedures under 24 CFR 50.20(k). List of Subjects 24 CFR Part 251 Low and moderate income housing, Mortgage insurance, Reporting and recordkeeping requirements. 24 CFR Part 252 Health facilities, Loan programs--housing and community development, Loan programs--health, Mortgage insurance, Reporting and recordkeeping requirements, Nursing homes. 24 CFR Part 255 Low and moderate income housing, Mortgage insurance, Reporting and recordkeeping requirements. Accordingly, 24 CFR parts 251, 252 and 255 are amended to read as follows: PART 251--COINSURANCE FOR THE CONSTRUCTION OR SUBSTANTIAL REHABILITATION OF MULTIFAMILY HOUSING PROJECTS 1. The authority citation for 24 CFR part 251 is revised to read as follows: Authority: 12 U.S.C. 1715b, 1715z-9; 42 U.S.C. 3535(d). 2. Section 251.2 is added to read as follows: Sec. 251.2 GNMA right to assignment. If the lender-issuer defaults on its obligations under the GNMA Mortgage-Backed Securities Program, GNMA will have the right to cause all Coinsured Mortgages held in GNMA pools by the defaulting coinsuring lender-issuer to be assigned to another GNMA-approved coinsuring lender-issuer, or to GNMA itself. (a) For any Coinsured Mortgage that is not in default and is held by a defaulting lender-issuer, GNMA will have the right to perfect an assignment of the mortgage to itself. However, before exercising this right, GNMA will attempt to have the Mortgage assigned to another eligible coinsuring lender (unless GNMA determines, with the agreement of the Commissioner, that the attempt would prove ineffectual because of market conditions or other factors). This attempt will be undertaken by soliciting offers to assume the defaulting lender-issuer's rights and obligations under the Mortgage from those eligible coinsuring lenders that are also GNMA issuers and that are indicated on a periodically updated listing furnished to GNMA by the Commissioner. (b) For any Coinsured Mortgage that is in default and held by a defaulting lender-issuer, GNMA will have the right to perfect an assignment of the Coinsured Mortgage directly to itself before extinguishing the Mortgage by completion of foreclosure action or acquisition of title by deed-in-lieu of foreclosure. (c) GNMA, as assignee, will give the Commissioner written notice, within 30 days after taking a Mortgage by assignment in accordance with this section, in order to allow an appropriate endorsement and necessary changes in the Commissioner's records. (d) The Commissioner will endorse any Mortgage assigned to GNMA as provided by this section for full insurance, effective as of the date of assignment in accordance with the appropriate provisions of 24 CFR part 221. Any future claim by GNMA, or any assignment of the fully insured Mortgage, will be governed by the appropriate provisions of 24 CFR part 221, except that any payment will be made in cash instead of debentures. PART 252--COINSURANCE OF MORTGAGES COVERING NURSING HOMES, INTERMEDIATE CARE FACILITIES AND BOARD AND CARE HOMES 3. The authority citation for 24 CFR part 252 is revised to read as follows: Authority: 12 U.S.C. 1715b, 1715z-9; 42 U.S.C. 3535(d). 4. Section 252.2 is added to read as follows: Sec. 252.2 GNMA right to assignment. If the lender-issuer defaults on its obligations under the GNMA Mortgage-Backed Securities Program, GNMA will have the right to cause all Coinsured Mortgages held in GNMA pools by the defaulting coinsuring lender-issuer to be assigned to another GNMA-approved coinsuring lender-issuer, or to GNMA itself. (a) For any Coinsured Mortgage that is not in default and is held by a defaulting lender-issuer, GNMA will have the right to perfect an assignment of the mortgage to itself. However, before exercising this right, GNMA will attempt to have the Mortgage assigned to another eligible coinsuring lender (unless GNMA determines, with the agreement of the Commissioner, that the attempt would prove ineffectual because of market conditions or other factors). This attempt will be undertaken by soliciting offers to assume the defaulting lender-issuer's rights and obligations under the Mortgage from those eligible coinsuring lenders that are also GNMA issuers and that are indicated on a periodically updated listing furnished to GNMA by the Commissioner. (b) For any Coinsured Mortgage that is in default and held by a defaulting lender-issuer, GNMA will have the right to perfect an assignment of the Coinsured Mortgage directly to itself before extinguishing the Mortgage by completion of foreclosure action or acquisition of title by deed-in-lieu of foreclosure. (c) GNMA, as assignee, will give the Commissioner written notice, within 30 days after taking a Mortgage by assignment in accordance with this section, in order to allow an appropriate endorsement and necessary changes in the Commissioner's records. (d) The Commissioner will endorse any Mortgage assigned to GNMA as provided by this section for full insurance, effective as of the date of assignment in accordance with the appropriate provisions of 24 CFR part 232. Any future claim by GNMA, or any assignment of the fully insured Mortgage, will be governed by the appropriate provisions of 24 CFR part 232, except that any payment will be made in cash instead of debentures. PART 255--COINSURANCE FOR THE PURCHASE OR REFINANCING OF EXISTING MULTIFAMILY HOUSING PROJECTS 5. The authority citation for 24 CFR part 255 is revised to read as follows: Authority: 12 U.S.C. 1715b, 1715z-9 (42 U.S.C. 3535(d). 6. Section 255.2 is added to read as follows: Sec. 255.2 GNMA right to assignment. If the lender-issuer defaults on its obligations under the GNMA Mortgage-Backed Securities Program, GNMA will have the right to cause all Coinsured Mortgages held in GNMA pools by the defaulting coinsuring lender-issuer to be assigned to another GNMA-approved coinsuring lender-issuer, or to GNMA itself. (a) For any Coinsured Mortgage that is not in default and is held by a defaulting lender-issuer, GNMA will have the right to perfect an assignment of the mortgage to itself. However, before exercising this right, GNMA will attempt to have the Mortgage assigned to another eligible coinsuring lender (unless GNMA determines, with the agreement of the Commissioner, that the attempt would prove ineffectual because of market conditions or other factors). This attempt will be undertaken by soliciting offers to assume the defaulting lender-issuer's rights and obligations under the Mortgage from those eligible coinsuring lenders that are also GNMA issuers and that are indicated on a periodically updated listing furnished to GNMA by the Commissioner. (b) For any Coinsured Mortgage that is in default and held by a defaulting lender-issuer, GNMA will have the right to perfect an assignment of the Coinsured Mortgage directly to itself before extinguishing the Mortgage by completion of foreclosure action or acquisition of title by deed-in-lieu of foreclosure. (c) GNMA, as assignee, will give the Commissioner written notice, within 30 days after taking a Mortgage by assignment in accordance with this section, in order to allow an appropriate endorsement and necessary changes in the Commissioner's records. (d) The Commissioner will endorse any Mortgage assigned to GNMA as provided by this section for full insurance, effective as of the date of assignment in accordance with the appropriate provisions of 24 CFR part 207. Any future claim by GNMA, or any assignment of the fully insured Mortgage, will be governed by the appropriate provisions of 24 CFR part 207, except that any payment will be made in cash instead of debentures. Dated: December 16, 1993. Nicolas P. Retsinas, Assistant Secretary for Housing-Federal Housing Commissioner. [FR Doc. 94-35 Filed 1-10-94; 8:45 am] BILLING CODE 4210-27-P --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A94-35. Public record. Not legal advice.