[Federal Register Volume 69, Number 224 (Monday, November 22, 2004)]
[Rules and Regulations]
[Pages 68050-68052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-25753]



[[Page 68049]]

-----------------------------------------------------------------------

Part III





Department of Housing and Urban Development





-----------------------------------------------------------------------



24 CFR Part 92



 HOME Investment Partnerships Program; Amendments to Homeownership 
Affordability Requirements; Interim Rule

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

[[Page 68050]]


-----------------------------------------------------------------------

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:
    <bullet> The Federal eRulemaking Portal: at http://www.regulations.gov; or
    <bullet> 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 public-private 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 non-federal 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 
HOME-assisted 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 low-income 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 Sec.  92.254. The regulation 
does not explicitly track the statutory language limiting recaptures to 
the amount of the net proceeds. However, Sec.  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 Sec.  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

[[Page 68051]]

rule will provide an additional tool for the participating jurisdiction 
to preserve HOME-assisted homebuyer housing. Specifically, the interim 
rule creates a new Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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

[[Page 68052]]

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.

0
Accordingly, HUD amends 24 CFR part 92 as follows:

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
1. The authority citation for 24 CFR part 92 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d) and 12701-12839.

0
2. In Sec.  92.254, add two sentences at the end of paragraph 
(a)(5)(ii)(A) and add new paragraph (a)(9) to read as follows:


Sec.  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 Sec.  
92.214(a)(6), to preserve the affordability of housing that was 
previously assisted with HOME funds and subject to the requirements of 
Sec.  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 Sec.  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 
Sec.  92.250. Alternatively to charging the cost to the HOME program 
under Sec.  92.206, the participating jurisdiction may charge the cost 
to 2 the HOME program under Sec.  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