41538 Federal Register / Vol. 65, No. 129 / Wednesday, July 5, 2000 / Proposed Rules

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Parts 27 and 290

[Docket No. FR–4583–P–01]

RIN 2501–AC69

Prohibited Purchasers in Foreclosure

Sales of Multifamily Projects With

HUD-Held Mortgages and Sales of

Multifamily HUD-Owned Projects

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

SUMMARY: This proposed rule would

prohibit a defaulting mortgagor or

related parties to the mortgagor from

bidding on or acquiring the multifamily

property that was the subject of the

mortgagor’s default. The purpose of this

rule is to prevent a mortgagor from

benefitting from its default and failure

to meet its obligations.

DATES: Comment Due Date: September

5, 2000.

ADDRESSES: Interested persons are

invited to submit comments regarding

this rule to the Rules Docket Clerk,

Regulations Division, Office of General

Counsel, Room 10278, Department of

Housing and Urban Development, 451

Seventh Street, SW, Washington, DC

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:

Marc Harris, Director, Field Asset

Management Division, Office of Asset

Management, Department of Housing

and Urban Development, Room 6164,

451 Seventh Street SW, Washington, DC

20410, telephone (202) 708–2654.

Hearing or speech-impaired individuals

may call 1–800–877–8339 (Federal

Information Relay Service TTY). (Other

than the ‘‘800’’ number, these are not

toll-free numbers.)

SUPPLEMENTARY INFORMATION: This rule

proposes to codify HUD’s policy of

preventing a defaulting mortgagor on a

multifamily project, and the defaulting

mortgagor’s related parties, from

purchasing the property that was the

subject of the default. This situation

may arise in the foreclosure sale of a

multifamily project with a HUD-held

mortgage (addressed in 24 CFR part 27),

or in the disposition of a HUD-owned

multifamily project (addressed under 24

CFR part 290). HUD’s policy is intended

to prevent a party from benefiting from

its default and failure to meet

obligations. For example, an owner

could avoid prepayment restrictions by

defaulting and then buying at the

foreclosure, or an owner could default

and then buy back the project at

foreclosure for less than the amount of

the debt on which the default occurred.

The regulations governing nonjudicial

foreclosure and the disposition of

multifamily projects would be amended

by adding, respectively, a new

paragraph to § 27.20(f) and a new

§ 290.18. The new paragraph and

section would specifically prohibit the

defaulting mortgagor or any principal,

successor, affiliate, or any assignee of

any of the listed parties from bidding on

or otherwise acquiring the defaulted

property.

In codifying this general policy in

HUD’s regulations, the Assistant

Secretary for Housing still retains the

authority to waive these restrictions,

since there may be instances in which

it would be in HUD’s interest to permit

the defaulting mortgagor or the

mortgagor’s related parties to acquire

the defaulted property. For example, it

would be in HUD’s interest to permit

the defaulting mortgagor to bid or

purchase at a price that covers the

default, or where it could be clearly

shown that the default did not occur as

a result of the action or inaction of the

mortgagor.

Findings and Certifications

Regulatory Flexibility Act

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed and approved this

proposed rule, and in so doing certifies

that this rule will not have a significant

economic impact on a substantial

number of small entities. This rule only

addresses circumstances in which a

party may benefit at the public expense

by defaulting on its obligations, and

does not impose any additional costs or

burdens. Notwithstanding HUD’s

determination that this rule would not

have a significant economic effect on a

substantial number of small entities,

HUD specifically invites comments

regarding any 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. The Finding is available for public

inspection between 7:30 a.m. and 5:30

p.m. weekdays in the Office of the Rules

Docket Clerk, Office of the General

Counsel, Department of Housing and

Urban Development, Room 10276, 451

Seventh Street SW, Washington, DC

20410.

Executive Order 13132, Federalism

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

Executive Order 13132.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (Pub. L. 104–4;

approved March 22, 1995) (UMRA)

establishes requirements for Federal

agencies to assess the effects of their

regulatory actions on State, local, and

tribal governments, and on the private

sector. This proposed rule does not

impose any Federal mandates on any

State, local, or tribal governments, or on

the private sector, within the meaning of

the UMRA.

List of Subjects

24 CFR Part 27

Administrative practice and

procedure, Loan programs—housing

and community development.

24 CFR Part 290

Mortgage insurance, Low and

moderate-income housing.

Accordingly, parts 27 and 290 of title

24 of the Code of Federal Regulations

are amended as follows:

PART 27—NONJUDICIAL

FORECLOSURE OF MULTIFAMILY

AND SINGLE FAMILY MORTGAGES

1. The authority citation for 24 CFR

part 27 continues to read as follows:

Authority: 12 U.S.C. 1715b, 3701–3717;

3751–3768; 42 U.S.C. 1452b, 3535(d).

2. In § 27.20, a new paragraph (f) is

added to read as follows:

§ 27.20 Conditions of foreclosure sale.

* * * * *

(f) The defaulting mortgagor, or any

principal, successor, affiliate, or

assignee thereof, on the multifamily

mortgage being foreclosed, shall not be

eligible to bid on, or otherwise acquire,

the property being foreclosed by the

Department under this subpart or any

other provision of law. A ‘‘principal’’

and an ‘‘affiliate’’ are defined as

provided at 24 CFR 24.105 or successor

regulation.

Federal Register / Vol. 65, No. 129 / Wednesday, July 5, 2000 / Proposed Rules 41539

PART 290—DISPOSITION OF

MULTIFAMILY PROJECTS AND SALE

OF HUD-HELD MULTIFAMILY

MORTGAGES

3. The authority citation for 24 CFR

part 290 continues to read as follows:

Authority: 12 U.S.C. 1701z–11, 1701z–12,

1713, 1715b, 1715z–1b, 1715z–11a; 42 U.S.C.

3535(d) and 3535(i).

4. In subpart A, a new § 290.18 is

added, to read as follows:

§ 290.18 Restrictions on sale to former

mortgagors.

The defaulting mortgagor, or any

principal, successor, affiliate, or

assignee thereof, on the mortgage on the

property at the time of the default

resulting in acquisition of the property

by HUD shall not be eligible to purchase

the property. A ‘‘principal’’ and an

‘‘affiliate’’ are defined as provided at 24

CFR 24.105 or successor regulation.

Dated: May 25, 2000.

Andrew Cuomo,

Secretary.

[FR Doc. 00–16804 Filed 7–3–00; 8:45 am]

BILLING CODE 4210–32–P