60324 Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Rules and Regulations

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.

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 speechimpaired 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 HUDAcquired 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 HUDdesignated 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 fulltime 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 § 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.

Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Rules and Regulations 60325

(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

§ 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,

60326 Federal Register / Vol. 65, No. 196 / Tuesday, October 10, 2000 / Rules and Regulations

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 HUDacquired 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 HUDACQUIRED 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 § 291.530(a) to read as

follows:

§ 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]

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