Home Equity Conversion Mortgage Insurance Demonstration: Streamlining the Demonstration and Allowing Use of the Direct Endorsement Program

SUMMARY: This interim rule amends HUD's regulations in 24 CFR parts 203

and 206 to simplify the Home Equity Conversion Mortgage (HECM)

Insurance Demonstration, and to expedite the processing of HECMs by

permitting use of the Direct Endorsement program. The rule implements

the statutory disclosure amendments in section 334 of the Cranston-

Gonzalez National Affordable Housing Act. The rule also makes other

changes, including technical and clarifying changes, to improve and

streamline the program based on the first five years of the

demonstration.

DATES: Effective Date: September 15, 1995.

Comment Due Date: October 16, 1995.

ADDRESSES: Interested persons are invited to submit comments regarding

this interim 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: Richard K. Manuel, Acting Director,

Single Family Development Division, Office of Insured Single Family

Housing, Room number 9272, Department of Housing and Urban Development,

451 Seventh Street, SW, Washington, DC 20410, telephone (202) 708-2700;

TDD (202) 708-9300. (These are not toll-free telephone numbers.)

SUPPLEMENTARY INFORMATION:

Background

The Home Equity Conversion Mortgage (HECM) Insurance Demonstration

was authorized by Section 417 of the Housing and Community Development

Act of 1987 (42 U.S.C. 5301), which amended Section 255 of the National

Housing Act (12 U.S.C. 1715z-20) to permit elderly homeowners to borrow

against the equity in their homes. HUD published final regulations on

June 9, 1989, at 54 FR 24823, issued HUD Handbook 4235.1 for the

program in August 1989, and immediately began processing applications

for commitments to insure. The regulations are codified at 24 CFR part

206. Revision 1 to HUD Handbook 4235.1 was issued in November 1994.

This interim rule reflects ideas for improving the program

regulations based on experience from the first five years of the

demonstration. It also reflects HUD's implementation of section 334 of

the Cranston-Gonzalez National Affordable Housing Act (NAHA) (42 U.S.C.

12701). An explanation of the interim changes follows with a list of

purely technical amendments at the end of this section.

Changes to HECM Regulations

Section 334 of NAHA

Section 334 of NAHA amended subsections (d), (e), and (g) 1 of

section 255 of the National Housing Act (NHA). Section 255(e) was

amended to require additional disclosures to the mortgagor before loan

closing, including projections of future loan balances and information

that the mortgagor's liability is limited. Existing Sec. 206.43(a)

requires the mortgagee to identify and explain to the mortgagor the

principal provisions of the mortgage, which include the limitations on

liability. HUD provided mortgagees with instructions on these new

disclosures through Mortgagee Letter 91-1 and by making a software

package available to mortgagees.

\1\ Section 255(g) was amended to raise the limit on HECM's

insured under section 255 from 2,500 mortgages to 25,000 mortgages,

and to permit HUD to insure mortgages through September 30, 1995

instead of September 30, 1991. In response to these changes, HUD

eliminated the reservations system that had been adopted to insure

nationwide allocation of the small number of mortgages that had been

initially authorized (56 FR 16002, April 19, 1991.) No further

rulemaking is needed to implement this amendment.

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Section 154 of the Riegle Community Development and Regulatory

Improvement Act of 1994 (Pub.L. 103-325, September 23, 1994) imposes a

very similar disclosure requirement for all reverse mortgages. HUD has

concluded that Congress does not expect HECM mortgagees to attempt to

comply with the disclosure requirements of both the NAHA and the new

law, and that there is no need for HECM mortgagees to be exempted from

the new law. The new law will become mandatory when the Federal Reserve

Board's implementing regulations, published on March 24, 1995, at 57 FR

15463, become mandatory on October 1, 1995. At that time, HECM

mortgagees will be expected to comply with the Federal Reserve Board

regulations instead of the current HUD instructions on disclosures.

Until then, mortgagees may choose the option of compliance with the

Federal Reserve Board regulations as a means of complying with HUD's

instructions.

Section 255(d)(7) of the NHA was amended to permit a procedure for

the mortgagor to reserve a portion of the equity in the property for

the benefit of the mortgagor or the mortgagor's heirs. This interim

rule does not implement section 255(d)(7).

HUD has concluded that two of the amendments to section 255 of the

NHA by section 334 of NAHA that are mandatory do not require any change

to the current part 206. New section 255(d)(9) of the NHA requires that

an insured mortgage provide for payments under one of six payment plans

selected by the mortgagor: (1) Payments based on a line of credit, (2)

monthly payments over a term, (3) monthly payments over the mortgagor's

tenure in the home, (4) a combination of (1) and (2), (5) a combination

of (1) and (3), and (6) ``or any other basis that the Secretary

considers appropriate.'' In addition, new section 255(d)(10) of the NHA

requires that an insured mortgage provide for conversion by the

mortgagor from one payment plan to any other payment plan except that

HUD may limit conversion for fixed rate mortgages by regulation. The

payment plans designated above as (1) through (5) and the mortgagor's

ability to convert from one plan to another are currently authorized by

part 206. HUD has no current plans to alter this regulatory scheme.

HUD does not interpret the statutory reference to conversion by the

mortgagor as barring all HUD restrictions on conversions for adjustable

rate mortgages, if the restrictions do not have the effect of

substantially interfering with the general right to choose payment

plans. For example, the existing Sec. 206.26(b)(3) requires conversion

to a line of credit with restricted draws if required post-closing

repairs are not completed on schedule. Restrictions on convertability

[[Page 42755]]

end with completion of the required repairs. Another specific

restriction on conversion is in the existing Sec. 206.26(d), which

permits the mortgagee to charge a processing fee for changes in payment

plans, not to exceed twenty dollars. HUD is not making any change to

these provisions.

Section 206.26(e) of the existing regulations also generally

authorizes HUD to restrict changes in payment plans including a

limitation on the frequency of payment changes and a minimum notice

period for a mortgagor request for change. HUD has not adopted any

restrictions under this section. No change is being made to this

section, although any future restrictions adopted under the section

will be carefully scrutinized to ensure that they do not unduly limit

the mortgagor's ability to change payment plans in violation of the

statute. HUD has no current plans to include in the regulations any

limitations on convertability of fixed rate mortgages.

Direct Endorsement

Sections 203.3, 203.5, and 203.255

The interim rule makes the HECM program an eligible program for

Direct Endorsement processing. In order for a mortgagee to be approved

for Direct Endorsement processing of HECMs, the mortgagee will have to

initially submit 5 HECMs as test cases to the Secretary for review

prior to endorsement for insurance in addition to complying with the

other requirements of Sec. 203.3. This requirement for 5 test cases

will not apply to any mortgagee that is otherwise approved for Direct

Endorsement and that has closed 50 HECMs that were insured by HUD prior

to the effective date of the interim rule.

A Direct Endorsement mortgagee will have to submit the

documentation and certifications listed at Sec. 203.255 as well as the

certificate of counseling, the title insurance commitment, and the

mortgagee's election of the assignment or shared premium options as

required by Sec. 206.15. Paragraphs (c), (d) and (e) of Sec. 203.255,

regarding pre- and post-endorsement review and submission for

endorsement by a mortgagee other than the originating mortgagee, will

apply to HECMs. Sections 203.3, 203.5 and 203.255 of the current

regulations are amended and conforming amendments are made to

Sec. 206.3 defining maximum claim amount, Sec. 206.7 regarding

regulatory amendments, and Sec. 206.13 on ineligible programs.

Section 206.15

Section 206.15 of the current regulations, which pertains to the

insurance application process, is revised to conform to the decision to

make HECMs eligible for Direct Endorsement processing. Paragraph (a) of

Sec. 206.15 is removed because it refers to the old system of

reservations of insurance authority which was eliminated after the HECM

demonstration was expanded by section 334 of NAHA (See final rule

published on April 19, 1991, at 56 FR 16002). Paragraph (b) is removed

because the concept of applying for mortgage insurance prior to

execution of the mortgage is obsolete under the Direct Endorsement

program. Most of paragraph (c) is retained, except references to

application for insurance and conditional commitments will be replaced

with the Direct Endorsement requirements. The list of documentation in

Sec. 206.15(c) is amended to incorporate the Direct Endorsement

certifications at Sec. 203.255. The last sentence in Sec. 206.15(c)

concerning the General Insurance Fund is moved to a new Sec. 206.102 in

subpart C.

Other Program Amendments

Section 206.5

Section 206.5 of the current regulations is amended to include

waiver authority for subpart D regarding servicing to conform to the

1991 adoption of 24 CFR 203.685 permitting waivers of servicing

requirements for other single family mortgage insurance programs.

Section 206.19(f)

A new paragraph (f) is added to Sec. 206.19 to clarify that loan

advances cannot exceed any maximum mortgage amount stated in a

mortgage. The HECM program does not require that a maximum mortgage

amount be used, but some State laws require mortgages to contain a

maximum amount. This change will ensure that a mortgagee could comply

both with State law and its contractual obligation to make loan

advances and conforms to existing provisions in the approved mortgage

instruments.

Section 206.21

Section 206.21 is amended to make two corrections to paragraph (d).

Paragraph (d) as amended, provides that post-loan disclosures for

adjustments must be made 25 days before a change in the interest rate,

not a change in mortgage balance, and that disclosure be made of the

new interest rate rather than of the new mortgage balance. Paragraph

(d), as amended, also requires disclosure of the date of the index used

to calculate the new interest rate. These changes will conform the rule

to actual program operations as reflected in the program handbook and

mortgage instruments.

Sections 206.25 and 206.26

The provisions of Secs. 206.25 and 206.26 regarding payment

calculations and amounts set aside from the principal limit are revised

to eliminate differences between the regulations and the HECM Loan

Agreement. Section 206.25(b)(1) of the current regulation is

reorganized to describe the payments calculation in a manner to better

reflect the description in the Loan Agreement (Sec. 2.5 of the Loan

Agreement) required by HUD Handbook 4265.1 and the operations of the

HECM payments model software. Another change to Sec. 206.25(d) will

more accurately reflect the size of the amount set aside for servicing

charges.

Technical changes are made to the ``repair set aside'' provisions

at Sec. 206.26(b) to clarify repair set aside procedures as was done in

the Loan Agreement (Sec. 2.9 of the Loan Agreement). The mortgagee will

not be required to recalculate monthly payments when the repairs are

completed. Instead, excess funds in the repair set-aside will be

automatically transferred to a new or existing line of credit. In this

way mortgagors will only be charged a fee for changing payments if the

mortgagor requested an increase to monthly payments requiring a

recalculation. If the amount of funds in the repair set-aside will be

insufficient to complete the repairs, monthly payments will be

recalculated only if there are insufficient funds in a line of credit

to cover the repair charges.

Section 206.27(b)

Section 206.27(b) will be amended to clarify that any lien, in

addition to the tax deferral liens specified in the regulation, may be

recorded so long as those liens are subordinate to the first HECM and

any second HECM held by the Secretary.

Section 206.40

Section 206.40 of the current regulation is amended to reflect

statutory changes made by section 165 of the Housing and Community

Development Act of 1987 (Pub. L. 100-242, approved February 5, 1988)

which requires applicants and participants in any HUD program to

disclose to HUD their Social Security Numbers (SSNs) or Employer

Identification Numbers (EINs). To be eligible for mortgage insurance

under part 206, the mortgagor must meet the requirements for disclosure

and verification of SSNs and EINs as provided by part 200, subpart U.

This conforms part 206 to changes

[[Page 42756]]

previously made in regulations for other mortgage insurance programs.

Sections 206.45(a) and 206.15

The interim rule amends Secs. 206.45(a) and 206.15 to adjust the

time frame for submission to HUD of a title insurance commitment, and

to permit the mortgagee to retain its mortgagee's title insurance

policy in the loan servicing file. The requirement for a title policy

before endorsement has caused delay in endorsing mortgages. Section

206.45(a), as interim to be amended, would require the Direct

Endorsement mortgagee to obtain a title insurance commitment before

closing a loan and to obtain a title insurance policy satisfactory to

the Secretary. Section 206.15 will be amended to remove the requirement

to submit the title insurance policy to HUD, but mortgagees will still

be expected to obtain the title insurance policy, based on the

commitment obtained before closing, as soon as possible and to retain

the policy in the servicing file so that it is available for inspection

during HUD monitoring.

These requirements will still serve HUD's objective of ensuring

that any special problems regarding validity of a HECM in the

jurisdiction are known prior to insurance endorsement. HUD is

particularly interested in independent assurance of the validity of

title because HUD may be required to become the mortgagee upon

mortgagee default and the mortgage is non-recourse. HUD concludes that

it is still necessary to depart from its practice in other single

family programs which do not require any title evidence prior to

endorsement for mortgage insurance because of HUD's unique exposure in

the event of title problems, but there is no need to delay endorsement

if a title insurance commitment has been obtained by the mortgagee

before loan closing.

Section 206.45

Three other changes are made to Sec. 206.45 by this rule. Paragraph

(b) of that section, which currently requires the mortgaged property to

include a dwelling designed principally as a one-family residence, is

amended to permit a dwelling for such number of families as the

Secretary determines. Such a determination will need to be consistent

with statutory constraints. Although current section 255(d)(3) of the

NHA does not permit an HECM on a dwelling designed principally as a

residence for more than one family, HUD anticipates the possibility of

future statutory authority to insure an HECM secured by a dwelling

designed principally as a residence for up to four families. HUD

therefore has removed the unnecessary regulatory restriction that will

bar the Secretary from taking immediate advantage of any liberalization

in the size of dwellings eligible for the HECM program.

Paragraph (d) is amended to permit the HECM program to be used for

pre-1978 dwellings with defective paint surfaces if no child less than

six years of age is expected to reside in the dwelling. This change

conforms to a provision of the Residential Lead-Based Paint Hazard

Reduction Act of 1992 which changed the childhood age of concern for

exposure to lead-based paint hazards from less than seven years of age

to less than six years of age.

Section 206.107(a)(1)

Section 206.107(a)(1) of the current regulation is amended to

conform to the operating procedure announced in Handbook 4235.1, Rev.

1, Ch. 10-2 A.1. The Handbook was issued with the intent that HUD would

make this conforming rule change at the earliest opportunity and before

the balances of many mortgages would reach the maximum claim amount.

Under the current rule, mortgagees have expressed concern that they may

be obligated to make loan advances to the mortgagor in excess of the

maximum claim amount that HUD is permitted to pay to the mortgagee,

while not being able to assign the mortgage to HUD until the debt

reached the maximum claim amount. The rule will make clear that this

was not HUD's intent by providing mortgagees with a window period for

assignment. The mortgage could be assigned when the balance is equal to

or greater than 98 percent of the maximum claim amount, or when the

mortgagor has requested a payment that will result in the mortgage

balance exceeding the maximum claim amount.

A new paragraph (a)(1)(v) is added to Sec. 206.107 which will

require that the mortgage assigned to HUD under the mortgagee's

assignment option be a first lien and that the underlying security have

good and marketable title. The regulation incorporates Sec. 203.353

(mortgagee certification as to lien status, mortgage amount and

offsets), Sec. 203.387 (definition of good and marketable title) and

Sec. 203.389 (title objections which will not destroy marketability).

This clarifies that HUD may refuse assignment of a mortgage on a

property if some or all of the loan advances made after the mortgage

was closed are not secured by a first lien under the applicable state

law governing lien priority for funds advanced after closing. These

changes expressly adopt policies that apply to assignments of mortgages

to HUD under other authorities.

Section 206.116

A new Sec. 206.116 is added to codify the policy that the initial

Mortgage Insurance Premium (MIP) paid for an HECM is not refundable.

This policy was explained in the preamble to the HECM final rule

published on June 8, 1989, at 54 FR 24823. The non-refundable MIP is a

key factor in the payment model and in determination of risk under the

program.

Section 206.125

Three paragraphs of Sec. 206.125 are amended. First, paragraph (a)

will relieve the mortgagee from notifying the mortgagor when the

mortgage is due and payable because the mortgagor is deceased. While

HUD expects the mortgagee to attempt to provide adequate notice to an

executor or other party responsible for the property before a

foreclosure action is commenced, the term ``mortgagor'' is used in the

HECM regulations as referring only to the original mortgagor or

mortgagors, not to their successors in interest, so that notice to the

mortgagor after death will be an impossibility.

Second, paragraph (b) is revised to require an appraisal of the

property within 30 days of the date when the mortgagee is notified that

the mortgage is due and payable, or within 30 days of the date the

mortgagee becomes aware of the mortgagor's death, instead of permitting

the mortgagee to wait until 15 days before the foreclosure sale as in

the current rule. An appraisal will be needed in any event--either to

support a pre-foreclosure sale or in connection with the mortgagee's

bidding at foreclosure--and the early availability of an appraisal will

enable the mortgagor or the mortgagor's estate to offer the property

for sale at realistic terms in an attempt to avoid foreclosure. The

mortgagor may request an appraisal at any time if the property is being

sold. The mortgagee would no longer have to request the Secretary to

make an appraisal of the property. To be consistent with the change to

Direct Endorsement processing, which involves greater reliance on

mortgagees, the appraisal for this purpose would be ordered by the

mortgagee.

Paragraph (b) is also revised so that the current requirement for

the mortgagor to bear the expense applies only when the mortgage is not

due and payable. After the mortgage has been accelerated, the mortgagor

may not have funds available to pay for the appraisal or there may be a

substantial period of time before costs related to the property

[[Page 42757]]

can be paid by the mortgagor's estate. The revised paragraph (b)

therefore provides for the mortgagee to pay for the appraisal if the

mortgage is due and payable, with a right of reimbursement from any

proceeds from the sale of the home. If there are insufficient sales

proceeds, a related change in Sec. 206.129(d)(iv) will permit the

mortgagee to include the cost of the appraisal in its claim for

insurance benefits.

Third, paragraph (d) is amended to extend the time to foreclose

that is allowed without specific approval by HUD. The time is extended

to six months from the date of notice to the mortgagor that the

mortgage is due and payable, or from the date of the mortgagor's death

if applicable, or from the date that State law or Federal bankruptcy

law will permit the commencement of foreclosure. Such an extension will

provide additional time for the mortgagor or the mortgagor's estate to

sell the property. It is foreseen that the additional time may be

especially necessary where the property is being sold by the

mortgagor's estate or through probate proceedings.

Section 206.129

Several technical amendments are made to Sec. 206.129. Paragraph

(d) is amended to conform the HECM claim requirements to the updated

claim requirements for other insured single-family mortgages issued at

57 FR 47967, October 20, 1992. A claim payment under paragraph (d),

made when a mortgagee acquires title or is an unsuccessful bidder at

foreclosure, will include the items listed in paragraphs (p) and (q) of

Sec. 203.402 (HUD-approved amount paid to mortgagor for a deed-in-lieu

of foreclosure, and reasonable costs of evicting occupants), as well as

the items currently listed in the HECM regulation. The last sentence of

Sec. 206.129(d)(2)(ii) is removed because it is repetitive of

Sec. 203.402(p), which will be added, as noted above. The claim also

will include a certification that the property is undamaged by

incorporating the certification provisions of Sec. 203.380. Section

206.129(d)(3)(ii) will incorporate the inspection and preservation

requirements of Sec. 203.377.

Paragraph (e)(1) of Sec. 206.129 is amended with respect to claims

made in connection with the assignment option. Claims will be

calculated by starting with the mortgage balance at the time of

assignment instead of the maximum claim amount. This amendment is

related to the change previously discussed that will permit assignments

before the mortgage balance has reached the maximum claim amount.

Paragraph (e)(2) also will be amended to provide authority to reimburse

mortgagees for certain costs and attorney fees incurred in connection

with the assignment of mortgages to the Secretary as is currently

provided for under Sec. 203.404(a)(3) for Section 203(b) mortgages.

Section 206.203

A technical amendment is made to Sec. 206.203 to clarify that

mortgagees need only send a statement of account for line of credit

payments. Statements of account are not required for monthly payments.

New payment plans are required when payments are recalculated.

Section 206.207

Section 206.207 is amended to add title search costs to the list of

allowable post-endorsement charges by mortgagees in the case where the

mortgage was extended under Sec. 206.27(d)(10) for an additional amount

of debt or additional number of years beyond the debt or term

originally covered by the mortgage. Some State laws do not permit a

lien to be established for an indefinite amount or for advance over an

indefinite number of years, and later extension of the mortgage is

necessary because of the characteristics of the HECM program. The

section also is amended to permit a mortgagee to charge a mortgagor for

property preservation expenses incurred by a mortgagee in connection

with vacant or abandoned properties.

Technical Amendments

In addition to the foregoing amendments, certain minor technical

amendments are made to the following sections in 24 CFR part 206.

Section 206.9

This section is amended to correct the heading of paragraph (b).

Section 206.43(a)

The section is amended to include a cross reference to

Sec. 206.207(b).

Section 206.47(a)

This section is amended to replace the phrase ``minimum property

standards'' with ``the applicable property standards of the

Secretary''.

Section 206.102

This section is added to include language currently in Sec. 206.15,

stating that insured HECMs are obligations of the General Insurance

Fund.

Section 206.113

This section is amended to reflect a name change from the Treasury

Fiscal Requirements Manual to Treasury Financial Manual.

Section 206.121

This section is amended to correct a cross-reference citation.

Section 206.123(a)(4)

This section is amended to include a cross reference to

Sec. 206.127(a)(2).

Section 206.125(g)(3)

This section is amended to include the full text of Sec. 204.305(b)

from the coinsurance regulations in lieu of incorporation by reference,

because of HUD's recent rule that terminated the single family

coinsurance program.

Section 206.129(d)(2)

This section is amended to include the full text of Sec. 204.322(l)

from the coinsurance regulations. Some language from the related

Sec. 204.305(a) is now included in Sec. 206.125(g)(1).

Section 206.205(a)

This section is amended to add the word ``special'' before

``assessments''.

Other Matters

Justification for Interim Rule

In general, the Department publishes a rule for public comment

before issuing a rule for effect, in accordance with its own

regulations on rulemaking, 24 CFR part 10. However, part 10 does

provide for exceptions from that general rule where the Department

finds good cause to omit advance notice and participation. The good

cause required is satisfied when prior public procedure is

``impracticable, unnecessary, or contrary to the public interest.'' (24

CFR 10.1) The Department finds that good cause exists to publish this

interim rule for effect without first soliciting public comment in that

prior public procedure is both contrary to the public interest and

unnecessary.

Of the numerous changes made by the interim rule, the greatest

immediate impact is expected to be the change to Direct Endorsement

(DE) processing for HECM loans. DE processing permits the lender to

close the loan without prior approval from the Department. It is used

nearly exclusively for single family mortgage insurance programs other

than the HECM program, and has proven to be an effective method of

reducing the time needed for loan approval while permitting reduced HUD

field office staffs to deal with other matters that cannot be assigned

to mortgagees. The potential borrowers will clearly benefit by

elimination of processing through the HUD offices. Lenders will no

longer have a legal commitment for insurance

[[Page 42758]]

at the time they close the loan. However, HUD will always endorse the

loan under Direct Endorsement if it has been processed by the lender in

accordance with all applicable requirements. Lenders that follow all

HUD requirements are under no greater risk under Direct Endorsement

than if they closed a HECM loan in reliance on a HUD commitment. HUD

has received numerous informal communications from lenders endorsing a

conversion to Direct Endorsement processing for the HECM program as

soon as possible.

The many other changes included in this interim rule fall into

several general categories. Many are clarifications that reflect actual

program operation during the years the HECM program has been in effect.

Others are conforming changes that eliminate some unneeded and

unintended small discrepancies between part 206 and comparable

provisions in part 203. Another category of changes reflects changes in

other laws that have occurred since the original publication of part

206. Finally, some changes are simple wording changes to remove

possibility of confusion in meaning. In all of these cases, HUD has

determined that there is no public benefit to a delay in effectiveness

pending a public notice and comment period. There is no expansion of

regulatory burden for lenders or borrowers.

Regulatory Reinvention

Consistent with Executive Order 12866, and President Clinton's

memorandum of March 4, 1995, to all Federal Departments and Agencies on

the subject of Regulatory Reinvention, the Department is reviewing all

its regulations to determine whether certain regulations can be

eliminated, streamlined, or consolidated with other regulations. As

part of this review, this interim rule, at the final rule stage, may

undergo revisions in accordance with the President's regulatory reform

initiatives. In addition to comments on the substance of these

regulations, the Department welcomes comments on how this interim rule

may be made more understandable and less burdensome.

Environmental Impact

A Finding of No Significant Impact with respect to the environment

has been made in accordance with HUD regulations at 24 CFR part 50,

which implements section 102(2)(C) of the National Environmental Policy

Act of 1969 (NEPA). This Finding of No Significant Impact is available

for public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the

Office of the Rules Docket Clerk, Office of the General Counsel,

Department of Housing and Urban Development Room 10276, 451 Seventh

Street, SW, Washington, DC 20410.

Executive Order 12866

This interim rule was reviewed by the Office of Management and

Budget (OMB) under Executive Order 12866 on Regulatory Planning and

Review, issued by the President on September 30, 1993. Any changes made

in this interim rule as a result of that review are clearly identified

in the docket file, which is available for public inspection in the

office of the Department's Rules Docket Clerk, Room 10276, 451 Seventh

Street, SW, Washington, DC.

Impact on Small Entities

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this interim rule before publication and

by approving it certifies that this interim rule will not have a

significant economic impact on a substantial number of small entities.

The interim rule is limited to revision of the Home Equity Conversion

Mortgage Demonstration. Specifically, the requirements of the interim

rule are directed to making the program more efficient for

participating mortgagees, mortgagors and the Department.

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 interim rule will not have substantial direct effects

on States or their political subdivisions, or the relationship between

the Federal government and the States, or on the distribution of power

and responsibilities among the various levels of government. As a

result, the interim rule is not subject to review under the Order.

Executive Order 12606, the Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this interim rule will not

have potential for significant impact on family formation, maintenance,

and general well-being, and, thus, is not subject to review under the

order. No significant change in existing HUD policies or programs will

result from promulgation of this interim rule, as those policies and

programs relate to family concerns.

Regulatory Agenda

This interim rule was listed as sequence number 1414 in the

Department's Semiannual Agenda of Regulations published on May 8, 1995

(60 FR 23368, 23383) in accordance with Executive Order 12866 and the

Regulatory Flexibility Act.

List of Subjects

24 CFR Part 203

Hawaiian Natives, Home improvement, Indians--lands, Loan programs--

housing and community development, Mortgage insurance, Reporting and

recordkeeping requirements, Solar energy.

24 CFR Part 206

Aged, Condominiums, Loan programs--housing and community

development, Mortgage insurance, Reporting and recordkeeping

requirements.

Accordingly, 24 CFR parts 203 and 206 are amended as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

1. The authority citation for 24 CFR part 203 is revised to read as

follows:

Authority: 12 U.S.C. 1709, 1710, 1715b, and 1715u; 42 U.S.C.

3535(d). In addition, subpart C is also issued under 12 U.S.C.

1715u.

2. In Sec. 203.3, paragraph (b)(4) is revised to read as follows:

Sec. 203.3 Approval of mortgagees for Direct Endorsement.

* * * * *

(b) * * *

(4) The mortgagee must submit initially 15 mortgages processed in

accordance with Secs. 203.5 and 203.255. Separate approval is required

to originate mortgages under part 206 of this chapter through the

Direct Endorsement program unless at least 50 mortgages closed by the

mortgagee have been insured under part 206 of this chapter prior to

September 15, 1995. Other mortgagees who have not closed at least 50

mortgages under part 206 of this chapter must submit five (5) Home

Equity Conversion Mortgages, processed in accordance with Secs. 203.3

and 203.255. The documents required by Sec. 203.255 will be reviewed by

the Secretary and, if acceptable, commitments will be issued prior to

endorsement of the mortgages for insurance. If the underwriting and

processing of these 15 mortgages (or the 5 Home Equity Conversion

Mortgages) is satisfactory, then the mortgagee may be approved to close

subsequent mortgages

[[Page 42759]]

and submit them directly for endorsement for insurance in accordance

with the process set forth in Sec. 203.255. Unsatisfactory performance

by the mortgagee at this stage constitutes grounds for denial of

participation in the program, or for continued pre-endorsement review

of a mortgagee's submissions. If participation in the program is

denied, such denial is effective immediately and may be appealed in

accordance with the procedures set forth in paragraph (d)(2) of this

section. Unsatisfactory performance solely with respect to mortgages

under 24 CFR part 206 may, at the option of the Secretary, be grounds

for denial of participation or for continued pre-endorsement review for

24 CFR part 206 mortgages without affecting the mortgagee's processing

of mortgages under other parts.

* * * * *

3. In Sec. 203.5, paragraph (b) is revised to read as follows:

Sec. 203.5 Direct Endorsement process.

* * * * *

(b) Eligible programs. All single family mortgages authorized for

insurance under the National Housing Act shall be originated through

the Direct Endorsement program, except mortgages authorized under

sections 203(n), 203(p), 213(d), 221(h), 221(i), 225, 233, 237, 809 or

810 of the National Housing Act, or any other insurance programs

announced by Federal Register notice or as provided in Sec. 203.1. The

provision contained in Sec. 221.55 of this chapter regarding deferred

sales to displaced families is not available in the Direct Endorsement

program.

* * * * *

4. Section 203.255 is amended by:

a. Revising the last sentence of paragraph (b)(11);

b. Redesignating the existing paragraph (b)(12) as paragraph

(b)(13);

c. Adding a new paragraph (b)(12); and

d. Revising paragraph (c) introductory text and paragraph (c)(3),

to read as follows:

Sec. 203.255 Insurance of mortgages.

* * * * *

(b) * * *

(11) * * * The certification shall incorporate each of the

mortgagee certification items which apply to the mortgage loan

submitted for endorsement, as set forth in the applicable handbook or

similar publication that is distributed to all Direct Endorsement

mortgagees;

(12) For a Home Equity Conversion Mortgage under part 206 of this

chapter, the additional documents required by Sec. 206.15 of this

chapter; and

* * * * *

(c) Pre-endorsement review for Direct Endorsement. Upon submission

by an approved mortgagee of the documents required by paragraph (b) of

this section, the Secretary will review the documents and determine

that:

* * * * *

(3) The stated mortgage amount does not exceed the maximum mortgage

amount for the area as most recently announced by the Secretary, except

for mortgages under 24 CFR part 206;

* * * * *

PART 206--HOME EQUITY CONVERSION MORTGAGE INSURANCE

5. The authority citation for part 206 is revised to read as

follows:

Authority: 12 U.S.C. 1715b, 1715z-1720; 42 U.S.C. 3535(d).

6. In Sec. 206.3, the definition of ``Maximum claim amount'' is

revised to read as follows:

Sec. 206.3 Definitions.

* * * * *

Maximum claim amount means the lesser of the appraised value of the

property or 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). Both the appraised value and the maximum

dollar amount for the area shall be as of the date the Direct

Endorsement underwriter receives the appraisal report. Closing costs

shall not be taken into account in determining appraised value.

Appraised value shall be determined by an appraisal performed in

accordance with part 267 of this chapter.

* * * * *

7. Section 206.5 is amended by revising the first sentence, to read

as follows:

Sec. 206.5 Waivers.

The Secretary, in an individual case, may waive any requirement of

subparts B and D of this part not required by statute if the Secretary

finds that application of such requirement will adversely affect

achievement of the purposes of this program. * * *

8. Section 206.7 is revised to read as follows:

Sec. 206.7 Effect of amendments.

The regulations in this part may be amended by the Secretary at any

time and from time to time, in whole or in part, but amendments to

subparts B and C of this part shall not adversely affect the interests

of a mortgagee on any mortgage to be insured for which either the

Direct Endorsement mortgagee has approved the mortgagor and all terms

and conditions of the mortgage or the Secretary has made a commitment

to insure. Such amendments shall not adversely affect the interests of

a mortgagor in the case of a default by a mortgagee where the Secretary

makes payments to the mortgagor.

9. In Sec. 206.9, the paragraph heading of paragraph (b), is

revised to read as follows:

Sec. 206.9 Eligible mortgagees.

* * * * *

(b) HUD approved mortgagees.

* * * * *

10. The title of subpart B is revised to read ``Subpart B--

Eligibility; Endorsement.''

Sec. 206.13 [Removed]

11. Section 206.13 is removed.

12. Section 206.15 is revised to read as follows:

Sec. 206.15 Endorsement for insurance.

Mortgages originated under this part must be endorsed through the

Direct Endorsement program under Sec. 203.5 of this chapter, except as

provided in Sec. 203.1 of this chapter. The mortgagee shall submit to

the Secretary, within 60 days after the date of closing of the loan or

such additional time as permitted by the Secretary, properly completed

documentation and certifications as listed in Sec. 203.255 of this

chapter and the certificate received by the mortgagor from the

counseling entity that the mortgagor has received counseling as

required under Sec. 206.41, a copy of the title insurance commitment

satisfactory to the Secretary (or other acceptable title evidence if

the Secretary has determined not to require title insurance under

Sec. 206.45(a)), the mortgagee's election of either the assignment or

shared premium option under Sec. 206.107, and any other documentation

required by the Secretary. Sections 203.255(c), (d) and (e) of this

chapter, pertaining to pre-endorsement review, submission for

endorsement by purchasing mortgagee, and post-endorsement review for

Direct Endorsement, apply to mortgages under this part. If the

mortgagee has complied with the Direct Endorsement requirements of

Secs. 203.3, 203.5 and 203.255 of this chapter and the requirements of

this part, and the mortgage is determined to be eligible, the Secretary

will endorse the mortgage

[[Page 42760]]

for insurance by issuance of a Mortgage Insurance Certificate.

13. In Sec. 206.19, a new paragraph (f) is added to read as

follows:

Sec. 206.19 Payment options.

* * * * *

(f) Payments limited by lien amount. No payments shall be made

under any of the payment options, notwithstanding anything to the

contrary in this section or in Sec. 206.25, in an amount which shall

cause the mortgage balance after the payment to exceed any maximum

mortgage amount stated in the security instruments or to otherwise

exceed the amount secured by a first lien.

14. In Sec. 206.21, paragraphs (c)(2) and (d) are revised to read

as follows:

Sec. 206.21 Interest rate.

* * * * *

(c) * * *

(2) Compliance with pre-loan disclosure provisions of 12 CFR part

226 (Truth in Lending) shall constitute full compliance with paragraph

(c)(1) of this section.

(d) Post-loan disclosure. At least 25 days before any adjustment to

the interest rate may occur, the mortgagee must advise the mortgagor of

the following:

(1) The current index amount;

(2) The date of publication of the index; and

(3) The new interest rate.

* * * * *

15. In Sec. 206.25, paragraph (b)(1) is revised to read as follows:

Sec. 206.25 Calculation of payments.

* * * * *

(b) Monthly payments--term option. (1) Using factors provided by

the Secretary, the mortgagee shall calculate the monthly payment so

that the sum of paragraphs (b)(1)(i) or (b)(1)(ii) of this section

added to paragraphs (b)(1)(iii), (b)(1)(iv), (b)(1)(v) and (b)(1)(vi)

of this section shall be equal to the principal limit at the end of the

payment term:

(i) An initial payment under paragraph (a) of this section plus any

initial servicing charge set aside under Sec. 206.19(d); or

(ii) The mortgage balance at the time of a change in payments

option in accordance with Sec. 206.26, plus any remaining servicing

charge set aside under Sec. 206.19(d); and

(iii) The portion of the principal limit set aside as a line of

credit including any set asides for repairs and first year property

charges under Sec. 206.19(d); and

(iv) All monthly payments due through the payment term, including

funds withheld for payment of property charges under Sec. 206.205; and

(v) All MIP, or monthly charges due to the Secretary in lieu of

mortgage insurance premiums due through the payment term; and

(vi) All interest through the remainder of the payment term. The

expected average mortgage interest rate shall be used for this purpose.

* * * * *

16. In Sec. 206.26, paragraphs (b)(1) and (b)(2) are revised to

read as follows:

Sec. 206.26 Change in payment option.

* * * * *

(b) * * *

(1) If initial repairs after closing under Sec. 206.47 are

completed without using all of the funds set aside for repairs, the

mortgagee shall transfer the remaining amount to a line of credit and

inform the mortgagor of the sum available to be drawn.

(2) If repairs after closing under Sec. 206.47 cannot be completed

with the funds set aside for repairs, the mortgagee may advance

additional funds to complete repairs from an existing line of credit.

If a line of credit is not sufficient to make the advance or if no line

of credit exists, future monthly payments shall be recalculated for use

as a line of credit in accordance with Sec. 206.25.

* * * * *

17. In Sec. 206.27, paragraph (b)(3) is revised to read as follows:

Sec. 206.27 Mortgage provisions.

* * * * *

(b) * * *

(3) The mortgagor shall not participate in a real estate tax

deferral program or permit any liens to be recorded against the

property, unless such liens are subordinate to the insured mortgage and

any second mortgage held by the Secretary.

* * * * *

18. A new Sec. 206.40 is added to read as follows:

Sec. 206.40 Disclosure and verification of Social Security and

Employer Identification Numbers.

The mortgagor must meet the requirements for the disclosure and

verification of Social Security and Employer Identification Numbers, as

provided by part 200, subpart U, of this chapter.

19. In Sec. 206.43, paragraph (a) is revised, and a new paragraph

(c) is added, to read as follows:

Sec. 206.43 Information to mortgagor.

(a) Explanation of mortgage terms. At the time the mortgagee

provides the mortgagor with a loan application, the mortgagee shall

provide each mortgagor with a copy of the mortgage forms. At that time

the mortgagee shall identify and explain to the mortgagor the principal

provisions of the mortgage, including the fact that the liability of

the homeowner is limited under the mortgage to the value of the

property and whether the mortgagee will collect servicing fees under

Sec. 206.207(b).

* * * * *

(c) Disclosure. The mortgagee must comply with any regulations

issued by the Federal Reserve Board to implement section 154 of the

Riegle Community Development and Regulatory Improvement Act of 1994 (15

U.S.C. 1648).

* * * * *

20. In Sec. 206.45, paragraphs (a), (b), and (d) are revised to

read as follows:

Sec. 206.45 Eligible properties.

(a) Title. A mortgage must be on real estate held in fee simple, or

on a leasehold under a lease for not less than 99 years which is

renewable, or under a lease having a remaining period of not less than

50 years beyond the date of the 100th birthday of the youngest

mortgagor. The mortgagee shall obtain a mortgagee's title insurance

policy satisfactory to the Secretary. If the Secretary determines that

title insurance for reverse mortgages is not available for reasonable

rates in a State, then the Secretary may specify other acceptable forms

of title evidence in lieu of title insurance.

(b) Type of property. The property shall include a dwelling

designed principally as a residence for one family or such additional

families as the Secretary shall determine.

* * * * *

(d) Lead-based paint poisoning prevention. If the appraiser of a

dwelling constructed prior to 1978 finds defective paint surfaces,

Sec. 200.810(d) of this chapter shall apply unless the mortgagor

certifies that no child who is less than six years of age resides or is

expected to reside in the dwelling.

* * * * *

21. In Sec. 206.47, paragraph (a) is revised to read as follows:

Sec. 206.47 Property standards; repair work.

(a) Need for repairs. Properties must meet the applicable property

standards of the Secretary in order to be eligible. Properties which do

not meet the property standards must be repaired in order to ensure

that the repaired property will serve as adequate security for the

insured mortgage.

* * * * *

22. A new Sec. 206.102 is added under the undesignated center

heading ``Sale,

[[Page 42761]]

Assignment and Pledge'' to read as follows:

Sec. 206.102 General Insurance Fund.

Mortgages insured under this part shall be obligations of the

General Insurance Fund.

23. In Sec. 206.107, paragraph (a)(1) introductory text is revised

and a new paragraph (a)(1)(v) is added, to read as follows:

Sec. 206.107 Mortgagee election of assignment or shared premium

option.

(a) * * *

(1) Under the assignment option, the mortgagee shall have the

option of assigning the mortgage to the Secretary if the mortgage

balance is equal to or greater than 98 percent of the maximum claim

amount, or the mortgagor has requested a payment which exceeds the

difference between the maximum claim amount and the mortgage balance

and:

* * * * *

(v) The mortgage is a first lien of record and title to the

property securing the mortgage is good and marketable. The provisions

of Sec. 203.353 of this chapter pertaining to mortgagee certifications,

Sec. 203.387 of this chapter pertaining to title evidence, and

Sec. 203.389 of this chapter pertaining to waived title objections also

apply.

* * * * *

24. In Sec. 206.113, paragraph (b) is revised to read as follows:

Sec. 206.113 Late charge and interest.

* * * * *

(b) Interest. In addition to any late charge provided in paragraph

(a) of this section, the mortgagee shall pay interest on any initial

MIP remitted to the Secretary more than 30 days after closing, and

interest on any monthly MIP remitted to the Secretary more than 30 days

after the payment date prescribed in Sec. 206.111(b). Such interest

rate shall be paid at a rate set in conformity with the Treasury

Financial Manual.

* * * * *

25. A new Sec. 206.116 is added before the undesignated center

heading ``HUD RESPONSIBILITY TO MORTGAGORS'', to read as follows:

Sec. 206.116 Refunds.

No amount of the initial MIP shall be refundable.

26. Section 206.121 is amended by revising the first sentence of

paragraph (c), to read as follows:

Sec. 206.121 Secretary authorized to make payments.

* * * * *

(c) Second mortgage. If the contract of insurance is terminated as

provided in Sec. 206.133(c) and if a second mortgage has been recorded

when required by Sec. 206.27(d), all payments to the mortgagor by the

Secretary (except late charges) will be secured by the second mortgage.

* * *

27. In Sec. 206.123, paragraph (a)(4) is revised to read as

follows:

Sec. 206.123 Claim procedures in general.

(a) * * *

(4) The mortgagee acquires title to the property by foreclosure or

a deed in lieu of foreclosure and sells the property as provided in

Sec. 206.125(g) for an amount which does not satisfy the mortgage

balance or fails to sell the property as provided in

Sec. 206.127(a)(2); or

* * * * *

28. Section 206.125 is amended by revising the first sentence of

paragraph (a)(2) and paragraphs (b), (d)(1), (d)(2), (g)(1), and

(g)(3), to read as follows:

Sec. 206.125 Acquisition and sale of the property.

(a) * * *

(2) After notifying the Secretary, and receiving approval of the

Secretary when needed, the mortgagee shall notify the mortgagor that

the mortgage is due and payable, unless the mortgage is due and payable

by reason of the mortgagor's death. * * *

* * * * *

(b) Appraisal. The mortgagee shall obtain an appraisal of the

property no later than 30 days after the mortgagor is notified that the

mortgage is due and payable, or no later than 30 days after the

mortgagee becomes aware of the mortgagor's death, or upon the

mortgagor's request in connection with a pending sale. The property

shall be appraised no later than 15 days before a foreclosure sale. The

appraisal shall be at the mortgagor's expense unless the mortgage is

due and payable. If the mortgage is due and payable, the appraisal

shall be at the mortgagee's expense but the mortgagee shall have a

right to be reimbursed out of the proceeds of any sale by the

mortgagor.

* * * * *

(d) Initiation of foreclosure. (1) The mortgagee shall commence

foreclosure of the mortgage within six months of giving notice to the

mortgagor that the mortgage is due and payable, or six months from the

date of the mortgagor's death if applicable, or within such additional

time as may be approved by the Secretary.

(2) If the laws of the State in which the mortgaged property is

located or if Federal bankruptcy law does not permit the commencement

of the foreclosure within six months from the date of the notice to the

mortgagor that the mortgage is due and payable, the mortgagee shall

commence foreclosure within six months after the expiration of the time

during which such foreclosure is prohibited by such laws.

* * * * *

(g) Sale of the acquired property. (1) Upon acquisition of the

property by foreclosure or deed in lieu of foreclosure, the mortgagee

shall take possession of, preserve and repair the property and shall

make diligent efforts to sell the property within six months from the

date the mortgagee acquired the property. Repairs shall not exceed

those required by local law and, in cases where the sale is made with a

mortgage insured by the Secretary or guaranteed by the Secretary of

Veterans Affairs, those necessary to meet the objectives of the

property standards required for mortgages insured by the Secretary. No

other repairs shall be made without the specific advance approval of

the Secretary. The mortgagee shall sell the property for an amount not

less than the appraised value (as provided under paragraph (b) of this

section) unless written permission is obtained from the Secretary

authorizing a sale at a lower price.

* * * * *

(3) The mortgagee shall not enter into a contract for the

preservation, repair or sale of the property with any officer,

employee, owner of ten percent or more interest in the mortgagee or

with any other person or organization having an identity of interest

with the mortgagee or with any relative of such officer, employee,

owner or person.

* * * * *

29. Section 206.129 is amended by revising paragraphs (d)(2)(i),

(d)(2)(ii), (d)(2)(iv), (d)(3)(ii), (e)(1), and (e)(2), and by adding

paragraphs (d)(2)(v) and (d)(2)(vi) to read as follows:

Sec. 206.129 Payment of claim.

* * * * *

(d) * * *

(2) The claim shall include the following items:

(i) Items listed in Sec. 203.402(a), (b), (c), (d), (e), (g), (j),

(p) and (q) of this chapter.

(ii) Foreclosure costs or costs of acquiring the property actually

paid by the mortgagee and approved by the Secretary, in an amount not

in excess of two-thirds of such costs or $75.00, which ever is greater.

* * * * *

(iv) Costs of any appraisal obtained under Secs. 206.125 or

206.127, provided that the appraisal was obtained after the mortgage

became due and payable and that the mortgagee is not otherwise

reimbursed for such costs.

[[Page 42762]]

(v) Reasonable payments made by the mortgagee for:

(A) Preservation and maintenance of the property;

(B) Repairs necessary to meet the objectives of the property

standards required for mortgages insured by the Secretary, those

required by local law, and such additional repairs as may be

specifically approved in advance by the Commissioner; and

(C) Expenses in connection with the sale of the property including

a sales commission at the rate customarily paid in the community and,

if the sale to the buyer involves a mortgage insured by the Secretary

or guaranteed by the Secretary of Veterans Affairs, a discount at a

rate not to exceed the maximum allowable by the Commissioner, as of the

date of execution of the discounted loan, on sales of properties

acquired by the Commissioner pursuant to Secs. 203.295 through 203.426

of this chapter.

(vi) A certification that the property is undamaged in accordance

with Sec. 203.380 of this chapter.

(3) * * *

(ii) Any adjustment for damage or neglect to the property pursuant

to Secs. 203.377, 203.378, and 203.379 of this chapter.

(e) * * *

(1) When a mortgagee assigns a mortgage which is eligible for

assignment under Sec. 206.107(a)(1), the amount of payment shall be

computed by subtracting from the mortgage balance on the date of

assignment the items set forth in Sec. 203.404(b) of this chapter and

any adjustments for damage or neglect to the property pursuant to

Secs. 203.377, 203.378 and 203.379 of this chapter.

(2) The claim shall also include:

(i) Reimbursement for such costs and attorney's fees as the

Secretary finds were properly incurred in connection with the

assignment of the mortgage to the Secretary, and

(ii) An amount equivalent to the interest allowance which will have

been earned from the date the mortgage was assigned to the Secretary to

the date the claim is paid, if the claim had been paid in debentures,

except that if the mortgagee fails to meet any of the requirements of

Sec. 206.127(c), or Sec. 206.131 if applicable, within the specified

time and in a manner satisfactory to the Secretary (or within such

further time as the secretary may approve in writing), the interest

allowance in the payment of the claim shall be computed only to the

date on which the particular required action should have been taken or

to which it was extended. The provisions of Secs. 203.405 through

203.411 of this chapter pertaining to debentures are incorporated by

reference.

* * * * *

30. In Sec. 206.203, paragraph (b) is revised to read as follows:

Sec. 206.203 Providing information.

* * * * *

(b) Line of credit and payment change statements. The mortgagee

shall provide the mortgagor with a statement of the account every time

it makes a line of credit payment. The mortgagee shall provide the

mortgagor with a new payment plan every time it recalculates monthly

payments.

* * * * *

31. In Sec. 206.205, paragraph (a) is revised to read as follows:

Sec. 206.205 Property charges.

(a) General. The mortgagor shall pay all property charges

consisting of taxes, ground rents, flood and hazard insurance premiums,

and special assessments in a timely manner and shall provide evidence

of payment to the mortgagee as required in the mortgage.

* * * * *

32. In Sec. 206.207, paragraph (a) is revised to read as follows:

Sec. 206.207 Allowable charges and fees after endorsement.

(a) Reasonable and customary charges. The mortgagee may collect

reasonable and customary charges and fees from the mortgagor after

insurance endorsement by adding them to the mortgage balance, but only

for: items listed in Sec. 203.552(a)(6), (9), (11), (13) and (14) of

this chapter; items authorized by the Secretary under

Sec. 203.552(a)(12) of this chapter, or as provided at Sec. 206.26(d);

or charges and fees related to additional documents described in

Sec. 206.27(b)(10) and related title search costs.

* * * * *

Dated: July 13, 1995.

Jeanne K. Engel,

General Deputy, Assistant Secretary for Housing--Federal Housing

Commissioner.

[FR Doc. 95-20221 Filed 8-15-95; 8:45 am]

BILLING CODE 4210-27-P