[Federal Register Volume 64, Number 199 (Friday, October 15, 1999)]
[Rules and Regulations]
[Pages 56108-56111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26972]
[[Page 56107]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 200, 203, and 234
Single Family Mortgage Insurance; Clarification of Floodplain
Requirements Applicable to New Construction; Final Rule
Federal Register / Vol. 64, No. 199 / Friday, October 15, 1999/ Rules
and Regulations
[[Page 56108]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 200, 203, and 234
[Docket No. FR-4323-F-02]
RIN 2502-AH16
Single Family Mortgage Insurance; Clarification of Floodplain
Requirements Applicable to New Construction
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This final rule adopts revisions to HUD's regulations
concerning flood hazard exposure and single family mortgage insurance
published for public comment in a proposed rule on April 30, 1999.
These revisions provide mortgagees with an additional means of
complying with HUD's single family flood hazard regulations and clarify
a number of provisions in HUD's single family mortgage insurance
regulations. HUD considered the comments received on the April 30, 1999
proposed rule, but is adopting the revisions published in the proposed
rule without change.
DATES: Effective Date: November 15, 1999.
FOR FURTHER INFORMATION CONTACT: Mark Holman, Chief, Mortgage
Underwriting and Insurance Branch, Office of Insured Single Family
Housing, U.S. Department of Housing and Urban Development, 451 Seventh
Street, SW, Room 9270, Washington, DC 20410-8000; telephone (202) 708-
2121 (this is not a toll-free telephone number). Hearing-or speech-
impaired persons may access this number via TTY by calling the toll-
free Federal Information Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
a. The April 30, 1999 Proposed Rule
On April 30, 1999, HUD published a rule (64 FR 23480) for public
comment that proposed certain revisions to HUD's regulations concerning
flood hazard exposure and single family mortgage insurance. The
revisions permit mortgagees to obtain an Elevation Certificate as an
alternative to a final Letter of Map Amendment or Revision for
submission with the Builder's Certification of Plans, Specifications,
and Site when property improvements are located in a Special Flood
Hazard Area. The revisions clarify that all provisions of
Sec. 200.926d(c)(4) apply to one- to four-unit homes and to
communities, whether or not the community has adopted criteria for site
development. The revisions also clarify that structures are subject to
the same elevation requirements, whether or not they have basements.
Finally, the revisions remove obsolete provisions concerning
subdivisions and improved area processing and make a number of
conforming changes.
b. This Final Rule
This final rule adopts the revisions published in the April 30,
1999 proposed rule without change. The public comment period for the
proposed rule closed on June 29, 1999. HUD received 14 comments.
Commenters included trade associations, government agencies, lending
institutions, and housing developers. HUD appreciates the suggestions
offered by commenters and carefully considered the issues raised by
them. For the reasons discussed below, however, we have chosen not to
implement these suggestions. This section of the preamble presents a
summary of the issues raised by the public commenters and HUD's
responses to their comments.
Comment--Require submission of other evidence of compliance in
addition to elevation certificate. One commenter wrote that an
elevation certificate (EC) alone does not document compliance with
National Floodplain Insurance Program (NFIP) floodplain management
requirements. The commenter suggested that the final rule require, in
addition to an elevation certificate, the submission of other evidence
from the community that indicates that property improvements comply
with the community's floodplain management regulations. The commenter
listed a number of documents that could be required to satisfy this
requirement, including a building permit and a certificate of occupancy
issued by the community.
HUD Response. HUD agrees that the EC alone does not document
compliance with NFIP floodplain management requirements. We do not
believe, however, that it is necessary to require additional
documentation of compliance because local procedures already require
these documents. For example, it is absolutely necessary for a builder
to obtain a building permit from local authorities before construction
commences. Similarly, all properties submitted to HUD for endorsement
must have been issued an occupancy permit by local authorities prior to
submission. Requiring these additional documents, therefore, is
unnecessary, would be a duplication of effort, and would run counter to
the principle of streamlining government processes.
Comment--Required flood insurance that is lesser of the outstanding
balance of the mortgage, value of building, or maximum amount of NFIP
insurance available. One commenter was concerned about the language in
Sec. 203.16a(c) that states that flood insurance must be maintained in
an amount equal to either ``the outstanding balance of the mortgage,
less estimated land costs, or the maximum amount of the NFIP insurance
available with respect to the property improvements, whichever is
less.'' The commenter wrote that subtracting the estimated land cost
from the outstanding balance of the mortgage could result in situations
where no flood insurance is required on a mortgaged building. The
commenter suggested requiring that the amount of flood insurance be at
least equal to the lesser of the outstanding balance of the mortgage,
the value of the building, or the maximum amount of NFIP insurance
available.
HUD Response. While HUD appreciates the commenter's suggestion, the
provision contained in Sec. 203.16a(c) is not a direct subject of this
rulemaking. Consequently, we have not made any changes in response to
this comment. HUD, however, will consider this issue as a subject for a
future rulemaking.
Comment--HUD should conduct eight-step analysis required by
Executive Order 11988. One commenter wrote that the proposed rule, in
effect, waives the full eight-step process required by Executive Order
11988 (entitled ``Floodplain Management'') for individual mortgage
transactions. The commenter suggested that HUD should perform an
analysis applying the eight-step process to the transactions covered
under the proposed rule. The commenter suggested that the analysis
should balance the adverse impacts of placing fill in some floodplains
against any benefits of the current rule in discouraging floodplain
development by requiring letters of map amendment (LOMA) and letters of
map revision (LOMR).
HUD Response. The commenter has misinterpreted HUD's regulations.
The FHA single family mortgage insurance program, both for new
construction (which this rule addresses) as well as for existing
construction, is not subject to the requirements of Executive Order
11988. HUD regulations at 24 CFR part 55 specifically address our
responsibilities and procedures regarding the Executive Order. Prior to
1993, single family new construction
[[Page 56109]]
was analyzed in an environmental assessment, which included the
requirements of the Executive Order's eight-step analysis through HUD
subdivision processing procedures. However, we terminated subdivision
processing and approval in 1993. Currently, all applications for
mortgage endorsement (insurance) are submitted to HUD by lenders after
the structure has been built and the applicable local entity has
determined that it meets floodplain and other requirements.
Comment--Clarify when flood insurance must be purchased. One
commenter wrote that the preamble to the proposed rule was not clear
about when flood insurance must be purchased. The commenter suggested
that the preamble to the final rule should clarify that flood insurance
must be purchased when an EC is submitted, but not when a LOMA or LOMR
is submitted.
HUD Response. The commenter's understanding about when flood
insurance must be purchased is correct. Whenever an EC is utilized, it
indicates that improvements are in the base floodplain, and, therefore,
flood insurance is mandatory. HUD will make this requirement clear in
its processing documents and will advise lenders by issuing a Mortgagee
Letter.
Comment--Clarify rule and extend comment period. Two commenters
urged HUD to clarify the proposed rule and requested that HUD extend
the comment period in order to accomplish this.
HUD Response. The commenters did not specify what aspects of the
proposed rule needed clarification, and they gave no other
justification for extending the comment period. Therefore, we have not
extended the comment period. It is important to note, however, that we
accepted and considered all comments received on the proposed rule,
including those that were received shortly after the close of the
comment period.
Comment--Permit mortgage insurance in those portions of alluvial
fans that pose the same or less risk as riverine special flood hazards.
A number of commenters suggested that HUD should treat alluvial fans
that pose the same or less risk as riverine special flood hazards the
same as riverine special flood hazards for the purpose of issuing FHA
mortgage insurance. These commenters wrote that these areas pose no
more severe a threat than do riverine areas, and addressing them in the
final rule will open up many areas to affordable housing that have
previously been closed. Two commenters suggested certain additional
engineering certification requirements for allowing construction on
alluvial fans.
HUD Response. HUD appreciates these commenters' concern for
building affordable housing. Specific provisions concerning alluvial
fans, however, are not the subject of this rulemaking. HUD's
prohibition on mortgage insurance for properties in alluvial fans is
based on the hazard posed by location in an alluvial fan and is not
dependent on the availability from the Federal Emergency Management
Agency (FEMA) of a LOMA or LOMR, which is no longer required under this
rule. Adding provisions to specifically address alluvial fans in this
rule would require the publication of a new proposed rule for public
comment, which would delay the publication of this final rule. In
addition, any decision to permit alluvial fans would require serious
and detailed engineering and hydrological studies and analysis. These
studies, of FEMA identified and designated alluvial fan areas, would be
extremely time consuming and costly to conduct on a ``area by area''
basis. The reliance on certifications would be meaningless until such
time as FEMA completes their currently ongoing studies of alluvial fans
and makes a formal determination and issues guidance, requirements, and
regulations regarding the safety aspects of alluvial fans that should
be considered and taken into account. For the preceding reasons, we
have decided not to specifically address alluvial fans in this
rulemaking and have decided to proceed with the publication of this
final rule.
Comment--Add provision acknowledging Voluntary Affirmative
Marketing Agreement. One commenter suggested adding the following
language to Sec. 203.12(b)(3) at the end of the first paragraph:
In lieu of submission of an Affirmative Fair Housing Marketing
Plan, if the builder or developer is, either through a state or
local home builder association or directly, a signatory to the
Voluntary Affirmative Marketing Agreement (VAMA) between HUD and the
National Association of Home Builders, the builder or developer may
meet the requirement of this section by certifying to this effect on
the Builder's Certification of Plans, Specifications and Site.
HUD Response. While HUD appreciates the commenter's suggestion, the
suggestion is outside the scope of this rulemaking. However, it should
be noted that the provision that the commenter suggests is already part
of HUD procedures. Box 11 of the Builder's Certification of Plans,
Specifications, & Site allows a builder to certify that they are a
signatory in good standing to a Voluntary Affirmative Marketing
Agreement in lieu of submission of an Affirmative Fair Housing
Marketing Plan.
Comment--Include ``back-to-back'' units in Sec. 200.926(a)(1). One
commenter suggested that the language in Sec. 200.926(a)(1) be expanded
to include units that are ``back-to-back'' as well as units that are
``side-to-side.'' The commenter suggested using the language ``where
the units are joined in some manner with adjacent living units.''
HUD Response. We have reviewed this suggestion, but do not believe
any change or additional language is necessary. Section 200.926 applies
to any one- to four-family structure, regardless of whether it is side-
by-side, back-to-back, stacked, or configured as a duplex, triplex, or
fourplex.
II. Findings and Certifications
Environmental Impact
A Finding of No Significant Impact (FONSI) with respect to the
environment has been made in accordance with HUD regulations at 24 CFR
part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (42 U.S.C. 4332). The FONSI is
available for public inspection and copying between 7:30 a.m. and 5:30
p.m. weekdays at the Office of the Rules Docket Clerk, Room 10276, 451
Seventh Street, SW, Washington, DC 20410.
Paperwork Reduction Act Statement
The information collection requirement contained at Sec. 203.12 of
this final rule has been approved by the Office of Management and
Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44
U.S.C. 3501-3520) and assigned OMB control number 2502-0496. An agency
may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless the collection displays a valid
control number.
Regulatory Flexibility Act
The Secretary, in accordance with section 3(a) of the Regulatory
Flexibility Act (5 U.S.C. 605(b)), has reviewed this final rule before
publication, and by approving it certifies that this rule would not
have a significant economic impact on a substantial number of small
entities.
This final rule serves two primary purposes. First, it allows
mortgagees greater flexibility by permitting them to comply with
floodplain requirements through the submission of an additional type of
document. Second, the final rule
[[Page 56110]]
removes obsolete provisions and makes clarifying amendments to the
regulations. These changes reflect HUD's current interpretation of its
regulations and would not increase the regulations' burden. These
changes are being made in order to make the regulations clearer and
more accurate.
Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612 (entitled ``Federalism''), has determined that
the policies contained in this final rule do not have substantial
direct effects on States or their political subdivisions, on the
relationship between the Federal Government and the States, or on the
distribution of power and responsibilities among the various levels of
government.
III. List of Subjects
24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Home improvement, Housing standards,
Incorporation by reference, Lead poisoning, Loan programs--housing and
community development, Minimum property standards, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
24 CFR Part 203
Hawaiian Natives, Home improvement, Indians--lands, Loan programs--
housing and community development, Mortgage insurance, Reporting and
recordkeeping requirements, Solar energy.
24 CFR Part 234
Condominiums, Mortgage insurance, Reporting and recordkeeping
requirements.
PART 200--INTRODUCTION TO FHA PROGRAMS
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
PART 234--CONDOMINIUM OWNER MORTGAGE INSURANCE
For the reasons stated in the preamble, HUD amends 24 CFR parts
200, 203, and 234 as follows:
PART 200--INTRODUCTION TO FHA PROGRAMS
1. The authority citation for 24 CFR part 200 continues to read as
follows:
Authority: 12 U.S.C. 1701-1715z-18; 42 U.S.C. 3535(d).
2. Revise Sec. 200.926(a)(1) to read as follows:
Sec. 200.926 Minimum property standards for one and two family
dwellings.
(a) * * * (1) Applicable structures. The standards identified or
contained in this section, and in Secs. 200.926a-200.926e, apply to
single family detached homes, duplexes, three-unit homes, and to living
units in a structure where the units are located side-by-side in town
house fashion. Section 200.926d(c)(4) also applies to four-unit homes.
* * * * *
3. Amend Sec. 200.926d as follows:
a. Revise paragraph (c)(1)(ii);
b. Revise paragraph (c)(1)(iii);
c. Revise paragraph (c)(4)(iv); and
d. Remove paragraph (c)(4)(vii):
Sec. 200.926d Construction requirements.
* * * * *
(c) * * *
(1) * * *
(ii) With the exception of paragraph (c)(4) of this section, these
site design standards apply only in communities that have not adopted
criteria for site development applicable to one and two family
dwellings.
(iii) Single family detached houses situated on individual lots
located on existing streets with utilities need not comply with the
requirements of paragraphs (c)(2) and (c)(3) of this section.
* * * * *
(4) * * *
(iv)(A) In all cases in which a Direct Endorsement (DE) mortgagee
or a Lender Insurance (LI) mortgagee seek to insure a mortgage on a
newly constructed one-to four-family dwelling (including a newly
erected manufactured home) that was processed by the DE or LI
mortgagee, the DE or LI mortgagee must determine whether the property
improvements (dwelling and related structures/equipment essential to
the value of the property and subject to flood damage) are located in a
100-year floodplain, as designated on maps of the Federal Emergency
Management Agency. If so, the DE mortgagee, before submitting the
application for insurance to HUD, or the LI mortgagee, before
submitting all the required data regarding the mortgage to HUD, must
obtain:
(1) A final Letter of Map Amendment (LOMA);
(2) A final Letter of Map Revision (LOMR); or
(3) A signed Elevation Certificate documenting that the lowest
floor (including basement) of the property improvements is built at or
above the 100-year flood elevation in compliance with National Flood
Insurance program criteria 44 CFR 60.3 through 60.6.
(B) Under the DE program, these mortgages are not eligible for
insurance unless the DE mortgagee submits the LOMA, LOMR, or Elevation
Certificate to HUD with the mortgagee's request for endorsement.
* * * * *
PART 203--SINGLE FAMILY MORTGAGE INSURANCE
4. The authority citation for 24 CFR part 203 continues to read as
follows:
Authority: 12 U.S.C. 1709, 1710, 1715b, and 1715u; 42 U.S.C.
3535(d).
5. Revise Sec. 203.12 to read as follows:
Sec. 203.12 Mortgage insurance on proposed or new construction.
(a) Applicability. This section applies to an application for
insurance of a mortgage on a one-to four-family dwelling, unless the
mortgage will be secured by a dwelling that:
(1) Was completed more than one year before the date of the
application for insurance or, under the Direct Endorsement Program, was
completed more than one year before the date of the appraisal; or
(2) Is being sold to a second or subsequent purchaser.
(b) Procedures. (1) Applications for insurance to which this
section applies will be processed in accordance with procedures
prescribed by the Secretary. These procedures may only provide for
endorsement for insurance of a mortgage covering a dwelling that is:
(i) Approved under the Direct Endorsement Program or the Lender
Insurance Program; or
(ii) Located in a subdivision approved by the Rural Housing
Service.
(2) The mortgagee must submit a signed Builder's Certification of
Plans, Specifications and Site (Builder's Certification). The Builder's
Certification must be in a form prescribed by the Secretary and must
cover:
(i) Flood hazards;
(ii) Noise;
(iii) Explosive and flammable materials storage hazards;
(iv) Runway clear zones/clear zones;
(v) Toxic waste hazards;
(vi) Other foreseeable hazards or adverse conditions (i.e., rock
formations, unstable soils or slopes, high ground water levels,
inadequate surface drainage, springs, etc.) that may affect the health
and safety of the occupants or the structural soundness of
[[Page 56111]]
the improvements. The Builder's Certification must be provided to the
appraiser for reference before the performance of an appraisal on the
property.
(3) If a builder (or developer) intends to sell five or more
properties in a subdivision, an Affirmative Fair Housing Marketing Plan
(AFHMP) that meets the requirements of 24 CFR part 200, subpart M must
be submitted and approved by HUD no later than the date of the first
application for mortgage insurance in that subdivision. Thereafter,
applications for insurance on other properties sold by the same builder
(or developer) in the same subdivision may make reference to the
existing previously approved AFHMP.
6. Revise Sec. 203.16a to read as follows:
Sec. 203.16a Mortgagor and mortgagee requirement for maintaining flood
insurance coverage.
(a) If the mortgage is to cover property improvements (dwelling and
related structures/equipment essential to the value of the property and
subject to flood damage) that:
(1) Are located in an area designated by the Federal Emergency
Management Agency (FEMA) as a floodplain area having special flood
hazards, or
(2) Are otherwise determined by the Commissioner to be subject to a
flood hazard, and if flood insurance under the National Flood Insurance
Program (NFIP) is available with respect to these property
improvements, the mortgagor and mortgagee shall be obligated, by a
special condition to be included in the mortgage commitment, to obtain
and to maintain NFIP flood insurance coverage on the property
improvements during such time as the mortgage is insured.
(b) No mortgage may be insured that covers property improvements
located in an area that has been identified by FEMA as an area having
special flood hazards, unless the community in which the area is
situated is participating in the National Flood Insurance Program and
such insurance is obtained by the mortgagor. Such requirement for flood
insurance shall be effective one year after the date of notification by
FEMA to the chief executive officer of a flood prone community that
such community has been identified as having special flood hazards.
(c) The flood insurance must be maintained during such time as the
mortgage is insured in an amount at least equal to either the
outstanding balance of the mortgage, less estimated land costs, or the
maximum amount of the NFIP insurance available with respect to the
property improvements, whichever is less.
PART 234--CONDOMINIUM OWNER MORTGAGE INSURANCE
7. The authority citation for 24 CFR part 234 continues to read as
follows:
Authority: 12 U.S.C. 1715b and 1715y; 42 U.S.C. 3535(d). Section
234.520(a)(2)(ii) is also issued under 12 U.S.C. 1707(a).
Sec. 234.1 [Amended]
8. In Sec. 234.1, remove the words ``Mortgage insurance on proposed
or new construction in a new subdivision'' and add, in their place, the
words ``Mortgage insurance on proposed or new construction''.
* * * * *
Dated: October 8, 1999.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 99-26972 Filed 10-12-99; 3:10 pm]
BILLING CODE 4210-27-P