[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Rules and Regulations]
[Pages 32264-32265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15735]
[[Page 32263]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
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24 CFR Part 290
Sale of HUD-Held Multifamily Mortgages; Final Rule
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules
and Regulations
[[Page 32264]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 290
[Docket No. FR-3970-F-02]
RIN 2502-AG59
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner; Sale of HUD-Held Multifamily Mortgages
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This rule amends the Department's regulations governing the
sale of multifamily mortgages. It adds a provision protecting leases of
residential tenants in the event of foreclosure of certain mortgages
after they have been sold by HUD. This rule continues the protections
already provided to tenants that are receiving project-based federal
rental assistance or Section 8 tenant-based rental assistance. This
rule also clarifies a requirement added by the earlier interim rule
which continued, after the mortgage was sold by HUD, the prohibition on
project owners against discrimination in admitting tenants based on
their holding Section 8 certificates or vouchers. This rule clarifies
that this requirement continues until the mortgage debt is satisfied.
These amendments are intended to further the Department's efforts to
return its inventory of HUD-held multifamily mortgages to the private
sector in a manner that is beneficial to HUD and the residents of these
projects.
EFFECTIVE DATE: July 22, 1996.
FOR FURTHER INFORMATION CONTACT: Audrey Hinton, Associate Director for
Program Operations, Office of Multifamily Asset Management and
Disposition, Office of Housing, Room 6160, Department of Housing and
Urban Development, 451 Seventh Street, S.W., Washington, D.C. 20410,
telephone (202) 708-3730, Ext. 2691. (This is not a toll-free number.)
Hearing or speech-impaired individuals may call 1-800-877-8399 (Federal
Information Relay Service TTY).
SUPPLEMENTARY INFORMATION:
Background
On February 6, 1996, the Department published an interim rule (61
FR 4850) which added two sections to 24 CFR part 290 that provided
certain tenant protections when HUD sold multifamily mortgages. On
March 21, 1996, as part of its effort to reinvent and streamline all of
its regulations, the Department published a final rule that contained a
complete revision of 24 CFR part 290. That final rule contained the
pertinent sections and indicated that HUD would republish the sections
in a final rule after considering public comment.
Section 290.112 of the interim rule (now Sec. 290.37) provided
that, in the sale of delinquent mortgages on subsidized projects and
partially-assisted unsubsidized, HUD will require project purchasers,
including foreclosure purchasers, to assume federal rental subsidy
contracts. In addition, mortgage purchasers may not foreclose in a
manner that would terminate such assisted tenants' leases.
The interim rule preamble discussion of the then Sec. 290.112 also
sought comment on adding a requirement that existing leases of
unassisted tenants in such projects must be maintained after
foreclosure for a period equal to the remaining term of the lease or
one year, whichever period is shorter, if the leases could otherwise be
extinguished under state foreclosure law. The Department did not
actually effectuate this provision in the interim rule because it did
not believe it had a basis to forego prior public comment.
Section 290.114 of the interim rule (now Sec. 290.39) provided that
owners of subsidized projects and partially-assisted unsubsidized
projects will continue to be subject to a prohibition against
discriminating against certificate and voucher holders after a mortgage
sale without insurance. In addition, for all mortgages that are
delinquent when sold by HUD, owners both of subsidized projects and
unsubsidized projects must agree to record a covenant running with the
land to continue this obligation through the maturity date of the
mortgage as part of the consideration of a loan restructuring or
compromise of the mortgage indebtedness with the mortgage purchaser.
Alternatively, if the mortgage purchaser forecloses, this
nondiscrimination obligation would apply to the project purchaser at
foreclosure.
The preamble to the interim rule (61 FR 4581) also provided
additional guidance on how HUD intends to implement the then
Sec. 290.110(b) (now Sec. 290.35(b)).
The Department received one public comment on the interim rule,
which supported the changes made by the interim rule. The commenter did
not directly respond to the issue, raised in the preamble, of
safeguarding the possessory rights of unassisted tenants after
foreclosure.
Changes Effected by This Final Rule
This final rule amends Sec. 290.37(b) to adopt the change proposed
in the preamble to the interim rule. Namely, it requires a mortgagee
(and its successors and assigns) that purchases from HUD a delinquent
mortgage on a subsidized project or a partially-assisted unsubsidized
project and subsequently forecloses the mortgage to ensure that the
purchaser at foreclosure takes possession subject to the rights of
residential tenants who are not receiving federal project-based or
Section 8 tenant-based rental assistance. This tenant protection lasts
for the remaining term of the lease or for one year, whichever period
is shorter.
The scope and duration of this tenant protection is similar to that
which would apply under section 369E of the Multifamily Mortgage
Foreclosure Act of 1981, as amended, (12 U.S.C. 3713(c), see also 24
CFR 27.45(b)) when HUD forecloses on a mortgage that it holds.
The amendment does not affect residential tenants who receive
rental assistance. They are protected by existing requirements now in
Sec. 290.37(b)(1) (Sec. 290.112(b) in the interim rule). Under that
section, the mortgage purchaser and its successors and assigns, if they
foreclose, must foreclose in a manner that does not interfere with any
lease related to federal project-based assistance or any lease related
to tenant-based, Section 8 housing assistance payments.
This final rule makes one additional change to clarify the duration
of the nondiscrimination against certificate and voucher holders
requirement in current Sec. 290.39. Section 290.39 (Sec. 290.114 of the
interim rule) prohibits a project owner from unreasonably refusing to
lease a unit because the tenant is a certificate or voucher holder. The
prohibition applies to owners of subsidized projects or partially-
assisted unsubsidized projects. Section 290.39(c)(2) of the current
rule provides that ``This requirement shall continue until the mortgage
is paid in full, including by a mortgage prepayment, except as provided
in paragraph (d) of this section.'' The intent of this provision was to
continue the nondiscrimination requirement for as long as the project
was subject to the mortgage debt. (See the preamble discussion of
Sec. 290.114 in the interim rule at 61 FR 4583.) The above-quoted rule
text, however, is unclear as to the effect of a satisfaction of the
mortgage with less than a full payment. This rule amends Sec. 290.39 to
state explicitly that the nondiscrimination requirement
[[Page 32265]]
continues in effect until the mortgage debt is satisfied.
Other Matters
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 rule relate only to HUD
administrative procedures and, therefore, are categorically excluded
from the requirements of the National Environmental Policy Act.
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 rule will not have substantial direct effects on
States or their political subdivisions, or on the relationship between
the federal government and the States, or on the distribution of power
and responsibilities among the various levels of government. As a
result, the rule is not subject to review under the Order.
Specifically, the requirements of this rule are directed to HUD
administrative procedures, and do not impinge upon the relationship
between Federal government and State and local governments.
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
order 12606, The Family, has determined that this 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 rule, as those policies and programs
relate to family concerns.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this rule before publication and by
approving it certifies that this rule does not have a significant
economic impact on a substantial number of small entities. This rule
will not affect the ability of small entities, relative to larger
entities, to bid for and acquire HUD-held mortgages that HUD decides to
sell.
List of Subjects in 24 CFR Part 290
Low and moderate income housing, Mortgage insurance.
Accordingly part 290 of Title 24 of the Code of Federal Regulations
is amended as follows:
PART 290--MANAGEMENT AND DISPOSITION OF HUD-OWNED MULTIFAMILY
PROJECTS AND CERTAIN MULTIFAMILY PROJECTS SUBJECT TO HUD-HELD
MORTGAGES
1. The part heading for part 290 is revised as set forth above.
2. The authority citation for part 290 is revised to read as
follows:
Authority: 12 U.S.C. 1701z-11, 1701z-12, 1713, 1715b, 1715z-1b;
42 U.S.C. 3535(d) and 3535(i).
Sec. 290.30 [Amended]
3. In Sec. 290.30, paragraph (a) is amended by removing the
reference to ``Sec. 290.32(a)(2)'' and adding in its place
``Sec. 290.31(a)(2)''.
4. In Sec. 290.37, paragraph (b) is revised to read as follows:
Sec. 290.37 Requirements for continuing federal rental subsidy
contracts.
* * * * *
(b) In the event of foreclosure of the mortgage sold by HUD, the
mortgage purchaser and its successors and assigns:
(1) Shall foreclose in a manner that does not interfere with any
lease related to federal project-based assistance or any lease related
to tenant-based, Section 8 housing assistance payments; and
(2) Shall foreclose in manner that ensures that the right of
possession of the purchaser at a foreclosure sale shall be subject to
the terms of any residential lease not subject to paragraph (b)(1) of
this section for the remaining term of the lease or for one year,
whichever period is shorter.
* * * * *
3. In Sec. 290.39, paragraph (c)(2) is revised to read as follows:
Sec. 290.39 Nondiscrimination in admitting certificate and voucher
holders.
* * * * *
(c) * * *
(2) This requirement shall continue in effect until the mortgage
debt is satisfied.
* * * * *
Dated: June 11, 1996.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-15735 Filed 6-20-96; 8:45 am]
BILLING CODE 4210-27-P
