44838 Federal Register / Vol. 62, No. 163 / Friday, August 22, 1997 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Part 92

[Docket No. FR–4111–F–02]

RIN 2501–AC30

Home Investment Partnerships

Program—Additional Streamlining

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule; request for comment.

SUMMARY: This rule implements the

proposed rule published December 11,

1996 and amends the existing Home

Program final rule by: replacing the

hearing procedures of the current Home

rule with the Department-wide

streamlined hearing procedures;

removing the closeout requirements and

instead providing that Home funds will

be closed out in accordance with

procedures established by HUD;

replacing the extensive requirements for

the competitive reallocation of Home

funds with a citation to the selection

factors in the Home statute and a

statement of the maximum number of

points that may be awarded for each

factor; and establishing separate market

interest rate formula for rehabilitation

loans. This rule also promulgates an

amendment to, and requests public

comment on, § 92.252(i)(2) to limit the

rents charged to tenants of Homeassisted units whose income rises above

80 percent of area median income in

Home projects in which the Homeassisted units ‘‘float.’’

DATES: Effective Date: September 22,

1997.

Comment Due Date: Comments on

§ 92.252(i)(2) are due on October 21,

1997.

ADDRESSES: Interested persons are

invited to submit comments regarding

§ 92.252(i)(2) to the Rules Docket Clerk,

Office of General Counsel, Room 10278,

Department of Housing and Urban

Development, 451 Seventh Street, S.W.,

Washington, D.C. 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:

Mary Kolesar, Director, Program Policy

Division, Office of Affordable Housing

Programs, Room 7162, 451 Seventh

Street, S.W., Washington, D.C. 20410,

telephone (202) 708–2470 (this is not a

toll-free number). A

telecommunications device for hearingand speech-impaired persons (TTY) is

available at 1–800–877–8339 (Federal

Information Relay Service).

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

The Home Investment Partnerships

Act (the HOME Act) (Title II of the

Cranston-Gonzalez National Affordable

Housing Act) was signed into law on

November 28, 1990 (Pub. L. 101–625),

and created the Home Investment

Partnerships Program that provides

funds to expand the supply of affordable

housing for very low-income and lowincome persons. Interim regulations for

the Home Investment Partnerships

Program were first published on

December 16, 1991 (56 FR 65313) and

are codified at 24 CFR part 92.

The original statute has been

amended three times since enactment.

The Housing and Community

Development Act of 1992 (HCDA 1992)

(Pub. L. 102–550, approved October 28,

1992) included a substantial number of

amendments to the Home Program.

These amendments were implemented

in rules published on December 22,

1992 (57 FR 60960), June 23, 1993 (58

FR 34130), and April 19, 1994 (59 FR

18626). The HUD Demonstration Act

(Pub. L. 103–120, approved October 27,

1993) provided additional authorization

for Home Program technical assistance.

The Multifamily Housing Property

Disposition Reform Act of 1994

(MHPDRA) (Pub. L. 103–233, approved

April 11, 1994) included an additional

number of amendments to the Home

Program. These amendments were

implemented in a rule published on

August 26, 1994 (59 FR 44258).

A proposed rule (60 FR 36012) to

modify the Home allocation formula

and an interim rule (60 FR 36020) with

clarifying changes to the Home

regulation and a request for additional

comments before the issuance of a final

rule were published on July 12, 1995.

The proposed rule was issued as an

interim rule on January 23, 1996 (61 FR

1824). On March 6, 1996 (61 FR 9036),

an interim rule that made a number of

streamlining amendments to the Home

regulation was published. On

September 16, 1996 (61 FR 48736), the

Department published a final rule for

the Home Investment Partnerships

Program (the Home program). Finally, a

proposed rule to make a number of

additional streamlining changes was

published on December 11, 1996 (61 FR

65298). This rule implements the

changes proposed in the December 11,

1996 rule. This rule also implements,

and solicits public comment on, an

amendment to § 92.252(i)(2) that would

provide relief, in circumstances

explained below in this preamble, from

the requirement that tenants who no

longer qualify as low-income pay 30

percent of their adjusted income as rent.

The purpose of this rule is two-fold:

(1) To respond to a memorandum that

President Clinton issued to all Federal

departments and agencies regarding

regulatory reinvention; and (2) to

provide additional flexibility to Home

participating jurisdictions by more

accurately measuring the match value of

below-market interest rate rehabilitation

loans.

In response to the President’s

memorandum, the Department of

Housing and Urban Development

conducted a page-by-page review of its

regulations to determine which could be

eliminated, consolidated, or otherwise

improved. HUD determined that the

regulations for the Home Investment

Partnerships Program would be

improved and streamlined by

eliminating unnecessary provisions.

For the first streamlining change,

HUD replaces the requirements for the

competitive reallocation of Home funds

in § 92.453, which largely repeat the

Home statute at section 217(c) of the

Cranston-Gonzalez National Affordable

Housing Act (42 U.S.C. 12747(c)), with

a citation to the selection criteria in the

statute; the maximum number of points

that may be awarded for each category

of criteria (policies, actions,

commitment), as was done in the

regulation; and a statement that such

requirements will be published in a

Notice of Funding Availability (NOFA)

in accordance with the requirements of

the HUD Reform Act as funds become

available.

Second, this rule removes the

closeout requirements specified in

§ 92.507 and instead provides that,

‘‘Home funds will be closed out in

accordance with procedures established

by HUD.’’

Third and last of the streamlining

changes, this rule replaces the hearing

procedures in § 92.552 of the current

HOME rule with the Department-wide,

streamlined, hearing procedures of 24

CFR part 26 published as a final rule on

September 24, 1996 (61 FR 50208).

The changes described above are

consistent with the general reinvention

goals of streamlining the requirements

of HUD’s funding programs and

maximizing their administrative

flexibility. For example, removing the

current rigid and burdensome closeout

requirements permits the Department to

simplify the closeout process and

administer it on the basis of the reports

and other monitoring information it

receives. In addition, every recipient of
Federal Register / Vol. 62, No. 163 / Friday, August 22, 1997 / Rules and Regulations 44839

HUD funding and the Department itself

will benefit from the adoption of

uniform hearings procedures that apply

to all HUD programs.

This rule also establishes a separate

formula for calculating the match value

of below-market interest rate

rehabilitation loans for both owneroccupied and rental housing. This

change to the Home program responds

to comments that this methodology,

which involves calculating the yield

foregone based upon the difference

between the actual interest rate charged

and the market interest rate established

at § 92.220(a)(1)(iii)(B), understated the

actual value of these contributions.

Because the formula for determining the

market interest rate for various types of

projects was based on assumptions

involving first mortgage financing,

participating jurisdictions claimed that

the methodology understated the match

value of below-market interest rate

rehabilitation loans, which typically

carry higher market interest rates than

first mortgage financing for comparable

projects.

Finally, this rule amends

§ 92.252(i)(2) to address, to the extent

permissible, an unintended inequity

that may arise with respect to the rent

for a Home-assisted unit. This section is

amended to limit the rents charged to

tenants of Home-assisted units whose

income rises above 80 percent of area

median income in Home projects in

which the Home-assisted units ‘‘float.’’

The Home statute requires that the

tenants of Home-assisted units who no

longer qualify as low-income pay 30

percent of their adjusted income as rent,

except that tenants of units assisted

with both Home funds and Low-Income

Housing Tax Credits (LIHTC) are subject

to the rules of the LIHTC program. The

Department has determined that there is

legal precedent that enables it, in

projects with floating Home units, to

limit the rent charged to over-income

tenants in Home-assisted units to the

market rent for comparable units in the

neighborhood. This precedent does not

apply to rents in projects where Home

units are fixed. Thus, extending this

rent limitation provision to such units

was not an option available to HUD.

In Home projects in which the Homeassisted units are fixed, the requirement

that the over-income tenant pay 30

percent of adjusted income as rent may

provide that tenant with an incentive to

move because the Home rent might

eventually exceed the market rent on an

unassisted unit. In such instances, the

Home project could be brought back

into compliance with the requirements

of § 92.252 (a) and (b) more quickly

because the over-income tenant is likely

to move from the Home-assisted unit.

However, in projects where the Home

units are designated as floating and a

tenant’s income rises above 80% of area

median income, the next available,

comparable unit can be designated as a

Home-assisted unit. In these instances,

the project can be brought back into

compliance without the over-income

tenant moving to avoid paying an

excessive rent. Recognizing that

individual tenants may have reasons for

remaining in Home-assisted units even

at a higher rent (e.g., proximity to work

or schools, the cost of moving, or

unavailability of unassisted units in the

neighborhood), the Department is

exercising the flexibility afforded by

legal precedent to limit the rents for

over-income tenants in floating Home

units. In projects receiving both Home

and LIHTC, the rent requirements of the

tax credit program will continue to

supersede Home rental requirements.

II. Summary of Comments and

Responses

The Department received four

comments on the proposed rule

published December 11, 1996. Two

comments were received from a State

Home participating jurisdiction. Two

comments were received from public

interest groups representing public

agencies administering the Home

Program.

Streamlining Provisions

One commenter, a public interest

group, supported the three proposed

changes to streamline the program

regulations. The commenter suggested

that HUD seek the input of Home

program administrators in developing

requirements for Home grant closeouts.

Matching Requirements

All four commenters supported

HUD’s proposal to establish a separate

market interest rate formula for

determining the match value of belowmarket interest rate rehabilitation loans

made to single-family and multifamily

housing, whether owner-occupied or

rental. One commenter recommended

that each participating jurisdiction be

permitted to establish the market rate

for rehabilitation loans made in its

jurisdiction by conducting weekly

surveys of lenders in its area to

determine the rates being offered for

rehabilitation loans. Two commenters

preferred that the Department use the

same methodology for determining the

match value of below-market interest

rate rehabilitation loans as it did for

acquisition loans, establishing a rate

based on the interest rate for a 10-year

Treasury note plus a specified number

of basis points. One of the commenters

recommended that the market rate be

equal to the interest rate for a 10-year

Treasury note plus 400 basis points. The

other commenter recommended that 200

basis points be added to each of the

three existing market interest rates for

single-family fixed financing (200 basis

points), single-family adjustable rate

financing (250 basis points), and

multifamily financing (300 basis points).

One commenter suggested that HUD

establish separate market rates for

single-family homeownership and

multifamily rental loans made for

rehabilitation. Another commenter

recommended that the formula

established by HUD be as simple as

possible.

The Department agrees that the

methodology for calculating the value of

rehabilitation loans should be simple

and has adopted the suggestion that the

market interest rate for these loans be

set at a rate equal to the interest rate on

a 10-year note plus 400 basis points. In

the interest of simplicity, this single rate

shall apply to rehabilitation loans made

to housing of all types and tenures. This

standard should provide for a generous

valuation of match contributions in

most participating jurisdictions, is

consistent with the methodology for

other types of loans, is simple to

calculate, and avoids the additional

burden and recordkeeping that would

be necessary if each participating

jurisdiction were to conduct periodic

surveys of lenders.

Findings and Certifications

Justification for Implementation of

§ 92.252(i)(2)

The Department has determined that

the amendment made by this rule to

§ 92.252(i)(2) should be adopted without

the delay occasioned by requiring prior

notice and comment. The amendment

only removes, to the extent permissible,

a requirement that could result in an

unintentionally inequitable result and

provides more flexibility for

administering the program. As such,

prior notice and comment are

unnecessary under 24 CFR Part 10. The

Department, however, is soliciting

comments on this change, and will

consider whether changes should be

made to this section as a result of the

comments.

Paperwork Reduction Act

The information collection

requirements for the Home Investment

Partnerships Program have been

approved by the Office of Management

and Budget, under section 3504(h) of

the Paperwork Reduction Act of 1980
44840 Federal Register / Vol. 62, No. 163 / Friday, August 22, 1997 / Rules and Regulations

(44 U.S.C. 3501–3520), and assigned

OMB control number 2501–0013. This

rule does not contain additional

information collection requirements. 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 valid control

number.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 establishes

requirements for Federal agencies to

assess the effects of their regulatory

actions on State, local, and tribal

governments and the private sector.

This rule does not impose any Federal

mandates on any State, local or tribal

governments or the private sector within

the meaning of the Unfunded Mandates

Reform Act of 1995.

Environmental Impact

At the time of publication of the

proposed rule, a Finding of No

Significant Impact with respect to the

environment was made in accordance

with HUD regulations in 24 CFR part 50

that implement section 102(2)(C) of the

National Environmental Policy Act of

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

rule is adopted by this final rule without

significant change. Accordingly, the

initial Finding of No Significant Impact

remains applicable, and is available for

public inspection between 7:30 a.m. and

5:30 p.m. weekdays in the office of the

Rules Docket Clerk at the above address.

Impact on Small Entities

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)) has reviewed and approved this

rule, and in so doing certifies that this

rule will not have a significant

economic impact on a substantial

number of small entities, because

jurisdictions that are statutorily eligible

to receive formula allocations are

relatively larger cities, counties or

States. The rule will have no adverse or

disproportionate economic impact on

small businesses.

Federalism Impact

The General Counsel has determined,

as the Designated Official for HUD

under section 6(a) of Executive Order

12612, Federalism, that this rule does

not have federalism implications

concerning the division of local, State,

and federal responsibilities. This rule

only streamlines the Home regulations

by removing provisions determined to

be unnecessary or overly restrictive.

The Catalog of Federal Domestic

Assistance Number for the Home

Program is 14.239.

List of Subjects in 24 CFR Part 92

Grant programs—housing and

community development, Manufactured

homes, Rent subsidies, Reporting and

recordkeeping requirements.

Accordingly, part 92 of title 24 of the

Code of Federal Regulations is amended

to read as follows:

PART 92—HOME INVESTMENT

PARTNERSHIPS PROGRAM

1. The authority citation for part 92

continues to read as follows:

Authority: Title II, Cranston-Gonzalez

National Affordable Housing Act (42 U.S.C.

12701–12839); sec. 7(d), Department of

Housing and Urban Development Act (42

U.S.C. 3535(d)).

2. In § 92.220, paragraphs

(a)(1)(iii)(B)(2) and (a)(1)(iii)(B)(3) are

revised, and a new paragraph

(a)(1)(iii)(B)(4) is added, to read as

follows:

§ 92.220 Form of matching contribution.

(a) * * *

(1) * * *

(iii) * * *

(B) * * *

(2) With respect to one- to four-unit

housing financed with an adjustable

interest rate mortgage, a rate equal to the

one-year Treasury bill rate plus 250

basis points;

(3) With respect to a multifamily

project, a rate equal to the 10-year

Treasury note rate plus 300 basis points;

or

(4) With respect to housing receiving

financing for rehabilitation, a rate equal

to the 10-year Treasury note rate plus

400 basis points.

* * * * *

3. In § 92.252, a new sentence is

added to the end of paragraph (i)(2), to

read as follows:

§ 92.252 Qualification as affordable

housing: Rental housing.

* * * * *

(i) * * *

(2) * * * In addition, in projects in

which the Home units are designated as

floating pursuant to paragraph (j) of this

section, tenants who no longer qualify

as low-income are not required to pay

as rent an amount that exceeds the

market rent for comparable, unassisted

units in the neighborhood.

* * * * *

4. Section 92.453 is revised to read as

follows:

§ 92.453 Competitive reallocations.

(a) HUD will invite applications

through Federal Register publication of

a Notice of Funding Availability

(NOFA), in accordance with section 102

of the Department of Housing and Urban

Development Reform Act of 1989 (42

U.S.C. 3545) and the requirements of

sec. 217(c) of the Cranston-Gonzalez

National Affordable Housing Act (42

U.S.C. 12747(c)), for HOME funds that

become available for competitive

reallocation under § 92.451 or § 92.452,

or both. The NOFA will describe the

application requirements and

procedures, including the total funding

available for the competition and any

maximum amount of individual awards.

The NOFA will also describe the

selection criteria and any special factors

to be evaluated in awarding points

under the selection criteria.

(b) The NOFA will include the

selection criteria at sec. 217(c) of the

Cranston-Gonzalez National Affordable

Housing Act (42 U.S.C. 12747(c)), with

the following maximum number of

points awarded for each category of

criteria:

(1) Commitment. Up to 25 points for

the criteria at sec. 217(c)(1) of the

Cranston-Gonzalez National Affordable

Housing Act (42 U.S.C. 12747(c)(1));

(2) Actions. Up to 50 points for the

criteria at sec. 217(c)(2) of the CranstonGonzalez National Affordable Housing

Act (42 U.S.C. 12747(c)(2)); and

(3) Policies. Up to 25 points for the

criteria at sec. 217(c)(3) of the CranstonGonzalez National Affordable Housing

Act (42 U.S.C. 12747(c)(3)).

5. Section 92.507 is revised to read as

follows:

§ 92.507 Closeout.

Home funds will be closed out in

accordance with procedures established

by HUD.

6. In § 92.552, paragraph (b) is revised

to read as follows:

§ 92.552 Notice and opportunity for

hearing; sanctions.

* * * * *

(b) Proceedings. When HUD proposes

to take action pursuant to this section,

the respondent in the proceedings will

be the participating jurisdiction or, at

HUD’s option, the State recipient.

Proceedings will be conducted in

accordance with 24 CFR part 26, subpart

B.

Dated: July 23, 1997.

Andrew Cuomo,

Secretary.

[FR Doc. 97–22296 Filed 8–21–97; 8:45 am]

BILLING CODE 4210–32–P