95808 Federal Register / Vol. 89, No. 232 / Tuesday, December 3, 2024 / Notices 

locate the AAF for the geographic area 

where the contract unit is located. 

• Determine whether the highest cost 

utility is or is not included in contract 

rent for the contract unit. 

• If highest cost utility is included, 

select the AAF from the column for 

‘‘Highest Cost Utility Included.’’ If 

highest cost utility is not included, 

select the AAF from the column for 

‘‘Highest Cost Utility Excluded.’’ 

V. Methodology 

AAFs are rent inflation factors. Two 

types of rent inflation factors are 

calculated for AAFs: gross rent factors 

and shelter rent factors. The gross rent 

factor accounts for inflation in the cost 

of both the rent of the residence and the 

utilities used by the unit; the shelter 

rent factor accounts for the inflation in 

the rent of the residence but does not 

reflect any change in the cost of utilities. 

The gross rent inflation factor is 

designated as ‘‘Highest Cost Utility 

Included’’ and the shelter rent inflation 

factor is designated as ‘‘Highest Cost 

Utility Excluded.’’ HUD calculates the 

AAFs based on the shelter and gross 

rent inflation factors used in FMR 

calculations. The source data for AAFs 

therefore come from the 23 local and 4 

regional CPI components (rent of 

primary residence and household fuels 

and utilities), depending on the location 

of the AAF area, and are combined with 

available measures of private data 

sources in calculating a weighted 

average shelter and gross rent inflation 

factor. The private measures of rent 

used by HUD are the RealPage average 

effective rent per unit; Moody’s 

Analytics REIS average market rent; 

CoStar Group average effective rent; 

CoreLogic, Inc. single-family combined 

3-bedroom median rent; Apartment List 

Rent Estimate; and Zillow Observed 

Rent Index. 

In calculating the AAF from these 

data, HUD first takes the annual average 

of each statistic, then its year-to-year 

change. HUD then takes the mean of 

changes from all available sources for 

each area. Next, HUD takes an average 

of this private-sector measure of rent 

inflation with rent inflation as captured 

by the CPI for the area, where the 

private-sector measure is weighted at 

approximately 75 percent and the CPI 

rent inflation measure is weighted at 

approximately 25 percent. HUD has 

determined these weights by comparing 

the national average of the private rent 

changes and changes in CPI rent of 

primary residence to changes in the 

national average of recent mover rents 

from the American Community Survey 

(ACS) from 2018 through 2022. HUD 

weights the private data averages and 

overall CPI rent of primary residence in 

such a way as to minimize the root 

mean squared error between the 

resulting average and the ACS recent 

mover rents. For future AAFs, HUD will 

update the weights by adding the most 

recent years of ACS recent mover rents, 

private rent data, and CPI rent of 

primary residence to the analysis. 

HUD uses a local measure of private 

rent inflation for markets that are 

covered by at least three of the six 

available sources of private rent data. 

HUD combines this local measure of 

rent inflation with either the local 

metropolitan area CPI rent of primary 

residence for the 23 areas where such 

data exist or the regional CPI rent in 

areas without a local index. For areas 

without at least three of the six private 

rent data sources available, HUD uses a 

regional average of private rent inflation 

factors alongside the regional CPI rent of 

primary residence. HUD constructs the 

regional average by taking the rental 

unit weighted average of the change in 

rents of each area in a region that does 

have private rent data coverage. This 

ensures that smaller areas that are not 

directly covered by the private sources 

will still have current rental market 

conditions taken into account in the 

calculation of the rent inflation factor 

for such areas. 

The results of the above calculation 

are the ‘‘Highest Cost Utility Excluded’’ 

AAF. For the ‘‘Highest Cost Utility 

Included’’ AAF, HUD averages the 

result of this step with the year-to-year 

change in the CPI housing fuels and 

utilities index for the area in order to 

make the resulting inflation measure 

reflective of gross rents. 

VI. Area Definitions 

To make certain that they are using 

the correct AAFs, users should refer to 

the Area Definitions Table section at 

https://www.huduser.gov/portal/ 

datasets/aaf.html. Furthermore, users 

can also search for AAF area definitions 

using an online lookup tool available on 

HUD User at the link in the previous 

sentence. AAFs are based on the 

updated metropolitan area definitions 

published by the Office of Management 

and Budget (OMB) on September 14, 

2018, and first incorporated by the U.S. 

Census Bureau into the 2019 ACS data 

and the corresponding FY 2022 FMRs. 

On July 21, 2023, OMB published 

Bulletin No. 23–01, which contains 

revisions to metropolitan area 

definitions. However, the U.S. Census 

Bureau has not yet incorporated these 

revisions into the data available to HUD, 

and therefore HUD is not using these 

new definitions for FY 2025. 

Solomon Greene, 

Principal Deputy Assistant Secretary for 

Policy Development and Research. 

[FR Doc. 2024–28314 Filed 12–2–24; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–6474–N–01] 

Notice of Partial Claim Electronic 

Delivery Alternative Demonstration 

AGENCY: Office of the Assistant 

Secretary for Housing—Federal Housing 

Commissioner, HUD. 

ACTION: Notice, with request for 

comments. 

SUMMARY: This notice announces the 

Partial Claim Electronic Delivery 

Alternative Demonstration (the 

Demonstration). Under the 

Demonstration, participating mortgagees 

will submit digital copies of partial 

claim promissory notes and subordinate 

mortgages (PC Documents) to HUD 

instead of originals, which they will 

retain and provide to HUD upon 

request. The Demonstration will include 

any mortgagees that elect to participate 

but will only include partial claim 

subordinate mortgages secured by 

mortgage properties where the use of 

digital copies is permissible under 

applicable law. When the 

Demonstration ends, HUD will evaluate 

its success, determine whether to 

permanently implement the 

Demonstration processes, and identify 

any other necessary changes. 

DATES: Comments are due no later than 

February 3, 2025. Following the 

conclusion of the 60-day comment 

period, HUD will fully evaluate 

submitted comments and may modify 

the design of the Demonstration. HUD 

will then issue another notice 

announcing the start date of the 

Demonstration and will also publish a 

mortgagee letter with further 

information. 

ADDRESSES: There are two methods for 

submitting public comments. All 

submissions must refer to the above 

docket number and title. 

1. Electronic Submission of 

Comments. Comments may be 

submitted electronically through the 

Federal eRulemaking Portal at 

www.regulations.gov. HUD strongly 

encourages commenters to submit 

comments electronically. Electronic 

submission of comments allows the 

commenter maximum time to prepare 


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and submit a comment, ensures timely 

receipt by HUD, and enables HUD to 

make comments immediately available 

to the public. Comments submitted 

electronically through 

www.regulations.gov can be viewed by 

other commenters and interested 

members of the public. Commenters 

should follow the instructions provided 

on that website to submit comments 

electronically. 

2. Submission of Comments by Mail. 

Comments may be submitted by mail to 

the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

7th Street SW, Room 10276, 

Washington, DC 20410–0500. 

Note: To receive consideration as 

public comments, comments must be 

submitted through one of the two 

methods specified above. 

No Facsimile Comments. Facsimile 

(FAX) comments are not acceptable. 

Public Inspection of Public 

Comments. HUD will make all properly 

submitted comments and 

communications available for public 

inspection and copying during regular 

business hours at the above address. 

Due to security measures at the HUD 

Headquarters building, you must 

schedule an appointment in advance to 

review the public comments by calling 

the Regulations Division at 202–708– 

3055 (this is not a toll-free number). 

HUD welcomes and is prepared to 

receive calls from individuals who are 

deaf or hard of hearing, as well as 

individuals with speech or 

communication disabilities. To learn 

more about how to make an accessible 

telephone call, please visit: https://

www.fcc.gov/consumers/guides/ 

telecommunications-relay-service-trs. 

Copies of all comments submitted are 

available for inspection and 

downloading at https://

www.regulations.gov/. 

FOR FURTHER INFORMATION CONTACT: 

Elissa Saunders, Director, Office of 

Single Family Asset Management, Office 

of Housing, Department of Housing and 

Urban Development, 100 South Charles 

Street, Bank of America Building, Tower 

II, 11th Floor, Baltimore, MD 21201; 

telephone number 202–402–2378 (this 

is not a toll-free number). HUD 

welcomes and is prepared to receive 

calls from individuals who are deaf or 

hard of hearing, as well as individuals 

with speech or communication 

disabilities. To learn more about how to 

make an accessible telephone call, 

please visit https://www.fcc.gov/ 

consumers/guides/telecommunicationsrelay-service-trs. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Partial Claim Processes and 

Mortgagee Responsibilities 

Pursuant to section 230(b) of the 

National Housing Act (12 U.S.C. 1715u), 

HUD will pay a partial claim to a 

mortgagee to cure arrearages and, in 

certain cases, to achieve principal 

reduction on an FHA-insured mortgage 

in default or facing imminent default. In 

exchange for this partial claim payment, 

the borrower agrees to execute PC 

Documents in favor of HUD. 

HUD’s PC Documents do not accrue 

interest and require repayment only 

when the first of the following events 

occurs: the maturity of the first 

mortgage, the sale of the property, the 

payoff of the first mortgage, or if 

provided for under the partial claim 

note, the termination of FHA insurance, 

except that HUD will agree to 

subordinate the partial claim note to an 

FHA streamline refinance. 

The mortgagee is responsible for 

having the PC Documents executed, 

recording the partial claim mortgage, 

and delivering the original PC 

Documents to HUD (see 24 CFR 203.371 

and HUD Handbook 4000.1 

III.A.2.k.v.(H)). If the mortgagee fails to 

provide HUD with the original PC 

Documents within the required 

timeframes, HUD requires 

reimbursement of the full amount of the 

partial claim and partial claim incentive 

fee (see 24 CFR 203.371(d), specifically). 

The mortgagee must retain copies of 

the PC Documents and other required 

partial claim information in its servicing 

file. The mortgagee is currently required 

to retain these items in its servicing file 

for at least seven years after the transfer 

or sale of the first mortgage or 

termination of mortgage insurance. 

B. Partial Claim Servicing and Debt 

Collection 

The mortgagee services the partial 

claim until it records the partial claim 

mortgage and delivers the PC 

Documents to HUD. Thereafter, HUD, 

through its Loan Servicing Contractor 

(LSC), services partial claims and serves 

as the document custodian for PC 

Documents. 

When HUD is informed that the first 

mortgage is being paid in full, sold, 

transferred or assumed, terminated, or 

refinanced without resubordinating the 

partial claim, HUD, through its LSC, 

may provide a payoff figure on a partial 

claim. Once PC Documents become due 

and payable, HUD’s LSC issues a payoff 

letter. If the borrower fails to pay the 

partial claim debt, it can be referred to 

HUD’s Financial Operations Center for 

appropriate collection action. The 

referral package includes a copy of the 

PC Documents. 

While HUD primarily relies on copies 

of PC Documents to conduct its 

servicing and collection activities, there 

are limited occasions where original PC 

Documents are required to support such 

efforts. This is why HUD requires the 

mortgagee to deliver original PC 

Documents to HUD and why HUD 

retains original PC Documents. 

HUD is aware of the costs incurred 

and burdens associated with the 

mortgagee’s delivery of and HUD’s 

retention of original PC Documents. 

Besides these regular costs and burdens, 

there are also additional costs and 

burdens when original PC Documents 

are lost during delivery and it becomes 

necessary to take various steps to locate 

the lost PC Documents and execute lost 

note affidavits. In light of these costs 

and burdens, HUD now seeks to 

evaluate whether mortgagees could 

retain original PC Documents in their 

servicing files and deliver them to HUD 

only upon HUD’s request. 

II. Notice of Demonstration Program 

A. Duration 

HUD will announce the start date of 

the Demonstration in a subsequent 

notice that will be issued after the 

conclusion of the 60-day comment 

period for this notice. The 

Demonstration will continue for five 

years after this start date, unless 

extended. Mortgagees electing to 

participate in the Demonstration would 

be required to retain original PC 

Documents for the same records 

retention timeframe as the associated 

first mortgage. The requirement to retain 

the original PC Documents would not 

end after the expiration of the 

Demonstration for any PC Documents 

that have been electronically submitted 

to HUD as part of this Demonstration. 

B. Overview 

Under the Demonstration, mortgagees 

would, after execution of the PC 

Documents by all required parties, agree 

to: (1) submit an electronic copy of the 

executed partial claim note to HUD no 

later than 60 days from the execution 

date, (2) submit an electronic copy of 

the recorded partial claim mortgage to 

HUD no later than six months following 

the execution date, (3) retain the 

original PC Documents for the required 

duration of document retention, as 

described in HUD Handbook 4000.1 

III.A.1.n, unless HUD otherwise 

instructs the mortgagee that the 

retention requirements have changed or 

that retention is no longer required, and 

(4) deliver the original PC Documents to 


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HUD upon HUD’s request no later than 

five business days after the date of the 

request, or within another timeframe 

prescribed by HUD. Mortgagees that 

elect to submit electronic PC Documents 

for a subordinate mortgage must 

continue to process all future PC 

Documents electronically, for the 

duration of the Demonstration, unless a 

particular mortgage property is located 

in a jurisdiction where the use of digital 

documents is prohibited. 

C. Goals 

The main goal of the Demonstration is 

to reduce the costs and burdens for 

mortgagees associated with the mailing 

and tracking of original PC Documents. 

The Demonstration is also intended to 

reduce the incidence of original PC 

Documents being lost during delivery, 

as when this occurs mortgagees have to 

obtain and resubmit replacements and 

borrowers have to re-execute lost 

documents. In addition, it is intended to 

reduce the amount of mortgagee 

reimbursement to HUD in connection 

with lost PC Documents. Finally, the 

Demonstration is also intended to 

reduce HUD’s costs related to the 

retention of original PC Documents and 

to enhance HUD’s ability to conduct 

servicing and debt collection activities 

associated with partial claims. 

D. Participating Mortgagees 

Mortgagee participation in the 

Demonstration is voluntary. HUD will 

allow all mortgagees to participate in 

the Demonstration, where state and 

local law permits. The actions the 

participating mortgagees will take 

related to the submission of electronic 

PC Documents and the retention of 

original PC Documents will be 

performed without any expectation of 

compensation. If a mortgagee does not 

adhere to the requirements of the 

Demonstration, they may be removed 

from participation in the Demonstration. 

III. Impacted Regulations 

For the duration of the 

Demonstration, participating mortgagees 

will not adhere to the 24 CFR 203.371(d) 

requirements to submit original PC 

Documents to HUD within certain 

prescribed timeframes. Failure to submit 

original PC Documents within these 

timeframes will not result in mortgagees 

having to reimburse HUD for the full 

amount of the partial claim or any 

partial claim incentive fee, so long as 

electronic copies of the PC Documents 

were submitted within the required 

timeframes and original PC Documents 

are delivered to HUD, upon HUD’s 

request, within the required timeframe. 

IV. Evaluating the Success of the 

Demonstration 

At the conclusion of the 

Demonstration, HUD will assess its 

success, determine whether to 

implement the Demonstration’s PC 

Documents submission and retention 

processes on a permanent basis, and 

identify any additional changes that 

may be needed to implement those 

processes. In conducting this 

evaluation, HUD will assess such factors 

as whether the Demonstration 

processes: (1) reduce the costs and 

burdens for mortgagees associated with 

delivering original PC Documents to 

HUD, (2) reduce the number of lost 

original PC Documents, (3) reduce the 

costs and burdens for HUD associated 

with the retention of original PC 

Documents, (4) enhance HUD’s ability 

to conduct servicing and debt collection 

activities associated with partial claims, 

and (5) allow for the assessment of risk 

to HUD’s partial claim recoveries and 

FHA’s Mutual Mortgage Insurance 

Fund. 

V. Solicitation of Public Comments 

In accordance with 24 CFR part 10 

and section 470 of the Housing and 

Urban-Rural Recovery Act of 1983 (42 

U.S.C. 3542), HUD is seeking comment 

on the Demonstration in this Federal 

Register notice for 60 days of public 

comment. The public comment period 

will give HUD the opportunity to 

consider submitted comments and to be 

in a position to commence 

implementation of the Demonstration 

following the conclusion of the 60-day 

comment period and publication of an 

additional notice announcing the 

Demonstration start date. HUD will fully 

evaluate submitted comments before the 

Demonstration commences and may 

modify the design of the Demonstration. 

If HUD decides to make any changes to 

the Demonstration, HUD will provide 

separate notice to the public prior to 

commencing the Demonstration. 

Julia R. Gordon, 

Assistant Secretary for Housing—Federal 

Housing Commissioner. 

[FR Doc. 2024–28298 Filed 12–2–24; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

[Docket No. FR–6492–N–01] 

Notice of Adoption of U.S. Department 

of Agriculture Farm Service Agency 

Categorical Exclusions Pursuant to 

Section 109 of the National 

Environmental Policy Act 

AGENCY: Office of the Secretary, HUD. 

ACTION: Notice. 

SUMMARY: HUD has identified 

categorical exclusions (CEs) to the 

National Environmental Policy Act 

(NEPA) established by the U.S. 

Department of Agriculture—Farm 

Service Agency (USDA–FSA) that cover 

categories of actions that HUD proposes 

to adopt. This notice identifies the 

USDA–FSA CEs and HUD’s categories 

of proposed actions for which it intends 

to use USDA–FSA’s CEs and describes 

the consultation between the agencies. 

DATES: This action is effective upon 

publication. 

FOR FURTHER INFORMATION CONTACT: 

Lauren Hayes Knutson, Environmental 

Planning Division Director, Office of 

Environment and Energy, U.S. 

Department of Housing and Urban 

Development, 451 7th Street SW, Room 

7282, Washington, DC 20410–5000; 

telephone 202–402–4270 (this is not a 

toll-free number); email 

EnvironmentalPlanningDivision@

hud.gov. HUD welcomes and is 

prepared to receive calls from 

individuals who are deaf or hard of 

hearing, as well as individuals with 

speech and communication disabilities. 

To learn more about how to make an 

accessible telephone call, please visit 

https://www.fcc.gov/consumers/guides/ 

telecommunications-relay-service-trs. 

SUPPLEMENTARY INFORMATION: 

I. Background 

National Environmental Policy Act and 

Categorical Exclusions 

Congress enacted the National 

Environmental Policy Act, 42 U.S.C. 

4321–4347, (NEPA) in order to 

encourage productive and enjoyable 

harmony between humans and the 

environment, recognizing the profound 

impact of human activity and the 

critical importance of restoring and 

maintaining environmental quality to 

the overall welfare of humankind. 42 

U.S.C. 4321, 4331. NEPA seeks to 

ensure that agencies consider the 

environmental effects of their proposed 

major actions in their decision-making 

processes and inform and involve the 

public in that process. NEPA created the 


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