[Federal Register Volume 60, Number 36 (Thursday, February 23, 1995)]
[Rules and Regulations]
[Pages 10016-10018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-4366]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner
24 CFR Part 207
[Docket No. R-95-1768; FR-3753-I-01]
RIN 2502-AG34
Multifamily Cooperative Refinancing and Conversion Program
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Interim rule.
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SUMMARY: HUD's multifamily mortgage insurance regulations are being
amended to revise the occupancy requirements for rental projects
converted to cooperative ownership. The amended regulations replace the
strict 70 percent owner-occupant subscription requirement with one that
varies according to the loan-to-value ratio. This flexibility will
allow the Federal Housing Commissioner to expand affordable housing
opportunities.
DATES: Effective date: March 27, 1995.
Expiration date: Section 207.32a(h)(2) will expire on September 23,
1996.
Comments due date: April 24, 1995.
ADDRESSES: Interested persons are invited to submit comments regarding
this interim rule to the Office of the General Counsel, Rules Docket
Clerk, Room 10276, Department of Housing and Urban Development, 451
Seventh Street SW., Washington, D.C. 20410-0500. Communications should
refer to the above docket number and title. Facsimile (FAX) comments
are not acceptable. A copy of each communication submitted will be
available for public inspection and copying during regular business
hours (7:30 a.m. to 5:30 p.m. Eastern Time) at the above address.
FOR FURTHER INFORMATION CONTACT: Linda D. Cheatham, Director, Office of
Multifamily Housing Development, Room 6134, Department of Housing and
Urban Development, 451 Seventh Street, S.W., Washington, DC 20410-0500,
telephone (202) 708-3000. Hearing or speech-impaired individuals may
call HUD's TDD number (202) 708-4594. (These are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
I. Background
Title II of the National Housing Act of 1934, specifically section
223(f) (12 U.S.C. 1715n(f)), authorizes HUD to insure mortgages for
multifamily rental units through the Federal Housing Administration
(FHA). The regulations implementing section 223(f) are codified at 24
CFR 207.32a. The section 223(f) regulations were amended June 24, 1985
(50 FR 25940), to include cooperative mortgagors. The regulations, as
amended in 1985, expand section 223(f) to provide mortgage insurance
for the refinancing of existing cooperative projects and the purchase/
conversion of existing rental projects by cooperative sponsors.
Paragraph (h)(2) of Sec. 207.32a sets forth the occupancy
requirements for rental projects converted to cooperative ownership. At
least 70 percent of the total units in the project must be subscribed
to on a cooperative basis before endorsement of the mortgage for
insurance by the Federal Housing Commissioner. This interim rule
replaces the strict 70 percent subscription requirement of
Sec. 207.32a(h)(2) with one that varies according to the loan-to-value
ratio.
The amended regulation provides that with respect to a cooperative
project, the following pre-sale and loan-to-value ratios apply: (1) A
70 percent loan-to-value ratio loan will require that 51
[[Page 10017]] percent of the project's units be pre-sold and occupied
by the owners as a principal residence prior to endorsement; (2) an 80
percent loan-to-value ratio loan will require that 60 percent of the
project's units be pre-sold and occupied by the owners as a principal
residence prior to endorsement; and (3) a 90 percent loan-to-value
ratio loan will require that 70 percent of the project's units be pre-
sold and occupied by the owners as a principal residence prior to
endorsement.
These amendments will minimize HUD's risk in insuring mortgages on
cooperative projects while at the same time, providing a mechanism for
development of a wide range of cooperative projects. In general, the
higher the pre-sale rate, the more likely a project will succeed as a
cooperative. Likewise, the greater the loan-to-value ratio, the higher
HUD's risk in most cases. Therefore, the amendment requires a higher
pre-sale rate in order to secure a higher loan-to-value ratio loan.
Conversely, the smaller the loan-to-value ratio, the less substantial
HUD's risk, and, thus, the lower the required pre-sale.
Furthermore, this interim rule also creates a new
Sec. 207.32a(h)(2)(iv) mandating that voting control of the cooperative
project rest with the owner-occupants. Since owner-occupant control is
a distinguishing feature of cooperatives, this requirement will ensure
that the insured mortgage is associated with a legitimate cooperative
project.
These amendments not only increase program flexibility with respect
to the insurance of mortgages on cooperative projects, but will promote
HUD's policy of revitalizing neighborhoods and communities. HUD
believes these amendments will help make affordable housing a reality
for more families everywhere and help revitalize ``communities in
peril.''
II. Justification for Interim Rulemaking
It is HUD's policy to publish rules for public comment before their
issuance for effect, in accordance with its own regulations on
rulemaking found at 24 CFR part 10. However, part 10 provides that
prior public procedure will be omitted if HUD determines that it is
``impracticable, unnecessary, or contrary to the public interest'' (24
CFR 10.1). HUD finds that in this case prior public comment is contrary
to the interest of the public. This interim rule removes a strict
regulatory and administrative requirement in order to increase program
flexibility and expand homeownership opportunities. Although HUD
believes the public will benefit from immediate implementation of this
interim rule, HUD welcomes public comment. All comments will be
considered in the development of the final rule.
The Department has adopted a policy of setting an expiration date
for an interim rule unless a final rule is published before that date.
This ``sunset'' provision appears in Sec. 207.32a(h)(2)(v), and
provides that the interim rule will expire on a date 18 months from its
effective date.
III. Other Matters
A. Environmental Impact
In accordance with 40 CFR 1508.4 of the regulations of the Council
on Environmental Quality and 24 CFR 50.20(k) of the HUD regulations,
the policies and procedures contained in this interim rule relate only
to HUD administrative procedures and, therefore, are categorically
excluded from the requirements of the National Environmental Policy
Act.
B. Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this interim rule will not have substantial direct effects
on states or their political subdivisions, or the relationship between
the federal government and the states, or on the distribution of power
and responsibilities among the various levels of government.
Specifically, this interim rule is directed towards applicants and
participants in HUD's multifamily mortgage insurance program. It
effects no changes in the current relationships between the federal
government, the states and their political subdivisions in connection
with these programs.
C. Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this interim rule does not
have potential for significant impact on family formation, maintenance,
and general well-being, and thus, is not subject to review under the
order. No significant change in existing HUD policies or programs will
result from promulgation of this interim rule, as those policies and
programs relate to family concerns.
D. Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) has reviewed and approved this interim rule, and in so
doing certifies that this interim rule will not have a significant
economic impact on a substantial number of small entities. This interim
rule only governs the procedures under which the Department insures
multifamily cooperative projects, and will not have any meaningful
economic impact on any entity.
E. Regulatory Agenda
This interim rule was listed as sequence number 1773 in the
Department's Semiannual Agenda of Regulations published on November 14,
1994 (59 FR 57632, 57634) in accordance with Executive Order 12866 and
the Regulatory Flexibility Act.
List of Subjects in 24 CFR Part 207
Manufactured homes, Mortgage insurance, Reporting and recordkeeping
requirements, Solar energy.
Accordingly, 24 CFR part 207 is amended as follows:
PART 207--MULTIFAMILY HOUSING MORTGAGE INSURANCE
1. The authority citation for 24 CFR part 207 continues to read as
follows:
Authority: 12 U.S.C. 1701z-11(e), 1713, and 1715b; 42 U.S.C.
3535(d).
2. In Sec. 207.32a, paragraph (h)(2) is revised to read as follows:
Sec. 207.32a Eligibility of mortgages on existing projects.
* * * * *
(h) * * *
(2) With respect to a cooperative project:
(i) At least 51 percent of the total units in the project must be
subscribed to on a cooperative basis and occupied by the owners as a
principal residence before endorsement of the mortgage for insurance by
the Commissioner in order to obtain a 70 percent loan-to-value ratio
loan;
(ii) At least 60 percent of the total units in the project must be
subscribed to on a cooperative basis and occupied by the owners as a
principal residence before endorsement of the mortgage for insurance by
the Commissioner in order to obtain an 80 percent loan-to-value ratio
loan; and
(iii) At least 70 percent of the total units in the project must be
subscribed to on a cooperative basis and occupied by the owners as a
principal residence before endorsement of the mortgage for insurance by
the Commissioner in order to obtain a 90 percent loan-to-value ratio
loan.
(iv) Voting control of the cooperative rests with the owner-
occupants. [[Page 10018]]
(v) This paragraph (h)(2) expires on September 23, 1996, unless a
Federal Register notice extending its effectiveness is published prior
to this expiration date.
* * * * *
Dated: December 27, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 95-4366 Filed 2-22-95; 8:45 am]
BILLING CODE 4210-27-P
