61072 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Parts 200, 236, 880, 881 and

883

[Docket No. FR–4532–F–01]

RIN 2502–AH46

Increased Distributions to Owners of

Certain HUD-Assisted Multifamily

Rental Projects

AGENCY: Office of the Assistant

Secretary for Housing—Federal Housing

Commissioner, HUD.

ACTION: Final rule.

SUMMARY: This final rule adds an

exception to current limits on

distributions to owners for HUDassisted multifamily rental projects.

HUD may now permit increased

distributions for owners of projects with

section 8 project-based assistance and

below-market rents, if such increases are

necessary to ensure continued

participation of the owners in the

section 8 program.

EFFECTIVE DATE: November 13, 2000.

FOR FURTHER INFORMATION CONTACT:

Willie Spearmon, Director, Office of

Housing Assistance and Grants

Administration, Department of Housing

and Urban Development, 451 7th St.

SW, Washington DC 20410, 202–708–

2866. (This not a toll-free number.) For

hearing- and speech-impaired persons,

these numbers may be accessed via TTY

by calling the Federal Information Relay

Service at 1–800–877–8339.

SUPPLEMENTARY INFORMATION:

Background

On June 16, 1999, the Department

issued Notice H 99–15, Emergency

Initiative to Preserve Below-Market

Project-Based Section 8 Multifamily

Housing Stock. The Notice identified a

class of HUD-assisted multifamily

projects that were most at risk of

‘‘opting-out’’ of section 8 project-based

assistance when contracts expired, and

provided inducements for the owners of

at-risk projects to renew the expiring

contracts.

Most importantly, the Notice

provided for ‘‘marking up’’ of rent levels

for certain projects at risk of opting out,

as permitted by section 524 of the

Multifamily Affordable Housing Reform

and Affordability Act of 1997 (MAHRA),

to comparable market rents (or 150% of

Fair Market Rent, if lower). Section 524

was recently amended by Public Law

106–74 to mandate marking up in

certain circumstances, and the

Department is addressing those

amendments in a separate rulemaking

proceeding involving 24 CFR part 402.

Notice H 99–15 also announced that

HUD would waive regulations to permit

owners of the at-risk projects to take

distributions in excess of the limits

stated in regulations. This waiver

approach is continued for FY 2000 by

HUD Notice H 99–36 issued on

December 29, 1999. Limits on

distributions are not set by statute and

are not directly affected by the recent

legislation on ‘‘marking up’’. However,

the Department expects to continue to

permit increased distributions along the

lines of Notices H 99–15 and H 99–36

in connection with ‘‘marking up’’ under

amended section 524 of MAHRA.

Because this will become a permanent

policy, it would be inappropriate to

continue to rely indefinitely on the use

of waivers of relevant regulatory

restrictions. This final rule makes

continued reliance on waivers

unnecessary.

Changes to Parts 236, 880, 881, and 883

Made in This Rule

Notice H 99–15 refers to five

regulatory provisions of title 24 that

limit distributions to project owners:

§§ 221.532(a) (1995), 236.50(a)(2) (1995),

880.205(b), 881.205(b), and 883.306(b).

This rule adds language to the latter four

provisions to authorize HUD to allow

distributions of surplus cash, in excess

of the amounts usually permitted by

such provisions, for project owners who

participate in a HUD-approved initiative

or program to preserve assisted housing

stock with below-market rates, such as

the Emergency Initiative begun by

Notice H 99–15. Consistent with the

regulation waivers that HUD has already

granted, the increased distributions will

be limited to a maximum amount based

on market rents and calculated

according to HUD instructions. Any

increased limits on distributions, or

changes in those limits, will be

announced in a widely-distributed HUD

issuance such as a HUD Notice (which

will also be available on HUD’s Internet

website), but the limits will not be

required to be published in the Federal

Register. The new language also

clarifies that any excess rental charges

that a section 236 project owner is

authorized to retain under section

236(g) of the National Housing Act

(which was amended after Notice 99–15

was issued) are not considered

distributions.

For part 236, we have clarified the

language of the ‘‘savings provision’’ of

§ 236.1(c), which preserves language

predating a 1996 regulatory

‘‘streamlining’’ effort. No substantive

change is intended. In addition, we

added a new § 236.2 that is

substantively the same as the additions

to §§ 880.205, 881.205, and 883.306

described above.

Changes to Part 200 Made in This Rule

Although the waiver mentioned

§ 221.532(a) (1995), that provision is not

amended by this final rule because it is

no longer in effect as such. Section

221.532(a) was removed by a

streamlining rule published on April 1,

1996, without any express savings

provision. In lieu of matters that

formerly appeared in subpart C of part

221 (including specific limits on

distributions), § 221.501 now refers the

reader to subpart A of part 200. That

subpart is a restatement of eligibility

requirements (including continued

general authority for mortgagor

supervision by HUD) for FHA

multifamily and health care mortgage

insurance programs. Current § 200.105

contains general regulatory authority for

HUD’s mortgagor supervision policies

and permits regulation to be by a

regulatory agreement or other means

prescribed by the Secretary. This

general authority is supplemented by

§ 200.106, which specifically permits

HUD to regulate as limited dividend

mortgagors projects receiving

government ‘‘assistance’’ as defined in

regulations implementing the

Department of Housing and Urban

Development Reform Act of 1990 (as

explained below, there is no longer any

such definition and correction is

needed). Section 200.106 permits HUD

to continue to impose additional

regulation for mortgagors of assisted

projects beyond those applicable to all

multifamily mortgagors.

The preamble to the streamlining rule

made it clear that the replacement of

certain part 221 provisions with those

now in part 200 was not intended to

affect substantive policy. Because the

focus of current subpart A is on the

eligibility requirements for origination

of new mortgages, however, subpart A

lacks some of the previous specifics on

certain matters of mortgagor regulation

covered in former subpart C that

continue to be relevant after the

mortgage origination is completed.

We are taking this opportunity to

amend part 200 in several respects.

Most importantly, the final rule adds

language (new § 200.106(b)) that is

similar to the language added to the

other four sections amended by the final

rule. The previous language of § 200.106

is now designated as § 200.106(a) and is

revised in several respects. First, the

reference in § 200.106 to the definition

of ‘‘assistance’’ is brought up to date. It

appears to have been intended as a

Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Rules and Regulations 61073

reference to a defined term that formerly

appeared in 24 CFR parts 4 and 12

before those parts were streamlined and

combined in 1996 into the current 24

CFR part 4. Part 4 now uses several

different definitions to encompass the

concept formerly conveyed by the single

defined term ‘‘assistance’’. Of these

definitions, we have chosen to reference

in § 200.106 the defined phrase

‘‘assistance within the jurisdiction of

the Department to any housing project’’

from § 4.3. That phrase includes existing

section 221 projects held by limited

distribution mortgagors.

Second, we have clarified several

points in what is now redesignated as

§ 200.106(a). The revised language

expressly recognizes that regulation of

limited distribution mortgagors for

assisted projects may be by regulation or

otherwise and is in addition to any

regulation of mortgagors under

§ 200.105. This approach makes it clear

that § 201.106 is consistent with

§ 201.105. Further, the revised language

expressly includes regulation of the

amount of the permissible distribution

as an example of permissible regulation.

Prior to streamlining, this and other

matters especially applicable to assisted

projects were spelled out in regulations,

but they are now continued in force by

HUD by virtue of the more general

language of §§ 200.105 and 200.106.

On the technical corrections level, we

have deleted from the redesignated

§ 200.106(a) a confusing reference to the

Low-Income Housing Tax-Credit

program. Existing § 200.105(b) is also

revised to correct errors.

Pre-emption

Public Law 106–74 also added a new

section 524(f) to MAHRA that preempts

State and local laws and regulations that

limit or restrict project distributions to

an amount less than that provided for

under regulations of the Secretary. The

preemption is limited to projects which

have section 8 contracts renewed under

section 524 of MAHRA and which have

distributions of surplus funds accruing

after October 20, 1999. Preemption does

not apply to State-financed projects. An

owner may elect to waive the

preemption. Each section of the

regulations that is amended as

discussed above to permit increased

distributions is also covered by the

statutory preemption, both with respect

to distribution limits expressly set forth

in regulations and to any increased

amounts permitted by HUD pursuant to

this final rule.

Justification for Final Rulemaking

It is the general practice of the

Department to provide a 60-day public

comment period on all rules in

accordance with 24 CFR part 10.

However, a prior public comment

procedure may be omitted under § 10.1

if the Department determines that is

impracticable, unnecessary, or contrary

to the public interest.

The Department has determined that

prior public comment for these

provisions regarding increased limits on

distributions is unnecessary because

these provisions do not adversely affect

the interests of any person. Most of the

rule simply permits HUD to continue

existing practices that provide for the

preservation of certain below-market

projects as affordable housing resources.

It is also unnecessary to seek public

comment on the preemption language of

the rule because this language simply

sets forth a statutory provision with

some interpretation of its effect. As

such, that language is an interpretative

rule. HUD’s rulemaking procedures do

not require a notice and comment

procedure for interpretive rules (see 24

CFR 10.1). Additionally, the rule makes

certain technical corrections and

clarifications to existing regulations that

do not have any substantive effect.

Findings and Certifications

Environmental Impact

A Finding of No Significant Impact

with respect to the environment has

been made in accordance with HUD

regulations at 24 CFR part 50

implementing section 102(2)(C) of the

National Environmental Policy Act of

1969, 42 U.S.C. 4332. The Finding of No

Significant Impact is available for public

inspection and copying between 7:30

a.m. and 5:30 p.m. weekdays at the

Office of the Rules Docket Clerk, 451

Seventh Street, SW, Room 10276,

Washington, DC 20410–0500.

Regulatory Flexibility Act

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this rule before

publication and by approving it certifies

that this rule will not have a significant

economic impact on a substantial

number of small entities. The final rule

codifies long-established existing

practices that provide for the

preservation of certain below-market

projects as affordable housing resources.

The rule also includes a statutorily

required provision on preemption and

makes certain technical corrections and

clarifications to existing regulations that

do not have any substantive effect.

Executive Order 13132, Federalism

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.

Unfunded Mandates Reform Act

The Unfunded Mandates Reform Act

of 1995 (2 U.S.C. 1532) 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 a Federal

mandate that will result in the

expenditure by State, local, or tribal

governments, in the aggregate, or by the

private sector, of $100 million or more

in any one year.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic

Assistance program number is 14.134.

List of Subjects

24 CFR Part 200

Administrative practice and

procedure, Claims, Equal employment

opportunity, Fair housing, Home

improvement, Housing standards, Lead

poisoning, Loan programs—housing and

community development, Minimum

property standards, Mortgage insurance,

Organization and functions

(Government agencies), Penalties,

Reporting and recordkeeping

requirements, Social security,

Unemployment compensation, Wages.

24 CFR Part 236

Grant programs—housing and

community development, Low and

moderate income housing, Mortgage

insurance, Rent subsidies, Reporting

and recordkeeping requirements.

24 CFR Part 880

Grant programs—housing and

community development, Rent

subsidies, Reporting and recordkeeping

requirements.

24 CFR Part 881

Grant programs—housing and

community development, Rent

subsidies, Reporting and recordkeeping

requirements.

24 CFR Part 883

Grant programs—housing and

community development, Rent

subsidies, Reporting and recordkeeping

requirements.

Accordingly, chapter II of title 24 of

the Code of Federal Regulations is

amended as follows:

61074 Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Rules and Regulations

PART 200—INTRODUCTION TO FHA

PROGRAMS

1. The authority citation for part 200

is revised to read as follows:

Authority: 12 U.S.C. 1702–1715z–21; 42

U.S.C. 3535(d).

2. Section 200.105 is amended by

revising paragraph (b) to read as follows:

§ 200.105 Mortgagor supervision.

* * * * *

(b) The Commissioner may delegate to

the mortgagee or other party the

Commissioner’s authority, in whole or

in part, in accordance with the terms,

conditions and standards established by

the Commissioner in any executed

Regulatory Agreement or other

instrument granting the Commissioner

supervision of the mortgagor.

3. Section 200.106 is revised to read

as follows:

§ 200.106 Projects with limited distribution

mortgagors and program assistance.

(a) Regulation as limited distribution

mortgagors. In addition to regulation

under § 200.105, limited distribution

mortgagors for projects receiving

‘‘assistance within the jurisdiction of

the Department’’ (as defined in § 4.3 of

this title) may be regulated by the

Commissioner as to additional matters,

by regulation or otherwise, including as

to the amount of the permissible

distribution to the mortgagor.

(b) Increased distributions. The

Commissioner may permit increased

distributions of surplus cash, in excess

of the amounts the Commissioner

otherwise permits for limited

distribution mortgagors, to a limited

distribution mortgagor who participates

in a HUD-approved initiative or

program to preserve housing stock with

below-market rents as affordable

housing. The increased distribution will

be limited to a maximum amount based

on market rents and calculated

according to HUD instructions. Funds

that the mortgagor is authorized to

retain under section 236(g)(2) of the

National Housing Act are not

considered distributions to the

mortgagor.

(c) Pre-emption. Any State or local

law or regulation that restricts

distributions to an amount lower than

permitted by the Commissioner under

authority of this section is preempted to

the extent provided in section 524(f) of

the Multifamily Assisted Housing

Reform and Affordability Act of 1997.

PART 236—MORTGAGE INSURANCE

AND INTEREST REDUCTION

PAYMENTS FOR RENTAL PROJECTS

4. The authority citation for this part

continues to read as follows:

Authority: 12 U.S.C. 1715b and 1715z-1; 42

U.S.C. 3535(d).

5. Section 236.1(c) is revised to read

as follows:

§ 236.1 Applicability, cross-reference and

savings clause.

* * * * *

(c) Savings provision. Any mortgage

approved by the Commissioner for

insurance pursuant to sections 236(j) or

236(n) of the National Housing Act is

governed by subpart A of this part as in

effect immediately before May 1, 1996,

contained in the April 1, 1995 edition

of 24 CFR, parts 220 to 499, and by

subparts B through E of this part, except

as otherwise provided in this subpart.

6. A new § 236.2 is added to read as

follows:

§ 236.2 Increased distributions to certain

limited distribution mortgagors.

(a) Increased distributions. The

Commissioner may permit increased

distributions of surplus cash in excess

of the amounts otherwise permitted by

subpart A of this part to limited

distribution mortgagors who participate

in a HUD-approved initiative or

program to preserve below-market

housing stock. The increased

distributions will be limited to a

maximum amount based on market

rents and calculated according to HUD

instructions. Funds that the mortgagor is

authorized to retain under section

236(g)(2) of the National Housing Act

are not considered distributions to the

mortgagor.

(b) Pre-emption. Any State or local

law or regulation that restricts

distributions to an amount lower than

permitted by subpart A of this part as in

effect immediately before May 1, 1996,

contained in the April 1, 1995 edition

of 24 CFR, parts 220 to 499, or permitted

by the Commissioner under this section

is preempted to the extent provided by

section 524(f) of the Multifamily

Assisted Housing Reform and

Affordability Act of 1997.

PART 880—SECTION 8 HOUSING

ASSISTANCE PAYMENTS PROGRAM

FOR NEW CONSTRUCTION

7. The authority citation for part 880

continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f,

3535(d), 12701, and 13611–13619.

8. Section 880.205 is amended by

adding new paragraphs (h) and (i) to

read as follows:

§ 880.205 Limitation on distributions.

* * * * *

(h) HUD may permit increased

distributions of surplus cash, in excess

of the amounts otherwise permitted, to

profit-motivated owners who participate

in a HUD-approved initiative or

program to preserve below-market

housing stock. The increased

distributions will be limited to a

maximum amount based on market

rents and calculated according to HUD

instructions. Funds that the owner is

authorized to retain under section

236(g)(2) of the National Housing Act

are not considered distributions to the

owner.

(i) Any State or local law or regulation

that restricts distributions to an amount

lower than permitted by this section or

permitted by the Commissioner under

this paragraph (i) is preempted to the

extent provided by section 524(f) of the

Multifamily Assisted Housing Reform

and Affordability Act of 1997.

PART 881—SECTION 8 HOUSING

ASSISTANCE PAYMENTS PROGRAM

FOR SUBSTANTIAL REHABILITATION

9. The authority citation for part 881

continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f,

3535(d), 12701, and 13611–13619.

10. Section 881.205 is amended by

adding new paragraphs (h) and (i) to

read as follows:

§ 881.205 Limitation on distributions.

* * * * *

(h) HUD may permit increased

distributions of surplus cash, in excess

of the amounts otherwise permitted, to

profit-motivated owners who participate

in a HUD-approved initiative or

program to preserve below-market

housing stock. The increased

distributions will be limited to a

maximum amount based on market

rents and calculated according to HUD

instructions. Funds that the owner is

authorized to retain under section

236(g)(2) of the National Housing Act

are not considered distributions to the

owner.

(i) Any State or local law or regulation

that restricts distributions to an amount

lower than permitted by this section or

permitted by the Commissioner under

this paragraph (i) is preempted to the

extent provided by section 524(f) of the

Multifamily Assisted Housing Reform

and Affordability Act of 1997.

Federal Register / Vol. 65, No. 199 / Friday, October 13, 2000 / Rules and Regulations 61075

PART 883—SECTION 8 HOUSING

ASSISTANCE PAYMENTS

PROGRAM—STATE HOUSING

AGENCIES

11. The authority citation for part 881

continues to read as follows:

Authority: 42 U.S.C. 1437a, 1437c, 1437f,

3535(d), and 13611–13619.

12. Section 883.306 is amended by

adding new paragraph (g) and (h) to

read as follows:

§ 883.205 Limitation on distributions.

* * * * *

(g) HUD may permit increased

distributions of surplus, in excess of the

amounts otherwise permitted, to profitmotivated owners who participate in a

HUD-approved initiative or program to

preserve below-market housing stock.

The increased distributions will be

limited to a maximum amount based on

market rents and calculated according to

HUD instructions. Funds that the owner

is authorized to retain under section

236(g)(2) of the National Housing Act

are not considered distributions to the

owner.

(h) Any State or local law or

regulation that restricts distributions to

an amount lower than permitted by this

section or permitted by the

Commissioner under this paragraph (h)

is preempted as provided by section

524(f) of the Multifamily Assisted

Housing Reform and Affordability Act

of 1997.

Dated: July 7, 2000.

William C. Apgar,

Assistant Secretary for Housing-Federal

Housing Commissioner.

[FR Doc. 00–26247 Filed 10–12–00; 8:45 am]

BILLING CODE 4210–27–P