16678 Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 92 

[Docket No. FR–4832–F–02] 

RIN 2501–AC93 

HOME Investment Partnerships 

Program; American Dream 

Downpayment Initiative and 

Amendments to Homeownership 

Affordability 

AGENCY: Office of the Secretary, HUD. 

ACTION: Final rule. 

SUMMARY: This rule follows publication 

of, and considers the public comments 

on, two earlier HUD rules. First, this 

rule makes final the March 30, 2004, 

interim rule establishing regulations for 

a downpayment assistance component 

under the HOME Investment 

Partnerships Program (HOME), referred 

to as the American Dream 

Downpayment Initiative (ADDI). 

Through the ADDI, HUD makes formula 

grants to participating jurisdictions 

under the HOME Program for the 

purpose of assisting low-income 

families to achieve homeownership. In 

addition, this rule also makes final 

HUD’s November 22, 2004, interim rule, 

which revised and clarified the HOME 

Program homeownership affordability 

requirements of the HOME Investment 

Partnerships Program. In response to the 

public comments received on both 

interim rules, this final rule clarifies 

that the purchase of manufactured 

homes is an ADDI eligible activity, and 

broadens and clarifies the use of HOME 

funds to help preserve affordable 

housing previously assisted with HOME 

funds. 

DATES: Effective Date: May 4, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Virginia Sardone, Director, Program 

Policy Division, Office of Affordable 

Housing Programs, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 7164, 

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 

A. The HOME Program 

The HOME Investment Partnerships 

Program (HOME Program) is authorized 

under Title II of the Cranston-Gonzalez 

National Affordable Housing Act (42 

U.S.C. 12704 et seq.) (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 nonfederal resources. State 

and local governments that become 

participating jurisdictions may use 

HOME funds to carry out multiyear 

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 at 24 CFR 

part 92. 

B. The March 30, 2004, Interim Rule 

Implementing the American Dream 

Downpayment Initiative 

The American Dream Downpayment 

Act (Pub. L. 108–186, approved 

December 16, 2003) (ADDI statute) 

amended NAHA to establish a 

downpayment assistance component 

under the HOME program, referred to as 

the American Dream Downpayment 

Initiative (ADDI). Specifically, the ADDI 

statute established a separate formula 

under the HOME Program by which 

HUD allocates funds to states that are 

participating jurisdictions under the 

HOME Program and to participating 

jurisdictions within those states for the 

purpose of making downpayment 

assistance to low-income families who 

are first-time homebuyers for the 

purchase of single family housing that 

will serve as the family’s principal 

residence. The ADDI statute revised 

section 271 of NAHA (12 U.S.C. 12881) 

to establish specific statutory 

requirements for administration of 

ADDI, including the allocation of funds. 

With respect to allocation of funds, 

the ADDI statute established a formula 

that is based primarily on the need for 

assistance to homebuyers as measured 

by the percentage of low-income 

households residing in rental housing 

within the participating jurisdiction. 

This formula governs the allocation of 

ADDI funds. Among other requirements, 

the ADDI statute also established the 

definitions applicable to ADDI, 

authorized the use of ADDI funds for 

certain rehabilitation costs completed in 

conjunction with ADDI downpayment 

assistance, established new 

Consolidated Plan requirements, and 

prescribed other requirements regarding 

the allocation and use of ADDI funds. 

Through the statutory requirement that 

participating jurisdictions have a plan 

for conducting targeted outreach to 

public housing tenants and to families 

receiving rental assistance from public 

housing agencies, the ADDI statute 

envisioned that among the low-income 

families who will move from rental to 

homeownership are those families who 

are currently public housing residents 

or who are receiving rental assistance. 

ADDI provides a much-needed resource 

to participating jurisdictions to assist 

low-income families achieve the dream 

of homeownership. 

On March 30, 2004 (69 FR 16758), 

HUD published an interim rule that 

established regulations at 24 CFR part 

92 for ADDI. The interim rule codified 

the statutory formula (located at 42 

U.S.C. 12821) for allocation of ADDI 

funds to HOME participating 

jurisdictions, identified eligible 

activities and costs under ADDI, and 

established other applicable 

requirements. 

C. The November 22, 2004, Interim Rule 

Revising the HOME Program 

Homeownership Affordability 

Requirements 

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. 

On November 22, 2004 (69 FR 68050), 

HUD published an interim rule that 

amended the regulations at 24 CFR part 

92 for homeownership housing under 

the HOME Program. The interim rule 

revised the affordability requirements 

for homeownership housing assisted 

under the HOME program. Specifically, 

the interim rule limited the amount of 

the HOME investment subject to 

recapture after the sale of a HOMEassisted homebuyer project during the 

period of affordability to the net 

proceeds of the sale. In addition, the 

rule created a provision to allow 

participating jurisdictions to preserve 

HOME-assisted homebuyer housing as 


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affordable housing by investing 

additional HOME funds to acquire the 

housing before foreclosure or at a 

foreclosure sale. 

II. This Final Rule: Differences Between 

the March 30, 2004, ADDI Interim Rule, 

the November 22, 2004, Affordability 

Requirements Interim Rule, and This 

Final Rule 

This final rule follows publication of 

the March 30, 2004, and the November 

22, 2004, interim rules and takes into 

consideration the public comments 

received on the interim rules. After 

careful consideration of the public 

comments, HUD has made the following 

changes to the interim rules. 

1. Definition of first time homebuyer; 

clarifying language regarding 

manufactured housing as an eligible 

activity. HUD is amending the definition 

of first time homebuyer in the HOME 

Investment Partnerships program 

definitions to include those individuals 

who own dwelling units not 

permanently affixed to a foundation 

(inadvertently omitted from the March 

30, 2004, regulation); and amending the 

ADDI regulations to include statutory 

language on the purchase of 

manufactured housing as an ADDI 

eligible activity. Specifically, language 

has been included stating that 

individuals shall not be excluded from 

consideration as a first-time homebuyer 

on the basis that the individual owns or 

owned, as a principal residence during 

the three-year period prior to assistance 

with ADDI funds, a dwelling unit whose 

structure is not permanently affixed to 

a permanent foundation in accordance 

with local or other applicable 

regulations or not in compliance with 

state, local, or model building codes, or 

other applicable codes, and cannot be 

brought into compliance with such 

codes for less than the cost of 

constructing a permanent structure. 

Also, although the regulatory definition 

of ‘‘housing’’ includes manufactured 

housing and manufactured housing lots, 

the ADDI regulations now state that 

ADDI funds may be used to purchase 

manufactured housing units and 

manufactured housing lots; the 

manufactured housing must be 

connected to permanent utility hookups; and the land on which the 

manufactured housing is located must 

be owned by the manufactured housing 

owner, owned as cooperative, or subject 

to a leasehold interest with a term, at 

minimum, equal to the term of the 

mortgage financing on the unit or the 

period of affordability, whichever is 

greater. 

2. HOME funds for the preservation of 

affordable housing. HUD has amended 

the HOME program’s eligible 

administrative and planning costs to 

now include as eligible the preservation 

of affordable homeownership housing 

previously assisted with HOME funds. 

Also, the HOME program’s prohibitions 

were amended to make clear that funds 

may be used for assistance to preserve 

affordability of homeownership 

housing. Additionally, § 92.254(a)(9) has 

been reorganized to more clearly 

explain that HOME funds may be used 

to acquire housing in default through a 

purchase option, right of first refusal, or 

other preemptive right before 

foreclosure or through acquisition at a 

foreclosure sale, as well as to assist 

another homebuyer in purchasing the 

housing. Furthermore, although HOME 

funds cannot be used to repay a loan 

made with HOME funds, HOME funds 

may be used to pay foreclosure costs. 

The regulations were also amended to 

clarify that the investment of additional 

HOME funds to preserve affordability is 

considered an amendment of the 

original project rather than a new 

project. 

3. HOME fund recaptures. HUD has 

amended the final rule to clarify that 

HOME fund recaptures cannot exceed 

net proceeds, if there are in fact net 

proceeds. No substantive change is 

being made to the recapture 

requirement; but, rather, HUD is 

rewording the regulatory text for the 

sake of clarity. 

III. Discussion of Public Comments on 

the March 30, 2004, Interim Rule 

Establishing ADDI Regulations 

The public comment period on the 

ADDI interim rule closed on June 1, 

2004, and HUD received 15 public 

comments. Comments were received 

from trade and professional 

organizations representing the realtor, 

homebuilder, and manufactured home 

industries; state and local community 

development agencies (as well as the 

national organizations representing 

these state and local agencies); private 

citizens; and non-profit downpayment 

assistance organizations. This section of 

the preamble presents a summary of the 

significant issues raised by the public 

comments and HUD’s responses to those 

issues. 

A. General Comments 

Six commenters expressed general 

support for the ADDI interim rule. The 

commenters wrote that ‘‘this program 

will help reduce home buying costs and 

allow people to achieve 

homeownership’’ and that ADDI is 

‘‘focused on providing additional 

resources to HOME participating 

jurisdictions for homeownership 

activities.’’ One commenter wrote that it 

was pleased that HUD included 

displaced homemakers and single 

parent households among those eligible 

to benefit from ADDI, and that the 

inclusion of condominiums and 

cooperative units within the definition 

of single family housing was a positive 

step. 

The primary area of concern that 

commenters mentioned was the 

inability to use ADDI funds for ADDI 

administrative costs. Several 

commenters were concerned that even 

though the regulation permits HOME 

funds to be used for ADDI’s 

administration and planning, lack of 

additional funds for ADDI 

administration will make oversight and 

execution of the ADDI program 

extremely difficult. Another area of 

concern related to the requirement that 

participating jurisdictions repay HOME/ 

ADDI funds on homes that go into 

foreclosure. 

Additional comments involved 

perceived negative connotations of 

manufactured housing, questions about 

eligible new construction costs, 

questions about the definition of first 

time homebuyer, and concerns that 

nonprofit homebuyer assistance 

organizations may not be permitted to 

participate in the ADDI. A breakdown of 

the comments by subject area follows. 

B. Use of HOME Administrative Funds 

for ADDI Administrative Costs; ADDI 

Funding 

The March 30, 2004, interim rule 

amended § 92.207 to make clear that a 

participating jurisdiction may expend 

HOME funds for payment of ADDI 

administrative expenses. The expended 

amount cannot exceed ten percent of the 

fiscal year HOME basic formula. ADDI 

funds cannot be used for administration 

costs of the ADDI program. 

Comment: Not providing for 

additional funding for the ADDI 

program is unduly burdensome to 

participating jurisdictions. One 

commenter wrote that the intent of the 

ADDI program is to provide funding for 

a new homebuyer initiative rather than 

supplement funding for already existing 

programs. According to the commenter, 

new initiatives require new 

administrative costs; thus, additional 

funding is required in order to 

sufficiently get the ADDI program up 

and running. Another commenter wrote 

that a 10 percent allocation of HOME 

funds for both HOME and ADDI 

administrative costs is inadequate to 

meet program costs. An additional 

commenter wrote that HUD should add 

a participating jurisdiction’s ADDI 

allocation to its HOME allocation to 


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calculate its ten percent program 

administration limit. One commenter 

asked HUD to amend the rule to allow 

all participating jurisdictions to expend 

up to 10 percent of their ADDI 

allocations on administrative costs. 

HUD Response. ADDI is a 

downpayment assistance program under 

the HOME Program. Most participating 

jurisdictions already fund homebuyer 

projects with their HOME Program 

funds. Many of these projects are part of 

homebuyer programs that provide 

downpayment assistance to low-income 

homebuyers. Consequently, many 

participating jurisdictions will choose to 

implement ADDI as part of their existing 

homebuyer programs. HUD agrees that it 

may be burdensome to some 

participating jurisdictions to implement 

ADDI without additional funding for 

program administration. However, the 

ADDI statute does not provide 

additional funds for ADDI program 

administration from ADDI funds. 

Comment: Congress intended to allow 

for the expenditure of ADDI funds as 

administrative expenses. One 

commenter wrote that Congress’ silence 

on an administrative fee in the final 

statutory language for the ADDI program 

allows HUD the discretion to include a 

jurisdiction’s FY 2004 and subsequent 

ADDI allocation into its HOME 

allocation for purposes of calculating an 

administrative fee. Another commenter 

wrote that Congress considered 

including administrative funds for ADDI 

and that the Senate Banking, Housing 

and Urban Affairs Committee amended 

the original Senate bill, S. 811, during 

its mark-up of the bill to include a five 

percent administrative provision for 

ADDI. A third commenter wrote that the 

ADDI statute should be interpreted to 

authorize the same level of 

administrative funding for ADDI 

activities as is already available for all 

other HOME activities, including those 

that provide homeownership assistance. 

Another commenter wrote that it 

interprets 24 CFR 92.602 of the HOME 

regulation as allowing a participating 

jurisdiction to use ADDI funds to 

finance ADDI project delivery costs. 

HUD Response. HUD disagrees that 

Congress’ silence on the eligibility of 

administrative costs in the final 

statutory language for the ADDI program 

allows HUD the discretion to include a 

jurisdiction’s FY 2004 and subsequent 

ADDI allocations into its HOME 

allocations for purposes of calculating 

an administrative fee. As pointed out by 

a commenter, Congress considered 

including administrative funds for ADDI 

and the Senate Banking, Housing and 

Urban Affairs Committee amended the 

original Senate bill, S. 811, during its 

mark-up of the bill to permit five 

percent of ADDI funds to be used for 

administrative provision. However, this 

language was struck from the legislation 

before enactment. Section 92.602 

identifies eligible costs under ADDI 

including staff and overhead costs 

directly related to carrying out an ADDI 

project, which are eligible project 

related soft costs under 

§ 92.602(b)(3)(iv). 

Comment: ADDI should be funded as 

a standalone program instead of a setaside within the HOME program. One 

commenter made this suggestion. 

HUD Response. Congress wrote the 

ADDI legislation to be a component of 

the HOME Program. The American 

Dream Downpayment Act amended the 

HOME statute (subtitle E of Title II of 

the Cranston-Gonzalez National 

Affordable Housing Act (42 U.S.C. 

12821)) to create ADDI. The 

implementation of ADDI was facilitated 

because ADDI is a set-aside within the 

HOME Program. 

C. Recaptured/Repaid Funds Due to 

Foreclosure 

Several commenters on the ADDI rule 

expressed concern about HOME 

recapture and repayment requirements, 

which are applicable to ADDI under 

§ 92.616. HUD addressed the concerns 

of these commenters by publishing the 

November 22, 2004, rule. 

Comment: Validation is sought as to 

whether 24 CFR 92.254(a)(5) requires 

the participating jurisdiction to submit 

for HUD approval the resale and 

recapture provisions of the ADDI 

program before a participating 

jurisdiction may implement the 

program. 

HUD Response. The HOME 

regulations at § 92.254(a)(5) require 

HOME participating jurisdictions to 

establish resale or recapture 

requirements that comply with the 

provisions of that section of the HOME 

rule and to set forth the requirements in 

their consolidated plans. In addition, 

§ 91.220(g)(2)(ii) and § 91.320(g)(2)(ii) 

direct local participating jurisdictions 

and states, respectively, that will use 

HOME funds to assist homebuyers, to 

state the guidelines for resale or 

recapture as required in § 92.254. HUD 

reads § 92.254(a)(5) to include both 

HOME and ADDI funds used to assist 

homebuyers. Therefore, it is not 

necessary for a participating jurisdiction 

to separately submit for HUD approval 

the resale and recapture provisions it 

will use for the ADDI program unless 

the provisions used for ADDI projects 

differ from the provisions previously set 

forth in the consolidated plan for HOME 

homebuyer projects. 

D. Manufactured Homes 

Comment: Maintaining the current 

action plan language regarding 

manufactured homes is contrary to 

current federal and state policy. Two 

commenters wrote that the language 

requiring targeted outreach to residents 

and tenants of public and manufactured 

housing creates negative and inaccurate 

connotations for manufactured housing 

that are contrary to current policy. One 

of the commenters wrote that this 

language strongly implies that 

jurisdictions must have targeted plans to 

displace persons from manufactured 

homes. 

HUD Response. The language added 

to the consolidated plan regulations at 

24 CFR part 91 is the statutory 

requirement. Specifically, the language 

added to the action plan provisions for 

local HOME participating jurisdictions 

at § 91.220 and for states at § 91.320 

requires a recipient of ADDI funds to 

include in its action plan a plan for 

conducting targeted outreach to 

residents and tenants of manufactured 

housing. Because the definition of single 

family housing in the ADDI statute and 

rule includes manufactured housing and 

a manufactured housing lot, the 

consolidated plan requirement 

regarding outreach to residents and 

tenants of manufactured housing has 

been read by commenters as 

contradicting the eligibility of 

manufactured housing as ADDI eligible 

single-family housing. However, tenants 

of the manufactured housing qualify as 

first-time homebuyers. In addition, 

ownership of manufactured housing 

that is not permanently affixed does not 

disqualify the family as a first-time 

homebuyer. In order to clarify the 

language in the interim rule regarding 

participating jurisdictions’

responsibilities providing outreach to 

residents and tenants of manufactured 

housing, HUD is revising the definition 

of first-time homebuyer in the ADDI 

regulations that more closely tracks the 

statutory definition of single family 

housing. Specifically, the definition of 

first-time homebuyer now states that an 

individual shall not be excluded from 

consideration as a first-time homebuyer 

on the basis that the individual owns or 

owned, as a principal residence during 

the three-year period prior to assistance 

with ADDI funds, a dwelling unit whose 

structure is not permanently affixed to 

a permanent foundation in accordance 

with local or other applicable 

regulations or not in compliance with 

state, local, or model building codes, or 

other applicable codes, and cannot be 

brought into compliance with such 


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codes for less than the cost of 

constructing a permanent structure. 

Comment: The definition of single 

family housing should be revised to use 

the exact statutory language pertaining 

to manufactured housing. Two 

commenters wrote that the statutory 

language provides that manufactured 

housing owned as a cooperative or 

subject to a leasehold interest is an 

eligible activity under ADDI. The 

commenters urged that this be clarified 

in the final rule. 

HUD Response. HUD agrees that 

additional language is needed clarifying 

that the purchase of manufactured 

homes is an eligible activity. HUD has 

added language to § 92.602(a) stating 

that ADDI funds may be used to 

purchase a manufactured housing unit, 

manufactured housing lots, and that the 

manufactured housing unit must, at the 

time of project completion, be 

connected to permanent utility hookups and be located on land that is 

owned by the manufactured housing 

owner, owned as a cooperative, or is 

subject to a leasehold interest with a 

term equal to at least the term of the 

mortgage financing on the unit or the 

period of affordability (whichever is 

greater). 

E. Nonprofit Downpayment Assistance 

Programs 

Comment: The interim rule unfairly 

excludes certain nonprofit organizations 

from participation in ADDI. Two 

commenters objected to the limitation 

on subrecipients and contractors 

contained in the interim rule. The 

interim rule prohibits a participating 

jurisdiction from providing ADDI funds 

to an entity or organization that 

provides downpayment assistance, if 

the activities of that entity are financed 

by contributions, service fees, or other 

payments from the sellers of housing, 

whether or not made in conjunction 

with the sale of specific housing 

acquired with ADDI funds. The 

commenters wrote that this limitation 

goes beyond the statutory prohibition 

and unfairly excludes certain nonprofit 

organizations from participating in 

ADDI, because the commenters believe 

the statute can be interpreted to permit 

an entity to run two programs, one 

program with seller-provided funds and 

another—the ADDI program—without 

seller funds. In addition, the 

commenters objected to the rationale in 

the preamble to the interim rule, which 

provided that seller-financed 

downpayment assistance artificially 

inflated the fees charged to homebuyers 

in excess of the amount necessary to 

compensate sellers for their payment of 

certain closing charges or contributions 

to the cost of the downpayment. 

HUD Response. The ADDI statute 

prohibits participating jurisdictions 

from using ADDI to provide funding to 

an entity or organization that provides 

downpayment assistance if the activities 

of that entity or organization are funded 

in whole or in part, directly or 

indirectly, by contributions, service 

fees, or other payments from the sellers 

of housing. The ADDI regulations at 

§ 92.602(f) copy the statutory language 

and adds the following phrase: 

‘‘whether or not made in conjunction 

with the sale of specific housing 

acquired with ADDI funds.’’ HUD 

purposefully added this language to 

better articulate the statutory 

prohibition against organizations that 

receive funds from sellers of housing. 

The prohibition applies to the entire 

organization, not just to specific 

programs of the organization. 

The statement in the preamble about 

seller-funded downpayment programs is 

supported by a recent study. ‘‘An 

Examination of Downpayment Gift 

Programs Administered by Non-profit 

Organizations’’ (March 2005), prepared 

for HUD by Concentrance Consulting 

Group, found strong evidence that the 

cost of downpayment assistance added 

to the sales price, increased the loan 

amount, and eliminated any borrower 

equity in the property. This study can 

be found at: http://www.hud.gov/offices/ 

hsg/comp/rpts/dpassist/dpa2.pdf. 

F. Other Comments 

Comment: The language relating to 

the usage of ADDI funds for new 

construction financing and the 

definition of ‘‘single family home’’ 

should be made more clear. One 

commenter requested that HUD clarify 

that, although ADDI funds cannot be 

used for hard or soft costs related to new 

construction, ADDI funds may be used 

for the acquisition and financing of new 

construction. Two commenters 

requested a clarification on the 

definition of single family housing and 

whether that definition includes both 

newly constructed and existing homes. 

One commenter suggested the rule 

should state that downpayment funds 

can only be used in association with the 

purchase or repair of existing homes. 

The commenter interpreted the interim 

rule to prohibit the use of ADDI funds 

for newly constructed homes. 

HUD Response. The ADDI statute and 

§ 92.602(a) of the ADDI regulations 

clearly state that the only eligible 

activities are downpayment assistance 

towards the purchase of single family 

housing by low-income families who are 

first-time homebuyers and rehabilitation 

that is completed in conjunction with 

the home purchase assisted with ADDI 

funds. Single family housing includes 

housing that is newly constructed. 

Section 92.601(b)(4) prohibits the use of 

ADDI funds for the development costs 

of new construction of housing or for 

rental assistance. Since ADDI funds can 

only be used for downpayment 

assistance towards the purchase of 

single family housing and for 

rehabilitation of the ADDI-assisted 

housing, ADDI funds can be used to 

assist low-income first-time homebuyers 

to purchase newly constructed housing, 

but not to develop or finance new 

construction. 

Comment: The definition of first-time 

homebuyer should include a financial 

cap on ownership of other real estate. 

One commenter wrote that under the 

interim rule’s definition of a first-time 

homebuyer, the first-time homebuyer 

could feasibly own other types of real 

estate prior to purchasing a first home, 

such as industrial, agricultural, 

commercial, and rental housing which 

did not include the buyer’s residence. 

The commenter wrote that if HUD 

intends to allow for this kind of 

additional property ownership, the 

appraised value of such allowable 

property be capped at $300,000. 

HUD Response. The purpose of the 

ADDI program is to assist low-income 

first-time homebuyers with 

downpayment assistance to purchase 

modest single family housing. An 

individual who has owned housing—

whether or not it is the principal 

residence—within the three-year period 

before purchase of a home with ADDI 

assistance is not a first-time homebuyer, 

unless that person is a displaced 

homemaker or single parent as defined 

in the rule. If the participating 

jurisdiction is using the definition of 

‘‘annual income’’ in § 5.609, the assets 

of the individual must be considered in 

determining whether the person is lowincome. 

Comment: The definition of lowincome family at 24 CFR 92.2 should be 

waived for high-cost localities. One 

commenter wrote that HUD should 

allow a waiver of the definition of lowincome families for higher cost areas 

where there may be a shortage of 

affordable housing for purchase by 

persons at 80 percent of area median 

income or below. 

HUD Response. HUD disagrees with 

the commenter’s suggestion that HUD 

waive the definition of low-income 

families in high cost areas. The 

definition of low-income families is 

statutorily based (42 U.S.C. 12704(10)) 

and cannot be waived. Moreover, 

allowing participating jurisdictions in 


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high cost areas in which there may be 

a shortage of affordable housing for lowincome families to serve families with a 

higher income is contrary to the purpose 

of ADDI and will not resolve the 

affordable housing shortage for lowincome families in that area. 

Comment: Eligible ADDI costs should 

include pre-purchase housing 

inspections and housing counseling, 

regardless of ultimate ADDI assistance. 

One commenter wrote that pre-purchase 

housing inspections should be allowed 

as an eligible soft cost. The commenter 

wrote that in the event the purchase 

falls through due to the inspection 

uncovering problems that cancel the 

sale, HUD should allow participating 

jurisdictions to pay for those 

inspections with HOME administrative 

funds. The commenter also wrote that 

lead-based paint stabilization and 

clearance testing be included as an 

acceptable ADDI rehabilitation or soft 

cost, respectively. Another commenter 

wrote that HUD should recognize as an 

eligible ADDI cost the provision of prepurchase services, such as housing 

counseling, to potential buyers who are 

ADDI-eligible, whether or not those 

eligible buyers are ultimately assisted 

with ADDI funds. Another commenter 

suggested that ADDI funds received by 

housing counseling organizations be 

chargeable as project costs even when 

the individual receiving the assistance 

is not immediately able to qualify for 

mortgage financing or receives such 

financing without ADDI assistance. The 

commenter also wrote that HUD should 

give ADDI funds directly to housing 

counseling agencies rather than filtering 

the funds through participating 

jurisdictions and urged that the 25 

percent match associated with FY 2003 

ADDI funds be waived in the case of 

awards to housing counseling 

organizations. 

HUD Response. The ADDI statute and 

§ 92.602(a) of the ADDI regulations 

identify eligible activities as 

downpayment assistance and home 

repairs. Section 92.602(b) identifies 

eligible project costs of ADDI projects. 

Included in eligible project costs are 

acquisition costs, rehabilitation costs, 

and related soft costs. Pre-purchase 

inspections and housing counseling are 

considered eligible soft costs, provided 

the eligible low-income, first-time 

homebuyer purchases single-family 

housing with ADDI assistance. If the 

purchase falls through and the sale is 

cancelled, there is no eligible ADDI 

project, and therefore, there are no 

eligible project soft costs. In this case, 

participating jurisdictions may use 

HOME administrative funds to pay for 

related soft costs expended on the 

cancelled ADDI project. Likewise, lead 

paint clearance testing is an eligible 

ADDI project related soft cost and lead 

paint stabilization is an eligible ADDI 

rehabilitation cost provided an eligible 

low-income, first-time homebuyer 

purchases the subject single-family 

housing with ADDI assistance. 

HUD agrees that housing counseling 

is a crucial component of a successful 

homeownership program. However, the 

chief purpose of ADDI is to assist lowincome families to achieve 

homeownership. HUD currently 

administers a housing counseling 

program through the Federal Housing 

Administration (FHA) that could assist 

persons who will not purchase single 

family housing with ADDI assistance. 

ADDI only authorizes HUD to ‘‘award 

grants to participating jurisdictions to 

assist low-income families to achieve 

homeownership. * * *’’ ‘‘Participating 

jurisdiction’’ is defined in the ADDI 

statute as a State or unit of general local 

government. Accordingly, housing 

counseling entities that are not 

participating jurisdictions are not 

eligible direct recipients of ADDI funds. 

The ADDI statute does not require 

participating jurisdictions to match 

ADDI funds. However, because FY 2003 

ADDI funds are governed by the FY 

2003 HOME appropriation act, not the 

ADDI statute, participating jurisdictions 

are required to match their FY 2003 

ADDI funds. HUD cannot waive the 

statutory match requirement for these 

funds. 

Comment: Clarification requested 

regarding 20 percent cap on 

rehabilitation. One commenter asked for 

clarification about the actual 

percentages the homebuyer may receive 

for rehabilitation. The commenter asked 

if, for example, a homebuyer is 

receiving $4,000 in downpayment 

assistance, whether the homebuyer is 

limited to rehabilitation expenditures of 

20 percent of the $4,000 assistance total 

(in that case, $800), or can that 

homebuyer actually receive $6,000 in 

rehabilitation assistance (the maximum 

allowable under § 92.602(e)) as long as 

the participating jurisdiction’s total 

entire ADDI rehabilitation amount does 

not exceed 20 percent of the fiscal year 

formula allocation. 

HUD Response. According to ADDI 

statute, not more than 20 percent of the 

grant funds provided under the formula 

allocation to a participating jurisdiction 

may be used to provide assistance to 

low-income, first-time homebuyers for 

home repairs. The regulation at 

§ 92.602(a)(2) states that ‘‘total 

rehabilitation shall not exceed 20 

percent of the participating 

jurisdiction’s ADDI fiscal year formula 

allocation.’’ Therefore, a homebuyer can 

receive ADDI funds for downpayment 

assistance and home repairs, subject to 

the maximum amount of assistance set 

forth at § 92.602(e)—the greater of 6 

percent of the purchase price or 

$10,000—as long as the participating 

jurisdiction has not reached 20 percent 

of its ADDI formula allocation for home 

repairs. Thus, in the example the 

commenter set forth above, the 

homebuyer could receive up to $6,000 

in rehabilitation assistance as long as 

the participating jurisdiction’s entire 

ADDI rehabilitation amount does not 

exceed 20 percent of its fiscal year 

formula allocation. 

Comment: ADDI funds should be 

disbursed in the same manner HOME 

funds are disbursed. One commenter, 

citing 24 CFR 92.502, wrote that certain 

costs associated with downpayment 

assistance will be charged against ADDI 

funds which involves per-household 

assistance caps. The commenter wrote 

that ADDI costs will be assigned to 

projects by HUD computers and those 

computers cannot effectively discern 

separate ADDI expenditures. The 

commenter wrote that rather than 

assigning ADDI funds to individual 

projects, HUD should disburse ADDI 

funds in the same manner as HOME 

funds, since local jurisdictions are better 

suited to decide how funds should be 

distributed. 

HUD Response. ADDI funds are 

disbursed in the same manner as HOME 

funds through HUD’s Integrated 

Disbursement and Information System 

(IDIS). However, ADDI funds cannot be 

separated from HOME funds in IDIS, 

and therefore, HUD has developed a 

report that uses a number of project 

identification factors to identify ADDI 

projects. These reports may be useful to 

participating jurisdictions to track ADDI 

disbursements. However, participating 

jurisdictions are free to maintain their 

own records of ADDI project 

disbursements. The sum of HOME and 

ADDI disbursements in IDIS will match 

a participating jurisdiction’s records. 

Comment: HUD should accept the 

median area purchase price developed 

by the real estate industry in the 

participating jurisdiction as the price for 

single family housing as per 24 CFR 

92.254(a)(2)(iii). One commenter made 

this suggestion. 

HUD Response. A participating 

jurisdiction that receives ADDI funds 

may use the Single Family Mortgage 

Limits under section 203(b) of the 

National Housing Act or it may 

determine 95 percent of the median area 

purchase price as set forth in 24 CFR 

92.254(a)(2)(iii). 


ycherry on PROD1PC64 with RULES4
Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Rules and Regulations 16683 

IV. Discussion of Public Comments on 

the November 22, 2004, Interim Rule on 

the HOME Program Homeownership 

Affordability Requirements 

The public comment period on the 

November 22, 2004, interim rule closed 

on January 21, 2005, and HUD received 

seven public comments. Comments 

were received from state and local 

HOME participating jurisdictions, as 

well as the national organizations 

representing these state and local 

agencies, and private citizens. This 

section of the preamble presents a 

summary of the significant issues raised 

by the public comments and HUD’s 

responses to those issues. 

A. General Comments 

Five commenters expressed general 

support for the interim rule. One 

commenter expressed ‘‘strong support’’

for the interim rule. Commenters wrote 

that they ‘‘appreciate the clarification of 

the HOME affordability requirements 

relating to homebuyer projects’’ and that 

‘‘the interim rule goes a long way 

towards addressing our concerns about 

participating jurisdictions’ liability in 

cases of foreclosure.’’ Another 

commenter wrote that it appreciated the 

renewed flexibility provided in the 

interim rule. 

The November 22, 2004, interim rule 

made changes to the affordability 

requirements in § 92.254. One 

commenter wrote that it is supportive of 

the language in the interim rule that 

allows participating jurisdictions the 

flexibility to invest additional HOME 

funds in a HOME-assisted property in 

order to prevent foreclosure or acquire 

the HOME-assisted property at the 

foreclosure sale. 

B. Net Proceeds Limitation 

The November 22, 2004, interim rule 

limited recapture amounts in sales 

(voluntary and involuntary) of HOMEassisted homebuyer projects during the 

period of affordability to the net 

proceeds of the sale. One commenter 

wrote that HUD should ease the 

repayment requirement for HOME rental 

properties, homebuyer properties in 

which participating jurisdictions 

impose resale restrictions rather than 

recapture restrictions, and 

noncompliance other than foreclosure 

for housing that is subject to recapture. 

HUD Response. HUD is not expanding 

the coverage of this rule to include the 

commenter’s requests. However, HUD is 

aware of issues involving troubled 

HOME-assisted rental housing and is 

taking steps to address the issues, 

including using Technical Assistance 

funds to deploy experts to analyze 

specific projects and work out solutions. 

Homeownership housing that is 

subject to resale restrictions must 

continue to be affordable for the period 

of affordability. This portion of the 

rulemaking only addresses housing that 

is subject to recapture, not housing 

subject to resale restrictions. The 

participating jurisdiction determines 

which option—recapture or resale—it 

will impose to ensure the housing meets 

the affordability requirements for the 

period. The participating jurisdiction’s 

written agreement with the homebuyer 

sets forth its remedies for 

noncompliance. In addition, the rule 

permits additional investment of HOME 

funds to preserve previously assisted 

HOME homeownership housing, both 

housing subject to recapture and to 

resale restrictions. No substantive 

change is being made to the recapture 

requirement; but, rather, HUD is 

rewording the regulatory text for the 

sake of clarity. 

C. Additional Home Funds for 

Preserving Affordability 

The November 22, 2004, interim rule 

added language to the HOME 

regulations for the purpose of preserving 

the affordability of housing that was 

previously assisted with HOME funds 

and subject to the requirements of 

§ 92.254(a). The new paragraph (a)(9) 

allows a participating jurisdiction to use 

additional HOME funds to acquire 

HOME-assisted homebuyer 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 

section also allows participating 

jurisdictions to use HOME 

administrative funds under § 92.207 for 

this purpose. 

Comment: The prohibition against 

using HOME funds to acquire a unit that 

has a HOME mortgage at a foreclosure 

sale may be problematic for some 

participating jurisdictions. One 

commenter questioned why 

participating jurisdictions are permitted 

to use additional HOME funds to 

preserve homebuyer housing for which 

HOME funds were already used but not 

when a jurisdiction forecloses on a 

defaulted HOME loan. Another 

commenter wrote that participating 

jurisdictions with limited resources 

would be unable to enforce affordability 

requirements of the HOME loan 

agreement because of the costs 

associated with foreclosing on the 

HOME loan and reselling the unit. 

Another commenter wrote that HUD 

needs to clarify the language in the 

interim rule if its intent was to permit 

the participating jurisdiction to use 

HOME administrative funds to acquire 

HOME-assisted homebuyer housing 

before foreclosure or at the foreclosure 

sale when the mortgage being foreclosed 

is a HOME loan. 

HUD Response. In response to the 

comments, HUD is broadening the 

eligible uses of HOME funds to preserve 

affordable homeownership housing 

previously assisted with HOME funds in 

the final rule. Also, as noted earlier in 

the preamble, the HOME program’s 

prohibitions have been amended to 

make clear that funds may be used for 

assistance to preserve affordability of 

homeownership housing. Additionally, 

§ 92.254(a)(9) has been reorganized to 

more clearly explain that HOME funds 

may be used to acquire housing in 

default through a purchase option, right 

of first refusal, or other preemptive right 

before foreclosure or through 

acquisition at a foreclosure sale, as well 

as to assist another homebuyer in 

purchasing the housing. Furthermore, 

although HOME funds cannot be used to 

repay a loan made with HOME funds, 

HOME funds may be used to pay 

foreclosure costs. HOME funds cannot 

be used to repay a loan made with 

HOME funds because, as stated in the 

preamble to the interim rule, if a 

participating jurisdiction forecloses on a 

HOME loan, it receives the housing 

without additional cost to the HOME 

program. However, the rule now permits 

the use of HOME funds to pay the 

foreclosure costs (92.207(h)). The 

regulation also permits HOME funds to 

be used for any necessary rehabilitation 

and for assistance to another homebuyer 

and for the cost of owning/holding the 

housing pending resale to another 

homebuyer—regardless of whether the 

housing was acquired due to default of 

a HOME loan or loan superior to the 

HOME loan. 

Comment: The use of HOME 

administrative funds to purchase a 

HOME-assisted property facing 

foreclosure may be problematic for some 

participating jurisdictions. A 

commenter expressed concern about the 

provision in the interim rule that allows 

participating jurisdictions to preserve 

the affordability of HOME-assisted 

homebuyer housing through the use of 

additional HOME funds to acquire the 

housing before foreclosure or at the 

foreclosure sale. According to the 

commenter, using HOME administrative 

funds to acquire the housing would be 

a burden to participating jurisdictions 

with limited administrative funds. In 

addition, the commenter wrote that the 

use of administrative funds to acquire 

the housing would not allow the 

participating jurisdiction to sell the 


ycherry on PROD1PC64 with RULES4
16684 Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Rules and Regulations 

affected property to an eligible 

homebuyer wishing to assume the 

existing HOME loan without having to 

permanently lose the administrative 

funds expended to foreclose and 

possibly rehabilitate the home. 

HUD Response. HUD is sympathetic 

to the commenter’s concern and 

understands that it may not be feasible 

for a participating jurisdiction with 

limited HOME resources to use its 

administrative funds to preserve 

affordability. However, for participating 

jurisdictions with sufficient 

administrative funds available for this 

purpose, the regulatory language 

provides participating jurisdictions 

another option to preserve their 

affordable housing portfolio. 

Comment: HUD should ensure that 

homebuyers purchasing homes already 

assisted with HOME funds that were 

acquired by the participating 

jurisdiction as a result of 

noncompliance can be assisted with 

HOME funds as direct homebuyer 

assistance. One commenter wrote that 

the interim rule should allow 

homebuyers purchasing housing 

previously assisted with HOME funds 

that was subsequently acquired by the 

participating jurisdiction before 

foreclosure or at the foreclosure sale to 

be assisted with HOME funds as direct 

homebuyer assistance, if they are 

eligible for HOME assistance. 

HUD Response. The HOME regulation 

at § 92.214(a)(6) has long provided an 

exception to the HOME prohibited 

activities to permit HOME funds to be 

used to provide assistance to a 

homebuyer to acquire housing 

previously assisted with HOME funds 

during the period of affordability. 

Section § 92.254(a)(9) also permits 

HOME funds to be used to provide 

direct homebuyer assistance to an 

eligible homebuyer purchasing that 

property that the participating 

jurisdiction has acquired to preserve its 

affordability. HUD has amended the 

HOME prohibited activities to now 

allow HOME funds to be used for 

assistance to preserve affordability of 

homeownership housing in accordance 

with § 92.254(a)(9) to a project 

previously assisted with HOME funds 

during the proscribed period of 

affordability. This clarification will help 

to ensure the preservation of affordable 

housing and ensure that homebuyers 

purchasing homes already assisted with 

HOME funds that were acquired by the 

participating jurisdiction as a result of 

noncompliance can be assisted with 

HOME funds as direct homebuyer 

assistance. 

IV. Findings and Certifications 

Executive Order 12866, 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). The docket file 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, Department of Housing and 

Urban Development, 451 Seventh Street, 

SW., Room 10276, Washington, DC 

20410–0500. Due to security measures 

at the HUD Headquarters building, 

please schedule an advance 

appointment to review the docket file by 

calling the Regulations Division at (202) 

708–3055 (this is not a toll-free 

number). 

Environmental Impact 

A Finding of No Significant Impact 

with respect to the environment has 

been made for this final rule 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 et 

seq.). This 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, Department 

of Housing and Urban Development, 

451 Seventh Street, SW., Room 10276, 

Washington, DC 20410–0500. Due to 

security measures at the HUD 

Headquarters building, please schedule 

an appointment to review the finding by 

calling the Regulations Division at (202) 

708–3055 (this is not a toll-free 

number). 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.) generally requires 

an agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements, unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. This rule 

makes final two interim rules that 

established regulations for the 

downpayment assistance program under 

the ADDI program and that revised and 

clarified the HOME program 

affordability requirements of the ADDI 

downpayment assistance program, 

respectively. This final rule is not 

imposing any additional regulatory 

requirements on participating 

jurisdictions. The majority of 

jurisdictions that are statutorily eligible 

to receive HOME formula allocations are 

relatively larger cities, counties, or 

states; thus, the final rule will not 

significantly affect a substantial number 

of small entities. Additionally, the final 

rule broadens the use of HOME funds to 

help preserve affordable 

homeownership housing. This 

expansion of the eligible use of funds 

actually benefits all participating 

jurisdictions, regardless of size. 

Accordingly, the undersigned certifies 

that this final rule will not have a 

significant economic impact on a 

substantial number of small entities. 

Executive Order 13132, Federalism 

Executive Order 13132 (entitled 

‘‘Federalism’’) prohibits an agency from 

publishing any rule that has federalism 

implications if the rule either imposes 

substantial direct compliance costs on 

state and local governments and is not 

required by statute, or the rule preempts 

state law, unless the agency meets the 

consultation and funding requirements 

of section 6 of the order. This final rule 

will not have federalism implications 

and would not impose substantial direct 

compliance costs on state and local 

governments or preempt state law 

within the meaning of the order. 

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 on 

the private sector. This final rule will 

not impose any federal mandates on any 

state, local, or tribal government, or on 

the private sector, within the meaning of 

UMRA. 

Paperwork Reduction Act 

Under section 3504(h) of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501–3520), an agency may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless the collection 

displays a currently valid control 

number. There are no information 

collection requirements contained in 

this final rule. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance Number for the HOME 

program is 14.239. 


ycherry on PROD1PC64 with RULES4
Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Rules and Regulations 16685 

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, for the reasons described 

in the preamble, HUD revises 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. 3535d and 12701–

12839. 

■ 2. In § 92.2 revise the definition of 

‘‘First-time homebuyer’’ to read as 

follows: 

§ 92.2 Definitions. 

* * * * * 

First-time homebuyer means an 

individual and his or her spouse who 

have not owned a home during the 

three-year period prior to purchase of a 

home with assistance under the 

American Dream Downpayment 

Initiative (ADDI) described in subpart M 

of this part. The term first-time 

homebuyer also includes an individual 

who is a displaced homemaker or single 

parent, as those terms are defined in this 

section. An individual shall not be 

excluded from consideration as a firsttime homebuyer on the basis that the 

individual owns or owned, as a 

principal residence during the threeyear period, a dwelling unit whose 

structure is not permanently affixed to 

a permanent foundation in accordance 

with local or other applicable 

regulations or is not in compliance with 

State, local, or model building codes, or 

other applicable codes, and cannot be 

brought into compliance with the codes 

for less than the cost of constructing a 

permanent structure. 

* * * * * 

■ 3. Section 92.207 is amended to add 

a new paragraph (h) to read as follows: 

§ 92.207 Eligible administrative and 

planning costs. 

* * * * * 

(h) Preserving affordable housing 

already assisted with HOME funds. 

Costs specified under § 92.254(a)(9) may 

be charged as an administrative cost or 

may be charged to the project as 

provided in § 92.254(a)(9). In addition, 

the foreclosure cost of a HOME-assisted 

rental housing project with a HOME 

loan in default is an eligible 

administrative cost. 

■ 4. Revise § 92.214(a)(6) to read as 

follows: 

§ 92.214 Prohibited activities. 

* * * * * 

(a) * * * 

(6) Provide assistance (other than 

tenant-based rental assistance, 

assistance to a homebuyer to acquire 

housing previously assisted with HOME 

funds, or assistance to preserve 

affordability of homeownership housing 

in accordance with § 92.254(a)(9)) to a 

project previously assisted with HOME 

funds during the period of affordability 

established by the particular jurisdiction 

in the written agreement under § 92.504. 

However, additional HOME funds may 

be committed to a project for up to one 

year after project completion (see 

§ 92.502), but the amount of HOME 

funds in the project may not exceed the 

maximum per-unit subsidy amount 

established under § 92.250. 

* * * * * 

■ 5. In § 92.254 revise paragraphs (a)(1), 

the second sentence of (a)(2)(ii), 

(a)(5)(ii)(A) introductory text, and (a)(9) 

to read as follows: 

§ 92.254 Qualification as affordable 

housing: Homeownership. 

(a) * * * 

(1) The housing must be single family 

housing. 

(2) * * * 

(iii) * * * The participating 

jurisdiction must set forth the price for 

different types of single family housing 

for the jurisdiction. * * * 

(5) * * * 

(ii) * * * 

(A) The following options for 

recapture requirements are acceptable to 

HUD. The participating jurisdiction may 

adopt, modify or develop its own 

recapture requirements for HUD 

approval. 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, the 

amount recaptured cannot exceed 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 of housing 

that was previously assisted with HOME 

funds. 

(i) To preserve the affordability of 

HOME-assisted housing a participating 

jurisdiction may use additional HOME 

funds for the following costs: 

(A) The cost to acquire the housing 

through a purchase option, right of first 

refusal, or other preemptive right before 

foreclosure, or at the foreclosure sale. 

(The foreclosure costs to acquire 

housing with a HOME loan in default 

are eligible. However, HOME funds may 

not be used to repay a loan made with 

HOME funds.) 

(B) The cost to undertake any 

necessary rehabilitation for the housing 

acquired. 

(C) The cost of owning/holding the 

housing pending resale to another 

homebuyer. 

(D) The cost to assist another 

homebuyer in purchasing the housing. 

(ii) When a participating jurisdiction 

uses HOME funds to preserve the 

affordability of such housing, the 

additional investment must be treated as 

an amendment to the original project. 

The housing must be sold to a new 

eligible homebuyer in accordance with 

the requirements of § 92.254(a) within a 

reasonable period of time. 

(iii) The total amount of the 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 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. 

To the extent administrative funds are 

used, they may be reimbursed, in whole 

or in part, when the housing is sold to 

a new eligible homebuyer. 

* * * * * 

■ 6. Section 92.602 is amended to add 

a new paragraph (a)(3) to read as 

follows: 

§ 92.602 Eligible activities. 

(a) * * * 

(3) Manufactured housing. ADDI 

funds may be used to purchase a 

manufactured housing unit and 

purchase a manufactured housing lot. 

The manufactured housing unit must, at 

the time of project completion, be 

connected to permanent utility hookups and be located on land that is 

owned by the manufactured housing 

owner, owned as a cooperative, or is 

subject to a leasehold interest with a 

term equal to at least the term of the 

mortgage financing on the unit or the 

period of affordability (whichever is 

greater). 

* * * * * 

Dated: March 23, 2007. 

Roy A. Bernardi, 

Deputy Secretary. 

[FR Doc. E7–5960 Filed 4–3–07; 8:45 am] 

BILLING CODE 4210–67–P 


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