16688 Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Rules and Regulations 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 234 

[Docket No. FR–5009–F–02] 

RIN 2502–AI36 

Approval of Condominiums in Puerto 

Rico on Evidence of Presentment of 

Legal Documents 

AGENCY: Office of the Assistant 

Secretary for Housing-Federal Housing 

Commissioner, HUD. 

ACTION: Final rule. 

SUMMARY: This final rule amends the 

Department’s regulations to provide that 

the date of recordation for purposes of 

obtaining Federal Housing 

Administration (FHA) approval of a 

condominium development in the 

Commonwealth of Puerto Rico for 

mortgage insurance under the section 

234(c) program is the date the 

condominium legal documents are 

presented to the Commonwealth Office 

of the Property Registry. This final rule 

enables parties to obtain mortgage 

insurance upon presentment of legal 

documents, whether the condominium 

regime is under construction, proposed 

for construction, or was established by 

conversion. Instituting a single standard 

for approval of mortgage insurance will 

result in a reduction in risk, time, and 

cost for developers and help to increase 

FHA activity and homeownership 

opportunities in Puerto Rico. This final 

rule follows publication of a May 23, 

2006, proposed rule on which HUD did 

not receive any public comments. 

Accordingly, HUD is adopting the May 

23, 2006, proposed rule without change. 

DATES: Effective Date: May 4, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Maynard T. Curry, Housing Program 

and Policy Specialist, Office of Single 

Family Program Development, Office of 

Housing, Department of Housing and 

Urban Development, 451 Seventh Street, 

SW., Room 9266, Washington, DC 

20410–7000, telephone (202) 708–2121 

(this is not a toll-free number). 

Individuals with speech or hearing 

impairments may access this number 

through TTY by calling the toll-free 

Federal Information Relay Service at 

(800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On May 23, 2006, HUD published a 

proposed rule (71 FR 29754) for public 

comment to amend the Department’s 

regulations governing Federal Housing 

Administration (FHA) approval of 

condominium developments in the 

Commonwealth of Puerto Rico for 

mortgage insurance under section 234 of 

the National Housing Act (12 U.S.C 

1715y(c)) (the Act). Section 234(c) of the 

Act authorizes the Secretary of HUD to 

insure an individual mortgage on a onefamily unit in a multifamily project and 

an undivided interest in the common 

areas and facilities that serve the 

project. Section 234(k) of the Act 

provides that, before FHA mortgage 

insurance can be placed on a unit in a 

condominium project converted from 

rental property, at least one year must 

elapse between the date of conversion 

and the date application for insurance is 

made. HUD’s regulations implementing 

section 234 of the Act are codified at 24 

CFR part 234. 

In response to a severe backlog at the 

Puerto Rico Commonwealth Office of 

the Property Registry, which resulted in 

developers and proponents being 

responsible for paying assessments and 

costs associated with operating and 

maintaining the multifamily project as a 

condominium before mortgage 

insurance could be obtained, HUD 

issued a February 7, 2003, final rule that 

amended the definition of conversion. 

The final rule changed the definition of 

conversion with respect to Puerto Rico, 

to allow the running of the one-year 

waiting period to begin upon 

presentment for inscription (i.e., 

recording) of the required 

documentation. 

This revision allowed the Department 

to approve condominium developments 

in Puerto Rico for FHA mortgage 

insurance on individual units within 

the multifamily project on the basis of 

evidence of presentment of legal 

documents and the parties’ obtaining 

title insurance on each unit. The final 

rule thereby relieved Puerto Rican 

lenders from the heavy burden of 

holding section 234(c) loans without 

insurance, while waiting for documents 

to be recorded to meet the then-existing 

definition of conversion. 

The May 23, 2006, proposed rule 

would revise the part 234 regulations to 

provide that, in the case of Puerto Rico, 

the date of presentment should serve as 

the date of recordation for all 

condominium regimes, which includes 

existing rental units that have been 

converted, units under construction, or 

units that are planned for construction. 

The proposed regulatory changes were 

designed to expand the scope of 

recordation while better reflecting the 

realities of the inscription process in 

Puerto Rico. Condominium plans would 

still have to comply with the legal 

requirements of the local jurisdiction. In 

addition, the proposed rule would not 

alter property rights, which are 

conferred by the legal documents 

themselves and not their recordation. 

The proposed rule would allow all 

condominium regimes in Puerto Rico to 

obtain FHA approval for mortgage 

insurance at the time of presentment of 

condominium documents. This would 

establish a uniform approach to the 

FHA mortgage insurance approval 

process by allowing FHA mortgage 

insurance to be placed on 

condominiums, whether they be 

conversions of existing rental units, 

units under construction, or units 

planned for construction, following 

presentment of the condominium’s legal 

documents to the Commonwealth Office 

of the Property Registry. 

For more detailed information 

regarding the proposed regulatory 

changes, please refer to the preamble of 

the May 23, 2006, proposed rule. 

II. This Final Rule 

This final rule follows the publication 

of a May 23, 2006, proposed rule. The 

public comment period on the proposed 

rule closed on July 24, 2006. HUD did 

not receive any public comments on the 

proposed rule. HUD, therefore, is 

issuing this final rule without change 

from the proposed rule. 

III. Findings and Certifications 

Information Collection Requirements 

The information collection 

requirements contained in the section 

234(c) program have been approved by 

the Office of Management and Budget 

(OMB) under the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501–3520) and 

assigned OMB Control Number 2502– 

0059. In accordance with the Paperwork 

Reduction Act, HUD 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 OMB control number. 

Environmental Review 

This amendment is categorically 

excluded from environmental review 

under the National Environmental 

Policy Act (42 U.S.C. 4321). In keeping 

with the exclusion provided for in 24 

CFR 50.19(c)(1), this amendment does 

not direct, provide for assistance, or 

loan and mortgage insurance for, or 

otherwise govern or regulate, real 

property acquisition, disposition, 

leasing, rehabilitation, alteration, 

demolition, or new construction, or 

establish, revise, or provide for 

standards for construction or 

construction materials, manufactured 

housing, or occupancy. Accordingly, 

this amendment is categorically 

excluded because it amends an existing 


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Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Rules and Regulations 16689 

document where the existing document 

as a whole would not fall within the 

exclusion in 24 CFR 50.19(c)(1). 

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 final rule does not 

impose any federal mandates on any 

state, local, or tribal government or the 

private sector within the meaning of 

UMRA. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) generally requires an 

agency to conduct 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 will not have a 

significant economic impact on a 

substantial number of small entities for 

the following reasons: (1) there are no 

anti-competitive discriminatory aspects 

of the rule with regard to small entities, 

and (2) there are no unusual procedures 

that would need to be complied with by 

small entities. 

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. 

Catalog of Federal Domestic Assistance 

The Catalog of Federal Domestic 

Assistance numbers for 24 CFR part 234 

are 14.117 and 14.133. 

List of Subjects in 24 CFR Part 234 

Condominiums, Mortgage insurance, 

Reporting and recordkeeping 

requirements. 

■ Accordingly, for the reasons described 

in the preamble, HUD amends 24 CFR 

part 234 to read as follows: 

PART 234—CONDOMINIUM 

OWNERSHIP MORTGAGE INSURANCE 

■ 1. The authority citation for 24 CFR 

part 234 continues to read as follows: 

Authority: 12 U.S.C. 1715b and 1715y; 42 

U.S.C. 3535(d). 

■ 2. Revise § 234.26(b) and (d)(1) to read 

as follows: 

§ 234.26 Project requirements. 

* * * * * 

(b) Plan of condominium ownership. 

The project in which the unit is located 

shall have been committed to a plan of 

condominium ownership by a deed, or 

other recorded instrument, that is 

acceptable to the Commissioner. In the 

case of condominium documents in the 

Commonwealth of Puerto Rico, the 

Commissioner will accept documents 

presented for inscription (recordation) 

to the Commonwealth Office of the 

Property Registry so long as the 

mortgagor obtains a title insurance 

policy that reflects the condominium 

regime. 

* * * * * 

(d) * * * 

(1) The deed of the family unit and 

the deed or other recorded instrument 

committing the project to a plan of 

condominium ownership must comply 

with legal requirements of the 

jurisdiction. In the case of 

condominium documents in the 

Commonwealth of Puerto Rico, the 

Department will accept documents 

presented for inscription (recordation) 

to the Commonwealth Office of Property 

Registry for certification purposes so 

long as the mortgagor obtains a title 

insurance policy that reflects the 

condominium regime. 

* * * * * 

Dated: March 20, 2007. 

Brian D. Montgomery, 

Assistant Secretary for Housing-Federal 

Housing Commissioner. 

[FR Doc. E7–6088 Filed 4–3–07; 8:45 am] 

BILLING CODE 4210–67–P 


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