[Federal Register: July 28, 2009 (Volume 74, Number 143)]
[Notices]
[Page 37238-37240]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28jy09-59]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5305-N-01]
RIN 2502-AZ00
Housing and Economic Recovery Act of 2008: Pilot Program for
Automated Process for Borrowers Without Sufficient Credit History;
Solicitation of Comments on Program Design
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice.
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SUMMARY: The Housing and Economic Recovery Act of 2008 requires that
HUD carry out a pilot program to establish, and make available to
mortgagees, an automated process for providing alternative credit
rating information, which might include rent, utilities, and insurance
payment histories, etc., for mortgagors and prospective mortgagors who
have insufficient credit histories for determining their credit
worthiness. With this notice, HUD commences the process for development
of the mandated pilot program and solicits public comment and
suggestions for a practicable design of the pilot program that is
consistent with statutory goals, program requirements, and fair lending
standards, and includes comment on how the pilot program might align
with existing Federal Housing Administration policy regarding
nontraditional credit verification. Comments addressing the
information, data, and experience necessary to support an evaluation of
the operation, performance, and fair lending compliance of a pilot are
welcome as well. All comments will be considered in the development of
the pilot program.
DATES: Comment Due Date: September 28, 2009.
ADDRESSES: Interested persons are invited to submit comments regarding
this notice to the Regulations Division, Office of General Counsel,
Department of Housing and Urban Development, 451 7th Street, SW., Room
10276, Washington, DC 20410-0500. Communications must refer to the
above docket number and title. There are two methods for submitting
public comments. All submissions must refer to the above docket number
and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street, SW., Room 10276,
Washington, DC 20410-0500.
2. Electronic Submission of Comments. Interested persons may submit
comments electronically through the Federal eRulemaking Portal at
http://www.regulations.gov. HUD strongly encourages commenters to
submit comments electronically. Electronic submission of comments
allows the commenter maximum time to prepare and submit a comment,
ensures timely receipt by HUD, and enables HUD to make them immediately
available to the public. Comments submitted electronically through the
http://www.regulations.gov Web site can be viewed by other commenters
and interested members of the public. Commenters should follow the
instructions provided on that site to submit comments electronically.
Note: To receive consideration as public comments, comments must
be submitted through one of the two methods specified above. Again,
all submissions must refer to the docket number and title of the
rule.
[[Page 37239]]
No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
Public Inspection of Public Comments. All properly submitted
comments and communications submitted to HUD will be available for
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the
above address. Due to security measures at the HUD Headquarters
building, an advance appointment to review the public comments must be
scheduled by calling the Regulations Division at 202-708-3055 (this is
not a toll-free number). Individuals with speech or hearing impairments
may access this number through TTY by calling the Federal Information
Relay Service at 800-877-8339. Copies of all comments submitted are
available for inspection and downloading at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Margaret Burns, Director, Office of
Single Family Program Development, Office of Housing, Department of
Housing and Urban Development, 451 7th Street, SW., Room 9278,
Washington, DC 20410-8000; telephone number 202-708-2121 (this is not a
toll-free number). Persons with hearing or speech impairments may
access this number through TTY by calling the toll-free Federal
Information Relay Service at 800-877-8339.
SUPPLMENTARY INFORMATION:
I. Background
The Housing and Economic Recovery Act of 2008 (Pub. L. 110-289, 122
Stat. 2654, approved July 30, 2008) (HERA) made significant and
comprehensive reforms to the National Housing Act (12 U.S.C. 1701 et
seq.), which governs Federal Housing Administration (FHA) programs.
Section 2124 of HERA adds a new section 258 to the National Housing Act
(12 U.S.C. 1701 et seq.) that requires the Secretary of HUD to ``carry
out a pilot program to establish, and make available to mortgagees, an
automated process for providing alternative credit rating information
for mortgagors and prospective mortgagors who have insufficient credit
histories for determining their credit worthiness.'' \1\ ``Such
alternative credit rating information may include rent, utilities, and
insurance payment histories, and such other information as the
Secretary considers appropriate.'' In addition, section 258 allows the
Secretary to restrict the program to first-time homebuyers and limits
annual loan volume under the pilot program to 5 percent of FHA's prior-
year aggregate loan volume for the duration of the pilot program, which
ends July 30, 2013. The Government Accountability Office is charged
with providing Congress with a report on the number of additional
mortgagors served using the automated process and the impact on the
safety and soundness of the insurance funds supporting the pilot
program mortgages, by July 30, 2010.
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\1\ Note that HERA inadvertently established two sections 257 of
the National Housing Act. Section 1402 of HERA also added a new
section 257 to the National Housing Act, which established the HOPE
for Homeowners Program. The Helping Families Save Their Homes Act of
2009 (Pub. L. 111-22, approved May 20, 2009) addressed this issue
through a technical correction designating the HERA pilot program as
a new section 258 to the National Housing Act.
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FHA has long permitted mortgagees to establish a borrower's credit
history through nontraditional means, including the compilation of
performance on rental payments, utility bills, telephone and cellular
phone services, cable television service, payments to local stores,
etc. Mortgagee Letter 2008-11 (issued on April 29, 2008) provides
further guidance on the issue, and states that ``FHA has no objection
to the use of various service providers now operating that are able to
develop a bill payment history, as well as a score by obtaining rental
payment history, utility trade-lines, and other common recurring non-
reporting bill payments. While * * * [FHA does] not endorse any
particular service provider, FHA approved lenders may use such services
to develop a credit history for borrowers with no or little traditional
credit.'' A copy of Mortgagee Letter 2008-11 may be downloaded at
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/index.cfm.
The pilot program authorized by section 258 of the National Housing
Act builds upon this past FHA practice by requiring that HUD establish
an automated process for providing alternative, or nontraditional,
credit information.
II. This Notice--Solicitation of Public Comment on Automated Process
Through publication of this notice, HUD starts the process for
developing the mandated pilot program and solicits public comment and
suggestions for a practicable design of the pilot program that is
consistent with statutory goals, program requirements, and fair lending
standards and includes comment on how various pilot programs might
align with existing FHA policy regarding nontraditional credit
verification. Comments addressing the information, data, and experience
necessary to support an evaluation of the operation, performance, and
fair lending compliance of a pilot program are welcome as well.
In particular, HUD is interested in obtaining feedback on the
following questions:
1. What automated processes for providing alternative credit rating
information for mortgagors and prospective mortgagors who have
insufficient credit histories for determining their credit worthiness
are currently available and operational?
2. For operational automated processes identified in question 1,
what factors or information is utilized to develop the alternative
credit histories and in what form is the information passed on to end-
user mortgagees--i.e., individual items to be assembled into a credit
profile by end user, items aggregated into a summary profile or score
with distributional reference points, individual and summary
information in combination, etc.?
3. Which operational automated processes identified in questions 1
and 2 currently can be uniformly applied everywhere in the United
States and, if not, what impediments must be overcome before uniform
and universal application is possible?
4. What new and universally available automated processes for
providing alternative credit rating information might be developed and
maintained with reasonable accommodation and investment by industry and
government? Conversely, are there aspects of manual processes with
little potential for automation?
5. For current and potential new automated processes, what criteria
and validation methods should be employed to evaluate the relative
strength and reliability of alternative processes for establishing
accurate and predictive credit profiles? What relevant evaluative
information already exists?
6. Which current or potential new automated processes would be
likely to prove most beneficial for mortgagees, mortgagors, and FHA and
why? For example, such benefits could include acceleration of
origination and improving the quality of underwriting.
7. How would automated processes affect the potential for fraud or
misrepresentation during underwriting?
8. If no single automated process was universally feasible, how
might HUD ensure equal treatment of equals processed by differing HUD-
provided systems?
9. Is there any reason the Secretary should not limit the pilot
program to first-time homebuyers?
10. What is the total size and characteristics of borrowers who
potentially would use automated
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histories? What are the implications of these characteristics for
design and implementation of automated processes?
11. How should the pilot program be structured with respect to
geographic coverage, to ensure representative results? What criteria
should be employed in selecting pilot locations and participants? What
control groups could be used to support a rigorous evaluation?
12. What additional concerns should be considered in structuring
the pilot program and evaluation design to ensure a successful pilot
evaluation?
13. What safeguards to ensure compliance with applicable fair
lending and nondiscrimination requirements would be most effective?
14. What are any statutory or regulatory obstacles to automated
processes?
As noted in the ADDRESSES section of this notice, all public
comments submitted to HUD will be made available for public inspection.
Accordingly, commenters are cautioned against submitting proprietary or
confidential information not intended for public disclosure. All
information solicited in this notice is solely for the purpose of
assisting HUD in designing the pilot program, and does not imply that
HUD will be contracting with any provider of automated credit
evaluation services for purposes of the pilot program. Comments must be
submitted by the deadline date established in the DATES section of this
notice, and in accordance with the instructions contained in the
ADDRESSES section of this notice.
HUD will consider all public comments in the development of the
pilot program. HUD will announce the establishment of the pilot program
in a follow-up Federal Register notice that is based on the
consideration of these comments.
Dated: July 21, 2009.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. E9-17854 Filed 7-27-09; 8:45 am]
BILLING CODE 4210-67-P