[Federal Register Volume 75, Number 96 (Wednesday, May 19, 2010)]
[Proposed Rules]
[Pages 27949-27951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11383]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 75, No. 96 / Wednesday, May 19, 2010 /
Proposed Rules
[[Page 27949]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 1980
RIN 0575-AC83
Single Family Housing Guaranteed Loan Program
AGENCY: Rural Housing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Rural Housing Service proposes two changes to its Single
Family Housing Guaranteed Loan Program (SFHGLP) regulation. This action
is taken to achieve savings for the taxpayer, simplify regulations, and
promote efficiency in managing the SFHGLP. The proposed changes are in
accordance with the recommendations of the Inspector General in its
Audit (Number 04601-0017-CH) of April 2009.
Under the SFHGLP regulation as it stands today, lenders may set an
interest rate for a loan under the SFHGLP that either does not exceed
the Lender's published rate for VA first mortgage loans with no
discount points or does not exceed the current Federal National
Mortgage Association (Fannie Mae) posted yield for 90-day delivery
(Actual/Actual), plus six-tenths of 1 percent for 30-year fixed rate
conventional loans, rounded up to the nearest one-quarter of 1 percent.
The first proposed rule change would eliminate the lender's published
VA rate for first mortgage loans with no discount points as an option
for a maximum interest rate on loans. The effect of this action would
be to create a more uniform, simpler standard for interest rates under
the SFHGLP, whereby lenders would always use the current Fannie Mae
rate as the rate ceiling. The Fannie Mae rate is the most widely
utilized interest rate guidance by approved lenders. It is also the
most accessible to lenders and the Agency when documenting loan files
to ensure affordable interest rates are extended to Guaranteed Loan
Program borrowers.
The second proposed change relates to the rights of the Secretary
when the Secretary has to pay a claim under the guarantee for the loan,
but the original lender did not originate the loan in accordance with
the program requirements. The proposed rule change would allow the
Secretary in certain circumstances to seek indemnification from the
originator of the loan for the Secretary's loss. This change promises
to save taxpayer money and incentivize due care on the part of lenders
by allowing the Government to recoup the funds it pays out in the event
of a claim under the guarantee where the original lender did not comply
with SFHGLP requirements.
DATES: Written or e-mail comments on the proposed rule must be received
on or before July 19, 2010.
ADDRESSES: You may submit comments on this proposed rule by any one of
the following methods:
E-Mail: [email protected]. Include ``RIN No. 0575-
AC83'' in the subject line of the message.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments electronically.
Mail: Submit written comments via the U.S. Postal Service
to the Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, STOP 0742, 1400 Independence Ave., SW.,
Washington, DC 20250-0742.
Hand Delivery/Courier: Submit written comments via Federal
Express mail, or other courier service requiring a street address to
the Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington,
DC 20024.
All written comments will be available for public inspection during
regular work hours at the 300 7th Street, SW., 7th Floor address listed
above.
FOR FURTHER INFORMATION CONTACT: Joaquin Tremols, Acting Director,
Single Family Housing Guaranteed Loan Division, USDA Rural Development,
Room 2241, STOP 0784, 1400 Independence Ave., SW., Washington, DC
20250, Telephone: (202) 720-1465, E-mail: [email protected].
SUPPLEMENTARY INFORMATION:
Classification
This proposed rule has been determined to be non-significant by the
Office of Management and Budget (OMB) under Executive Order 12866.
Executive Order 12988
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Except where specified, all State and local laws and
regulations that are in direct conflict with this rule will be
preempted. Federal funds carry Federal requirements. No person is
required to apply for funding under this program, but if they do apply
and are selected for funding, they must comply with the requirements
applicable to the Federal program funds. This rule is not retroactive.
It will not affect agreements entered into prior to the effective date
of the rule. Before any judicial action may be brought regarding the
provisions of this rule, the administrative appeal provisions of 7 CFR
part 11 must be exhausted.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effect of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, the
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures to State, local, or tribal
governments, in the aggregate, or to the private sector, of $100
million, or more, in any one year. When such a statement is needed for
a rule, section 205 of the UMRA generally requires the Agency to
identify and consider a reasonable number of regulatory alternatives
and adopt the least costly, most cost-effective, or least burdensome
alternative that achieves the objectives of the rule.
This proposed rule contains no Federal mandates (under the
regulatory provisions of Title II of the UMRA) for State, local, and
tribal governments or the private sector. Therefore, this rule is not
subject to the requirements of sections 202 and 205 of the UMRA.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
[[Page 27950]]
subpart G, ``Environmental Program.'' It is the determination of the
Agency that this action does not constitute a major Federal action
significantly affecting the quality of the human environment, and, in
accordance with the National Environmental Policy Act of 1969, Public
Law 91-190, neither an Environmental Assessment nor an Environmental
Impact Statement is required.
Federalism--Executive Order 13132
The policies contained in this rule do not have any substantial
direct effect on States, on the relationship between the national
government and States, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on State and local
governments. Therefore, consultation with the States is not required.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.) the undersigned has determined and certified by signature of this
document that this rule change will not have a significant impact on a
substantial number of small entities. This rule does not impose any
significant new requirements on Agency applicants and borrowers, and
the regulatory changes affect only Agency determination of program
benefits for guarantees of loans made to individuals.
Intergovernmental Consultation
This program/activity is not subject to the provisions of Executive
Order 12372, which require intergovernmental consultation with State
and local officials. (See the Notice related to 7 CFR part 3015,
subpart V, at 48 FR 29112, June 24, 1983; 49 FR 22675, May 31, 1984; 50
FR 14088, April 10, 1985).
Programs Affected
This program is listed in the Catalog of Federal Domestic
Assistance under Number 10.410, Very Low to Moderate Income Housing
Loans (Section 502 Rural Housing Loans).
Paperwork Reduction Act
The information collection and record keeping requirements
contained in this regulation have been approved by OMB in accordance
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The
assigned OMB control number is 0575-AC83.
E-Government Act Compliance
The Rural Housing Service is committed to complying with the E-
Government Act, to promote the use of the Internet and other
information technologies to provide increased opportunities for citizen
access to Government information and services, and for other purposes.
Background
In the spring of 2009, the Inspector General completed an audit of
the controls over lending activities in the SFHGLP. The audit was
initiated because of an investigation by the Inspector General into a
lender who submitted false documents to the Agency to obtain loan
guarantees. Additionally, the Inspector General was concerned that some
lenders were setting interest rates on guaranteed loans that were
excessive and not in compliance with Agency guidelines. The audit
evaluated the systems and processes to ensure that lenders (1) submit
accurate and legitimate borrower eligibility data and (2) set interest
rates on loans within Agency guidelines. The audit report made a number
of recommendations for what the SFHGLP can do to streamline operations,
prevent fraud, and improve efficiency in its mission. In response to
the audit, the two rules presented here are being proposed.
OMB Control Number
The report and recordkeeping requirements contained in this
regulation have been approved by the Office of Management and Budget
and have been assigned OMB control number 0575-AC83.
List of Subjects in 7 CFR Part 1980
Home improvement, Loan Programs--Housing and community development,
Mortgage insurance, Mortgages, Rural areas.
For the reason stated in the preamble, Chapter XVIII, Title 7 of
the Code of Federal Regulations is proposed to be amended as follows:
PART 1980--RURAL HOUSING LOANS
1. The authority citation for part 1980 continues to read as
follows:
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. Subpart E also
issued under 7 U.S.C. 1932(a).
Subpart D--Rural Housing Loans
2. Section 1980.308 is revised to read as follows:
Sec. 1980.308 Full faith and credit.
(a) Loan note guarantee. The loan note guarantee constitutes an
obligation supported by the full faith and credit of the United States
and is incontestable except for fraud or misrepresentation of which the
Lender has actual knowledge at the time it becomes such Lender or which
the Lender participates in or condones. Misrepresentation includes
negligent misrepresentation. A note which provides for the payment of
interest on interest shall not be guaranteed. Any guarantee or
assignment of a guarantee attached to or relating to a note which
provides for the payment of interest on interest is void.
Notwithstanding the prohibition of interest on interest, interest may
be capitalized in connection with reamortization over the remaining
term with written concurrence of RHS. The loan note guarantee will be
unenforceable to the extent any loss is occasioned by violation of
usury laws, negligent servicing, or failure to obtain the required
security regardless of the time at which RHS acquires knowledge of the
foregoing. Negligent servicing is defined as servicing that is
inconsistent with this subpart and includes the failure to perform
those services which a reasonably prudent lender would perform in
servicing its own loan portfolio of loans that are not guaranteed. The
term includes not only the concept of a failure to act, but also not
acting in a timely manner or acting contrary to the manner in which a
reasonably prudent lender would act up to the time of loan maturity or
until a final loss is paid. Any losses occasioned will be unenforceable
to the extent that loan funds are used for purposes other than those
authorized in this subpart. When the lender conducts liquidation in an
expeditious manner, in accordance with the provisions of Sec. 1980.374
of this subpart, the loan note guarantee shall cover interest until the
claim is paid within the limit of the guarantee.
(b) Indemnification. If RHS determines that a Lender did not
originate a loan in accordance with the requirements in this subpart,
and RHS pays a claim under the loan guarantee, RHS may revoke the
Lender's eligibility status in accordance with Sec. 1980.309 (h) of
this subpart and may also require the Lender:
(1) To indemnify RHS for the loss, if the payment under the
guarantee was made within 24 months of loan closing; or
(2) To indemnify RHS for the loss regardless of how long ago the
loan closed, if RHS determines that fraud or misrepresentation was
involved in connection with the origination of the loan.
3. Section 1980.320 is revised to read as follows:
[[Page 27951]]
Sec. 1980.320 Interest rate.
The interest rate must not exceed the established, applicable usury
rate. Loans guaranteed under this subpart must bear a fixed interest
rate over the life of the loan. The rate shall be agreed upon by the
borrower and the Lender and must not be more than the current Fannie
Mae rate as defined in Sec. 1980.302(a) of this subpart. The Lender
must document the rate and the date it was determined.
4. Section 1980.353 (c)(4) is revised to read as follows:
Sec. 1980.353 Filing and processing applications.
(c) * * *
(4) Anticipated loan rates and terms, the date and amount of the
Fannie Mae rate used to determine the interest rate, and the Lender's
certification that the proposed rate is in compliance with Sec.
1980.320 of this subpart.
* * * * *
Dated: April 30, 2010.
Tammye Trevi[ntilde]o,
Administrator, Rural Housing Service.
[FR Doc. 2010-11383 Filed 5-18-10; 8:45 am]
BILLING CODE 3410-XV-P