Office of the General Counsel
B-272940
August 8, 1996
The Honorable Alfonse D'Amato Chairman The Honorable Paul S.
Sarbanes Ranking Minority Member Committee on Banking, Housing, and
Urban Affairs United States Senate
The Honorable James A. Leach Chairman The Honorable Henry B.
Gonzalez Ranking Minority Member Committee on Banking and Financial
Services House of Representatives
Subject: Department of Housing and Urban Development: Single
Family Mortgage Insurance; Loss Mitigation Procedures
Pursuant to section 801(a)(2)(A) of title 5, United States Code,
this is our report on a major rule promulgated by the Department of
Housing and Urban Development (HUD), entitled "Single Family
Mortgage Insurance; Loss Mitigation Procedures" (RIN: 2502-AG72).
We received the rule on July 25, 1996. It was published in the
Federal Register as an interim rule on July 3, 1996. 61 Fed. Reg.
35,014.
Enclosed is our assessment of HUD's compliance with the
procedural steps required by sections 801(a)(1)(B)(i) through (iv)
of title 5 with respect to the rule. Our review indicates that HUD
complied with the applicable requirements.
The interim rule eliminates the Mortgage Assignment Program and
provides alternative procedures to foreclosure for mortgagors in
default such as special forbearance, loan modifications, and deeds
in lieu of foreclosure. The rule provides for recompense to the
mortgagees for using these alternative procedures and provides for
payment to the mortgagee of a partial claim which would be applied
to the arrearage. As a result of these procedures, the Department
estimates an annual net savings of $545 million. Under the rule,
HUD may also accept an assignment of
GAO/OGC-96-33
a mortgage which has been recast or modified to cure the
default, but where repooling of the loan is not possible. HUD
reports that such circumstances should be rare.
If you have any questions about this report, please contact Alan
Zuckerman, Assistant General Counsel, at (202) 512-4586. The
official responsible for GAO evaluation work relating to HUD is
Judy England-Joseph, Director, Housing and Community Development
Issues. Ms. England-Joseph can be reached at (202) 5125167.
Robert P. Murphy General Counsel
cc: Mr. Nelson A. Diaz General Counsel Department of Housing and
Urban Development
Page 2 GAO/OGC-96-33
ENCLOSURE
ANALYSIS UNDER 5 U.S.C. § 801(a)(1)(B)(i)-(iv) OF A MAJOR
RULE
ISSUED BY
THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD)
ENTITLED "SINGLE FAMILY MORTGAGE INSURANCE; LOSS MITIGATION
PROCEDURES" (RIN: 2502-AG72)
(i)
Cost-benefit analysis
The Agency performed an economic analysis dated May 31, 1996.
That document analyzes the various loss mitigation procedures
promulgated in the interim rule and concludes that HUD will realize
an annual net saving of $545 million from implementation of the
interim rule.
(ii)
Agency actions relevant to the Regulatory Flexibility
Act, 5 U.S.C. §§ 603-605, 607 and 609.
Pursuant to 5 U.S.C. § 605(b), the Secretary has certified that
the interim rule will not have a significant economic impact on a
substantial number of small entities. Such certification was
published in the Federal Register, 61 Fed. Reg. 35017. As a
consequence, HUD was not required to prepare either an initial or a
final regulatory flexibility analysis under sections 603 and 604 of
the Act, and sections 607 and 609 are not applicable.
According to a HUD representative, HUD's section 605(b)
statement and certification were not separately provided to the
Chief Counsel for Advocacy of the Small Business Administration.
Rather, publication in the Federal Register was treated as
providing notice to the SBA. The SBA has not objected to this
procedure.
(iii) Agency actions relevant to sections 202-205 of the
Unfunded Mandates Reform Act of 1995, 2 U.S.C. §§ 1532-1535
According to the agency the rule will not result in expenditures
of $100 million in any year by either State, Local or Tribal
governments in the aggregate or by the private sector. In addition,
the rule neither affects small governments nor contains a
significant intergovernmental mandate. Consequently the rule does
not impose unfunded mandates under the Unfunded Mandates Reform Act
of 1995.
(iv) Other relevant information or requirements under Acts and
Executive orders
GAO/OGC-96-33
Administrative Procedure Act, 5 U.S.C. §§ 551 et seq.
The Omnibus Consolidated Rescissions and Appropriations Act of
1996, Pub. L. 104134 directed the Department to issue interim
regulations within 30 days of the date of enactment. As a
consequence, the notice and comments procedures in 5 U.S.C. § 553
were impracticable. Nonetheless, the Department specifically
requested comments from interested persons, which are due by
September 3, 1996. An agency official has advised that HUD will
subsequently issue final regulations.
Paperwork Reduction Act, 44 U.S.C. §§ 3501-3520
The Department has requested, but has not yet received an OMB
approval of the information collection requirements of the rule. In
the preamble to the rule, HUD states that it may not conduct or
sponsor and a person is not required to respond to a collection of
information until OMB has issued the control number.
Statutory authorization for the rule
The statutory requirement to issue these interim regulations is
contained in the Balanced Budget Downpayment Act, Pub. L. 104-99,
January 26, 1996.
Executive Order No. 12866
HUD reports that the interim rule and the accompanying economic
analysis were reviewed and approved by OMB as required by E.O.
12866. HUD received the approval from OMB on June 10, 1996 and no
changes were made.
Executive Order No. 12612
HUD states that the interim rule will not have a substantial,
direct effect on the States or on the relationship between the
federal government and the States or on the distribution of power
or responsibilities among various levels of government because the
interim rule primarily involves relationships between HUD and
private entities.
Executive Order No. 12606
HUD reports that the interim rule will have only an indirect
impact on family formation, maintenance, and general well-being and
that such impact will be beneficial because it will assist
mortgagors in maintaining ownership of their properties. In the
preamble, HUD states that no further review is necessary.
Page 2 GAO/OGC-96-33
National Environmental Policy Act of 1969.
A finding of no significant impact on the environment has been
made by HUD in accordance with its regulations implementing the
National Environmental Policy Act of 1969.
Page 3 GAO/OGC-96-33
