Proposed Rule2023-16128
Modernization of Engagement With Mortgagors in Default
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 31, 2023
Issuing agencies
Housing and Urban Development Department
Abstract
HUD's regulations require that mortgagees of Federal Housing Administration (FHA) insured single family mortgages (mortgagees) meet in person, or make a reasonable effort to meet in person, with mortgagors who are in default on their mortgage payments. This rule proposes to modernize this requirement by updating HUD's regulation to better align with advances in electronic communication technology and mortgagor engagement preferences, while preserving consumer protections. Specifically, this rule proposes to update HUD's current in-person, face-to-face meeting requirements by permitting mortgagees to utilize methods of communication most likely to receive a response from the mortgagor as determined by the Secretary, including electronic and other remote communication methods, such as telephone calls or video calls, to meet with mortgagors who are in default on their mortgage payments. This proposed rule would also expand the meeting requirement to all mortgagors in default, including mortgagors who do not reside in the mortgaged property and those with a mortgaged property not within 200 miles of their mortgagee, its servicer, or a branch office of either.
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<title>Federal Register, Volume 88 Issue 145 (Monday, July 31, 2023)</title>
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[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Proposed Rules]
[Pages 49392-49397]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-16128]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 203
[Docket No. FR-6353-P-01]
RIN 2502-AJ66
Modernization of Engagement With Mortgagors in Default
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, Department of Housing and Urban Development, HUD.
ACTION: Proposed rule.
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SUMMARY: HUD's regulations require that mortgagees of Federal Housing
Administration (FHA) insured single family mortgages (mortgagees) meet
in person, or make a reasonable effort to meet in person, with
mortgagors who are in default on their mortgage payments. This rule
proposes to modernize this requirement by updating HUD's regulation to
better align with advances in electronic communication technology and
mortgagor engagement preferences, while preserving consumer
protections. Specifically, this rule proposes to update HUD's current
in-person, face-to-face meeting requirements by permitting mortgagees
to utilize methods of communication most likely to receive a response
from the mortgagor as determined by the Secretary, including electronic
and other remote communication methods, such as telephone calls or
video calls, to meet with mortgagors who are in default on their
mortgage payments. This proposed rule would also expand the meeting
requirement to all mortgagors in default, including mortgagors who do
not reside in the mortgaged property and those with a mortgaged
property not within 200 miles of their mortgagee, its servicer, or a
branch office of either.
DATES: Comment Due Date: September 29, 2023.
ADDRESSES: There are two methods for submitting public comments. All
submissions must refer to the above docket number and title.
1. Electronic Submission of Comments. Comments may be submitted
electronically through the Federal eRulemaking Portal at
<a href="http://www.regulations.gov">www.regulations.gov</a>. 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 comments immediately available
to the public. Comments submitted electronically through
<a href="http://www.regulations.gov">www.regulations.gov</a> can be viewed by other commenters and interested
members of the public. Commenters should follow the instructions
provided on that website to submit comments electronically.
2. 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.
Note: To receive consideration as a public comment, comments
must be submitted through one of the two methods specified above.
Public Inspection of Public Comments. HUD will make all properly
submitted comments and communications available for public inspection
and copying during regular business hours at the above address. Due to
security measures at the HUD Headquarters building, you must schedule
an appointment in advance to review the public comments by calling the
Regulations Division at 202-708-3055 (this is not a toll-free number).
HUD welcomes and is prepared to receive calls from individuals who are
deaf or hard of hearing, as well as individuals with speech or
communication disabilities. To learn more about how to make an
accessible telephone call, please visit <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>. Copies of all comments
submitted are available for inspection and downloading at
<a href="http://www.regulations.gov">www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Graham Mayfield, Acting Director,
Office of Single Family Asset Management, Department of Housing and
Urban Development, 451 7th Street SW, Room 9278, Washington, DC 20410,
telephone 202-768-2838 (this is not a toll-free number). HUD welcomes
and is prepared to receive calls from individuals who are deaf or hard
of hearing, as well as individuals with speech or communication
disabilities. To learn more about how to make an accessible telephone
call, please visit <a href="https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs">https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs</a>.
SUPPLEMENTARY INFORMATION: First codified in 1976, HUD's regulations at
24 CFR 203.604 require mortgagees to meet in person, or make a
reasonable effort to meet in person, with mortgagors who are in default
on their mortgage payment. This requirement for an in-person meeting
with the mortgagor, commonly referred to as the ``face-to-face
meeting'' requirement, originated during a time when mortgage lending
and servicing activities were conducted in person at locations in the
local communities a mortgagee served. At that time, a ``face-to-face''
meeting was the most effective way to discuss and facilitate loss
mitigation options because knowledgeable mortgagee staff were available
at locations near the mortgaged property. Beginning in the mid-1990s,
many mortgagees began consolidating origination and servicing
activities in centralized locations. Today, many mortgagees have a
national presence and often employ a single national servicing center
or a limited number of regional servicing centers, operate without
retail places of business altogether, and tend to conduct origination
and servicing activities with employees and clients not being in close
physical proximity. In addition, mortgagors prefer to conduct business
online or through other remote methods. This proposed rule would permit
the use of electronic and other remote communication methods to make it
more convenient for mortgagors in default to participate in meetings
with their mortgagee.
The current face-to-face meeting requirement also reflects a time
when electronic methods for conducting virtual meetings were not widely
[[Page 49393]]
available or commonly used. Since 24 CFR 203.604 was last amended,
significant advances have been made in the mortgage industry's use of
technology and mortgagors' access to such, including smartphones,
tablets, and live video communications. Over the years, HUD has updated
certain mortgage servicing policies to increase requirements for
mortgagees to engage with mortgagors in default on their mortgage
payments. To adapt to changing uses of communication technology, in
updates to the FHA Single Family Policy Handbook, HUD has expanded its
acceptable methods for communicating with mortgagors in default
situations, which currently include phone calls, emails, web portals,
and other previously used electronic methods.\1\ In addition to HUD
increasing its requirements for mortgagees to engage with mortgagors in
default, the Consumer Financial Protection Bureau (CFPB) servicing
regulations at 12 CFR part 1024 and State laws in many jurisdictions
require engagement with mortgagors, causing mortgagees to expand their
outreach processes to offer mortgagors timely loss mitigation options.
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\1\ FHA Single Family Housing Policy Handbook 4000.1, section
III.A.2.h. Early Default Intervention.
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As a result of mortgagees' expanded outreach processes to
mortgagors and mortgagors' ability to independently research loss
mitigation options, mortgagees reported very few mortgagors who agreed
to participate in face-to-face meetings with their mortgagees prior to
the COVID-19 pandemic. Data obtained in 2017 and 2018 from members of
the Mortgage Bankers Association (MBA) demonstrate mortgagors' limited
participation and mortgagees' burdensome costs associated with face-to-
face meetings. ``According to data from one mortgagee, the cost of
complying with the face-to-face interview requirement in just one year
amounted to $3.9 million; however, these efforts resulted in a
successful loss mitigation document collection rate of only 5.8 percent
for that same period.'' \2\ As stated in this feedback to HUD, MBA
members' ``compliance with this requirement results in a significant
commitment of resources by mortgagees, and offers no additional
benefits or protections to mortgagors than those already required by
other consumer protection servicing regulations.'' \3\ In 2018, MBA
collected additional data from three mortgagees that service the
largest FHA-insured portfolios, to further illustrate the limited
mortgagor acceptance rate for face-to-face meetings. In the data
collected by the MBA, one mortgagee that services over 300,000 FHA-
insured mortgages reported hand-delivering over 50,000 face-to-face
meeting request letters throughout the year. From those letters, the
mortgagee conducted or referred 14 mortgagors for face-to-face
meetings, resulting in a 0.028 percent acceptance rate. Another
mortgagee that services approximately 610,000 FHA-insured mortgages
sent 53,000 letters and conducted 18,000 property visits to deliver
face-to-face meeting offers. From that population of sent letters and
property visits, no mortgagors accepted the face-to-face meeting offer.
A third mortgagee that services approximately 930,000 FHA-insured
mortgages conducted 145,000 property visits to deliver face-to-face
meeting request letters. From these property visits, 124 mortgagors
accepted the face-to-face meeting offers, for a 0.085 percent
acceptance rate.\4\
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\2\ MBA letter re: Docket No. FR-6030-N-01, Reducing Regulatory
Burden; Enforcing the Regulatory Reform Agenda Under Executive Order
13777, addressed to HUD's Office of General Counsel, Regulations
Division, June 14, 2017.
\3\ Id.
\4\ Correspondence from the MBA to HUD regarding face-to-face
meetings, March 14, 2023.
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Due to public health concerns around the spread of COVID-19, in
March 2020, HUD issued a temporary, partial waiver of the face-to-face
meeting requirement found in 24 CFR 203.604, which has been extended on
three occasions and remains in effect through December 31, 2023
(collectively, the ``waiver'').\5\ Similar to the updates described in
this proposed rule, the waiver permitted mortgagees to use alternative
methods for contacting mortgagors, including electronic methods of
communication, e.g., phone interviews, email, video calling services,
and other communication technologies, to meet the requirements of 24
CFR 203.604. With this waiver in place, mortgagees provided over 1.5
million mortgagors in default with loss mitigation assistance during
this time. HUD received positive feedback from mortgagees and consumer
advocates related to the added flexibility to existing loss mitigation
outreach requirements permitted by the waiver.
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\5\ The original waiver issued on March 13, 2020, and subsequent
additional temporary, partial waivers to the face-to-face meeting
requirement in 24 CFR 203.604 are posted on HUD's Housing Waivers
web page, available at <a href="https://www.hud.gov/program_offices/administration/hudclips/waivers">https://www.hud.gov/program_offices/administration/hudclips/waivers</a>.
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Mortgagors are demonstrating their preference for interacting with
mortgagees through technology. For example, in May 2021, Forbes
published the results of a new survey on borrowing and lending
conducted by ICE Mortgage Technology, which found the pandemic has
permanently changed the way consumers utilize technology and those
looking to buy or refinance a home are seeking lenders who offer online
tools to complete their mortgage loans from home.\6\ According to the
survey, ``the importance of lenders offering digital solutions such as
online applications during the lending process increased for borrowers
in 2020, with 58 percent saying the availability of an online
application would affect their lender decision (up from 50 percent in
2018).'' Respondents to the survey who were offered online and/or
mobile options by their lenders took advantage of these tools during
the mortgage loan process. ``Sixty-one percent of borrowers used an
online application in 2020, slightly up from 58 percent in 2018. Sixty-
one percent also used an online portal for electronically signing and
notarizing documents, compared to 56 percent in 2018.'' As expected,
decreased in-person interactions became more important in 2020 due to
the COVID-19 pandemic. Only 37 percent of survey respondents in 2018
cited ``no need to meet in person'' as an aspect they preferred about
their online application process. ``Whether they had been through the
mortgage loan process or not, 63 percent of consumers surveyed believe
that an online mortgage process would make buying a home easier than an
in-person process.''
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\6\ Brenda Richardson, Forbes, ``How Digital Technology Changed
the Face of the Mortgage Industry,'' May 13, 2021, <a href="https://www.forbes.com/sites/brendarichardson/2021/05/13/how-digital-technology-changed-the-face-of-the-mortgage-industry/?sh=555736f82856">https://www.forbes.com/sites/brendarichardson/2021/05/13/how-digital-technology-changed-the-face-of-the-mortgage-industry/?sh=555736f82856</a>.
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Even prior to the COVID-19 pandemic, mortgagees were taking note of
the trend of mortgagors' preference for interacting with their
mortgagee using technology. As an example, in 2018, the Federal Reserve
Bank of New York published research conducted on the role of technology
in mortgage lending.\7\ While the report focused on mortgage
originations by `FinTech lenders,' which are lenders that offer an
application process that can be completed entirely online, similar
mortgagor preferences and behaviors are exhibited in mortgage servicing
as well. The Federal Reserve Bank of New York's research revealed that
``FinTech lender originations have grown annually by 30 percent from
$34bn of total originations in 2010 (2 percent of
[[Page 49394]]
market) to $161bn in 2016 (8 percent of market). The growth has been
particularly pronounced for refinances and for mortgages insured by the
Federal Housing Administration (FHA), a segment of the market which
primarily serves lower income borrowers.'' The study also found that
``default rates on FinTech mortgages are about 25 percent lower than
those for traditional lenders, even when controlling for detailed loan
characteristics.''
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\7\ Andreas Fuster, Matthew Plosser, Philipp Schnabl, James
Vickery, The Role of Technology in Mortgage Lending, Federal Reserve
Bank of New York, February 2018, <a href="https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr836.pdf">https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr836.pdf</a>.
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The evidence shows mortgagees are seeking ways to automate,
simplify, and expedite mortgage origination and servicing processes
through technological innovation. HUD's proposed updates to the in-
person meeting requirement, as described below, align with such
advances and better support mortgagor engagement preferences.
I. This Proposed Rule
A. Mortgages Insured Pursuant to 24 CFR Part 203, Except Mortgages
Insured on Indian Land Pursuant to Section 248 of the National Housing
Act <SUP>8</SUP>
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\8\ This section describes proposed requirements for mortgages
insured pursuant to 24 CFR part 203, except mortgages insured on
Indian Land pursuant to section 248 of the National Housing Act. Due
to statutory requirements, the in-person, face-to-face meeting
requirement found at 24 CFR 203.604 for mortgages insured pursuant
to section 248 of the National Housing Act will remain in place.
This proposed rule proposes certain other changes to 24 CFR 203.604
regarding mortgages insured pursuant to section 248 of the National
Housing Act, those proposed changes are described later in this
preamble.
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HUD's current regulations at 24 CFR 203.604 require mortgagees to
conduct a face-to-face meeting or make a reasonable effort to arrange
such a meeting, with mortgagors who are in default on their mortgage
payments. For mortgages insured pursuant to 24 CFR part 203, except
mortgages insured on Indian Land pursuant to section 248 of the
National Housing Act, HUD proposes to make it more convenient for
mortgagors in default to meet with their mortgagee by updating the
requirement that mortgages must have a face-to-face meeting requirement
with mortgagors to permit mortgagees to meet with mortgagors who are in
default on their mortgage payments either through a face-to-face
meeting or other communication methods as determined by the Secretary,
including electronic or other remote communication methods such as
telephone or video calls. Additionally, given these expanded methods of
engagement permitted and recent FHA policy updates that make loss
mitigation options available to mortgagors who do not reside in the
mortgaged property, HUD proposes to eliminate two of the exemptions to
the meeting with the mortgagor requirement currently found in 24 CFR
203.604(c). The exemptions proposed to be eliminated are that (1)
mortgagees are not required to meet with a mortgagor if the mortgagor
does not reside in the mortgaged property and (2) a meeting with the
mortgagor is not required if the mortgaged property is not within 200
miles of the mortgagee, its servicer, or a branch office of either.
Finally, the proposed updates would amend the definition of a
``reasonable effort'' to arrange a meeting with the mortgagor to align
with the proposed updates regarding the addition of the option to use
electronic or other remote communication methods as determined by the
Secretary to conduct a meeting with the mortgagor.
HUD believes that these proposed updates to 24 CFR 203.604 would
improve mortgagee engagement with mortgagors, reduce the cost of
mortgage default servicing, and align HUD's regulations with
advancements made in electronic communication technology and in
mortgagor communication preferences, while preserving consumer
protections. According to the survey results published by Forbes in
2021, discussed above, ``online applications and online portals are
currently the digital tools most commonly offered by lenders, with more
than 9 in 10 offering both options to borrowers (91 percent). Of
lenders who offer online applications, 38 percent said that more than
80 percent of their applications were completed online in 2020, while
60.4 percent said that more than half of all loan applications were
submitted online. Homeowners who used an online application appreciated
the simpler application process (55 percent) reduced time to close (53
percent) and fewer in-person interactions (49 percent).'' \9\
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\9\ Brenda Richardson, Forbes, How Digital Technology Changed
the Face of the Mortgage Industry, May 13, 2021, <a href="https://www.forbes.com/sites/brendarichardson/2021/05/13/how-digital-technology-changed-the-face-of-the-mortgage-industry/?sh=555736f82856">https://www.forbes.com/sites/brendarichardson/2021/05/13/how-digital-technology-changed-the-face-of-the-mortgage-industry/?sh=555736f82856</a>.
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While HUD's proposed updates would update the acceptable method(s)
that mortgagees may use to meet with a mortgagor in default, the
purpose for the meeting remains the same. The meeting requirement is
the mortgagor's opportunity to meet directly with trained mortgagee
staff who can provide information about FHA loss mitigation options to
assist the mortgagor in curing the default episode and bringing the
FHA-insured mortgage current or otherwise avoiding foreclosure.
Generally, mortgagors are unfamiliar with FHA's home retention loss
mitigation options and do not understand what a short-term forbearance,
loan modification, or partial claim would entail. Many are also unaware
that FHA provides home disposition options for mortgagors in default
who are unable to retain their homes and want to avoid foreclosure. In
addition to the meeting providing an opportunity for mortgagors in
default to meet with knowledgeable mortgagee staff who can explain all
loss mitigation options available, the meeting also provides the
opportunity for the mortgagee to begin collecting the information
needed to evaluate mortgagors for FHA's loss mitigation options.
With the addition of other Secretary approved options for
mortgagees to conduct the meeting with the mortgagor, the proposed
updates would permit mortgagees to utilize more flexible communication
and scheduling options to meet with the mortgagor at the mortgagor's
convenience. Additionally, the proposed updates would reduce the
expense incurred by mortgagees and the difficulties associated with
making at least one trip to see the mortgagor at the mortgaged property
to schedule a meeting with the mortgagor.
HUD is committed to requiring mortgagees to engage with mortgagors
in default to provide information about loss mitigation options
available to mitigate losses to HUD's Mutual Mortgage Insurance Fund
and avoid foreclosure. This proposed rule would maintain the
requirement that mortgagees meet, or make a reasonable effort to meet,
with mortgagors who are in default on their mortgage by updating HUD's
regulations to align with advances in electronic communication
technology and changes in mortgagor engagement preferences, while
preserving consumer protections. This proposed rule would also expand
the meeting requirement to all mortgagors in default, including
mortgagors who do not reside in the mortgaged property and those with a
mortgaged property that is not within 200 miles of the mortgagee, its
servicer, or a branch office of either. A paragraph-by-paragraph
summarized explanation and description of the proposed updates to 24
CFR 203.604 are outlined immediately below.
Proposed 24 CFR 203.604(a)
HUD proposes to add language to paragraph (a), currently reserved,
to clarify that paragraph (a) applies to all mortgages insured pursuant
to 24 CFR part 203, except mortgages insured on Indian Land pursuant to
section 248 of
[[Page 49395]]
the National Housing Act. As described below, the proposed text in
paragraph (b) would apply to mortgages insured on Indian Land pursuant
to section 248 of the National Housing Act (Section 248 Mortgages on
Indian Land).
Proposed 24 CFR 203.604(a)(1)
HUD proposes to add paragraph (a)(1) to Sec. 203.604, which would
largely consist of language currently found in Sec. 203.604(b). The
proposed paragraph (a)(1) would update the requirement that mortgagees
must meet ``face-to-face'' with mortgagors. As discussed earlier, the
proposed updates would require that the mortgagee meet with the
mortgagor either through a face-to-face meeting or by using other
communication methods as determined by the Secretary. These may include
electronic or other remote communication methods such as telephone or
video calls. Specific guidance detailing acceptable communication
methods that may be used for conducting the meeting with mortgagors in
default, in addition to a face-to-face meeting option, will be
established through a Mortgagee Letter or an update to the FHA Single
Family Housing Policy Handbook 4000.1.
In addition, HUD proposes to eliminate reference to Section 248
Mortgages on Indian Land, as listed in the current paragraph (b),
because HUD proposes to describe the face-to-face meeting requirements
for Section 248 Mortgages on Indian Land in a revised paragraph (b), as
described below. Finally, HUD proposes to eliminate reference to
mortgages authorized by section 203(q) of the National Housing Act, as
listed in the current paragraph (b), because section 203(q) of the
National Housing Act was repealed on July 30, 2008.
Proposed 24 CFR 203.604(a)(1)(i)
HUD proposes to add paragraph (a)(1)(i) to Sec. 203.604, which
would largely consist of language currently found in Sec. 203.604(b).
The proposed paragraph (a)(1)(i) would clarify that mortgagees are also
required to meet with a mortgagor when default occurs on a repayment
plan.
Proposed 24 CFR 203.604(a)(2)
HUD proposes to add paragraph (a)(2) to Sec. 203.604, which would
replace Sec. 203.604(c), while using most of the language from the
current paragraph (c). The proposed paragraph (a)(2), as changed from
the language currently in paragraph (c), would remove reference to a
``face-to-face'' meeting with mortgagors, consistent with and as
described in the proposed paragraph (a)(1).
In proposed paragraph (a)(2), HUD also proposes to eliminate
certain exemptions from the meeting with the mortgagor rule, which are
currently detailed in paragraph (c). The two exemptions proposed to be
eliminated from the current paragraph (c) are (1) a meeting with the
mortgagor is not required if the mortgagor does not reside in the
mortgaged property, and (2) a meeting with the mortgagor is not
required if the mortgaged property is not within 200 miles of the
mortgagee, its servicer, or a branch office of either.
Loss mitigation options were previously unavailable to mortgagors
who do not reside in the mortgaged property. As the availability of
loss mitigation has expanded to include these mortgagors, it is
appropriate to require that mortgagees meet the same engagement
requirements as for mortgagors who occupy the mortgaged property. The
current exemption for mortgagors with properties not within 200 miles
of the mortgagee was intended to prevent an unreasonable burden on the
mortgagor and mortgagee. HUD proposes to eliminate these two exemptions
to expand the requirement that mortgagees meet, or make a reasonable
effort to meet, with all mortgagors in default on their mortgage
payments. These two current exemptions would generally be unnecessary
given the proposal that mortgagees would be permitted to meet with
mortgagors via electronic communication methods.
Proposed 24 CFR 203.604(a)(3)
HUD proposes to add paragraph (a)(3) to Sec. 203.604, which would
replace the language currently found in paragraph (d). The proposed
paragraph (a)(3), as changed from the language currently in paragraph
(d), would remove reference to a ``face-to-face'' meeting with
mortgagors, consistent with and as described in the proposed paragraph
(a)(1). In proposed paragraph (a)(3), HUD also proposes to redefine
what constitutes a mortgagee's ``reasonable effort'' to arrange a
meeting with a mortgagor as required by Sec. 203.604. For the purposes
of the proposed paragraph (a)(3), HUD proposes to remove the language
currently found in paragraph (d) that a ``reasonable effort'' consists
of the mortgagee sending the mortgagor at least one letter certified by
the Postal Service and that the mortgagee must make at least one trip
to the mortgaged property in an effort to arrange a meeting with the
mortgagor. Instead, HUD proposes to define a ``reasonable effort'' to
arrange a meeting with a mortgagor to require, at a minimum, two
verifiable attempts to contact the mortgagor utilizing methods
determined by the Secretary. The definition for a ``verifiable
attempt'' will be established through Mortgagee Letter or an update to
the FHA Single Family Housing Policy Handbook 4000.1.
HUD specifically seeks public comment on its proposed revisions to
what constitutes a ``reasonable effort,'' including what should
constitute a ``verifiable attempt.''
B. Mortgages Insured on Indian Land Pursuant to Section 248 of the
National Housing Act
Due to statutory requirements, HUD is leaving the in-person, face-
to-face meeting requirement found in 24 CFR 203.604 in place for
Section 248 Mortgages on Indian Land. Unlike other single-family
mortgage insurance programs regulated under 24 CFR part 203, the
National Housing Act specifically requires that mortgagees conduct a
face-to-face meeting with mortgagors who are in default on their
mortgage payments for Section 248 Mortgages on Indian Land. Given these
statutory requirements, HUD is proposing no substantive updates to the
requirements for Section 248 Mortgages on Indian Land found in 24 CFR
203.604; however, HUD is proposing updates to the text of 24 CFR
203.604 to reorganize the paragraph structure and to make the
requirements for Section 248 Mortgages on Indian Land easier to
understand.
A summarized explanation and description of the proposed updates
are outlined immediately below.
Proposed 24 CFR 203.604(b)
HUD proposes to create a new paragraph (b) to Sec. 203.604, which
will replace the language currently found in paragraph (e). The
proposed paragraph (b) would detail the face-to-face meeting
requirements for Section 248 Mortgages on Indian Land. While the
language in the proposed paragraph (b) will appear expanded from the
text currently in paragraph (e), substantively, the requirements in the
proposed paragraph (b) would be the same as the requirements that
currently exist for Section 248 Mortgages on Indian Land found in the
current paragraph (e). The text in the proposed paragraph (b) appears
expanded from the current paragraph (e) because the current paragraph
(e) cross references the existing face-to-face meeting requirements
that are detailed in the current paragraphs (b), (c), and (d) of Sec.
203.604. Given the proposed updates to the meeting with the mortgagor
[[Page 49396]]
requirement for mortgages insured pursuant to 24 CFR part 203, except
mortgages insured on Indian Land pursuant to section 248 of the
National Housing Act, described above, the face-to-face meeting
requirements for Section 248 Mortgages on Indian Land would be directly
incorporated into the proposed paragraph (b). Additionally, various
wording changes from the current paragraph (e) would be made in the
proposed paragraph (b) to ensure clarity and consistency in word choice
throughout Sec. 203.604.
III. Findings and Certifications
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
The updates described in this proposed rule would be limited to
permitting mortgagees to communicate with mortgagors who are in default
on their mortgage methods via electronic or other remote communication
methods as determined by the Secretary rather than in-person. Since
mortgagees are already required to communicate with these mortgagors,
this proposed rule would, if finalized, only alter the options for how
mortgagees communicate with this population of mortgagors. If there is
an economic effect on mortgagees, it would fall equally on all
mortgagees. Further, HUD anticipates that the proposed rule, if
finalized, would have a net positive economic impact on mortgagees by
reducing the expenses associated with making an in-person visit to a
mortgagor's property to comply with the requirements of 24 CFR 203.604.
Environmental Impact
This proposed rule does not direct, provide for assistance or loan
and mortgage insurance for, or otherwise govern or regulate, real
property acquisition, disposition, rehabilitation, alteration,
demolition, or new construction, or establish, revise, or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this
proposed rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Executive Order 13132, Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule
either: (i) imposes substantial direct compliance costs on State and
local governments and is not required by statute, or (ii) preempts
State law, unless the agency meets the consultation and funding
requirements of section 6 of the Executive Order. This proposed rule
does not have federalism implications and does not impose substantial
direct compliance costs on State and local governments or preempt State
law within the meaning of the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (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 proposed rule would
not impose any Federal mandates on any State, local, or Tribal
governments, or on the private sector, within the meaning of the UMRA.
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.
For the reasons stated above, HUD proposes to amend 24 CFR part 203
as follows:
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
0
1. The authority citation for part 203 continues to read as follows:
Authority: 12 U.S.C. 1707, 1709, 1710, 1715b, 1715z-16, 1715u,
and 1715z-21; 15 U.S.C. 1639c; 42 U.S.C. 3535(d).
0
2. Revise Sec. 203.604 to read as follows:
Sec. 203.604 Contact with the mortgagor.
(a) For mortgages insured pursuant to this part, except those
mortgages insured on Indian Land pursuant to section 248 of the
National Housing Act:
(1) The mortgagee must conduct a meeting with the mortgagor, or
make a reasonable effort to arrange such a meeting, before three full
monthly installments due on the mortgage are unpaid and at least 30
days before foreclosure is commenced, or at least 30 days before
assignment is requested if the mortgage is insured on Hawaiian home
lands pursuant to section 247 of the National Housing Act. The meeting
with the mortgagor must be conducted in a manner as determined by the
Secretary.
(i) If default occurs on a repayment plan, the mortgagee must
conduct a meeting with the mortgagor, or make a reasonable effort to
arrange such a meeting, within 30 days after such default.
(ii) [Reserved]
(2) A meeting with the mortgagor is not required if:
(i) The mortgagor has clearly indicated that they will not
cooperate in the meeting;
(ii) The mortgagor is on a repayment plan to bring the mortgage
current, and the mortgagor is meeting the terms of the repayment plan;
or
(iii) A reasonable effort to arrange a meeting with the mortgagor
is unsuccessful.
(3) A reasonable effort to arrange a meeting with the mortgagor
shall consist of, at a minimum, two verifiable attempts to contact the
mortgagor utilizing methods determined by the Secretary.
(b) For mortgages insured on Indian Land pursuant to section 248 of
the National Housing Act:
(1) The mortgagee must conduct a face-to-face meeting with the
mortgagor, or make a reasonable effort to arrange such a meeting,
before three full monthly installments due on the mortgage are unpaid
and at least 30 days before assignment is requested.
(i) If default occurs on a repayment plan arranged other than
during a face-to-face meeting, the mortgagee must have a face-to-face
meeting with the mortgagor, or make a reasonable effort to arrange such
a meeting, within 30 days after default or at least 30 days before
assignment is requested.
(ii) [Reserved]
(2) A face-to-face meeting is not required if:
(i) The mortgagor has clearly indicated that they will not
cooperate in the meeting;
(ii) The mortgagor is on a repayment plan to bring the mortgage
current, and the mortgagor is meeting the terms of the repayment plan;
or
(iii) A reasonable effort to arrange a meeting with the mortgagor
is unsuccessful.
(3) A reasonable effort to arrange a face-to-face meeting with the
mortgagor shall include at a minimum, one letter sent to the mortgagor
certified by the Postal Service as having been dispatched and at least
one trip to see the mortgagor at the mortgaged property. In addition,
the mortgagee must document that it has made at least one telephone
call to the mortgagor for
[[Page 49397]]
the purpose of trying to arrange a face-to-face meeting. The mortgagee
may appoint an agent to perform its responsibilities under this
paragraph.
(4) The mortgagee must also:
(i) inform the mortgagor that HUD will make information regarding
the status and payment history of the mortgagor's loan available to
credit bureaus and prospective creditors;
(ii) Inform the mortgagor of other available assistance, if any;
and
(iii) Inform the mortgagor of the names and addresses of HUD
officials to whom further communications may be addressed.
Julia R. Gordon,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2023-16128 Filed 7-28-23; 8:45 am]
BILLING CODE P
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</html>Indexed from Federal Register on July 31, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.