Single Family Mortgage Limits: Redelegation of Authority; Final Rule

SUMMARY: This final rule amends HUD's Single Family Mortgage Insurance

regulations to recognize the redelegation of the authority to increase

Federal Housing Administration (FHA) single family maximum mortgage

limits and designate high cost areas. The FHA Commissioner is

redelegating this authority to certain officials in HUD's local

offices. This redelegation is consistent with the primary objectives of

the recent reorganization of HUD's Office of Housing, which are to

provide local offices with more direct authority and to enhance the

delivery of services to clients.

EFFECTIVE DATE: April 27, 1995.

FOR FURTHER INFORMATION CONTACT: Maynard Curry, Office of Insured

Single Family Housing, Room 9276, Department of Housing and Urban

Development, 451 Seventh Street, SW, Washington, DC 20410, telephone

(202) 708-2121, or (202) 708-4594 (TDD). (These numbers are not toll-

free.)

SUPPLEMENTARY INFORMATION:

Background

Section 203(b)(2) of the National Housing Act and 24 CFR

203.18(a)(1) prevent insured mortgages for 1-family residences from

exceeding 95 percent of the median house price for the area, as

determined by the Secretary. To date, the determination of the median

price is based on actual sales prices for new and existing homes. The

authority to make this determination has been delegated to the

Assistant Secretary for Housing-Federal Housing Commissioner (the

Commissioner). The Commissioner issues periodic notices in the Federal

Register announcing the mortgage limits for each area of the country

after determining the median house price for each area. A local HUD

office can recommend interim changes for specific areas based on

locally-gathered information on changes in house prices, but those

changes cannot be announced without approval by the Commissioner.

HUD has recently been reorganized to provide more direct authority

to its local offices regarding operation of its programs. Regulations

that reserve to Headquarters functions that are locally-based, such as

the determination of median house prices in an area, are inconsistent

with the new emphasis on empowerment of local offices.

HUD is taking two actions to recognize the reorganization and to

facilitate the timely adjustment of area mortgage limits in response to

increases1 in median area house prices. First, HUD is amending two

provisions in the current regulations (24 CFR 203.18(h) and

203.18b(b)(2)) to provide greater administrative flexibility regarding

the determination and announcement of mortgage limits based on median

area house prices. Second, HUD is preparing a formal delegation of

authority to identify specified officials in the local offices who are

authorized to determine median area house prices and the resulting

maximum mortgage amounts. HUD is also publishing this delegation of

authority today as a separate document.

\1\HUD has avoided reducing mortgage limits in response to

temporary reductions in local market prices. Therefore, the focus of

this rulemaking is only on increases to mortgage limits.

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HUD expects that increases in median house prices can be determined

at the local level more rapidly than at Headquarters and with

comparable accuracy. Currently Headquarters staff makes recommendations

to the Commissioner based on two approaches. Under the first approach,

a comprehensive review is performed of median house prices in all

areas. This review occurs from time to time, but normally no more

frequently than annually. Price data comes from two sources: the

Federal Housing Finance Board (FHFB) and the WEFA Group, a private

consulting firm. A chart is prepared for approval by the Commissioner

that shows the maximum mortgage amount for each area based on 95

percent of the median house price in the area (subject to a statutory

floor and ceiling on these amounts). The last such chart was published

in the Federal Register on March 15, 1993 (58 FR 13950).

HUD also has a procedure for receiving and reviewing local appeals

between publication of the charts with national updates if ``any party

believes that a mortgage limit established by the Secretary * * * does

not accurately reflect the median house prices in an area.'' 24 CFR

203.18b(a). The party seeking a change in the mortgage limit (typically

a mortgagee or an organization of mortgagees or real estate

professionals) must collect and submit data showing the actual sales

prices for all new and existing homes in the area over a period of time

that varies with the number of sales involved. This data goes to the

local office, which submits a recommendation based on the data to the

Commissioner for a final determination. Once the Commissioner approves

a change in the mortgage limit for an area based on the change in

median house price, the new mortgage limit can be made effective

through an administrative announcement to affected mortgagees in

advance of being included in a Federal Register notice.

Under this final rule, the local appeals approach will serve as the

usual method leading to mortgage limit increases, except that local

offices may also take the initiative in generating submissions of

actual sales price data to compensate for the lack of periodic national

updates. The change in regulations and the delegation of authority do

not prevent the Commissioner from also approving appropriate mortgage

limit increases when information available to the Commissioner

indicates that increases are warranted. The Commissioner may continue

to receive periodic information on median house prices from national

sources such as FHFB and the WEFA Group to confirm the accuracy of

local office determinations. The Commissioner will maintain a national

compilation of mortgage limits for all areas and may choose to continue

periodic publication of a national compilation in the Federal Register

for information purposes.

HUD will add a new chapter to HUD Handbook 4000.2 to ensure that

local offices have adequate instructions on their new role. These

instructions will cover such matters as appropriate sources of house

sales price data, extra weight that may be given to new home sales

prices in certain circumstances, and identification of the pertinent

``area'' in compliance with the statutory definition of that term.

These instructions should ensure a high degree of consistency in

approach among the different local offices.

Justification for Final Rulemaking

In general, HUD publishes a rule for public comment before issuing

a rule for effect, in accordance with its own regulations on rulemaking

in 24 CFR part 10. However, part 10 provides an exception from that

general rule with respect to rules governing HUD's organization or its

own internal practices or procedures. This final rule [[Page 16033]] is

limited to a revision of the respective roles of the Commissioner and

the local offices and therefore qualifies for the exception.

Other Matters

Regulatory Flexibility Act

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

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

approving it certifies that this rule does not have a significant

economic impact on a substantial number of small entities. The

redelegation of authority implemented by this rule is a matter of HUD's

internal practices or procedures, and it will not have an impact on

small entities.

Environmental Impact

In accordance with 40 CFR 1508.4 of the regulations of the Council

on Environmental Quality and 24 CFR 50.20(k) of the HUD regulations,

the policies and procedures contained in this rule relate only to

delegations of authority and therefore are categorically excluded from

the requirements of the National Environmental Policy 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 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. The

redelegation of authority implemented by this rule is a matter of HUD's

internal practices or procedures. As a result, the 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 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.

No significant change in existing HUD policies or programs will result

from promulgation of this rule, as those policies and programs relate

to family concerns.

Regulatory Agenda

This rule was not listed in HUD's Semiannual Agenda of Regulations

published on November 14, 1994 (59 FR 57632) in accordance with

Executive Order 12866 and the Regulatory Flexibility Act.

List of Subjects in 24 CFR Part 203

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

housing and community development, Mortgage insurance, Reporting and

recordkeeping requirements, Solar energy.

Accordingly, HUD amends 24 CFR part 203 as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

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

follows:

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

3535(d).

2. In Sec. 203.18, paragraph (h) is revised to read as follows:

Sec. 203.18 Maximum mortgage amounts.

* * * * *

(h) Notice of maximum mortgage amount. A maximum mortgage amount

based on the 1-family median house price for an area under paragraph

(a)(1) of this section may be made effective by:

(1) Providing direct notice to affected mortgagees through an

administrative issuance; or

(2) Publishing a notice in the Federal Register.

Sec. 203.18b [Amended]

3. In Sec. 203.18b, paragraph (b)(2) is amended by removing the

second sentence.

Dated: March 20, 1995.

Nicolas P. Retsinas,

Assistant Secretary for Housing--Federal Housing Commissioner.

[FR Doc. 95-7552 Filed 3-27-95; 8:45 am]

BILLING CODE 4210-27-P