Ginnie Mae MBS Program: Book Entry Securities

SUMMARY: This rule revises the security issuance procedures for Ginnie

Mae. Physical securities now will be issued only upon the request of

the registered holder. Ginnie Mae is revising two sections of part 320

to reflect this change. These changes bring Ginnie Mae's security

issuance procedures up to date with modern practices.

DATES: Effective Date: October 26, 1998, Comment Due Date: November 23,

1998.

ADDRESSES: Interested persons are invited to submit comments regarding

this rule to the Rules Docket Clerk, Regulations Division, Office of

the General Counsel, Room 10276, Department of Housing & Urban

Development, 451 Seventh Street, S.W., Washington, D.C. 20410-8000.

Communications should refer to the above docket number and title. 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. Facsimile (FAX) comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: Thomas R. Weakland, Vice President,

Office of Program Administration, Government National Mortgage

Association, Room 6204, Department of Housing and Urban Development,

451 Seventh Street, Washington, D.C. 20410-0500. Telephone (202) 708-

2884 (voice) or 202-708-1734 (TTY). For hearing- and speech-impaired

persons, this number may be accessed via TTY by calling the Federal

Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

Background

The Government National Mortgage Association (Ginnie Mae)

guarantees mortgage-backed securities of approved issuers. Ginnie Mae

wishes to adopt a true book entry system for the securities that it

guarantees, instead of the current system under which a physical

security is issued and immobilized (stored). Accordingly, Ginnie Mae is

revising Sec. 320.5 to: (1) revise paragraph (a) to indicate that only

physical securities will specify payment and maturity dates; (2)

indicate the date on and after which physical securities will be issued

only at the request of the registered holder; and (3) establish when

Ginnie Mae considers a book entry security to be guaranteed. Finally,

the current language of Sec. 320.13 states that the Ginnie Mae guaranty

must appear on the face of the security. Ginnie Mae has revised this

section to remove this statement because there is no physical security

under a true book entry system.

Justification for Interim Rulemaking

In general, the Department publishes a rule for public comment

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

regulations on rulemaking at 24 CFR part 10. Part 10, however, does

provide in Sec. 10.1 for exceptions from that general rule where the

Department finds good cause to omit advance notice and public

participation. The good cause requirement is satisfied when the prior

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

public interest''.

The Department finds that good cause exists to publish this interim

rule for effect without first soliciting public comment, in that the

elimination of the physical security represents an internal Ginnie Mae

adjustment which is part of Ginnie Mae's continuing effort to implement

paperless pool processing. In connection with this rule, Ginnie Mae

notes that the Department of Treasury published a proposed rule on

March 4, 1996 (61 FR 8420) that proposed to incorporate recent and

significant changes in commercial law addressing the holdings of

securities in book entry form through financial intermediaries. Ginnie

Mae, in developing its rule, had the benefit of reviewing the Treasury

rule and the public comments received on the Treasury proposed rule,

which was published in final on August 23, 1996 (61 FR 43626). In

issuing this rule published in today's Federal Register, Ginnie Mae

considered the public comments received on the Treasury proposed rule.

In addition, there is only one registered holder of Ginnie Mae book

entry securities, which is the designated depository. Ginnie Mae's

designated depository is working with Ginnie Mae to effect this program

change. Any investor potentially adversely affected by book entry can

avoid the adverse impact of the rule by getting a physical security

through the registered holder. Further, book entry securities issued

without an immobilized security will only be done prospectively.

Physical securities backing book entry securities that are already

issued will continue to be stored. In consideration of these issues,

advance public comment was determined not necessary, but HUD welcomes

comments from the public and is soliciting comment on this rule.

Findings and Certifications

Regulatory Flexibility Act

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

U.S.C. 605(b)), has reviewed and approved this interim rule, and in so

doing certifies that this rule will not have a significant economic

impact on a substantial number of small entities. Ginnie Mae's

designated depository is the only entity affected by this revision, and

the designated depository is not a small entity. The interim rule will

have no adverse or disproportionate economic impact on small

businesses. Notwithstanding HUD's determination that this rule will not

have a significant economic impact on small entities, HUD specifically

invites comments regarding alternatives to this rule that would meet

HUD's objectives as described in this preamble.

Environmental Impact

This rulemaking is exempt from the environmental review procedures

under HUD regulations in 24 CFR part 50 that implement section

102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C.

4332) because of the exemption under Sec. 50.19(c)(1) which pertains to

``the approval of policy documents that do not direct, provide for

assistance or loan and mortgage insurance for, or otherwise govern or

regulate property acquisition, disposition, lease, rehabilitation,

alteration, demolition, or new construction, or set out to provide for

standards for construction or construction materials, manufactured

housing, or occupancy.'' This rulemaking simply amends existing

regulations regarding the form of guaranteed securities.

Executive Order 12612, Federalism

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12612, Federalism, has determined that 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. No

programmatic or policy changes will result from this interim rule that

would affect the relationship between the Federal Government and State

and local governments.

[[Page 51251]]

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-

4; approved March 22, 1995) (UMRA) establishes requirements for Federal

agencies to assess the effects of their regulatory actions on State,

local, and tribal governments, and on the private sector. This interim

rule does not impose any Federal mandates on any State, local, or

tribal governments, or on the private sector, within the meaning of the

UMRA.

Executive Order 12866

This 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 the rule

subsequent to its submission to OMB are identified in the docket file,

which is available for public inspection as provided under the section

of this preamble entitled ADDRESS.

Catalog of Federal Domestic Assistance

There is no Catalog of Federal Domestic Assistance number for the

Ginnie Mae MBS program.

List of Subjects for 24 CFR Part 320

Mortgages.

Accordingly, 24 CFR part 320 is amended as follows:

PART 320--GUARANTY OF MORTGAGE-BACKED SECURITIES

1. The authority citation for 24 CFR part 320 continues to read as

follows:

Authority: 12 U.S.C. 1721(g) and 1723a(a); and 42 U.S.C.

4343(d).

2. Section 320.5 is amended by revising the last sentence of

paragraph (a) and by adding new paragraphs (e) and (f), to read as

follows:

Sec. 320.5 Securities.

(a) * * * The securities, if issued in physical form, must specify

the dates by which payments are to be made to the holders thereof, and

must indicate the accounting period for collections on the pool's

mortgages relating to each such payment, and the securities, if issued

in physical form, must also specify a date on which the entire

principal will have been paid or will be payable.

* * * * *

(e) Securities issued on or before October 31, 1998, are issued in

physical form. On or after November 1, 1998, securities are issued in

book entry form, and physical securities are issued only upon the

request of the registered holder.

(f) On or after November 1, 1998, Ginnie Mae guarantees a book

entry security when the transfer agent indicates by book entry that a

security has been transferred to a registered holder.

(Approved by the Office of Management and Budget under control

number 2503-0009)

3. Section 320.13 is revised to read as follows:

Sec. 320.13 Guaranty.

The Association guarantees the timely payment, whether or not

collected, of the interest on the outstanding balance and the specific

principal installments. The Association's guaranty is backed by the

full faith and credit of the United States.

Dated: August 26, 1998.

George S. Anderson,

Executive Vice President, Government National Mortgage Association.

[FR Doc. 98-25567 Filed 9-23-98; 8:45 am]

BILLING CODE 4210-01-P