[Federal Register Volume 62, Number 163 (Friday, August 22, 1997)]
[Rules and Regulations]
[Pages 44838-44840]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22296]
[[Page 44837]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 92
Home Investment Partnerships Program; Additional Streamlining; Final
Rule
Federal Register / Vol. 62, No. 163 / Friday, August 22, 1997 / Rules
and Regulations
[[Page 44838]]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 92
[Docket No. FR-4111-F-02]
RIN 2501-AC30
Home Investment Partnerships Program--Additional Streamlining
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule; request for comment.
-----------------------------------------------------------------------
SUMMARY: This rule implements the proposed rule published December 11,
1996 and amends the existing Home Program final rule by: replacing the
hearing procedures of the current Home rule with the Department-wide
streamlined hearing procedures; removing the closeout requirements and
instead providing that Home funds will be closed out in accordance with
procedures established by HUD; replacing the extensive requirements for
the competitive reallocation of Home funds with a citation to the
selection factors in the Home statute and a statement of the maximum
number of points that may be awarded for each factor; and establishing
separate market interest rate formula for rehabilitation loans. This
rule also promulgates an amendment to, and requests public comment on,
Sec. 92.252(i)(2) to limit the rents charged to tenants of Home-
assisted units whose income rises above 80 percent of area median
income in Home projects in which the Home-assisted units ``float.''
DATES: Effective Date: September 22, 1997.
Comment Due Date: Comments on Sec. 92.252(i)(2) are due on October
21, 1997.
ADDRESSES: Interested persons are invited to submit comments regarding
Sec. 92.252(i)(2) to the Rules Docket Clerk, Office of General Counsel,
Room 10278, Department of Housing and Urban Development, 451 Seventh
Street, S.W., Washington, D.C. 20410. Communications should refer to
the above docket number and title. A copy of each communication
submitted will be available for public inspection and copying between
7:30 a.m. and 5:30 p.m. weekdays at the above address. Faxed comments
will not be accepted.
FOR FURTHER INFORMATION CONTACT: Mary Kolesar, Director, Program Policy
Division, Office of Affordable Housing Programs, Room 7162, 451 Seventh
Street, S.W., Washington, D.C. 20410, telephone (202) 708-2470 (this is
not a toll-free number). A telecommunications device for hearing-and
speech-impaired persons (TTY) is available at 1-800-877-8339 (Federal
Information Relay Service).
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Background
The Home Investment Partnerships Act (the HOME Act) (Title II of
the Cranston-Gonzalez National Affordable Housing Act) was signed into
law on November 28, 1990 (Pub. L. 101-625), and created the Home
Investment Partnerships Program that provides funds to expand the
supply of affordable housing for very low-income and low-income
persons. Interim regulations for the Home Investment Partnerships
Program were first published on December 16, 1991 (56 FR 65313) and are
codified at 24 CFR part 92.
The original statute has been amended three times since enactment.
The Housing and Community Development Act of 1992 (HCDA 1992) (Pub. L.
102-550, approved October 28, 1992) included a substantial number of
amendments to the Home Program. These amendments were implemented in
rules published on December 22, 1992 (57 FR 60960), June 23, 1993 (58
FR 34130), and April 19, 1994 (59 FR 18626). The HUD Demonstration Act
(Pub. L. 103-120, approved October 27, 1993) provided additional
authorization for Home Program technical assistance. The Multifamily
Housing Property Disposition Reform Act of 1994 (MHPDRA) (Pub. L. 103-
233, approved April 11, 1994) included an additional number of
amendments to the Home Program. These amendments were implemented in a
rule published on August 26, 1994 (59 FR 44258).
A proposed rule (60 FR 36012) to modify the Home allocation formula
and an interim rule (60 FR 36020) with clarifying changes to the Home
regulation and a request for additional comments before the issuance of
a final rule were published on July 12, 1995. The proposed rule was
issued as an interim rule on January 23, 1996 (61 FR 1824). On March 6,
1996 (61 FR 9036), an interim rule that made a number of streamlining
amendments to the Home regulation was published. On September 16, 1996
(61 FR 48736), the Department published a final rule for the Home
Investment Partnerships Program (the Home program). Finally, a proposed
rule to make a number of additional streamlining changes was published
on December 11, 1996 (61 FR 65298). This rule implements the changes
proposed in the December 11, 1996 rule. This rule also implements, and
solicits public comment on, an amendment to Sec. 92.252(i)(2) that
would provide relief, in circumstances explained below in this
preamble, from the requirement that tenants who no longer qualify as
low-income pay 30 percent of their adjusted income as rent.
The purpose of this rule is two-fold: (1) To respond to a
memorandum that President Clinton issued to all Federal departments and
agencies regarding regulatory reinvention; and (2) to provide
additional flexibility to Home participating jurisdictions by more
accurately measuring the match value of below-market interest rate
rehabilitation loans.
In response to the President's memorandum, the Department of
Housing and Urban Development conducted a page-by-page review of its
regulations to determine which could be eliminated, consolidated, or
otherwise improved. HUD determined that the regulations for the Home
Investment Partnerships Program would be improved and streamlined by
eliminating unnecessary provisions.
For the first streamlining change, HUD replaces the requirements
for the competitive reallocation of Home funds in Sec. 92.453, which
largely repeat the Home statute at section 217(c) of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 12747(c)), with a
citation to the selection criteria in the statute; the maximum number
of points that may be awarded for each category of criteria (policies,
actions, commitment), as was done in the regulation; and a statement
that such requirements will be published in a Notice of Funding
Availability (NOFA) in accordance with the requirements of the HUD
Reform Act as funds become available.
Second, this rule removes the closeout requirements specified in
Sec. 92.507 and instead provides that, ``Home funds will be closed out
in accordance with procedures established by HUD.''
Third and last of the streamlining changes, this rule replaces the
hearing procedures in Sec. 92.552 of the current HOME rule with the
Department-wide, streamlined, hearing procedures of 24 CFR part 26
published as a final rule on September 24, 1996 (61 FR 50208).
The changes described above are consistent with the general
reinvention goals of streamlining the requirements of HUD's funding
programs and maximizing their administrative flexibility. For example,
removing the current rigid and burdensome closeout requirements permits
the Department to simplify the closeout process and administer it on
the basis of the reports and other monitoring information it receives.
In addition, every recipient of
[[Page 44839]]
HUD funding and the Department itself will benefit from the adoption of
uniform hearings procedures that apply to all HUD programs.
This rule also establishes a separate formula for calculating the
match value of below-market interest rate rehabilitation loans for both
owner-occupied and rental housing. This change to the Home program
responds to comments that this methodology, which involves calculating
the yield foregone based upon the difference between the actual
interest rate charged and the market interest rate established at
Sec. 92.220(a)(1)(iii)(B), understated the actual value of these
contributions. Because the formula for determining the market interest
rate for various types of projects was based on assumptions involving
first mortgage financing, participating jurisdictions claimed that the
methodology understated the match value of below-market interest rate
rehabilitation loans, which typically carry higher market interest
rates than first mortgage financing for comparable projects.
Finally, this rule amends Sec. 92.252(i)(2) to address, to the
extent permissible, an unintended inequity that may arise with respect
to the rent for a Home-assisted unit. This section is amended to limit
the rents charged to tenants of Home-assisted units whose income rises
above 80 percent of area median income in Home projects in which the
Home-assisted units ``float.'' The Home statute requires that the
tenants of Home-assisted units who no longer qualify as low-income pay
30 percent of their adjusted income as rent, except that tenants of
units assisted with both Home funds and Low-Income Housing Tax Credits
(LIHTC) are subject to the rules of the LIHTC program. The Department
has determined that there is legal precedent that enables it, in
projects with floating Home units, to limit the rent charged to over-
income tenants in Home-assisted units to the market rent for comparable
units in the neighborhood. This precedent does not apply to rents in
projects where Home units are fixed. Thus, extending this rent
limitation provision to such units was not an option available to HUD.
In Home projects in which the Home-assisted units are fixed, the
requirement that the over-income tenant pay 30 percent of adjusted
income as rent may provide that tenant with an incentive to move
because the Home rent might eventually exceed the market rent on an
unassisted unit. In such instances, the Home project could be brought
back into compliance with the requirements of Sec. 92.252 (a) and (b)
more quickly because the over-income tenant is likely to move from the
Home-assisted unit. However, in projects where the Home units are
designated as floating and a tenant's income rises above 80% of area
median income, the next available, comparable unit can be designated as
a Home-assisted unit. In these instances, the project can be brought
back into compliance without the over-income tenant moving to avoid
paying an excessive rent. Recognizing that individual tenants may have
reasons for remaining in Home-assisted units even at a higher rent
(e.g., proximity to work or schools, the cost of moving, or
unavailability of unassisted units in the neighborhood), the Department
is exercising the flexibility afforded by legal precedent to limit the
rents for over-income tenants in floating Home units. In projects
receiving both Home and LIHTC, the rent requirements of the tax credit
program will continue to supersede Home rental requirements.
II. Summary of Comments and Responses
The Department received four comments on the proposed rule
published December 11, 1996. Two comments were received from a State
Home participating jurisdiction. Two comments were received from public
interest groups representing public agencies administering the Home
Program.
Streamlining Provisions
One commenter, a public interest group, supported the three
proposed changes to streamline the program regulations. The commenter
suggested that HUD seek the input of Home program administrators in
developing requirements for Home grant closeouts.
Matching Requirements
All four commenters supported HUD's proposal to establish a
separate market interest rate formula for determining the match value
of below-market interest rate rehabilitation loans made to single-
family and multifamily housing, whether owner-occupied or rental. One
commenter recommended that each participating jurisdiction be permitted
to establish the market rate for rehabilitation loans made in its
jurisdiction by conducting weekly surveys of lenders in its area to
determine the rates being offered for rehabilitation loans. Two
commenters preferred that the Department use the same methodology for
determining the match value of below-market interest rate
rehabilitation loans as it did for acquisition loans, establishing a
rate based on the interest rate for a 10-year Treasury note plus a
specified number of basis points. One of the commenters recommended
that the market rate be equal to the interest rate for a 10-year
Treasury note plus 400 basis points. The other commenter recommended
that 200 basis points be added to each of the three existing market
interest rates for single-family fixed financing (200 basis points),
single-family adjustable rate financing (250 basis points), and
multifamily financing (300 basis points).
One commenter suggested that HUD establish separate market rates
for single-family homeownership and multifamily rental loans made for
rehabilitation. Another commenter recommended that the formula
established by HUD be as simple as possible.
The Department agrees that the methodology for calculating the
value of rehabilitation loans should be simple and has adopted the
suggestion that the market interest rate for these loans be set at a
rate equal to the interest rate on a 10-year note plus 400 basis
points. In the interest of simplicity, this single rate shall apply to
rehabilitation loans made to housing of all types and tenures. This
standard should provide for a generous valuation of match contributions
in most participating jurisdictions, is consistent with the methodology
for other types of loans, is simple to calculate, and avoids the
additional burden and recordkeeping that would be necessary if each
participating jurisdiction were to conduct periodic surveys of lenders.
Findings and Certifications
Justification for Implementation of Sec. 92.252(i)(2)
The Department has determined that the amendment made by this rule
to Sec. 92.252(i)(2) should be adopted without the delay occasioned by
requiring prior notice and comment. The amendment only removes, to the
extent permissible, a requirement that could result in an
unintentionally inequitable result and provides more flexibility for
administering the program. As such, prior notice and comment are
unnecessary under 24 CFR Part 10. The Department, however, is
soliciting comments on this change, and will consider whether changes
should be made to this section as a result of the comments.
Paperwork Reduction Act
The information collection requirements for the Home Investment
Partnerships Program have been approved by the Office of Management and
Budget, under section 3504(h) of the Paperwork Reduction Act of 1980
[[Page 44840]]
(44 U.S.C. 3501-3520), and assigned OMB control number 2501-0013. This
rule does not contain additional information collection requirements.
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.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 establishes
requirements for Federal agencies to assess the effects of their
regulatory actions on State, local, and tribal governments and the
private sector. This rule does not impose any Federal mandates on any
State, local or tribal governments or the private sector within the
meaning of the Unfunded Mandates Reform Act of 1995.
Environmental Impact
At the time of publication of the proposed rule, a Finding of No
Significant Impact with respect to the environment was made in
accordance with HUD regulations in 24 CFR part 50 that implement
section 102(2)(C) of the National Environmental Policy Act of 1969 (42
U.S.C. 4332). The proposed rule is adopted by this final rule without
significant change. Accordingly, the initial Finding of No Significant
Impact remains applicable, and is available for public inspection
between 7:30 a.m. and 5:30 p.m. weekdays in the office of the Rules
Docket Clerk at the above address.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) has reviewed and approved this rule, and in so doing
certifies that this rule will not have a significant economic impact on
a substantial number of small entities, because jurisdictions that are
statutorily eligible to receive formula allocations are relatively
larger cities, counties or States. The rule will have no adverse or
disproportionate economic impact on small businesses.
Federalism Impact
The General Counsel has determined, as the Designated Official for
HUD under section 6(a) of Executive Order 12612, Federalism, that this
rule does not have federalism implications concerning the division of
local, State, and federal responsibilities. This rule only streamlines
the Home regulations by removing provisions determined to be
unnecessary or overly restrictive.
The Catalog of Federal Domestic Assistance Number for the Home
Program is 14.239.
List of Subjects in 24 CFR Part 92
Grant programs--housing and community development, Manufactured
homes, Rent subsidies, Reporting and recordkeeping requirements.
Accordingly, part 92 of title 24 of the Code of Federal Regulations
is amended to read as follows:
PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM
1. The authority citation for part 92 continues to read as follows:
Authority: Title II, Cranston-Gonzalez National Affordable
Housing Act (42 U.S.C. 12701-12839); sec. 7(d), Department of
Housing and Urban Development Act (42 U.S.C. 3535(d)).
2. In Sec. 92.220, paragraphs (a)(1)(iii)(B)(2) and
(a)(1)(iii)(B)(3) are revised, and a new paragraph (a)(1)(iii)(B)(4) is
added, to read as follows:
Sec. 92.220 Form of matching contribution.
(a) * * *
(1) * * *
(iii) * * *
(B) * * *
(2) With respect to one- to four-unit housing financed with an
adjustable interest rate mortgage, a rate equal to the one-year
Treasury bill rate plus 250 basis points;
(3) With respect to a multifamily project, a rate equal to the 10-
year Treasury note rate plus 300 basis points; or
(4) With respect to housing receiving financing for rehabilitation,
a rate equal to the 10-year Treasury note rate plus 400 basis points.
* * * * *
3. In Sec. 92.252, a new sentence is added to the end of paragraph
(i)(2), to read as follows:
Sec. 92.252 Qualification as affordable housing: Rental housing.
* * * * *
(i) * * *
(2) * * * In addition, in projects in which the Home units are
designated as floating pursuant to paragraph (j) of this section,
tenants who no longer qualify as low-income are not required to pay as
rent an amount that exceeds the market rent for comparable, unassisted
units in the neighborhood.
* * * * *
4. Section 92.453 is revised to read as follows:
Sec. 92.453 Competitive reallocations.
(a) HUD will invite applications through Federal Register
publication of a Notice of Funding Availability (NOFA), in accordance
with section 102 of the Department of Housing and Urban Development
Reform Act of 1989 (42 U.S.C. 3545) and the requirements of sec. 217(c)
of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C.
12747(c)), for HOME funds that become available for competitive
reallocation under Sec. 92.451 or Sec. 92.452, or both. The NOFA will
describe the application requirements and procedures, including the
total funding available for the competition and any maximum amount of
individual awards. The NOFA will also describe the selection criteria
and any special factors to be evaluated in awarding points under the
selection criteria.
(b) The NOFA will include the selection criteria at sec. 217(c) of
the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C.
12747(c)), with the following maximum number of points awarded for each
category of criteria:
(1) Commitment. Up to 25 points for the criteria at sec. 217(c)(1)
of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C.
12747(c)(1));
(2) Actions. Up to 50 points for the criteria at sec. 217(c)(2) of
the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C.
12747(c)(2)); and
(3) Policies. Up to 25 points for the criteria at sec. 217(c)(3) of
the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C.
12747(c)(3)).
5. Section 92.507 is revised to read as follows:
Sec. 92.507 Closeout.
Home funds will be closed out in accordance with procedures
established by HUD.
6. In Sec. 92.552, paragraph (b) is revised to read as follows:
Sec. 92.552 Notice and opportunity for hearing; sanctions.
* * * * *
(b) Proceedings. When HUD proposes to take action pursuant to this
section, the respondent in the proceedings will be the participating
jurisdiction or, at HUD's option, the State recipient. Proceedings will
be conducted in accordance with 24 CFR part 26, subpart B.
Dated: July 23, 1997.
Andrew Cuomo,
Secretary.
[FR Doc. 97-22296 Filed 8-21-97; 8:45 am]
BILLING CODE 4210-32-P
