supporting statement -2502-0404.F

Supporting Statement for Paperwork Reduction Act Submissions

Requirements for Single Family Mortgage Instruments

OMB Number 2502-0404

A. Justification

1. FHA insures single-family mortgages and stipulates the specific provisions needed for mortgage instruments as required by statutory and regulatory provisions. Regulation 24 CFR 203.255 (b)(3) - Accompanying documents required by the Secretary – states the requirements for applications for insurance involving mortgages originated under the Direct Endorsement (DE) program under 24 CFR 203.5. One requirement is for the mortgagee to submit to the Secretary, within 60 days after the date of closing of the loan or such additional time as permitted by the Secretary, properly completed documentation and certifications, including a certified copy of the mortgage and note executed upon forms which meet the requirements of the Secretary.

The lender or designee prepares the mortgage and mortgage note that are to be insured by the Department. In accordance with the subject policy, the lender must include language in the mortgage, mortgage note, deed of trust, etc., that accomplishes the requirements of the Department for mortgage insurance. The lender must ensure that the mortgage and the note contain these provisions and do not include provisions that conflict. If these requirements are not observed, FHA may insure a mortgage that fails to comply with statutory and regulatory requirements established to protect the interest of the government.

For each mortgage, the lender or designee must provide the name of the mortgagor, the legal description of the property, and the term and rate of the mortgage to be insured.. A lender must develop or procure mortgage and note forms that comply with both HUD and applicable state and local requirements for a recordable and enforceable mortgage. Proof of recoding is often found on the document; a recorded document normally has a seal or other marking that indicates where it may be found in the land records. Either proof of recordation or a certified copy of the document with the recordation seal will meet this requirement.

2. For each mortgage, the lender or designee must provide the name of the mortgagor, the legal description of the property, and the term and rate of the mortgage to be insured (information obtained from the borrower, statement of appraised value, and truth-in-lending disclosure). A lender must develop or procure mortgage and note forms that comply with both HUD and applicable state and local requirements for a recordable and enforceable mortgage.

The lender or designee prepares the mortgage and mortgage note that are to be insured by the Department. In accordance with the subject policy, the lender must include language in the mortgage, mortgage note, deed of trust, etc., that accomplishes the requirements of the Department for mortgage insurance.

3. HUD has instituted e-endorsement which allows lenders to submit their cases for insurance electronically. The chart below shows the rate in which lenders are moving towards e-binders from date of last renewal in 2013 to current renewal in 2017.

CY	Number of Lender Insured Cases Insured	Number of Lender Insured Electronic Cases Insured	Total Number of Cases Insured
2013	1,029,861	5,086	1,261,143
2016	207,433	1,099,498	1,306,931

4. There is no duplication of effort. Each requirement is made only once for each FHA-insured loan. The total number of FHA insured cases for 2016 is 1,306,931.

5. Typically, small businesses are not involved in the mortgage application process and no attempt was made to modify the requirements to accommodate small businesses. The Department believes that the burden estimate associated with these information collections are the minimum needed to make certain that statutory and regulatory requirements are being met and the integrity of the insurance fund is maintained.

6. The Department will not be able to verify that a mortgage has been properly recorded and is eligible for FHA mortgage insurance if the information is not collected. FHA could be at risk by paying claims for benefits on mortgages not insured by the government.

7. * The collections are made at minimum frequency, that is, once per loan transaction.

* Respondents are not required to prepare a written response to a collection of information in fewer than

30 days after receipt of request:

* Respondents are not required to submit more than an original and two copies of any document;

* To obtain benefits under the single-family mortgage insurance programs, a lender must retain a copy of

these instruments for the duration of the mortgage, which can be up to 30 years. This need is inherent in

the nature of the transaction. To only require retention of such documents for three years would be

inconsistent with the FHA’s risk management policies because of the length of most mortgages (10 – 30

years).

* Statistical surveys are not a requirement of the collection;

* The use of a statistical data classification that has not been reviewed and approved by OMB;

* A pledge of confidentiality that is not supported by authority established in statute or regulation, that is

not supported by disclosure and data security policies that are consistent with the pledge, or which

unnecessarily impedes sharing of data with other agencies for compatible confidential use in not a

requirement of this collection; or

* Requiring respondents to submit proprietary trade secrets, or other confidential information unless the

agency can demonstrate that it has instituted procedures to protect the information's confidentiality to

the extent permitted by law is not a requirement of this collection.

8. In accordance with 5 CFR Part 1320.8(d), this information collection requirement was announced for

public comment in the Federal Register on Tuesday, August 29, 2017 (Page 41044, Vol. 82, No. 166). No

comments were received.

HUD did not consult with mortgagees regarding this information collection. These documents are the basics of mortgage lending; lenders must have them to secure their interest in the property. Many local governments have statutes that control them; this is not solely a HUD requirement. The burden estimate was based on experience of legal and program staff in mortgage transactions, and the recognition that most mortgage documents are drawn up electronically with only minimal human intervention (i.e., adding name, property address, loan amount, rate and terms).

9. No gifts or any payments are provided to respondents.

10. The Privacy Act of 1974 provides privacy protection to respondents.  There is no promise of

confidentiality.

11. No assurance of confidentiality is provided, nor is such appropriate or feasible. Mortgages must be

publicly recorded for them to be enforceable. The information contained in this collection is not of a

sensitive nature.

12. The Department expects the time to complete the mortgage and the mortgage note (which require only

several entries to existing model mortgages and notes) to be 5 minutes (burden per response .0833 hours).

This number is substantially reduced from 2013 based on lenders producing mortgage documents

electronically. These below estimates reflect the data provided by departmental system files and informed

judgment of program staff. The Department estimates that the number of responses and the associated

burden will be relatively constant for the next three years as more lenders/buyers are doing FHA business.

Number of Respondents (FHA approved lenders)	Number of FHA cases endorsed for 2016	Mortgage Note/Deed of Trust	Annual Frequency of Response	Responses Per Annum (1 response per endorsed case)	Burden Hour Per Response	Annual Burden Hours	Cost per Burden Hour	Total Annual Cost
15,871	1,306,931	1	1	1,306,931	0.0833	108,867	$34.58	$3,764,621

This is a clerical function. The $38.20 hourly rate is based on a GS-12, step 1. Financial instruments are

prepared by the lender as a requirement of State and local laws, and as a requirement for FHA insurance. Processing this instrument is often accomplished automatically; however, small lenders may still complete these forms manually. The closing department of most lenders has responsibility for preparing the closing package, including the mortgage and note.

13. There are no additional costs to respondents.

14. There is no additional cost to the Federal government involved in implementation of these requirements.

15. This is an extension of a currently approved collection; however, there is a change/adjustment due to an

decrease in FHA endorsement of mortgages. There is a reduction of burden hours due to lenders producing

mortgage documents electronically. The breakdown is as follows:

1. The number of respondents means the number of FHA approved lenders. Currently, there are 15,871 approved lenders.

2. The number of FHA endorsed cases was used to reflect a more accurate picture of the collection activity. In 2016, 1,306,931 cases were endorsed. Of the 1,306,931 FHA endorsed cases for 2016, 1,099,498 cases were submitted electronically.

3. The number of burden hour per response is estimated at five minutes per hour per loan. The Department endorsed 1,306,931 loans in 2016; therefore these instruments are required per loan. It is estimated that the total annual burden hours is 108,867 with a total annual cost of $3,810,345.

16. The results of this collection will not be published.

17. HUD is not seeking approval to avoid displaying the expiration date of the OMB approval.

18. There are no exceptions to the certification statement identified in Item #19 of the OMB 83-I. Changes to

the housing market has increased FHA business substantially despite the number of foreclosed properties.

2. Collections of Information Employing Statistical Methods

This information collection does not employ statistical methods.