[Federal Register Volume 65, Number 196 (Tuesday, October 10, 2000)]
[Rules and Regulations]
[Pages 60324-60326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25870]



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Part V





Department of Housing and Urban Development





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24 CFR Part 291



Disposition of HUD-Acquired Single Family Property; Officer Next Door 
Sales Program; Final Rule

Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / 
Rules and Regulations

[[Page 60324]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 291

[Docket No. FR-4277-F-03]
RIN 2502-AH37


Disposition of HUD-Acquired Single Family Property; Officer Next 
Door Sales Program

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Final rule.

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SUMMARY: This final rule on the Officer Next Door Sales program (OND 
Sales program) follows publication of an interim rule published on July 
2, 1999. The interim rule, which solicited public comment, became 
effective August 2, 1999. The OND Sales program makes HUD-acquired 
single family homes available, with certain restrictions, to law 
enforcement officers for purchase at a discount from list prices. This 
final rule addresses the comments received on the interim rule and 
expands eligibility for the OND Sales program to include campus police 
officers employed by private colleges and universities. HUD believes 
the inclusion of these law enforcement officers will further the goal 
of the OND Sales program to promote safe neighborhoods.

DATES: Effective Date: November 9, 2000.

FOR FURTHER INFORMATION CONTACT: Joe McCloskey, Director, Single Family 
Asset Management Division, Office of Insured Single Family Housing, 
Room 9286, U.S. Department of Housing and Urban Development, 451 
Seventh Street, SW, Washington, DC 20410-8000; telephone (202) 708-1672 
(this is not a toll-free number). Hearing- or speech-impaired 
individuals may access this number via TTY by calling the toll-free 
Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. The July 2, 1999 Interim Rule

    On July 2, 1999 (64 FR 36210), HUD published for public comment 
interim regulations on the Officer Next Door Sales program (OND Sales 
program). HUD developed this program to further its goal of promoting 
safe neighborhoods. Beginning in 1997, until publication of the July 2, 
1999 interim rule, the OND Sales program had been operating as a 
temporary program under HUD's authority to make single family 
properties available under 24 CFR part 291 (entitled ``Disposition of 
HUD-Acquired Single Family Property''). The July 2, 1999 interim rule 
announced HUD's intent to establish the OND Sales program as a 
permanent part of HUD's single family property disposition program and 
issued for effect regulations covering the terms and conditions of the 
program. The interim rule became effective August 2, 1999.
    Under the OND Sales program, law enforcement officers may purchase 
HUD-acquired single family homes, with certain restrictions, at a 
discount (currently 50%) from list prices. The home must be located in 
a HUD-designated revitalization zone, and the law enforcement officer 
must agree to own and live in the home as his or her sole residence for 
a set period of time (currently 3 years). The law enforcement officer 
must also agree to execute a second mortgage and note on the home. The 
amount of the second mortgage is the difference between the list price 
of the home and the discounted selling price, and this amount is 
reduced, according to a schedule established by HUD, periodically over 
the period of time in which the law enforcement officer is required to 
own and live in the home. At the end of this period of time, the amount 
of the second mortgage is zero. So long as he or she fulfills the 
obligations under the program, the law enforcement officer is not 
required to make any monthly payments, nor does any interest accrue on 
the second mortgage.
    Governmental entities and private nonprofit organizations may also 
purchase homes through the OND Sales program, if they intend to resell 
these homes directly to law enforcement officers under the terms and 
conditions of the OND Sales program. A complete description of the OND 
Sales program is presented in the preamble to the July 2, 1999 interim 
rule.

II. This Final Rule

    This final rule adopts the July 2, 1999 interim regulations, and 
takes into consideration the public comments received on the interim 
rule. The public comment period for the interim rule closed on August 
31, 1999. HUD received 2 comments, both from nonprofit public interest 
housing and community development organizations. HUD appreciates the 
suggestions offered by the commenters and carefully considered these 
suggestions. For the reasons discussed in section III of this preamble, 
however, HUD has chosen not to implement their suggestions.
    This final rule makes one change to the July 2, 1999 interim rule. 
Specifically, the final rule expands eligibility for the OND Sales 
program to include campus police officers employed by private colleges 
and universities. The July 2, 1999 interim rule defines ``law 
enforcement officers'' as persons who are: (1) employed full-time by a 
Federal, State, county, or municipal government; and (2) sworn to 
uphold, and make arrests for violations of, Federal, State, county, or 
municipal law. (See Sec. 291.530 of the July 2, 1999 interim rule.) 
Under this definition, police officers employed by State or local 
colleges and universities are eligible to participate in the OND Sales 
program. Private campus police officers, however, are excluded under 
the eligibility requirements established by the interim rule.
    Upon reconsideration, HUD believes that this limitation on 
eligibility, based solely on the governmental status of the police 
officer's employer, is too restrictive. Private campus police officers 
have the same qualifications and responsibilities as police officers 
who are employed by public colleges or universities. They are police 
academy graduates, and are sworn to uphold, and make arrests for 
violations of, Federal, State, county, or municipal law. The presence 
of these police officers would be as beneficial to communities as that 
of their public sector counterparts. However, because these police 
officers are employed by private entities and not government 
institutions, they would be denied participation in OND Sales program 
under the July 2, 1999 interim rule. HUD has, therefore, revised the 
July 2, 1999 interim rule to allow private campus police officers to 
participate in the program.

III. Discussion of the Public Comments Received on the July 2, 1999 
Interim Rule

    This section of the preamble presents a summary of the issues 
raised by the public commenters and HUD's responses to their comments. 
For the reasons discussed below, HUD has decided not to revise the 
interim rule in response to public comment.
    Comment--Current disposition procedure negatively impacts community 
development efforts and may harm the Federal Housing Administration 
(FHA) insurance funds. Currently, under the OND Sales program, HUD 
offers both law enforcement officers and nonprofit organizations the 
opportunity to purchase eligible HUD properties at a discount. The 
current disposition procedure for these properties is as follows:
    (1) Eligible properties are listed on a special nonprofit/OND Sales 
program list.

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    (2) Nonprofits and law enforcement officers have 5 days to indicate 
an interest in a property.
    (3) A winner is selected from among those indicating an interest 
through a random computerized lottery.
    (4) The winner has the right to either purchase or not purchase the 
property. If the winner chooses not to purchase the property, the 
property is then relisted on a public list.
    The commenters wrote that this procedure is unfair to serious 
bidders and counterproductive for communities requiring significant 
revitalization because it encourages casual bidding. According to the 
commenters, casual bidding is encouraged because bid winners are chosen 
through a random computerized lottery, so law enforcement officers feel 
the need to play the odds and bid on multiple properties. Additionally, 
the system does not require a deposit so law enforcement officers need 
not be selective about which properties they submit bids on.
    The commenters wrote that, in some communities, law enforcement 
officers have been expressing interest in properties, winning the right 
to purchase those properties, but then failing to purchase them. When 
this happens, nonprofit organizations lose the opportunity to purchase 
these properties from the private list because the properties are 
automatically relisted on the public list. While nonprofit 
organizations can bid off the public list, the competition is much 
greater.
    The commenters also wrote that, while it may seem that the FHA 
insurance funds are better protected because properties sold off the 
public list are sold at a higher price, in many cases this benefit is 
only short-term. According to the commenters, properties sold from the 
public list are often purchased by private investors whose primary 
interest in the property is as an investment. The commenters wrote that 
these investors may only patch, paint, and either try to quickly resell 
the properties to unsophisticated purchasers or rent them. The 
commenters wrote that, as a consequence, these properties often show up 
on the HUD inventory list again and again. The commenters wrote that 
nonprofit organizations, on the other hand, are mission oriented and 
more apt to invest significant funds to substantially renovate these 
homes in the manner they truly need to stabilize and revitalize the 
community.
    The commenters suggested two possible solutions to these perceived 
problems. First, the commenters suggested that the computer lottery 
should simply rank all nonprofit and law enforcement officers in order 
in which they are selected. The first person selected would be given 
the option to purchase the property. If this person declines, then the 
second person on the list would be given the option and so on. This 
system would not delay the process and could be completed within a 
reasonable time (such as 14-days) if strict deadlines are enforced.
    The commenters also recommended that HUD structure the OND Sales 
program so that it promotes only serious participants. For example, the 
program could allow law enforcement officers to participate in only one 
lottery at a time. Alternatively, limits should be placed on the number 
of times a law enforcement officer may express interest in a property 
and then choose not to purchase that property.
    HUD Response. HUD appreciates the recommendations submitted by the 
commenters. The comments, however, relate almost exclusively to the 
lottery procedure currently used by HUD to determine winning bids under 
the OND Sales program. The July 2, 1999 interim rule did not establish 
specific disposition procedures for the program. Rather, the interim 
rule focused on the eligibility requirements for participation in the 
OND Sales program, and the requirements applicable to eligible law 
enforcement officers who are selected to purchase a home through the 
program.
    HUD's single family property disposition regulations at 24 CFR part 
291 provide HUD with the necessary flexibility to use a variety of 
innovative, efficient, and cost-effective methods for making properties 
available for sale (see Sec. 291.90). In developing the OND Sales 
program, HUD wished to retain this flexibility, and elected not to 
establish a specific sales method for the program. HUD currently uses a 
lottery system to make properties available to law enforcement officers 
under the OND Sales program. However, HUD may, in its discretion, 
either on a case-by-case basis or as a regular course of business, 
elect to use another disposition method for the program (for example, a 
competitive bid process).
    The suggestions made by the commenters relate to a matter not 
covered by the OND Sales program regulations, and are, therefore, 
outside the scope of this rulemaking. Accordingly, HUD has not adopted 
the changes recommended by the commenters in this final rule. Again, 
HUD prefers not to establish precise property disposition procedures 
for the OND Sales program. HUD, however, will consider these comments 
in the development of any future revisions to the lottery system, or in 
the adoption of an alternative disposition method for OND Sales 
program.

IV. For More Information About the OND Sales Program

    Law enforcement officers, governmental entities, private nonprofit 
organizations, and other interested persons can receive more 
information about the OND Sales program by calling (800) 217-6970 or by 
visiting HUD's Web site at http://www.hud.gov.

V. Justification for Final Rulemaking

    In general, HUD publishes a rule for public comment before issuing 
a rule for effect, in accordance with its own regulations on rulemaking 
at 24 CFR part 10. Part 10, however, does provide for exceptions from 
that general rule where HUD finds good cause to omit advance notice and 
public participation. The good cause requirement is satisfied when the 
prior public procedure is ``impracticable, unnecessary, or contrary to 
the public interest'' (24 CFR 10.1).
    As discussed above, this final rule makes a single change to the 
July 2, 1999 interim rule. Specifically, the final rule amends the July 
2, 1999 interim rule to permit private campus police officers to 
participate in the OND Sales program. HUD finds that good cause exists 
to publish this amendment for effect without first soliciting public 
comment, in that prior public procedure is contrary to the public 
interest. The reasons for HUD's determination are as follows.
    As noted above, campus police officers employed by State and local 
colleges or universities are currently eligible to participate in the 
OND Sales program. Private campus police officers, however, are 
ineligible under the July 2, 1999 interim rule. Upon reconsideration, 
HUD believes that this limitation on eligibility, based solely on the 
governmental status of the police officer's employer, is too 
restrictive. Police officers employed by private colleges and 
universities have the same qualifications and responsibilities as their 
public sector counterparts.
    Delaying the effectiveness of this amendment to solicit prior 
public comment would only prolong the denial of eligibility to private 
campus police officers, simply because they are employed by private 
institutions. In addition, a delay in the effectiveness of this 
amendment would deny to residents the benefits of having these police 
officers reside in their communities. By expanding eligibility, HUD 
anticipates that the number of properties on which bids are placed by 
law enforcement officers will increase,

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therefore furthering the goal of the OND Sales program to promote safe 
neighborhoods.

VI. Findings and Certifications

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) requires Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and on 
the private sector. This final rule does not impose any Federal 
mandates on any State, local, or, tribal governments, or on the private 
sector, within the meaning of the UMRA.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment was made at the interim rule stage, in accordance with the 
HUD regulations at 24 CFR part 50 that implement section 102(2)(C) of 
the National Environmental Policy Act of 1969 (42 U.S.C. 4332). That 
FONSI remains applicable to this final rule and is available for public 
inspection and copying during regular business hours (7:30 a.m. to 5:30 
p.m.) at the Office of the Rules Docket Clerk, Room 10276, U.S. 
Department of Housing and Urban Development, 451 Seventh Street, SW, 
Washington, DC 20410-0500.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this final rule and in so 
doing certifies that it would not have a significant economic impact on 
a substantial number of small entities.
    This final rule promotes safe neighborhoods by enabling law 
enforcement officers to purchase HUD-acquired single family homes at a 
significant discount. The final rule places restrictions on the use of 
a home purchased through the Officer Next Door Sales program that 
affects the individual purchasing the home. The final rule, however, 
does not place restrictions on any small entities involved in any 
transactions related to the Officer Next Door Sales program.

Federalism Impact

    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 Executive Order. This final 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.

List of Subjects in 24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    For the reasons discussed in the preamble, HUD adopts the 
amendments made in the interim rule amending 24 CFR part 291, which was 
published at 64 FR 36210 on July 2, 1999, with the following change:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

    1. The authority citation for part 291 continues to read as 
follows:

    Authority: 12 U.S.C. 1701 et seq.; 42 U.S.C. 1441, 1441a, 1551a, 
and 3535(d).

    2. Revise Sec. 291.530(a) to read as follows:


Sec. 291.530  Who qualifies as a law enforcement officer?

* * * * *
    (a) Employed full-time by:
    (1) A Federal, state, county or municipal government; or
    (2) A public or private college or university; and
* * * * *

    Dated: October 2, 2000.
William C. Apgar,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 00-25870 Filed 10-6-00; 8:45 am]
BILLING CODE 4210-27-P