94-1307. Fund Availability for Section 8 Assistance Under the Loan Management Set-Aside Program DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 59, Number 13 (Thursday, January 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1307]


[[Page Unknown]]

[Federal Register: January 20, 1994]


_______________________________________________________________________

Part VI





Department of





Housing and





Urban





Development





_______________________________________________________________________



Office of Assistant Secretary for Housing-Federal Housing Commissioner



_______________________________________________________________________



Notice of 
Fund Availability for Section 8 Assistance Under the Loan 
Management Set-Aside Program
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner
[Docket No. N-94-3694; FR-3599-N-01]

 
Fund Availability for Section 8 Assistance Under the Loan 
Management Set-Aside (LMSA) Program.

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Notice of fund availability for Fiscal Year 1994.

-----------------------------------------------------------------------

SUMMARY: This Notice of Fund Availability (NOFA) announces HUD's 
funding for new units of section 8 Loan Management Set-Aside (LMSA) 
assistance. In the body of this document is information concerning the 
following:
    (a) The purpose of the NOFA and information regarding eligibility, 
available LMSA assistance, and selection criteria;
    (b) Application processing, including how to apply and how 
selections will be made; and
    (c) A checklist of steps and exhibits involved in the application 
process.

DATES: Applications for consideration under the General LMSA Funding 
procedures are due on or before March 7, 1994. If submitted on the 
application deadline date, the completed application package must be 
received by 4:00 PM (local time) in the HUD Field Office having 
jurisdiction over the applicant project. The above-stated application 
deadline is firm as to date and hour. In the interest of fairness to 
all competing applicants, the Department will treat as ineligible for 
consideration any application that is received after the deadline, 
except for applications made under Emergency procedures described 
below. Applicants should recognize this practice and submit materials 
early to avoid loss of eligibility brought about by unanticipated 
delays or other delivery-related problems. It is not sufficient for the 
application to bear a postage date within the submission time period. 
Applications must be submitted in an envelope, package, or binding 
which includes all parts of the application in their entirety as they 
are described in the Application Checklist Section of this NOFA. 
Applications submitted by facsimile are not acceptable.

FOR FURTHER INFORMATION CONTACT: The Loan Management Branch in the 
local HUD Field Office having jurisdiction over the project(s) in 
question for application materials and project-specific guidance. 
Policy questions of a general nature may be referred to the Director of 
the Office of Housing in the HUD Regional Office having jurisdiction 
over the project in question. These are listed as follows:

    Region I, Boston, Ken Salk, [phone]
    Region II, New York, Edwin Sprenger, [phone]
    Region III, Philadelphia, Sidney Severe, [phone]
    Region IV, Atlanta, Kenneth Williams, [phone]
    Region V, Chicago, Michael Kulick, [phone]
    Region VI, Ft. Worth, Robert Creech, [phone]
    Region VII, Kansas City, Gerald F. Hayes, Jr. [phone]
    Region VIII, Denver, Ronald Bailey, [phone]
    Region IX, San Francisco, Keith Axtell, [phone]
    Region X, Seattle, Diana Goodwin Shavey, [phone]

SUPPLEMENTARY INFORMATION:

Information Collection Requirements

    The Office of Management and Budget has approved the Loan 
Management Set-Aside Program under the provisions of the Paperwork 
Reduction Act of 1980 (44 U.S.C. 3501-3520) and has assigned it OMB 
control number 2502-0407.

I. Purpose and Substantive Description

(a) Authority

    The Loan Management Set-Aside (``LMSA'') program provides special 
allocations of Housing Assistance Payments (``HAP'') under Section 8 of 
the United States Housing Act of 1937, 42 U.S.C. 1437f. Title 24 of the 
Code of Federal Regulations, Part 886, Subpart A sets forth rules for 
administration of the LMSA program. Matters addressed in the LMSA 
regulation include:
    (1) Application contents (Sec. 886.105);
    (2) Requirements for HUD approval of applications (Sec. 886.107);
    (3) Owner responsibilities under the program (Sec. 886.119); and
    (4) Rules governing Federal preferences in the selection of tenants 
(Sec. 886.132).

(b) Purpose

    The primary purpose of the LMSA program is to reduce claims on the 
Department's insurance fund by aiding those FHA-insured or Secretary-
held projects with presently or potentially serious financial 
difficulties. First priority is given to insured projects with 
presently or potentially serious financial problems which are likely to 
result in a claim on the insurance fund in the near future. To the 
extent that resources remain available, assistance also may be provided 
to HUD-Held and section 202 projects with present or potentially 
serious financial problems which, on the basis of financial and/or 
management analysis, appear to have a high probability of producing 
within approximately the next five years either a claim on the 
insurance fund or a loss of direct loan investment in the case of a 
section 202 loan.

(c) Allocation Amounts

    This Notice of Funding Availability (NOFA) announces availability 
of up to $104 million from Fiscal Year 1994 section 8 LMSA program 
funds for purposes of avoiding claims on the Department's insurance 
fund. HUD is distributing funds under this NOFA to its ten Regional 
Offices on the basis of a formula allocation. The formula takes into 
consideration recent requests for assistance, assignments, and 
potentially eligible projects in each Region.
    LMSA funds available under this NOFA are distributed as denoted 
below. 

------------------------------------------------------------------------
                        HUD region                           Allocation 
------------------------------------------------------------------------
Region I..................................................    $8,835,060
Region II.................................................     4,507,491
Region III................................................    21,603,346
Region IV.................................................    21,282,394
Region V..................................................    20,462,492
Region VI.................................................     9,137,675
Region VII................................................     3,522,971
Region VIII...............................................     1,537,367
Region IX.................................................    12,071,082
Region X..................................................       971,126
------------------------------------------------------------------------


    The Regional Offices will make awards under this NOFA in accordance 
with the selection criteria and procedures described herein.
    Pursuant to this Notice, HUD is accepting applications for 
assistance under the LMSA program from owners of FHA-insured or 
Secretary-held multifamily projects with presently or potentially 
serious financial difficulties. All LMSA assistance awarded from these 
Fiscal Year 1994 program funds will have a term of five years, with no 
contractual provision for renewal of the contract at the end of the 
five-year term. This NOFA does not govern non-competitive assistance 
awards under the section 8 LMSA program pursuant to specific regulatory 
authority (e.g., LMSA assistance as a prepayment plan of action 
incentive under Sec. 248.231(e) or such assistance under 
Sec. 219.325(b)(4) to alleviate the effect of rent increases resulting 
from debt service on capital improvement loans).

(d) Eligibility

    Projects eligible for LMSA assistance include: (1) Any existing 
subsidized or unsubsidized multifamily residential project subject to a 
mortgage insured under any section of the National Housing Act; (2) any 
such project subject to a mortgage that has been assigned to the 
Secretary; (3) any such mortgage acquired by the Secretary and 
thereafter sold under a Secretary-held purchase money mortgage; and (4) 
a project for the elderly financed under section 202 of the Housing Act 
of 1959 (except projects receiving assistance under 24 CFR part 885 or 
part 889). References to HUD-Held or Secretary-Held projects throughout 
this Notice include any project which meets one of the descriptions in 
(2)-(4) above.
    Owners meeting these criteria who applied for assistance in a prior 
year but did not receive the desired number of units are eligible to 
reapply under this NOFA. The FY 1994 application must contain current 
information and conform to all requirements outlined in this notice.

(e) Selection Criteria/Ranking Factors

    (1) Application Review: Each application for assistance under the 
LMSA program will be reviewed by the HUD Field Office having 
jurisdiction over the project in question. Within 10 days of receipt of 
each application involving more than 12 units, the HUD Field Office 
will notify the chief executive of the unit of general local government 
in which the project is located and provide the opportunity for non-
binding comments on the application (see 24 CFR 886.106 and 24 CFR part 
791). These comments will be considered by the Field Office in 
determining whether the application meets regulatory approval 
requirements in section 886.107 and described in detail in HUD Handbook 
4350.2 REV-1. The Field Office's review of the application will be 
based on the following determinations:
    (i) HUD's Fair Housing requirements (24 CFR 886.107(a) and 886.114) 
are met;
    (ii) The HUD-approved unit rents are approvable within the 
limitations described in Sec. 886.110, which are based on HUD's Fair 
Market Rents;
    (iii) The residential units meet the housing quality standards set 
forth in Sec. 886.113, except for such variations as HUD may approve;
    (iv) A significant number of residents, or potential residents in 
the case of projects having a vacancy rate over 10 percent, are 
eligible for and in need of section 8 assistance;
    (v) The proposed section 8 assistance would not affect other HUD-
related multifamily housing within the same neighborhood in a 
substantially adverse manner. Examples of such adverse effects are 
substantial move-outs from nearby HUD-related multifamily housing, or 
substantial diversion of prospective applicants from such projects to 
the subject project;
    (vi) The project has serious current financial problems, which are 
likely to result in a claim on the insurance fund in the near future, 
or the project has potentially serious financial problems which, on the 
basis of financial and/or management analysis, appear to have a high 
probability of producing a claim on the insurance fund within 
approximately the next five years. Current audited financial statements 
will be utilized in the determination of project financial position. 
Project owners who have not submitted audited annual financial 
statements within 60 days of the end of the project fiscal year or by 
the deadline of the extension (if one has been granted) are not in 
compliance with the Regulatory Agreement. Since the assignment to a 
priority category, as well as scoring and ranking (if required within 
priority category), cannot be properly performed without current 
financial data, a project will be rejected on this basis. The only 
exception to this procedure is one in which the Field Office has 
granted an indefinite extension due to the inability of the project to 
cover the expense of the preparation of the audited statements. 
Required data must be available from Field Office sources prior to 
scoring and ranking.
    (vii) The proposed section 8 assistance for the project would solve 
an identifiable problem and provide a reasonable assurance of long-term 
project viability. A determination of long-term viability must be based 
on the following findings:
    (A) The project is not subject to any serious problems that are 
non-economic in nature. Examples of such problems are poor location, 
structural deficiencies or disinterested ownership;
    (B) The owner is in substantial compliance with the Regulatory 
Agreement. Owners have not or are not diverting project funds for 
personal use. No dividends have been paid during any period of 
financial difficulty;
    (C) The current management agent has been approved by HUD and is in 
substantial compliance with the management agreement. Financial records 
are adequately kept. Occupancy requirements are being met. Marketing 
and maintenance programs are being carried out in an adequate manner, 
based upon available financial resources;
    (D) The project's problems are primarily the result of factors 
beyond the control of the present ownership and management;
    (E) The major problems are traceable to an inadequate cash flow;
    (F) The proposed Section 8 assistance would solve the cash flow 
problem by:
    (1) Making it possible to grant needed rent increases; and
    (2) Reducing turnover, vacancies and collection losses;
    (G) The owner's plan for remedying any deferred maintenance, 
financial problems, or other problems is realistic and achievable; 
there is positive evidence that the owner will carry out the plan. 
Examples of such evidence are the owner's past performance in 
correcting problems and, in the case of profit-motivated owners, any 
cash contributions made to correct project problems.
    (viii) For projects with a history of financial default, financial 
difficulties or deferred maintenance, any plan for remedying defaulted 
or deferred obligations submitted pursuant to Sec. 886.105(d) must be 
adequate in HUD's determination.
    In its review of an application, the HUD Field Office will consider 
recent physical inspections, management reviews, and tenant complaints 
and comments. If there is no report of a detailed HUD physical 
inspection conducted by either the mortgagee, HUD, or a third-party 
contractor of HUD dated within one year of the date an application for 
LMSA assistance is received in the reviewing office and containing a 
description and estimated cost of required repairs, the HUD Field 
Office will schedule a physical inspection and Housing Quality 
Standards (HQS) inspection in conjunction with its review and approval 
of the application for LMSA assistance. Execution of a subsidy contract 
in such case will be contingent upon satisfactory modification of the 
owner's plan to include solutions for all additional problems 
discovered in the scheduled review(s).
    After HUD Field Offices have determined which applications meet 
LMSA program requirements, the projects which are both eligible for, 
and in need of, new or additional LMSA assistance shall be reported to 
the appropriate Regional Office for further consideration under the 
competitive selection procedures outlined in this Notice. Projects 
awarded subsidy from Fiscal Year 1994 LMSA program funds shall be 
selected in accordance with ``general'' or ``emergency'' procedures as 
described below. If an application can be approved only on certain 
conditions, the HUD Field Office will notify the owner of the 
conditions and specify a time limit by which those conditions must be 
met. A project recommended for a conditional approval may be reported 
to the Regional Office by the HUD Field Office for further processing 
under procedures set forth below; however, execution of an LMSA 
contract for any units which may be allocated to the project in the 
Regional process, will be contingent upon the owner's compliance with 
the approval conditions. If the HUD Field Office concludes that an 
application will not meet LMSA program requirements, processing of the 
application is discontinued, and the applicant will be notified by the 
Field Office as soon as possible of the reasons for disapproval.
    (2) General LMSA Funding Round:
    (i) Annual needs survey:
    Fiscal Year 1994 general funding awards will be made from projects 
recommended by HUD Field Offices to their Regional Offices in response 
to the Fiscal Year 1994 Annual Needs Survey. The Field Offices' needs 
survey responses will be forwarded to Regional Offices after the due 
date announced in this Notice for program applications. HUD Field 
Office staff shall determine and report the minimum number of LMSA 
units needed to cure each project's vacancy and cash flow problems, 
subject to limitations as described below.
    (ii) Limitations on Units:
    (A) An allocation may not exceed the difference between total units 
in the project and the number of units already assisted under project-
based tenant subsidy contracts (project-based section 8 subprograms, 
Rent Supplement and Rental Assistance Payments).
    (B) Total project-based section 8 assistance for projects with 
unsubsidized mortgages is limited to 40 percent of total units in the 
project. If the respective HUD Field Office determines that a project 
with an unsubsidized mortgage needs section 8 assistance above the 40 
percent level, or if the project was developed as a retirement service 
center, a recommendation by the Field Office will be subject to further 
review by the Regional Office in a process similar to the review of 
applications submitted under the emergency procedures described in 
paragraph (3) below. In all such cases, the Field Office's 
justification for LMSA units must document that project management has 
an aggressive and workable plan in place for leasing the market rate 
units in the project. A project is considered unsubsidized for the 
purpose of LMSA funding selections if the HUD mortgage is unsubsidized. 
The definition of subsidized project for purposes of section 203 of the 
Housing and Community Development Amendments of 1978, which includes 
projects with over 50 percent of total units assisted under certain 
section 8 subprograms, pertains to management and disposition of 
projects which have been acquired by HUD and is not applicable to 
projects eligible for LMSA assistance.
    (iii) Determination of Priority Category:
    HUD Field Offices will include in their needs survey reports, data 
needed by the Regional Offices to classify approved projects into six 
priority categories and to establish a funding score for each project.
    Fiscal Year 1994 LMSA funds will be allocated in the following 
order of priority:
    (A) Insured projects with presently serious financial problems 
likely to result in a mortgage insurance claim in the near future;
    (B) Insured projects with potentially serious financial problems 
which appear to have a high probability of producing a mortgage 
insurance claim within approximately the next five years;
    (C) HUD-held and section 202 projects with presently serious 
financial problems likely to result in a loss of loan investment within 
the near future; and
    (D) HUD-held and section 202 projects with potentially serious 
financial problems which appear to have a high probability of producing 
a loss of loan investment within approximately the next five years.
    The Department of Housing and Urban Development never intended to 
provide relief in the form of Loan Management Set Aside assistance for 
Retirement Service Centers (RESC) or formerly coinsured projects. 
However, it is recognized that if LMSA assistance could be made 
available for those types of projects some additional claims on the FHA 
Fund might be avoided. Accordingly, the following priority categories 
of eligible projects are included, once again, in FY 1994:
    (E) Insured Retirement Service Centers and insured formerly 
coinsured projects (i.e., projects whose mortgages have been converted 
from coinsurance to full insurance), with presently serious financial 
problems likely to result in a mortgage insurance claim in the near 
future.
    (F) HUD-held Retirement Service Centers and HUD-held formerly 
coinsured projects with presently serious financial problems.
    (iv) Determining the ``presently serious'' classification:
    For purposes of determining classification, HUD will consider a 
project to have ``presently serious financial problems'' if both of the 
following two financial ratios are less than zero:
    Income/Expense Ratio, defined as follows:
    (Net Income or Loss Before Depreciation LESS Annual Debt Service 
and Reserve Payments) Times 100 Divided by: Total Annual Cost of 
Operating the Project

and,

    Ratio of Surplus Cash (or Deficiency) to Monthly Mortgage Payment, 
defined as follows:
    Total Cash LESS Total Current Obligations Divided by: Total Monthly 
Mortgage Payment
    A negative income/expense ratio occurs when there was a net loss 
during the period or when net income before depreciation was less than 
annual debt service plus reserve payments. The project did not generate 
sufficient cash flow from operations in the previous year to cover its 
cash requirements, suggesting cash flow difficulties which were 
possibly severe and, if left unresolved, are likely to result in 
financial problems in the current year. Comparison to the total cost of 
operating the project provides an indication of the seriousness of any 
negative cash flow, since the size of the problem generally varies 
directly with the absolute value of the ratio.
    The second ratio approximates the project's Mortgage Payment 
Coverage Ratio and is negative when there is a cash deficiency, i.e., 
the surplus cash calculation is less than zero. A cash deficiency means 
that cash available to the project at the end of the period, including 
any subsidy vouchers due for the period, is less than the amount needed 
to cover current obligations. A cash deficiency points to a severe 
liquidity problem since the project cannot even meet its past 
obligations without some form of relief. Calculation of the ratio of 
surplus cash (deficiency) to the total mortgage payment provides an 
indication of the project's ability to make the next mortgage payment 
after past obligations are met, without depending upon the next month's 
rent collections.
    The two ratios defined above will be calculated using financial 
data contained in the project's most recent annual audited financial 
statement submitted to the Field Office in accordance with the 
Regulatory Agreement (see par. (e)(1)(vi.), in conjunction with monthly 
accounting reports. A result of zero or less on the two ratios suggests 
that the project has a current financial problem. These ratios were 
selected because they provide a straightforward means of identifying 
projects with cash flow difficulties. Projects with either ratio in the 
positive range may be added to Category A for insured projects or 
Category C for HUD-held projects based on written justifications by HUD 
Field Offices documenting appropriate circumstances. For example, a 
substantial increase in vacancies in recent months may warrant 
elevating the project's priority category. The justifications will be 
reviewed by the Regional Housing Director, who will resolve any issues 
with the respective Field Offices and approve, or disapprove, the 
change in priority.

(v) Determination of Ranking Within Priority Category

    The number of projects which can be funded from Fiscal Year 1994 
resources will depend upon the units and budget authority designated in 
Field Office recommendations. If LMSA program funds are available to 
fund some, but not all of the projects in a given priority category 
(after funding all projects in higher priority categories), any project 
selections from the given category will follow from a ranking of 
projects within that category using a funding score. A maximum score of 
115 points (110 points for HUD-held projects) may be accumulated on the 
basis of the following project characteristics and maximum point 
potentials:
    (A) Occupancy--25 points.
    Calculation: No. of occupied units Divided by Total units in the 
project. Lower values yield higher points.
    (B) Owner advances or contributions since October 1, 1990-- 25 
points.
    Calculation: Total of owner advances or contributions during the 
period Divided by Total Units in the project. Larger values yield 
higher points.
    (C) Tenants paying in excess of 40 percent of their income for 
rent--15 points.
    Calculation: No. of units occupied by tenants paying over 40 
percent of their income for rent Divided by Total units in the project. 
Larger values yield higher points.
    (D) Income/Expense Ratio--15 points.
    Calculation: As defined above. Smaller values yield higher points.
    (E) Ratio of Surplus Cash (Deficiency) to Total Monthly Mortgage 
Payment--15 points.
    Calculation: As defined above. Smaller values yield higher points.
    (F) For HUD-insured projects only, Mortgage balance per dollar of 
additional subsidy--5 points.
    Calculation: Mortgage principal balance Divided By Proposed LMSA 
annual contract authority. Larger values yield higher points.
    (G) Resident Initiatives--15 points.
    Evidence in the form of a contract, or other written commitment, to 
transfer title to the property to a resident organization, cooperative 
association, non-profit entity, public body including an 
instrumentality thereof, public housing agency or Indian Housing 
Authority, for the purpose of resident ownership or management of the 
project.

(vi) LMSA/Flexible Subsidy Program Coordination

    Pursuant to section 405(f) of the Housing and Community Development 
Act of 1992 (Pub. L. 102-550), assistance under this NOFA will be 
coordinated with assistance made available under the NOFA for the 
Flexible Subsidy Program. Projects seeking assistance under both 
programs will be reviewed to evaluate the effect on cash flow and 
ability to fund repair items from the increased operating income. By 
taking into account all funding sources, HUD can determine whether the 
infusion of Flexible Subsidy assistance together with the LMSA 
represents the appropriate solution for project stabilization.

(vii) Funding for Selected Projects

    If the Regional Office confirms that all program requirements have 
been met and selects the project for funding, notification of a general 
funding award will be made through the HUD Field Office. If an 
application can be approved only on certain conditions, HUD will notify 
the owner of the conditions and specify a time limit by which those 
conditions must be met. Disapproved applicants will also be notified 
with a statement of the grounds for disapproval.

(3) Emergency LMSA Funding

    Up to five percent of the LMSA funds announced in this Notice may 
be made available to fund projects recommended by the respective HUD 
Field Office subsequent to the Annual Needs Survey reporting deadline 
for the general funding round. After this deadline, only emergency 
requests will be accepted. In all cases governed by these emergency 
procedures, consideration will be given to the extent that sufficient 
resources are available.
    To qualify for emergency LMSA assistance, the project must be 
Insured with presently serious financial problems (as described in 
paragraph (2)(iii) above), and must meet one of the conditions listed 
below:
    (i) The applications (or corrections to the applications) were 
received too late by the Field Office to be included in the Annual 
Needs Survey.
    (ii) Projects were recommended by the Field Office during this 
general funding round, but were not approved by the Regional Office or 
did not score a sufficient number of points in the ranking process.
    All application and Field Office review procedures pertaining to 
the LMSA program will be followed for emergency recommendations. In 
addition, an emergency recommendation must have a full written 
justification signed by the Field Office Manager. HUD Field Offices are 
required to demonstrate that provision of the proposed LMSA units is 
likely to avert a mortgage default or assignment in the near future, 
and the request to the Regional Office will explain why funds are 
needed on an emergency basis. The Region will not consider any 
emergency funding request which does not have written justification 
signed by the Manager.
    The Region will review Field Office justifications and will 
determine whether provision of LMSA units is an appropriate response to 
the circumstances documented by HUD Field staff. If an emergency 
request is approved, notification of the subsidy award will be made 
through the HUD Field Office.

II. Application Process

    (a) Completed applications must be submitted to the HUD Field 
Office having jurisdiction over the multifamily property for which 
assistance is requested. Application kits containing copies of required 
HUD forms and Notices are available from HUD Field Offices.
    (b) For consideration under the General LMSA Funding procedures set 
forth previously in this Notice, a completed LMSA application must be 
received in the Field Office on or before 4 p.m. March 7, 1994. 
Applications received after this deadline will be considered for LMSA 
assistance only if the Secretary determines that such assistance is 
needed immediately in response to emergency circumstances and only to 
the extent that sufficient Fiscal Year 1994 LMSA budget authority 
remains to satisfy the subsidy requirement.

III. Checklist of Application Submission Requirements

    (a) LMSA applications must meet the requirements set forth in 
section 886.105 of the LMSA regulations and HUD Handbook 4350.2 REV-1 
(6/92). All requirements have been incorporated into form HUD-52530, 
Application for Loan Management Set-Aside, Section 8 Program, and the 
ancillary forms cited therein. The application form can be reproduced 
from appendix 1 of Handbook 4350.2. Regulatory requirements are cited 
below.
    (1) Information on gross income, family size and amount of rent 
paid to the project by families currently in residence;
    (2) Information on vacancies and turnover;
    (3) Total number of units by unit size (by bedroom count) for which 
section 8 assistance is requested;
    (4) Affirmative Fair Housing Marketing Plan on Form HUD-935.2.
    (5) Estimate of effect of the availability of the requested section 
8 LMSA assistance on marketability of units in the project;
    (6) For projects having a history of financial default, financial 
difficulties or deferred maintenance, a plan and a schedule for 
remedying such defaulted or deferred obligations. To be credible, the 
owner must clearly state each problem being addressed and enumerate 
proposed actions for curing each problem. Proposed actions must be 
presented in trackable form, with the specific dates that each action 
would begin and end if the requested LMSA subsidy were awarded.
    (7) A Statement of the Sources and Uses of all financial resources 
needed to complete the plan, including any cash contributions from the 
owner. Please note: If Low Income Housing Tax Credits have been or are 
planned for this project, a special Sources and Uses format is 
required. See Item 11 below.
    (8) Since HUD's approval must be based in part on evidence that the 
plan will be carried out, certification by the owner that the plan will 
be executed as presented and that sources of funds identified in the 
plan, other than the LMSA assistance applied for, will be available by 
the scheduled dates (any conditions must be stated, e.g. ``subject to 
HUD approval of Flexible Subsidy'').
    (9) Certification by the owner that every effort has been made to 
secure funding from all possible funding sources; supporting 
documentation of those efforts must be attached.
    (10) Certification by the owner that he/she agrees to modify the 
plan, prior to execution of an LMSA contract, for the purpose of 
including any changes which the HUD Field Office determines are 
necessary to address problems not identified or inadequately addressed 
in the plan, as indicated by recent HUD physical inspections, 
management reviews or records of tenant complaints and comments, or by 
HUD physical inspections and/or management reviews which may be 
scheduled in conjunction with review of the LMSA application. Changes 
required by HUD may also include requirements for carrying out Resident 
Initiatives activities where it is determined that it could be 
beneficial to the management of the project.
    (11) All documentation needed to conduct a subsidy layering review 
as required by HUD Notice 90-17, ``Combining Low-Income Housing Tax 
Credits (LIHTC) with HUD Programs'', and by the Notice of 
administrative guidelines to be applied to assistance programs of the 
Office of Housing published on April 9, 1991 (56 FR 14436). The 
Department is obligated by law to reduce the amount of assistance it 
will provide if the review discloses a certain level of excess. These 
may include the Sources and Uses Statement which can be reproduced from 
appendix F of HUD Handbook 4350.1, REV-1, Insured Project Servicing; 
evidence of issuance of tax credits from the State Housing Finance 
Agency; the terms and conditions for all mortgages (interest rates, 
etc.), and Income and Expense Statement (Statement of Profit/Loss Form 
HUD-92410).
    (12) Form HUD-2880, Applicant/Recipient Disclosure/Update Report, 
as required under subpart C of 24 CFR part 12, Accountability in the 
Provision of HUD Assistance.
    (13) Disclosures and verification requirements for Social Security 
and Employer Identification Numbers, as required by 24 CFR part 750.
    (14) Certification and disclosure according to HUD Notice H-90-27 
entitled ``OMB's Guidance on New Government-wide Restrictions on 
Lobbying'' issued April 13, 1990.
    (15) Form HUD-2530, Previous Participation Certificate(s) for all 
principals (including management agents) requiring clearance under 
those procedures.
    (16) A certification stating that the owner will comply with the 
provisions of the Fair Housing Act, Title VI of the Civil Rights Act of 
1964, Executive Orders 11063 and 11246, section 504 of the 
Rehabilitation Act of 1973, the Age Discrimination Act of 1975, section 
3 of the Housing and Urban Development Act of 1968, as well as with all 
regulations issued pursuant to these authorities.
    (17) Certification that the applicant will comply with the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970, as amended, (URA), implementing regulations at 49 CFR part 24, 
and HUD Handbook 1378, Tenant Assistance, Relocation and Real Property 
Acquisition.
    (18) Anti-lobbying Certification for contracts, grants, loans and 
cooperative agreements for grants exceeding $100,000; and Disclosure of 
Lobbying Activities (SF-LLL), if applicable. Standard Form-LLL is 
required if funds other than federally appropriated funds will be or 
have been used to lobby the Executive or Legislative branches of the 
Federal government regarding specific contracts, grants, loans or 
cooperative agreements.

IV. Corrections to Deficient Applications

    (a) After the submission date for applications, no owner-initiated 
changes to application documents will be accepted, except for 
correction of curable technical deficiencies which do not alter the 
substance of the application materials. Curable technical deficiencies 
are items that are not necessary for HUD review under the selection 
criteria (e.g., failure to submit a required certification). Applicants 
may not submit items that would improve the substantive quality of the 
application after the application deadline.
    (b) HUD will notify an applicant in writing, shortly after the 
application response deadline, of any curable technical deficiencies in 
the application. The applicant must submit corrections to the Field 
Office within 14 calendar days from the date of HUD's letter notifying 
the applicant of any such deficiency. The applicant must submit the 
corrected document(s) with a separate written summary of all changes 
from the original submission.

V. Other Matters

    (a) HUD regulations in 24 CFR part 50, implementing section 
102(2)(C) of the National Environmental Policy Act of 1969, contain 
categorical exclusions from their requirements for the actions, 
activities, and programs specified in Sec. 50.20. Since the activities 
set forth in this Notice are within the exclusion set forth in 
Sec. 50.20(d), no environmental assessment is required, and no 
environmental finding has been prepared.
    (b) Executive Order 12612, Federalism. The General Counsel, as the 
Designated Official under section 6(a) of Executive Order 12612, 
Federalism, has determined that this NOFA does not have ``federalism 
implications'' because it does not have substantial direct effects on 
the States (including their political subdivisions), or on the 
distribution of power and responsibilities among the various levels of 
government.
    (c) Executive Order 12606, the Family. The General Counsel, as the 
Designated Official under Executive Order 12606, the Family, has 
determined that this NOFA does not have potential significant impact on 
family formation, maintenance, and general well-being.
    (d) Section 13 of the Department of Housing and Urban Development 
Act contains two provisions dealing with efforts to influence HUD's 
decisions with respect to financial assistance. The first imposes 
disclosure requirements on those who are typically involved in these 
efforts--those who pay others to influence the award of assistance or 
the taking of a management action by the Department and those who are 
paid to provide the influence. The second restricts the payment of fees 
to those who are paid to influence the award of HUD assistance, if the 
fees are tied to the number of housing units received or are based on 
the amount of assistance received, or if they are contingent upon the 
receipt of assistance.
    Section 13 was implemented by final rule published in the Federal 
Register on May 17, 1991 (56 FR 22912). If readers are involved in any 
efforts to influence the Department in these ways, they are urged to 
read the final rule at 24 CFR part 86, particularly the examples 
contained in appendix A of the rule.
    Any questions regarding the rule should be directed to the Office 
of Ethics, room 2158, Department of Housing and Urban Development, 451 
Seventh Street, SW., Washington, DC 20410. Telephone: [phone]; 
TDD: [phone]. (These are not toll-free numbers.) Forms necessary 
for compliance with the rule may be obtained from the local HUD office.
    (e) Section 103 of the HUD Reform Act. HUD's regulation 
implementing Section 103 of the Department of Housing and Urban 
Development Reform Act of 1989 (42 U.S.C. 3537a) was published May 13, 
1991 (56 FR 22088) and became effective on June 12, 1991. That 
regulation, codified as 24 CFR part 4, applies to the funding 
competition announced today. The requirements of the rule continue to 
apply until the announcement of the selection of successful applicants.
    HUD employees involved in the review of applications and in the 
making of funding decisions are restrained by part 4 from providing 
advance information to any person (other than an authorized employee of 
HUD) concerning funding decisions, or from otherwise giving any 
applicant an unfair competitive advantage. Persons who apply for 
assistance in this competition should confine their inquiries to the 
subject areas permitted under 24 CFR part 4.
    Applicants who have questions should contact the HUD Office of 
Ethics [phone]. (This is not a toll-free number.) The Office of 
Ethics can provide information of a general nature to HUD employees, as 
well. However, a HUD employee who has specific program questions, such 
as whether particular subject matter can be discussed with persons 
outside the Department, should contact his or her Regional or Field 
Office Counsel, or Headquarters counsel for the program to which the 
question pertains.
    (f) Accountability in the Provision of HUD Assistance--Section 102 
of the HUD Reform Act. HUD has promulgated a final rule to implement 
section 102 of the Department of Housing and Urban Development Reform 
Act of 1989 (HUD Reform Act) The final rule is codified at 24 CFR part 
12. Section 102 contains a number of provisions that are designed to 
ensure greater accountability and integrity in the provision of certain 
types of assistance administered by HUD. On January 14, HUD published 
at 57 FR 1942, additional information that gave the public including 
applicants for, and recipients of, HUD assistance) further information 
on the implementation, public access, and disclosure requirements of 
section 102. The documentation, public access, and disclosure 
requirements of section 102 are applicable to assistance awarded under 
this NOFA as follows:
    (1) Documentation and public access. HUD will ensure that 
documentation and other information regarding each application 
submitted pursuant to this NOFA are sufficient to indicate the basis 
upon which assistance was provided or denied. This material, including 
any letters of support, will be made available for public inspection 
for a five-year period beginning not less than 30 days after the award 
of the assistance. Material will be made available in accordance with 
the Freedom of Information Act (5 U.S.C. 552) and HUD's implementing 
regulations at 24 CFR part 15. In addition, HUD will include the 
recipients of assistance pursuant to this NOFA in its quarterly Federal 
Register notice of all recipients of HUD assistance awarded on a 
competitive basis. (See 24 CFR 12.14(a) and 12.16(b), and the notice 
published in the Federal Register on January 16, 1992 (57 FR 1942), for 
further information on these requirements.)
    (2) Disclosures. HUD will make available to the public for five 
years all applicant disclosure reports (HUD Form 2880) submitted in 
connection with this NOFA. Update reports (also Form 2880) will be made 
available along with the applicant disclosure reports, but in no case 
for a period less than three years. All reports--both applicant 
disclosures and updates--will be made available in accordance with the 
Freedom of Information Act (5 U.S.C. 552) and HUD's implementing 
regulations at 24 CFR part 15. (See 24 CFR subpart C, and the notice 
published in the Federal Register on January 16, 1992 (57 FR 1942), for 
further information on these disclosure requirements.)
    (3) Subsidy-layering determinations. 24 CFR 12.52 requires HUD to 
certify that the amount of HUD assistance is not more than is necessary 
to make the assisted activity feasible after taking account of other 
government assistance. HUD will make the decision with respect to each 
certification available to the public free of charge, for a three-year 
period. (See the notice published in the Federal Register on January 
16, 1992 (57 FR 1942) for further information on requesting these 
decisions.) Additional information about applications, HUD 
certifications, and assistance adjustments, both before assistance is 
provided or subsequently, are to be made under the Freedom of 
Information Act (24 CFR part 15).
    (g) The Byrd Amendment. Prohibition Against Lobbying Activities. 
The use of funds awarded under this NOFA is subject to the disclosure 
requirements and prohibitions of Section 319 of the Department of 
Interior and Related Agencies Appropriations Act for Fiscal Year 1990 
(31 U.S.C. 1352) (the ``Byrd Amendment'') and the implementing 
regulations at 24 CFR part 87. These authorities prohibit recipients of 
Federal contracts, grants, or loans from using appropriated funds for 
lobbying the Executive or Legislative branches of the Federal 
government in connection with a specific contract, grant, or loan. The 
prohibition also covers the awarding of contracts, grants, cooperative 
agreements, or loans unless the recipient has made an acceptable 
certification regarding lobbying. Under 24 CFR part 87, applicants, 
recipients, and subrecipients of assistance exceeding $100,000 must 
certify that no Federal funds have been or will be spent on lobbying 
activities in connection with the assistance.

Required Reporting

    A certification is required at the time application for funds is 
made that Federally appropriated funds are not being or have not been 
used in violation of section 319 and that disclosure will be made of 
payments for lobbying with other than Federally appropriated funds. 
Also there is a standard disclosure form, SF-LLL, ``Disclosure Form to 
Report Lobbying'', which must be used to disclose lobbying with other 
than Federally appropriated funds.

    Authority: Section 8 of the United States Housing Act of 1937, 
42 U.S.C. 1437f.

    Dated: January 10, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-1307 Filed 1-19-94; 8:45 am]
BILLING CODE 4210-27-P