Mortgagee Review Board; Streamlined Final Rule

SUMMARY: This rule further streamlines HUD's regulations on the

Mortgagee Review Board (MRB). This rule is part of HUD's efforts to

comply with the President's regulatory reform initiatives by producing

concise regulations that are easy to use and understand. This rule will

not change the substantive requirements of the MRB regulations, but it

will eliminate provisions that are redundant of the MRB statute.

EFFECTIVE DATE: February 8, 1996.

FOR FURTHER INFORMATION CONTACT: Emmett N. Roden, Assistant General

Counsel for Administrative Proceedings, Office of General Counsel,

Department of Housing and Urban Development, 451 7th Street, S.W., Room

10251, Washington, D.C. 20410, telephone (202) 708-2350. The telephone

number for the hearing impaired (TDD) is (202) 708-9300. These are not

toll-free numbers.

SUPPLEMENTARY INFORMATION: The Mortgagee Review Board (MRB or the

Board) final rule was published in the Federal Register on August 1,

1995 (60 FR 39236). The August 1, 1995 final rule streamlined the

hearing procedures to allow the Board to delegate its hearing authority

to a hearing official. This new process is much less time-consuming and

expensive, and it is consistent with the President's regulatory reform

initiatives expressed in Executive Order 12866 and the President's

memorandum of March 4, 1995 to all Federal departments and agencies.

However, HUD has determined that it can further streamline the

regulations by removing language that is redundant of the MRB statute

(12 U.S.C. 1708(c)-(d)). For example, the statute fully describes the

types of administrative actions that the Board may take against

mortgagees, the Board's authority to request the Secretary to issue

cease and desist orders to mortgagees, and the requirement to notify

GNMA of withdrawal actions. Since these statutory provisions are nearly

self-explanatory and widely accessible, it is unnecessary to repeat

them in the Code of Federal Regulations.

Therefore, this rule removes several redundant provisions from the

MRB regulations. This rule revises Sec. 25.3 to remove the following

definitions: administrative action, cease and desist order, letter of

reprimand, notice of charges, party, probation, reasonable cause,

suspension, and withdrawal. The rule revises Sec. 25.5 (Administrative

actions) and removes Sec. 25.12 (Cease and desist orders). The rule

also revises Sec. 25.14 concerning the requirement to notify GNMA of

withdrawal actions, and removes Sec. 25.15 concerning annual reports to

the Secretary. In place of the redundant statutory language, this rule

includes the references to the appropriate statutory provisions.

Although the statutory provisions are accessible and are referenced

in the new rule text, HUD seeks to ensure that this rule is easy to

use. Therefore, HUD intends to provide mortgagees with a copy of the

MRB statute along with the copies of the updated regulatory text that

HUD routinely provides.

This rule also amends the regulations to correct three minor

errors. First, this rule corrects a typographical error in

Sec. 25.9(l); the word ``inquiries'' should appear instead of

``inquires.'' Second, this rule corrects Sec. 25.9(p) to refer to

prudent ``mortgagees'' rather than ``lenders.'' HUD had intended to use

the term ``mortgagees'' in this paragraph, in conformance with the

definition of that term in Sec. 25.3. Third, this rule restores

language in Sec. 25.5(d) regarding the effect of a suspension upon

Title I lenders that was inadvertently deleted from Sec. 202.9(a)(3) in

the August 1, 1995 final rule.

Justification for Final Rulemaking

HUD generally publishes a rule for public comment before issuing a

final rule for effect, in accordance with its regulations on rulemaking

(24 CFR part 10). However, part 10 provides exceptions from the general

rule if HUD finds good cause to omit advance notice and public

participation. The good cause requirement is satisfied when prior

public procedure is ``impracticable, unnecessary, or contrary to the

public interest'' (24 CFR 10.1). HUD finds that good cause exists to

publish this rule for effect without first soliciting public comment.

Since this rule does not alter any rights or responsibilities of

parties affected by the rule nor any substantive requirements of the

rule, such prior public procedure is unnecessary.

Findings and Other Matters

National Environmental Policy Act

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

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

policies and procedures contained in this rule relate only to

administrative decisions, which do not constitute development decisions

and do not affect the physical condition of a project area or building.

Therefore, this rule is categorically excluded from the requirements of

the National Environmental Policy Act.

Regulatory Flexibility Act

In accordance with the Regulatory Flexibility Act (5 U.S.C.

605(b)), the Secretary hereby certifies that this rule would not have a

significant economic impact on a substantial number of small entities.

The rule streamlines the Mortgagee Review Board regulations by removing

language from the Code of Federal Regulations that is redundant of

language that appears in the United States Code. It will have no

adverse or disproportionate economic impact on small businesses.

Executive Order 12606, The Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this final rule does not

have potential for significant impact on family formation, maintenance,

and general well-being. 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. Therefore, the rule is

not subject to review under the Order.

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. As a result,

the final rule is not subject to review under the Order.

List of Subjects in 24 CFR Part 25

Administrative practice and procedure, Loan programs--housing and

community development, Organization and functions (Government

agencies).

[[Page 685]]

Accordingly, 24 CFR part 25 is amended as follows:

PART 25--MORTGAGEE REVIEW BOARD

1. The authority citation for part 25 continues to read as follows:

Authority: 12 U.S.C. 1708 (c)-(d)), 1709(s), 1715b, and 1735

(f)-14; 42 U.S.C. 3535(d).

2. Section 25.3 is amended by removing the definitions for the

following terms: ``administrative action'', ``cease and desist order'',

``letter of reprimand'', ``notice of charges'', ``party'',

``probation'', ``reasonable cause'', ``suspension'', and

``withdrawal''; and by revising the definitions for the terms

``lender'', ``loan correspondent'', and ``mortgagee'', to read as

follows:

Sec. 25.3 Definitions.

* * * * *

Lender. A financial institution as defined in Sec. 202.2(a) of this

title.

Loan correspondent. A financial institution as defined in

Sec. 202.2(b) of this title.

Mortgagee. For purposes of the regulations in this part, the term

``mortgagee'' includes:

(1) The original lender

under the mortgage, as that term is defined at sections 201(a) and

207(a)(1) of the National Housing Act (12 U.S.C. 1707(a), 1713(a)(1));

(2) A lender or loan correspondent as defined in this section;

(3) A branch office or subsidiary of the mortgagee, lender, or loan

correspondent; or

(4) Successors and assigns of the mortgagee, lender, or loan

correspondent, as are approved by the Commissioner.

* * * * *

3. Section 25.5 is revised to read as follows:

Sec. 25.5 Administrative actions.

(a) General. The Board is authorized to take the following

administrative actions: letter of reprimand, probation, suspension,

withdrawal, or settlement agreement. These actions are described at 12

U.S.C. 1708(c)(3), and as further set out in this section.

(b) Letter of reprimand. A letter of reprimand shall be effective

upon receipt of the letter by the mortgagee. Failure to comply with a

directive in the letter of reprimand may result in any other

administrative action under this part that the Board finds appropriate.

(c) Probation. Probation shall be effective upon receipt of the

notice of probation by the mortgagee. Failure to comply with the terms

of probation may result in any other administrative action under this

part that the Board finds appropriate.

(d) Suspension. A suspension shall be based upon adequate evidence

and shall be effective upon receipt of the notice of suspension by the

mortgagee. During the period of suspension, HUD will not endorse any

mortgage originated by the suspended mortgagee unless prior to the date

of suspension a firm commitment has been issued relating to any such

mortgage, or a Direct Endorsement underwriter has approved the

mortgagor for any such mortgage. During the period of suspension, a

lender or loan correspondent may not originate new title I loans under

their Title I Contracts of Insurance or apply for a new Contract of

Insurance.

(e)(1) Withdrawal. During the period of withdrawal, HUD will not

endorse any mortgage originated by the withdrawn mortgagee unless prior

to the date of withdrawal a firm commitment has been issued relating to

any such mortgage, or a Direct Endorsement underwriter has approved the

mortgagor for any such mortgage. During the period of withdrawal, a

lender or loan correspondent may not originate new title I loans under

their Title I Contracts of Insurance or apply for a new Contract of

Insurance. The Board may limit the geographical extent of the

withdrawal, or limit its scope (e.g., to either the single family or

multifamily activities of a withdrawn mortgagee). Upon the expiration

of the period of withdrawal, the mortgagee may file a new application

for approval under 24 CFR part 202.

(2) Effective date of withdrawal. (i) If the Board determines that

immediate action is in the public interest or in the best interests of

the Department, then withdrawal shall be effective upon receipt of the

Board's notice of withdrawal.

(ii) If the Board does not determine that immediate action is

necessary according to paragraph (e)(2)(i) of this section, then

withdrawal shall be effective either:

(A) Upon the expiration of the 30-day period specified in

Sec. 25.8, if the mortgagee has not requested a hearing; or

(B) Upon receipt of the Board's decision under Sec. 25.8, if the

mortgagee requests a hearing.

4. Section 25.9 is amended by revising paragraphs (l) and (p) to

read as follows:

Sec. 25.9 Grounds for an administrative action.

* * * * *

(l) Failure of a mortgagee to respond to inquiries from the Board;

* * * * *

(p) Business practices which do not conform to generally accepted

practices of prudent mortgagees or which demonstrate irresponsibility;

* * * * *

Sec. 25.12 [Removed]

5. Section 25.12 is removed.

Sec. 25.13 [Redesignated as Sec. 25.12]

6. Section 25.13 is redesignated as Sec. 25.12.

7. Section 25.14 is redesignated as Sec. 25.13, and is revised to

read as follows:

Sec. 25.13 Notifying GNMA of withdrawal actions.

When the Board issues a notice of violation that could lead to

withdrawal of a mortgagee's approval, or is notified by GNMA of an

action that could lead to withdrawal of GNMA approval, the Board shall

proceed in accordance with 12 U.S.C. 1708(d).

(Approved by the Office of Management and Budget under Control

Number 2502-0450.)

Sec. 25.15 [Removed]

8. Section 25.15 is removed.

Sec. 25.16 [Redesignated as Sec. 25.14]

9. Section 25.16 is redesignated as Sec. 25.14.

Sec. 25.18 [Redesignated as Sec. 25.15]

10. Section 25.18 is redesignated as Sec. 25.15.

Dated: December 15, 1995.

Henry G. Cisneros,

Secretary.

[FR Doc. 96-113 Filed 1-8-96; 8:45 am]

BILLING CODE 4210-32-P