00-22788. Multifamily Housing Mortgage and Housing Assistance Restructuring Program (Mark-to-Market); Correction

AGENCY:

Office of Multifamily Housing Assistance Restructuring, HUD.

ACTION:

Final rule; correction.

SUMMARY:

This document makes various corrections to the March 22, 2000, final rule for the Mark-to-Market program administered by HUD's Office of Multifamily Housing Assistance Restructuring (OMHAR).

DATES:

Effective Date: April 21, 2000.

FOR FURTHER INFORMATION CONTACT:

Dan Sullivan, Public Policy Analyst, Office of Multifamily Housing Assistance Restructuring, 1280 Maryland Ave., SW., Suite 4000, Washington, DC 20024; telephone [phone] (this is not a toll-free number). Hearing or speech impaired individuals may access this number via TTY by calling the toll-free Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

On March 22, 2000, the Office of Multifamily Housing Assistance Restructuring (OMHAR) within HUD published a final rule for the Mark-to-Market program authorized by the Multifamily Assisted Housing Reform and Affordability Act of 1997 (MAHRA). That final rule, which took effect on April 21, 2000, replaced an interim rule published on September 11, 1998 (63 FR 48926). The final rule contained some errors that need correction.

The purpose of this document is to make various corrections to the final rule, as follows:

1. § 401.2. “NHA” is substituted for “NA” as the defined term for the National Housing Act. Related corrections are made in §§ 401.450(b), 401.472(a)(3), and 401.473 (heading and text).

2. § 401.99(a)(2). The word “or” is added between “sale” and “transfer” to conform to the rest of the rule.

3. § 401.99(c). A reference to § 402.4 is now identified as a reference to § 402.4 “of this chapter”.

4. § 401.310(d)(1)(ii). The word “notices” is corrected to “notification” to conform to the preceding sentence in the rule.

5. § 401.450(b). The acronym “CA” (referring to a comprehensive needs assessment) is corrected to read “CNA”. The same correction is made in § 401.503(a)(1).

6. § 401.501(b)(2). An extraneous semi-colon is removed.

7. § 401.502(a). A missing parenthesis is added, the word “comparable” is removed from the phrase “comparable market rent” to match a forthcoming revision to § 402.6(a)(2), “of this chapter” is added after three references to sections from part 402, a reference to § 400.500 is corrected to refer to § 401.500, and a reference to a comprehensive needs assessment is added to conform to a change made in § 401.450 of the final rule.

8. § 401.550(b). The rule is corrected to require a Participating Administrative Entity (PAE) to review annually a project with an “executed” Restructuring Plan rather than an “approved” Plan, because no annual PAE review is required if a project owner refuses to execute a Restructuring Plan approved by OMHAR.

9. § 401.558. An extraneous comma is removed from the first sentence.

10. § 401.595. The word “a” in the first sentence was misplaced and this is corrected. Also, we removed “initial and subsequent” from the phrase “initial and subsequent contract renewals under this part [401]”. The language that is removed was unnecessary. In addition, it could cause confusion because the “subsequent” renewal would be governed by 24 CFR part 402 rather than part 401 if the “initial renewal” is approved as part of an approved Restructuring Plan under part 401.

11. § 401.600. The references to a section 8 contract “extension” or similar term, in the heading and text of this section, are changed to contract “renewal” or similar term. MAHRA occasionally refers to “extension” of an expiring section 8 contract rather than “renewal” of the contract, as in section 514(d) of MAHRA which corresponds to § 401.600. However, HUD's use of these terms in part 401 has not always been consistent with the use in the corresponding MAHRA provisions. In practice HUD has found no need to distinguish between contract extensions and renewals, and the statutory and regulatory definition of “renewal” does not exclude extensions. Therefore, to avoid confusion and to match the usage in the forthcoming related final 24 CFR part 402, part 401 is corrected so that it no longer refers to both extensions and renewals, but will only refer to renewals. Related changes are made to §§ 401.408(k), 401.421(b), 401.554, 401.602(a)(1) and (2), and 401.602(c)(1)(i).

12. § 401.602(a)(1)(i). A missing parenthesis is added.

13. § 401.602(a)(2). The parenthetical reference to section 8(c)(8)(C) of the United States Housing Act of 1937 is removed because that provision no longer existed when the final rule was issued. It was combined with section 8(c)(8)(A) by recent amendments to that Act and section 8(c)(8)(A) is already referenced in this provision of the rule. We also added “of this chapter” after “§ 402.4” and removed an apostrophe from “month's”.

List of Subjects in 24 CFR Part 401

• Grant programs—housing and community development
• Housing
• Housing assistance payments
• Housing standards
• Insured loans
• Mortgage insurance
• Mortgages

Accordingly, the following corrections are made to 24 CFR part 401:

PART 401—MULTIFAMILY HOUSING MORTGAGE AND HOUSING ASSISTANCE RESTRUCTURING PROGRAM (MARK-TO-MARKET)

1. The authority citation for part 401 continues to read as follows:

Authority: 12 U.S.C. 1715z-1 and 1735f-19(b); 42 U.S.C. 1437f note and 3535(d).

2. Revise the definition of “NA” in § 401.2(c) to read as follows:

§ 401.2

What special definitions apply to this part?

* * * * *

(c) * * *

NHA means the National Housing Act, 12 U.S.C. 1702 et seq.

* * * * *

3. Amend § 401.99 by revising paragraphs (a)(2) and (c) to read as follows:

§ 401.99

How does an owner request a section 8 contract renewal?

(a) * * *

(2) The owner is not suspended or debarred or has been notified by HUD of any pending suspension or debarment or other enforcement action, or, if so, a voluntary sale or transfer of the property is proposed in accordance with § 401.480.

* * * * *

(c) Not eligible for Restructuring Plan. Section 402.5 of this chapter addresses renewal of project-based assistance for a Restructuring Plan. An owner of such a project may also request renewal under § 402.4 of this chapter.

4. Revise the third sentence of § 401.310(d)(1)(ii) to read as follows:

§ 401.310

Conflicts of interest.

* * * * *

(d) * * *

(1) * * *

(ii) * * * The potential PAE may, with its notification, request that the conflict be waived or may propose how it may eliminate the conflict. The potential PAE may also request a determination as to the existence of the conflict. * * *

* * * * *

5. Revise § 401.408(k) to read as follows:

§ 401.408

Affordability and use restrictions required.

* * * * *

(k) Owner obligation to accept project-based assistance. Subject to the availability of appropriated funds, the owner of the project must accept any offer of renewal of project-based assistance if the offer is in accordance with the terms and conditions specified in the Restructuring Plan.

6. Revise § 401.421(b), introductory text, to read as follows:

§ 401.421

Rental Assistance Assessment Plan.

* * *

(b) Matters to be assessed. The PAE must include an assessment of the impact of converting to tenant-based assistance and the impact of renewing project-based assistance on: * * *

* * * * *

7. Revise § 401.450(b), introductory text, to read as follows:

§ 401.450

Owner evaluation of physical condition.

* * * * *

(b) Use of CNA. An owner may comply with paragraph (a) of this section by submitting a comprehensive needs assessment in accordance with title IV of the Housing and Community Development Act of 1992 (12 U.S.C. 1715z-1a note) if the CNA: * * *

* * * * *

8. Revise § 401.501(b)(2) to read as follows:

§ 401.501

Delivery of notices and recipients of notices.

* * * * *

(b) * * *

(2) The recipient of any Outreach and Training Grant (OTAG) or Intermediary Technical Assistance Grant (ITAG) for the project location; and * * *

* * * * *

9. Revise § 401.502(a), introductory text, and (a)(1) to read as follows:

§ 401.502

Notice requirement when debt restructuring will not occur.

(a) PAE responsibility. If an owner of an eligible project requests a renewal of a section 8 contract without a Restructuring Plan under § 402.4 of this chapter, HUD or the PAE must notify, or ensure that the owner notifies, all parties identified in § 401.501 of the request and of:

(1) The availability (as provided in § 401.500(c)(3)) of the following information:

(i) The owner evaluation of physical condition (OEPC), or a comprehensive needs assessment (CNA) if used instead of an OEPC, as required by § 401.450 and § 402.6(a)(3) of this chapter;

(ii) The market analysis required by § 402.6(a)(2) of this chapter, but without addresses (or other specific information indicating location) for comparable properties; and

(iii) The items identified in § 401.500(b)(1)(i), (ii), and (iv); and

* * * * *

10. Revise the first sentence of § 401.550(b) to read as follows:

§ 401.550

Monitoring and compliance agreements.

* * * * *

(b) Periodic monitoring and inspection. At least once a year, a PAE must review the status of each project for which it developed an executed restructuring Plan. * * *

* * * * *

11. Revise the first sentence of § 401.554 to read as follows:

§ 401.554

Contract renewal and administration.

HUD will offer to renew or extend section 8 contracts as provided in each Restructuring Plan, subject to the availability of appropriations and subject to the renewal authority available at the time of each contract expiration (§ 402.5 of this chapter or another appropriate renewal authority). * * *

12. Revise the first sentence of § 401.558 to read as follows:

§ 401.558

Physical condition standards.

The Restructuring Plan must require the owner to maintain the project in a decent and safe condition that meets the applicable standards under this section. * * *

13. Revise § 401.595 to read as follows:

§ 401.595

Contract and regulatory provisions.

The provisions of chapter VIII of this title will apply to renewal of a section 8 project-based assistance contract under this part only to the extent, if any, provided in the contract. Part 983 of this title will not apply. The term of the contract renewals under this part will be determined by the appropriate HUD official.

14. Revise § 401.600 to read as follows:

§ 401.600

Will a section 8 contract be renewed if it would expire while an owner's request for a Restructuring Plan is pending?

If a section 8 contract for an eligible project would expire before a Restructuring Plan is implemented, the contract may be renewed at rents not exceeding current rents for up to the earlier of 1 year or closing on the Restructuring Plan under § 401.407. HUD may terminate the contract earlier if the PAE or HUD determines that an owner is not cooperative under § 401.402 or if an owner's request is rejected under § 401.403 or § 401.405. Any renewal of the contract beyond 1 year for a pending Restructuring Plan must be at comparable market rents or exception rents. A renewal at comparable market rents or exception rents under this section will not affect a project's eligibility for the Mark-to-Market Program once it has been initially established under this part.

15. Amend § 401.602 by revising the first sentence of paragraph (a)(1)(i), paragraph (a)(2), and paragraph (c)(1)(i) to read as follows:

§ 401.602

Tenant protections if an expiring contract is not renewed.

(a) Required notices. (1)(i) The owner of an eligible project who has requested a Restructuring Plan and contract renewal must provide a 12-month notice as provided in section 514(d) if MAHRA, if the owner later decides not to renew an expiring contract (except due to a rejection under §§ 401.101, 401.403, 401.405, or 401.451.) * * *

(2) The owner of an eligible project who has requested a Restructuring Plan but who has been rejected under §§ 401.101, 401.403, 401.405, or 401.451 must provide 12 months advance notice under section 8(c)(8)(A) of the United States Housing Act of 1937, unless project-based assistance is renewed under § 402.4 of this chapter.

* * * * *

(c) * * *

(i) If the owner of an eligible project does not renew the project-based assistance, any eligible tenant residing in a unit assisted under the expiring contract on the date of expiration will be eligible to receive assistance on the later of the date of expiration or the date the owner's obligations under paragraph (b) of this section expire; and

* * * * *

Dated: August 30, 2000.

Camille E. Acevedo,

Assistant General Counsel for Regulations.