68050 Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 92 

[Docket No. FR–4940–I–01] 

RIN 2501–AD06 

HOME Investment Partnerships 

Program; Amendments to 

Homeownership Affordability 

Requirements

AGENCY: Office of the Secretary, HUD.

ACTION: Interim rule.

SUMMARY: This interim rule revises the 

homeownership affordability 

requirements of the HOME Investment 

Partnership program. First, the interim 

rule clarifies that, upon the sale of 

HOME-assisted homeownership 

housing before the close of the required 

affordability period, a participating 

jurisdiction may recapture an amount 

less than or equal to the net proceeds of 

the sale. Second, the interim rule also 

provides a participating jurisdiction 

with the flexibility to invest additional 

HOME funds in homebuyer housing for 

which HOME funds have already been 

used.

DATES: Effective Date: December 22, 

2004. 

Comment Due Date: January 21, 2005.

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this rule to the Regulations Division, 

Office of General Counsel, Room 10276, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Washington, DC 20410–0500. Electronic 

comments may be submitted through 

either: 

• The Federal eRulemaking Portal: at 

http://www.regulations.gov; or 

• The HUD electronic Web site at: 

http://www.epa.gov/feddocket. Follow 

the link entitled ‘‘View Open HUD 

Dockets.’’ Commenters should follow 

the instructions provided on that site to 

submit comments electronically. 

Facsimile (FAX) comments are not 

acceptable. In all cases, communications 

must refer to the docket number and 

title. All comments and 

communications submitted will be 

available for public inspection and 

copying between 8 a.m. and 5 p.m. 

weekdays at the above address. Copies 

are also available for inspection and 

downloading at http://www.epa.gov/

feddocket.

FOR FURTHER INFORMATION CONTACT:

Virginia Sardone, Director, Program 

Policy Division, Office of Affordable 

Housing Programs, Room 7164, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Washington, DC 20410–7000; telephone 

(202) 708–2470. (This is not a toll-free 

number.) A telecommunications device 

for hearing- and speech-impaired 

persons (TTY) is available at 800–877–

8339 (Federal Information Relay 

Service).

SUPPLEMENTARY INFORMATION: 

I. Background

The HOME Investment Partnerships 

program (HOME program) is authorized 

under Title II of the Cranston-Gonzalez 

National Affordable Housing Act (Public 

Law 101–625, approved November 28, 

1990) (NAHA). Through the HOME 

program, HUD allocates funds by 

formula among eligible state and local 

governments to strengthen publicprivate partnerships and to expand the 

supply of decent, safe, sanitary, and 

affordable housing for very low-income 

and low-income families. Generally, 

HOME funds must be matched by nonfederal resources. State and local 

governments that become participating 

jurisdictions may use HOME funds to 

carry out multi-year housing strategies 

through acquisition, rehabilitation, and 

new construction of housing, and 

through tenant-based rental assistance. 

Participating jurisdictions may provide 

assistance in a number of eligible forms, 

including grants, loans, advances, 

equity investments, interest subsidies, 

and other forms of assistance that HUD 

approves. HUD’s regulations for the 

HOME Program are located in 24 CFR 

part 92. 

Section 215(b) of NAHA establishes 

affordability requirements for HOMEassisted homeownership housing. These 

requirements apply to both the initial 

sale to a HOME-assisted homebuyer and 

to any subsequent resale by that 

homebuyer during the applicable period 

of affordability. Specifically, the statute 

provides that participating jurisdictions 

must impose restrictions that either 

require that: (1) The HOME-assisted 

housing be resold to another lowincome homebuyer at an affordable 

price; or (2) the HOME-assisted housing 

may be resold to any homebuyer 

regardless of income, but the subsidy to 

the original homebuyer must be 

recaptured unless the net proceeds of 

the sale are insufficient. 

Under the second provision discussed 

above (i.e., the recapture of the subsidy), 

NAHA limits the amount of the 

recaptured assistance to an amount 

equal to the net proceeds of the resale. 

Specifically, Section 215(b)(3)(B) of 

NAHA requires that a participating 

jurisdiction adopt restrictions to 

recapture the HOME investment ‘‘except 

where there are no net proceeds or 

where the net proceeds are insufficient 

to repay the full amount of the 

assistance.’’ 

HUD has implemented the 

homeownership affordability 

requirements, including the recapture 

provisions, at § 92.254. The regulation 

does not explicitly track the statutory 

language limiting recaptures to the 

amount of the net proceeds. However, 

§ 92.254(a)(5)(ii)(3) allows net proceeds 

to be shared if they are not sufficient to 

recapture the full HOME investment 

and enables the homeowner to recover 

the downpayment and any capital 

improvement investment. 

II. This Interim Rule 

This interim rule revises the 

affordability requirements for 

homeownership housing assisted under 

the HOME program. This section of the 

preamble describes the specific changes 

that will be made by this interim rule. 

A. Limitation of Recapture to Net 

Proceeds 

This interim rule revises § 92.254 to 

clarify that recaptures are limited to the 

amount of the net proceeds and to more 

closely track the statutory language of 

NAHA. Specifically, the interim rule 

explicitly provides that when the 

recapture requirement is triggered by a 

sale (voluntary or involuntary) of the 

housing, and there are no net proceeds 

or the net proceeds are insufficient to 

repay the HOME investment due, the 

participating jurisdiction may recapture 

an amount less than or equal to the net 

proceeds. The net proceeds are the sales 

price minus loan repayment (other than 

HOME funds) and any closing costs. 

The new regulatory language conforms 

the regulation to the statutory language 

in Section 215(b)(3)(B) of NAHA. That 

section limits repayment of HOME 

assistance to recapture out of net 

proceeds when the property is sold 

before the affordability restrictions 

expire. For example, a low-income 

homebuyer receives $10,000 in HOME 

assistance to purchase a home and sells 

the property during the period of 

affordability. The net proceeds of the 

sale ‘‘after the seller pays the first 

mortgage and closing costs—is $7,500. 

The new regulatory language reflects the 

statute in limiting the maximum amount 

that the participating jurisdiction may 

recapture up to the $7,500 available 

from the sale, as opposed to the entire 

$10,000. 

B. Investment of Additional HOME 

Funds in Homeownership Projects 

In addition to clarifying the 

repayment requirements, this interim 

Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Rules and Regulations 68051

rule will provide an additional tool for 

the participating jurisdiction to preserve 

HOME-assisted homebuyer housing. 

Specifically, the interim rule creates a 

new § 92.254(a)(9) to provide flexibility 

to participating jurisdictions to invest 

additional HOME funds to preserve 

homebuyer housing for which HOME 

funds were already used. 

The interim rule permits participating 

jurisdictions to use additional HOME 

funds to acquire the housing through a 

purchase option, right of first refusal or 

other preemptive right before 

foreclosure, to acquire the housing at 

the foreclosure sale, to undertake any 

necessary rehabilitation, and to provide 

assistance to another eligible 

homebuyer. The participating 

jurisdiction may invest additional 

HOME funds whether the housing was 

subject to resale restrictions or to 

recapture requirements. 

New § 92.254(a)(9) authorizes the use 

of additional HOME funds to preserve 

the HOME-assisted homeownership 

housing stock on which the affordability 

requirements would lapse upon 

foreclosure. If a participating 

jurisdiction forecloses on a HOME loan, 

it receives the housing and can preserve 

affordability without additional cost to 

the HOME program. Accordingly, the 

interim rule does not permit the use of 

additional HOME funds in the case of 

foreclosure of a defaulted HOME loan.

The per-unit HOME subsidy limit in 

§ 92.250 applies to the total HOME 

funds used for the housing (i.e., the 

original amount plus the additional 

amount). To provide some relief from 

this requirement, the interim rule 

permits HOME ‘‘administrative’’ funds 

to be used so long as they do not exceed 

the cap on administrative funds in 

§ 92.207. HUD believes this use of funds 

is a reasonable administrative cost of the 

HOME program. To the extent 

administrative funds are used, they can 

be reimbursed, in whole or in part, 

when the housing is sold to a 

homebuyer. The reimbursement of 

administrative funds will be considered 

a return of grant funds and all returned 

funds will continue to be available for 

administrative and planning costs. Any 

additional amount realized from the sale 

of the housing will be HOME program 

income. 

III. Justification for Interim 

Rulemaking 

In general, before issuing a rule for 

effect, HUD publishes it for public 

comment, in accordance with its own 

regulations on rulemaking in 24 CFR 

part 10. Part 10 provides for exceptions 

to the general rule if HUD finds good 

cause to omit advanced notice and 

public participation. The good cause 

requirement is satisfied when prior 

public procedure is ‘‘impractical, 

unnecessary, or contrary to the public 

interest’’ (see 24 CFR 10.1). For the 

following reasons, HUD has determined 

that good cause exists to publish this 

rule for effect without soliciting prior 

public comments. 

The interim rule revises § 92.254 to 

more closely track the statutory 

language of NAHA regarding recapture 

of HOME homeownership assistance. 

The amendment does not impose a new 

regulatory obligation, nor modify an 

existing requirement. Rather, the new 

regulatory language conforms the HOME 

program regulations to the statutory 

language in Section 215(b)(3)(B) of 

NAHA. That section limits repayment of 

HOME assistance to recapture out of net 

proceeds when the property is sold 

before the affordability restrictions 

expire. Since the recapture limitation is 

statutory in nature, HUD does not have 

the discretion to revise the new 

regulatory language in response to 

public comments. Accordingly, it is 

unnecessary to delay the effectiveness of 

this regulatory change in order to solicit 

prior public comment. 

In addition to clarifying the 

repayment requirements, this interim 

rule will make a change to the HOME 

homeownership affordability 

requirements. Specifically, the interim 

rule provides flexibility to participating 

jurisdictions to invest additional HOME 

funds to preserve homebuyer housing 

for which HOME funds were already 

used. This change will not impose a 

new regulatory burden on participating 

jurisdictions but, rather, provide them 

with an additional tool to preserve 

HOME-assisted homebuyer housing. 

Accordingly, HUD believes it would be 

contrary to the public interest to delay 

effectiveness of this change to solicit 

public comment. 

Although HUD believes that good 

cause exists to publish this rule for 

effect without prior public comment, it 

recognizes the value of public comment 

in the development of its regulations. 

Therefore, HUD has issued these 

regulations on an interim basis and has 

provided the public with a 60-day 

comment period. HUD welcomes 

comments on the regulatory 

amendments made by this interim rule. 

The public comments will be addressed 

in the final rule. 

IV. Findings and Certifications 

Regulatory Planning and Review 

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866 (entitled 

‘‘Regulatory Planning and Review’’). 

OMB determined that this rule is a 

‘‘significant regulatory action’’ as 

defined in Section 3(f) of the Order 

(although not an economically 

significant regulatory action, as 

provided under Section 3(f)(1) of the 

Order). Any changes made to the rule 

subsequent to its submission to OMB 

are identified in the docket file, which 

is available for public inspection in the 

Regulations Division, Room 10276, 

Office of General Counsel, Department 

of Housing and Urban Development, 

451 Seventh Street, SW., Washington, 

DC 20410–0500. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531–

1538) (UMRA) establishes requirements 

for federal agencies to assess the effects 

of their regulatory actions on state, 

local, and tribal governments and the 

private sector. This interim rule does 

not impose any federal mandate on any 

state, local, or tribal government or the 

private sector within the meaning of 

UMRA. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits, to the extent 

practicable and permitted by law, an 

agency from promulgating a regulation 

that has federalism implications and 

either imposes substantial direct 

compliance costs on state and local 

governments and is not required by 

statute or preempts state law, unless the 

relevant requirements of Section 6 of the 

Executive Order are met. This rule does 

not have federalism implications and 

does not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the Executive 

Order. 

Impact on Small Entities 

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 rule will not have a significant 

economic impact on a substantial 

number of small entities for the 

following reasons.

First, the majority of jurisdictions that 

are statutorily eligible to receive HOME 

formula allocations are relatively larger 

cities, counties or states. The new 

regulatory language regarding recaptures 

will not have any impact on 

participating jurisdictions. Rather, the 

change will conform the HOME program 

regulations to the statutory language in 

Section 215(b)(3)(B) of NAHA. That 

section limits repayment of HOME 

68052 Federal Register / Vol. 69, No. 224 / Monday, November 22, 2004 / Rules and Regulations 

assistance to recapture out of net 

proceeds when the property is sold 

before the affordability restrictions 

expire. Second, the interim rule 

provides flexibility to participating 

jurisdictions to invest additional HOME 

funds to preserve homebuyer housing 

for which HOME funds were already 

used. To the extent this change has any 

impact on participating jurisdictions, it 

will be a beneficial one of providing 

them with an additional tool to preserve 

HOME-assisted homebuyer housing. 

Notwithstanding HUD’s 

determination that this rule will not 

have a significant economic impact on 

a substantial number of small entities, 

HUD specifically invites comments 

regarding less burdensome alternatives 

to this rule that will meet HUD’s 

objectives as described in this preamble. 

Environmental Impact 

A Finding of No Significant Impact 

with respect to the environment has 

been made in accordance with HUD 

regulations at 24 CFR part 50, which 

implement Section 102(2)(C) of the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4332(2)(C)). The 

Finding of No Significant Impact is 

available for public inspection between 

the hours of 8 a.m. and 5 p.m. weekdays 

in the Regulations Division, Office of 

General Counsel, Room 10276, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Washington, DC 20410–0500. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance number for the HOME 

Program is 14.239.

List of Subjects in 24 CFR Part 92 

Administrative practice and 

procedure, Grant programs—housing 

and community development, Low- and 

moderate-income housing, 

Manufactured homes, Rent subsidies, 

Reporting and recordkeeping 

requirements.

■ Accordingly, HUD amends 24 CFR part 

92 as follows:

PART 92—HOME INVESTMENT 

PARTNERSHIPS PROGRAM

■ 1. The authority citation for 24 CFR 

part 92 continues to read as follows:

Authority: 42 U.S.C. 3535(d) and 12701–

12839.

■ 2. In § 92.254, add two sentences at the 

end of paragraph (a)(5)(ii)(A) and add 

new paragraph (a)(9) to read as follows:

§ 92.254 Qualification as affordable 

housing: Homeownership. 

(a) * * * 

(5) * * * 

(ii) * * * 

(A) * * * In establishing its recapture 

requirements, the participating 

jurisdiction is subject to the limitation 

that when the recapture requirement is 

triggered by a sale (voluntary or 

involuntary) of the housing unit, and 

there are no net proceeds or the net 

proceeds are insufficient to repay the 

HOME investment due, the participating 

jurisdiction can only recapture the net 

proceeds, if any. The net proceeds are 

the sales price minus superior loan 

repayment (other than HOME funds) 

and any closing costs.

* * * * *

(9) Preserving affordability. (i) 

Notwithstanding § 92.214(a)(6), to 

preserve the affordability of housing 

that was previously assisted with HOME 

funds and subject to the requirements of 

§ 92.254(a), a participating jurisdiction 

may use additional HOME funds to 

acquire the housing through a purchase 

option, right of first refusal, or other 

preemptive right before foreclosure, or 

to acquire the housing at the foreclosure 

sale, to undertake any necessary 

rehabilitation, and to provide assistance 

to another homebuyer. The housing 

must be sold to a new eligible 

homebuyer in accordance with the 

requirements of § 92.254(a). Additional 

HOME funds may not be used if the 

mortgage in default was funded with 

HOME funds. 

(ii) The total amount of original and 

additional HOME assistance may not 

exceed the maximum per-unit subsidy 

amount established under § 92.250. 

Alternatively to charging the cost to the 

HOME program under § 92.206, the 

participating jurisdiction may charge 

the cost to 2 the HOME program under 

§ 92.207, as a reasonable administrative 

cost of its HOME program, so that the 

additional HOME funds for the housing 

are not subject to the maximum per-unit 

subsidy amount.

* * * * *

Dated: October 22, 2004. 

Alphonso Jackson, 

Secretary.

[FR Doc. 04–25753 Filed 11–19–04; 8:45 am] 

BILLING CODE 4210–32–P