53480 Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 291 

[Docket No. FR–4712–P–01; HUD–2005– 

0016] 

RIN 2502–AH72 

Disposition of HUD-Acquired Single 

Family Property; Good Neighbor Next 

Door Sales Program 

AGENCY: Office of the Assistant 

Secretary for Housing-Federal Housing 

Commissioner, HUD. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

establish regulations for HUD’s new 

Good Neighbor Next Door (GNND) Sales 

Program. The requirements for the new 

program are closely modeled on those 

for HUD’s Officer Next Door (OND) and 

Teacher Next Door (TND) Sales 

Programs. The GNND Sales Program 

would replace and build upon the 

success of these two existing sales 

programs. The purpose of the GNND 

Sales Program is to improve the quality 

of life in distressed urban communities 

by encouraging law enforcement 

officers, teachers, and firefighters/ 

emergency responders whose daily 

responsibilities and duties represent a 

nexus to the needs of the community to 

purchase and live in homes in these 

communities. Although the 

requirements governing the new GNND 

Sales Program would be similar to the 

existing requirements for the Officer and 

Teacher Next Door Sales Programs, HUD 

is also proposing to make several 

important modifications and 

improvements to the existing 

requirements. 

DATES: Comments Due Date: November 

7, 2005. 

ADDRESSES: Interested persons are 

invited to submit comments regarding 

this proposed rule to the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 10276, Washington, DC 20410– 

0500. Interested persons may also 

submit comments electronically through 

either: 

• The Federal eRulemaking Portal at 

www.regulations.gov; or 

• The HUD electronic Web site at 

www.epa.gov/feddocket. Follow the link 

entitled ‘‘View Open HUD Dockets.’’ 

Commenters should follow the 

instructions provided on that site to 

submit comments electronically. 

Facsimile (FAX) comments are not 

acceptable. In all cases, communications 

must refer to the docket number and 

title. All comments and 

communications submitted will be 

available, without charge, for public 

inspection and copying between 8 a.m. 

and 5 p.m. weekdays at the above 

address. Due to security measures at the 

HUD Headquarters building, please 

schedule an appointment to review the 

public comments by calling the 

Regulations Division at (202) 708–3055 

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

of the public comments are also 

available for inspection and 

downloading at www.epa.gov/ 

feddocket. 

FOR FURTHER INFORMATION CONTACT: 

Joseph McCloskey, Director, Office of 

Single Family Asset Management, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 9172, Washington, DC 20410– 

8000; telephone (202) 708–1672 (this is 

not a toll-free number). Hearing- or 

speech-impaired individuals may access 

this number through TTY by calling the 

toll-free Federal Information Relay 

Service at (800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

A vital part of HUD’s mission is to 

promote homeownership and the 

revitalization of cities. In support of 

these goals, HUD established the OND 

Sales Program. The OND Sales Program 

enables full-time law enforcement 

officers to purchase HUD-acquired 

homes located in revitalization areas at 

a 50 percent discount from list prices. 

HUD’s regulations for the OND Sales 

Program are located in subpart F of 24 

CFR part 291 (entitled ‘‘Disposition of 

HUD-Acquired Single Family 

Properties’’). 

In June 2004, HUD completed an 

evaluation of the success of the OND 

and TND Sales programs, which 

supported the assumption that an influx 

of police officers as homeowners does 

result in a substantial decrease in 

serious crime in a target neighborhood. 

HUD’s evaluation of the OND/TND 

Sales programs is available for 

download at www.huduser.org. 

The success of the OND Sales 

Program led to the development of the 

TND Sales Program. The TND Sales 

Program, modeled after the OND Sales 

Program, was designed to enable more 

teachers to help revitalize economically 

distressed neighborhoods by 

encouraging eligible teachers to 

purchase HUD-acquired homes located 

in HUD-designated revitalization areas 

at a 50 percent discount from list prices. 

HUD announced the creation of the 

TND Sales Program through a Federal 

Register notice published on December 

7, 1999 (64 FR 68370). 

II. This Proposed Rule 

This proposed rule would establish 

regulations for the GNND Sales 

Program. The requirements for the new 

program are similar to those for the 

existing OND and TND Sales Programs. 

The GNND Sales Program would replace 

and build upon the success of these two 

existing sales programs. The regulations 

for the GNND Sales Program would 

replace the existing OND regulations at 

24 CFR part 291, subpart F. The 

objective of the new program is to 

improve the quality of life in distressed 

urban communities by encouraging law 

enforcement officers, teachers, and 

firefighters/emergency responders, 

whose daily responsibilities and duties 

reflect a high level of public service 

commitment and represent a nexus to 

the needs of the community, to 

purchase and live in homes in these 

communities. 

III. Overview of the GNND Sales 

Program 

Although the requirements governing 

the new GNND Sales Program would be 

similar to the existing requirements for 

the OND and TND programs, HUD is 

also proposing to make several 

important modifications and 

improvements to the current 

requirements. This section of the 

preamble provides an overview of the 

proposed GNND Sales Program and 

highlights the most significant changes 

that would be made to the existing 

requirements by this rule. 

1. General. The GNND Sales Program 

will enable a full-time law enforcement 

officer, teacher, or firefighter/emergency 

responder (collectively referred to in 

this rule as ‘‘participants’’) to purchase 

a HUD-acquired home located in a 

HUD-designated revitalization area at a 

50 percent discount from the list price. 

The participant would also be eligible to 

purchase the home with a reduced 

down payment of $100, but only if the 

participant finances the home through 

an FHA-insured mortgage. 

To be eligible to purchase a home 

under the GNND Sales Program, the 

participant (or his/her spouse) may not 

have owned any residential real 

property for one year prior to the date 

of submitting an offer on the home being 

acquired through the program. Further, 

the participant (or his/her spouse) must 

not have previously purchased another 

home under the GNND Sales Program 

(or its predecessor OND/TND sales 

programs). This will help to ensure that 

the limited inventory of properties 

available for sale under the GNND Sales 

Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules 53481 

Program are purchased by individuals 

who do not currently own a home. 

Although both spouses, if otherwise 

eligible, may submit an offer on a single 

property made available for sale under 

the program, HUD will approve an offer 

from only one spouse. 

Under the current OND/TND 

requirements, participants are 

prohibited from owning any residential 

property (other than the home 

purchased through the OND or TND 

sales programs) during the owner 

occupancy term. Upon reconsideration, 

HUD has concluded that this 

requirement imposes an unduly 

burdensome restriction on business 

activity. Accordingly, the prohibition on 

the purchase of other residential 

property during the owner occupancy 

term would no longer apply under the 

GNND Sales Program. 

2. Eligible properties. Under the 

GNND Sales Program, all properties 

acquired by HUD that are located in 

HUD-designated revitalization areas 

(both those that are eligible for FHA 

mortgage insurance and those that are 

not eligible) will be made available to 

interested participants prior to listing 

the properties for sale to other 

purchasers. 

In the event that several offers are 

made on a single property, HUD will 

select a winning offer by lottery, as well 

as a back-up offer in the event the 

winning offeror is unable to close on the 

purchase of the property. If the back-up 

offeror is also unable to close on the 

purchase of the property, the property 

will then be made available for sale to 

other purchasers. Unlike the current 

OND/TND requirement, GNND offerors 

will no longer be required to notify HUD 

of their geographic area of interest and 

to indicate a preliminary interest in a 

particular property. This current OND/ 

TND requirement has proven to be an 

administratively burdensome and 

inefficient method for determining 

interest in properties made available for 

sale under the programs. As a matter of 

practice, HUD lists properties eligible 

for purchase separately from other 

properties, so that they can be more 

easily identified. 

3. Real Estate Brokers. Participants 

must submit offers through a 

participating real estate broker. In 

HUD’s experience, the business 

expertise of real estate brokers is 

beneficial to participants and facilitates 

the home buying process. Any real 

estate broker who has agreed to comply 

with HUD requirements may participate 

in the GNND Sales Program. Real estate 

brokers may submit unlimited numbers 

of offers on an individual property 

provided each offer is from a different 

prospective purchaser. 

4. Cap on Program Sales. HUD 

proposes to limit the number of HUDacquired homes sold under the GNND 

Sales Program in a fiscal year to no 

greater than five percent of the number 

of ‘‘Part A’’ mortgage insurance 

conveyance claims paid by HUD in the 

immediately preceding fiscal year. 

(Generally, there are two ‘‘parts’’ to the 

payment of an FHA mortgage insurance 

claim. A Part A claim consists of 

payment to cover the unpaid principal 

balance of the mortgage loan and certain 

interest expenses. A Part B claim, which 

is paid subsequent to a Part A claim, 

includes all other expenses covered by 

the FHA mortgage insurance.) 

The cap shall apply on a national 

basis, but HUD reserves the right to 

geographically apportion the cap to 

address regional or local differences in 

the number of homes sold through the 

GNND Sales Program. Additionally, 

HUD retains the flexibility to adjust the 

percentage of this cap for any fiscal 

year. Any HUD determination to 

geographically distribute the cap, 

change a current geographic 

distribution, or adjust the percentage of 

the cap would be announced by HUD 

through publication of a Federal 

Register notice at least 30 days before 

the revision takes effect. This provision 

would allow HUD to respond to 

disparities or changing circumstances 

more quickly than might be possible 

through notice and comment 

rulemaking procedures, while still 

ensuring that affected members of the 

public are provided with advance notice 

of any changes to the GNND Program 

sales cap. 

HUD believes that the proposed cap 

on sales will help ensure that sufficient 

numbers of HUD-acquired properties are 

available for other departmental 

property disposition initiatives (such as 

the programs for discounted sales to 

nonprofit organizations and government 

agencies). Further, the proposed limit 

on properties sold under the GNND 

Sales Program will better enable HUD to 

control the program and implement any 

necessary changes. 

5. Eligible law enforcement officers. A 

law enforcement officer would be 

eligible to purchase a home through the 

GNND Sales Program if employed fulltime by a law enforcement agency of the 

federal government, a state, a unit of 

general local government, or an Indian 

tribal government. Further, in carrying 

out such full-time employment, the lawenforcement officer must be sworn to 

uphold, and make arrests for violations 

of federal, state, tribal, county, 

township, or municipal law. For 

purposes of the GNND Sales Program, 

the term ‘‘unit of general local 

government’’ would be defined to mean 

a county or parish, city, town, township, 

or other political subdivision of a state. 

As noted above, the officer must be 

employed by a law-enforcement agency. 

Officers employed by federal, state, 

local, or tribal agencies that are not lawenforcement agencies (such as, for 

example, a public housing authority) 

would not be eligible to participate 

under the GNND Sales Program. The 

employment requirement must be 

satisfied both at the time the law 

enforcement officer submits a bid to 

purchase the home, and at the time of 

closing on the purchase of the home. 

Law enforcement officers employed 

by public or private colleges and 

universities would no longer be eligible 

to participate under the new program. 

Generally, these law enforcement 

officers do not have arrest authority 

beyond the campus and therefore have 

limited deterrent effect on crime in the 

communities where they live. 

Continuing eligibility to include these 

officers would not achieve the objective 

of the GNND Sales Program, which is to 

improve the quality of life in distressed 

urban communities by having law 

enforcement officers live in the 

neighborhoods where they are 

authorized to make arrests. 

The scope of the definition of law 

enforcement officer has been expanded 

to include tribal police officers. Tribal 

police officers are sworn to uphold and 

make arrests for violations of tribal law. 

Because tribal police officers have 

general arrest authority, the presence of 

tribal police officers would be as 

beneficial to their communities as that 

of their counterparts employed by 

federal, state, or local governments. 

HUD, therefore, proposes to revise the 

current regulations to allow tribal police 

officers to participate in the GNND Sales 

Program. 

6. Eligible teachers. A teacher would 

be eligible to purchase a home through 

the GNND Sales Program if employed 

full-time by a state-accredited public 

school or private school that provides 

direct services to students in grades prekindergarten through 12. The 

employment requirement must be 

satisfied both at the time the teacher 

submits a bid to purchase the home, and 

at the time of closing on the purchase 

of the home. The public or private 

school where the teacher is employed 

must serve students from the area where 

the home is located in the normal 

course of business. 

7. Eligible firefighters/emergency 

responders. The GNND Sales Program 

would include firefighters and 

53482 Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules 

emergency responders as a new class of 

eligible participants. To qualify as a 

firefighter/emergency responder, an 

individual would have to be employed 

as a full-time firefighter or emergency 

medical technician by a fire department 

or emergency medical services 

responder unit of the federal 

government, a state, a unit of general 

local government, or an Indian tribal 

government serving the area where the 

home is located. The employment 

requirement must be satisfied both at 

the time the firefighter/emergency 

responder submits a bid to purchase the 

home, and at the time of closing on the 

purchase of the home. 

8. Earnest money deposit. The 

participant would be required to make 

an earnest money deposit at the time of 

submitting an offer to purchase a home. 

The amount of the earnest money 

deposit required for a property would be 

an amount equal to one percent of the 

list price, but no less than $500 and no 

more than $2,000. 

The earnest money deposit must be in 

the form of a cash equivalent or a 

certification from the real estate broker 

that the earnest money deposit has been 

deposited in the broker’s escrow 

account. If an offer is accepted, the 

earnest money deposit would be 

credited to the purchaser at closing. If 

the offer is rejected, the earnest money 

deposit would be returned. Earnest 

money deposits are subject to total 

forfeiture upon the participant’s failure 

to close a sale. 

9. Start of owner-occupancy term. 

Participants must agree to live in the 

home purchased through the GNND 

Sales Program as their sole residence for 

at least 36 months. This proposed rule 

would establish new requirements 

governing the commencement of the 

required owner-occupancy term. The 

required start date would be based upon 

the date of closing and would vary 

depending on the scope of any repairs 

necessary for occupancy of the home. 

Specifically, the proposed rule provides 

that occupancy of the home must 

commence within 30 days after the 

closing date if HUD determines that the 

home requires no more than $10,000 in 

repairs prior to occupancy. If HUD 

determines that the home requires 

repairs worth more than $10,000 but 

less than $20,000, occupancy must start 

within 90 days of the closing date. If 

HUD determines that the home requires 

more than $20,000 in repairs, 

occupancy would be required to 

commence within 180 days of the 

closing date. The HUD determination 

regarding the amount of required repairs 

will be made solely for purposes of 

establishing the commencement of the 

owner-occupancy term, and does not 

constitute an assurance or guarantee for 

the benefit of purchaser. 

10. Interruptions to the owneroccupancy term. HUD may, at its sole 

discretion, allow interruptions to the 36- 

month owner-occupancy term if it 

determines that the interruption is 

necessary to prevent hardship. The 

participant must submit a written and 

signed request to HUD containing: (1) 

The reasons why the interruption is 

necessary; (2) the dates of the intended 

interruption; and (3) a certification from 

the participant that he/she is not 

abandoning the home as his/her 

permanent residence and will resume 

occupancy of the home upon the 

conclusion of the interruption to 

complete the remainder of the 36-month 

owner-occupancy term. 

The written request for approval of an 

interruption to the owner-occupancy 

term must be submitted to HUD at least 

30 calendar days before the anticipated 

interruption. Military service members 

protected by the Servicemembers Civil 

Relief Act of 2003 need not submit their 

written request to HUD 30 days in 

advance of an anticipated interruption, 

but should submit their written request 

as soon as practicable upon learning of 

a potential interruption, in order to 

ensure timely processing and approval 

of the request. 

11. Financing purchase of the home. 

If the participant uses conventional 

financing to purchase a home under the 

GNND Sales Program, the amount of the 

mortgage may not exceed the 

discounted sales price of the home. 

However, a participant using an FHAinsured mortgage to finance purchase of 

the home may finance reasonable and 

customary closing costs with the FHAinsured mortgage. The amount of the 

FHA-insured mortgage may not exceed 

the discounted sales price of the home 

plus the closing costs. In no event will 

HUD pay a buyer’s closing costs on the 

purchase of a property through the 

GNND Sales Program. 

12. The second mortgage. A 

participant must agree to execute a 

second mortgage and note payable to 

HUD on the home in the amount of the 

difference between the list price and the 

discounted selling price. The term of the 

second mortgage is equal to the owneroccupancy term (36 months) plus 30, 

90, or 180 days, as applicable depending 

on the amount of repairs required prior 

to occupancy (see section III.9. of this 

preamble). The amount of the second 

mortgage will be reduced by 1⁄36 on the 

last day of each month of occupancy 

following the occupancy start date. At 

the end of the 36th month of occupancy, 

the amount of the second mortgage will 

be zero. If the participant sells the home 

or stops living in the home as his/her 

sole residence prior to the expiration of 

the owner-occupancy term, the 

participant will owe HUD the amount 

due on the second mortgage as of the 

date the property is sold or vacated. 

13. Refinancing. This proposed rule 

would permit a participant to refinance 

the mortgage used to finance the 

purchase of his/her home. However, the 

total of the refinanced mortgage and the 

remaining principal balance of the 

second mortgage may not exceed 95 

percent of the value of the property, as 

appraised at the time of the refinancing. 

The second mortgage must hold a 

superior lien position to the refinanced 

mortgage in the absence of a 

subordination. HUD may permit 

subordination of the second mortgage, 

but only if HUD, at its sole discretion, 

determines that at least one of the 

following three conditions is satisfied: 

(1) The refinancing will result in a lower 

annual percentage rate on the first 

mortgage; (2) the refinancing is 

undertaken pursuant to HUD’s Section 

203(k) Rehabilitation Loan Insurance 

Program in order to rehabilitate or repair 

the home; or (3) the refinancing is 

necessary to prevent the participant 

from defaulting on the first mortgage. 

14. Multi-unit properties. Multi-unit 

properties would continue to be 

ineligible for purchase under the GNND 

Sales Program. 

15. Continuing obligations. To remain 

a participant in the GNND Sales 

Program, the participant must, for the 

entire duration of the owner-occupancy 

term, continue to own and live in as his/ 

her sole residence the home purchased 

through the GNND Sales Program. 

Additionally, the participant must 

certify initially, and once annually 

thereafter during and at the conclusion 

of the owner-occupancy term, that he or 

she owns, has lived in, and continues to 

live in the home as his or her sole 

residence. 

16. Governmental entities and 

nonprofit organizations. Under the 

proposed rule, governmental entities 

and nonprofit organizations would no 

longer be eligible to purchase HUDacquired homes for sale under the 

GNND Sales Program. Currently, 

governmental entities and nonprofit 

organizations may purchase OND and 

TND properties if they resell these 

homes directly to eligible law 

enforcement officers and teachers under 

the terms and conditions of the OND 

and TND Sales Programs. HUD believes 

that limiting participation in the GNND 

Sales Program to the ultimate 

purchasers—law enforcement officers, 

teachers, and firefighters/emergency 

Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules 53483 

responders—will better focus the 

program and help to ensure that the 

GNND Sales Program accomplishes its 

goals. 

IV. Findings and Certifications 

Executive Order 12866, Regulatory 

Planning and Review 

The Office of Management and Budget 

(OMB) reviewed this rule under 

Executive Order 12866 (entitled 

‘‘Regulatory Planning and Review’’). 

OMB determined that this rule is a 

‘‘significant regulatory action’’ as 

defined in section 3(f) of the Order 

(although not economically significant, 

as provided in section 3(f)(1) of the 

Order). The docket file is available for 

public inspection in the Regulations 

Division, Office of General Counsel, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 10276, Washington, DC 20410–

0500. Due to security measures at the 

HUD Headquarters building, please 

schedule an appointment to review the 

docket file by calling the Regulations 

Division at (202) 708–3055 (this is not 

a toll-free number). 

Information Collection Requirements 

The information collection 

requirements contained in this proposed 

rule have been submitted to OMB under 

the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501–3520). In accordance 

with the Paperwork Reduction Act, 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 currently valid 

OMB control number. 

The burden of the information 

collections in this proposed rule is 

estimated as follows: 

REPORTING AND RECORDKEEPING BURDEN

Section reference Number of 

parties 

Number of 

responses per 

respondent 

Estimated 

average time 

for requirement (in 

hours) 

Estimated 

annual burden 

(in hours) 

§§ 291.515, 291.520, 291.525, 291.530, and 291.540 ................................... 30,100 1 .12 3,612 

In accordance with 5 CFR 

1320.8(d)(1), HUD is soliciting 

comments from members of the public 

and affected agencies concerning this 

collection of information to: 

(1) Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

(2) Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information; 

(3) Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

(4) Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated collection 

techniques or other forms of information 

technology (e.g., permitting electronic 

submission of responses). 

Interested persons are invited to 

submit comments regarding the 

information collection requirements in 

this rule. Under the provisions of 5 CFR 

part 1320, OMB is required to make a 

decision concerning this collection of 

information between 30 and 60 days 

after today’s publication date. Therefore, 

a comment on the information 

collection requirements is best assured 

of having its full effect if OMB receives 

the comment within 30 days of today’s 

publication. This time frame does not 

affect the deadline for comments to the 

agency on the proposed rule, however. 

Comments must refer to the proposal by 

name and docket number (FR–4712) and 

must be sent to both: HUD Desk Officer, 

Office of Management and Budget, New 

Executive Office Building, Washington, 

DC 20503, Fax number: (202) 395–6947; 

and, Kathleen McDermott, Reports 

Liaison Officer, Office of HousingFederal Housing Commissioner, 

Department of Housing and Urban 

Development, 451 Seventh Street, SW., 

Room 9116, Washington, DC 20410–

8000. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531–

1538) (UMRA) 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 

UMRA. 

Executive Order 13132, Federalism 

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 Order. This proposed 

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 

Order. 

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, which 

implement section 102(2)(C) of the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4332(2)(C)). The 

Finding of No Significant Impact is 

available for public inspection between 

the hours of 8 a.m. and 5 p.m. weekdays 

in the Regulations Division, Office of 

General Counsel, Department of 

Housing and Urban Development, 451 

Seventh Street, SW., Room 10276, 

Washington, DC 20410–0500. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

(5 U.S.C. 601 et seq.), generally requires 

an agency to conduct a regulatory 

flexibility analysis of any rule subject to 

notice and comment rulemaking 

requirements unless the agency certifies 

that the rule will not have a significant 

economic impact on a substantial 

number of small entities. This proposed 

rule promotes safe neighborhoods by 

enabling law enforcement officers, 

teachers, and firefighters/emergency 

responders to purchase HUD-acquired 

single family homes at a significant 

discount. The proposed rule places 

restrictions on the use of a home 

purchased through the GNND Sales 

Program, which affects the individual 

purchasing the home. The proposed 

rule, however, does not place 

restrictions on any small entities 

involved in any transactions related to 

the GNND Sales Program. Accordingly, 

the undersigned certifies that this 

53484 Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules 

proposed rule would not have a 

significant economic impact on a 

substantial number of small entities. 

Notwithstanding HUD’s determination 

that this rule will not have a significant 

economic effect on a substantial number 

of small entities, HUD specifically 

invites comments regarding any less 

burdensome alternatives to this rule that 

will meet HUD’s objectives as described 

by this preamble. 

Catalog of Federal Domestic Assistance 

Numbers 

The Catalog of Federal Domestic 

Assistance Number for the Officer Next 

Door Program is 14.198. The Catalog of 

Federal Domestic Assistance Number 

for the Teacher Next Door Initiative is 

14.310. 

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. 

Accordingly, for the reasons described 

in the preamble, HUD proposes to 

amend 24 CFR part 291 as follows: 

PART 291—DISPOSITION OF HUDACQUIRED SINGLE FAMILY 

PROPERTY 

1. The authority citation for 24 CFR 

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. Subpart F is revised to read as 

follows: 

Subpart F—Good Neighbor Next Door 

Sales Program 

Sec. 

291.500 Purpose. 

291.505 Definition of ‘‘unit of general local 

government.’’

291.510 Overview of the GNND Sales 

Program. 

291.515 Purchaser qualifications. 

291.520 Eligible law enforcement officers. 

291.525 Eligible teachers. 

291.530 Eligible firefighter/emergency 

responders. 

291.535 Earnest money deposit. 

291.540 Owner-occupancy term. 

291.545 Financing purchase of the home. 

291.550 Second mortgage. 

291.555 Refinancing. 

291.560 Ineligibility of multiple-unit 

properties. 

291.565 Continuing obligations after 

purchase. 

Subpart F—Good Neighbor Next Door 

Sales Program 

§ 291.500 Purpose. 

This subpart describes the policies 

and procedures governing the Good 

Neighbor Next Door (GNND) Sales 

program. The purpose of the GNND 

Sales Program is to improve the quality 

of life in distressed urban communities. 

This is to be accomplished by 

encouraging law enforcement officers, 

teachers, and firefighters/emergency 

responders, whose daily responsibilities 

and duties represent a nexus to the 

needs of the community, to purchase 

and live in homes in these communities. 

§ 291.505 Definition of ‘‘unit of general 

local government.’’

For purposes of this subpart, the term 

‘‘unit of general local government’’

means a county or parish, city, town, 

township, or other political subdivision 

of a state. 

§ 291.510 Overview of the GNND Sales 

Program. 

(a) General. The GNND Sales Program 

enables a full-time law enforcement 

officer, teacher, or firefighter/emergency 

responder to purchase a specifically 

designated HUD-acquired home located 

in a HUD-designated revitalization area: 

(1) At a 50 percent discount from the 

list price; and 

(2) With a downpayment of $100, but 

only if the law enforcement officer, 

teacher, or firefighter/emergency 

responder finances the home through a 

Federal Housing Administration (FHA) 

insured mortgage. 

(b) Eligible properties. Under the 

GNND Sales Program, all properties 

acquired by HUD located in HUDdesignated revitalization areas (both 

those that are eligible for FHA mortgage 

insurance and those that are not 

eligible) are made available to interested 

law enforcement officers, teachers, and 

firefighters/emergency responders prior 

to listing the properties for sale to other 

purchasers. 

(c) Multiple offers. In the event that 

several offers are made on a single 

property, HUD will randomly select a 

winning offer by lottery as well as a 

back-up offer in the event the winning 

offeror is unable to close on purchase of 

the property. If the back-up offeror is 

also unable to close on the purchase of 

the property, the property will then be 

made available for sale to other 

purchasers. 

(d) Real estate brokers. Law 

enforcement officers, teachers, and 

firefighters/emergency responders must 

submit offers through a participating 

real estate broker. Any real estate broker 

who has agreed to comply with HUD 

requirements may participate in the 

GNND Sales Program. Real estate 

brokers may submit unlimited numbers 

of offers on an individual property 

provided each offer is from a different 

prospective purchaser. 

(e) Cap on sales. The number of HUDacquired homes sold under the GNND 

Sales Program in a fiscal year shall not 

exceed five percent of the number of 

‘‘Part A’’ mortgage insurance 

conveyance claims paid by HUD in the 

immediately preceding fiscal year. The 

cap shall apply on a national basis, but 

HUD reserves the right to geographically 

apportion the cap to address regional or 

local differences in the number of 

homes sold through the GNND Sales 

Program. Additionally, HUD may adjust 

the percentage of the cap for any fiscal 

year. Any HUD determination to 

geographically distribute the cap, 

change a current geographic 

distribution, or adjust the percentage of 

the cap will be announced by HUD 

through publication of a notice in the 

Federal Register at least 30 days before 

the revision takes effect. 

§ 291.515 Purchaser qualifications. 

To qualify to purchase a home 

through the GNND Sales Program: 

(a) The person must be employed as 

a full-time law enforcement officer (as 

described in § 291.520), teacher (as 

described in § 291.525), or firefighter/ 

emergency responder (as described in 

§ 291.530) at the time he/she submits a 

bid to purchase a home through the 

program and at the time of closing on 

the purchase of the home; 

(b) The person must certify to his/her 

good faith intention to continue 

employment as a law enforcement 

officer (as described in § 291.520), 

teacher (as described in § 291.525), or 

firefighter/emergency responder (as 

described in § 291.530) for at least one 

year following the date of closing; 

(c) The person must make an earnest 

money deposit at the time of signing the 

contract for purchase of the home as 

described in § 291.535; 

(d) The person must agree to own, and 

live in as his/her sole residence, the 

home for the entire duration of the 

owner-occupancy term, as described in 

§ 291.540 and to certify to that 

occupancy as described in § 292.565; 

(e) The person must agree to execute 

a second mortgage and note on the 

home as described in § 291.550 for the 

difference between the initial list price 

and the discounted selling price; 

(f) Neither the person (nor his/her 

spouse) may have owned any residential 

real property for one year prior to the 

date of submitting a bid on the home 

Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules 53485 

being acquired through the GNND Sales 

Program; 

(g) Neither the person (nor his/her 

spouse) must ever have purchased 

another home under the GNND Sales 

Program or under the predecessor 

Officer Next Door Sales and Teacher 

Next Door Sales programs; and 

(h) Although both spouses, if 

otherwise eligible, may submit an offer 

on a single home made available for sale 

under the GNND Sales Program, HUD 

will only approve an offer from only one 

spouse. 

§ 291.520 Eligible law enforcement 

officers. 

A person qualifies as a law 

enforcement officer, for the purposes of 

the GNND Sales Program if the person 

is: 

(a) Employed full-time by a law 

enforcement agency of the federal 

government, a state, unit of general local 

government, or an Indian tribal 

government; and 

(b) In carrying out such full-time 

employment, the person is sworn to 

uphold and make arrests for violations 

of federal, state, tribal, county, 

township, or municipal laws. 

§ 291.525 Eligible teachers. 

A person qualifies as a teacher for the 

purposes of the GNND Sales Program, if 

the person is: 

(a) Employed full-time by a state 

accredited public school or private 

school that provides direct services to 

students in grades pre-kindergarten 

through 12; and 

(b) The public or private school where 

the person is employed serves students 

from the area where the home is located 

in the normal course of business. 

§ 291.530 Eligible firefighter/emergency 

responders. 

A person qualifies as a firefighter/ 

emergency responder, for the purposes 

of the GNND Sales Program, if the 

person is employed full-time as a 

firefighter or emergency medical 

technician by a fire department or 

emergency medical services responder 

unit of the federal government, a state, 

unit of general local government, or an 

Indian tribal government serving the 

area where the home is located. 

§ 291.535 Earnest money deposit. 

(a) General. The earnest money 

deposit is the sum of money that must 

be paid by the law enforcement officer, 

teacher, or firefighter/emergency 

responder at the time of submitting an 

offer for purchase of a property under 

the GNND Sales Program. Each bid must 

be accompanied by an earnest money 

deposit in either the form of a cash 

equivalent as prescribed by HUD, or a 

certification from the real estate broker 

that the earnest money deposit has been 

deposited in the broker’s escrow 

account. 

(b) Amount of earnest money deposit. 

The amount of the earnest money 

deposit required is an amount equal to 

one percent of the list price, but no less 

than $500 and no more than $2,000. 

(c) Acceptance or rejection of offer. If 

an offer is accepted, the earnest money 

deposit will be credited to the purchaser 

at closing. If the offer is rejected, the 

earnest money deposit will be returned. 

Earnest money deposits are subject to 

total forfeiture for failure of the 

participant to close a sale. 

§ 291.540 Owner-occupancy term. 

(a) General. The owner-occupancy 

term is the number of months a 

participant in the GNND Sales Program 

must agree to own, and live in as his/ 

her sole residence, a home purchased 

through the GNND Sales Program. 

(b) Start of owner-occupancy term. 

The owner-occupancy term is 36 

months, commencing either 

(1) Thirty (30) days following closing, 

if HUD determines that the home 

requires no more than $10,000 in repairs 

prior to occupancy; 

(2) Ninety (90) days following closing, 

if HUD determines that the home 

requires more than $10,000, but not 

more than $20,000 in repairs prior to 

occupancy; or 

(3) One hundred and eighty (180) 

days following closing if HUD 

determines that the home requires more 

than $20,000 in repairs prior to 

occupancy. 

(c) Interruptions to owner-occupancy 

term. (1) General. HUD may, at its sole 

discretion, allow interruptions to the 36- 

month owner-occupancy term if it 

determines that the interruption is 

necessary to prevent hardship, but only 

if the law enforcement officer, teacher, 

or firefighter/emergency responder 

submits a written and signed request to 

HUD containing the following 

information: 

(i) The reasons why the interruption 

is necessary; 

(ii) The dates of the intended 

interruption; and 

(iii) A certification from the law 

enforcement officer, teacher, or 

firefighter/emergency responder that: 

(A) The law enforcement officer, 

teacher, or firefighter/emergency 

responder is not abandoning the home 

as his/her permanent residence; and 

(B) The law enforcement officer, 

teacher, or firefighter/emergency 

responder will resume occupancy of the 

home upon the conclusion of the 

interruption and complete the 

remainder of the 36-month owneroccupancy term. 

(2) Timing of written request to HUD. 

The written request for approval of an 

interruption to the owner-occupancy 

term must be submitted to HUD at least 

30 calendar days before the anticipated 

interruption. Military service members 

protected by the Servicemembers Civil 

Relief Act of 2003 need not submit their 

written request to HUD 30 days in 

advance of an anticipated interruption, 

but should submit their written request 

as soon as practicable upon learning of 

a potential interruption, in order to 

ensure timely processing and approval 

of the request. 

§ 291.545 Financing purchase of the home. 

(a) Purchase using conventional 

financing. If the law enforcement 

officer, teacher, or firefighter/emergency 

responder uses conventional financing 

to purchase a home under the GNND 

Sales Program, the amount of the 

mortgage may not exceed the 

discounted sales price of the home. 

(b) Purchase with FHA-insured 

mortgage. A law enforcement officer, 

teacher, or firefighter/emergency 

responder using an FHA-insured 

mortgage to finance purchase of the 

home may finance reasonable and 

customary closing costs with the FHAinsured mortgage. The amount of the 

FHA-insured mortgage may not exceed 

the discounted sales price of the home 

plus the closing costs. 

(c) No HUD payment of closing costs. 

In no event will HUD pay a buyer’s 

closing costs on the purchase of a 

property through the GNND Sales 

Program. 

§ 291.550 Second mortgage. 

(a) General. The second mortgage is a 

mortgage and note, payable to HUD, on 

the home purchased through the GNND 

Sales Program in the amount of the 

difference between the list price of the 

home and the discounted selling price. 

(b) Second mortgage term. The term of 

the second mortgage is equal to the 

owner-occupancy term (36 months) plus 

30, 90, or 180 days, as applicable 

depending on the amount of repairs 

required prior to occupancy (see 

§ 291.540(b)). The amount of the second 

mortgage will be reduced by 1⁄36th on 

the last day of each month of occupancy 

following the occupancy start date. At 

the end of the 36th month of occupancy, 

the amount of the second mortgage will 

be zero. 

(c) Sale or vacancy of home. If the law 

enforcement officer, teacher, or 

firefighter/emergency responder sells 

his/her home or stops living in the 

53486 Federal Register / Vol. 70, No. 173 / Thursday, September 8, 2005 / Proposed Rules 

home as his/her sole residence prior to 

the expiration of the owner-occupancy 

term, he/she will owe HUD the amount 

due on the second mortgage either as of 

the date the property is sold or vacated. 

§ 291.555 Refinancing. 

(a) General. A law enforcement 

officer, teacher, or firefighter/emergency 

responder may refinance the mortgage 

and note used to purchase the home. 

However, the total of the refinanced 

mortgage and the remaining principal 

balance of the second mortgage may not 

exceed 95 percent of the value of the 

property, as appraised at the time of the 

refinancing. Unless HUD permits 

subordination pursuant to paragraph (b) 

of this section, the second mortgage 

described in § 291.550 must hold a 

superior lien position to the refinanced 

mortgage. 

(b) Subordination of second mortgage. 

HUD may permit subordination of the 

second mortgage to the refinanced 

mortgage, but only if HUD, at its sole 

discretion, determines that the 

refinancing will satisfy one of the 

following: 

(1) Will result in a lower annual 

percentage rate (APR) on the first 

mortgage; 

(2) Will be undertaken pursuant to 

HUD’s Section 203(k) Rehabilitation 

Loan Insurance Program in order to 

rehabilitate or repair the home; or 

(3) Is necessary to prevent the law 

enforcement officer, teacher, or 

firefighter/emergency responder from 

defaulting on the first mortgage. 

§ 291.560 Ineligibility of multiple-unit 

properties. 

Only single-unit properties are 

eligible for the GNND Sales Program. 

§ 291.565 Continuing obligations after 

purchase. 

To remain a participant in the GNND 

Sales Program, the law enforcement 

officer, teacher, or firefighter/emergency 

responder, must, for the entire duration 

of the owner-occupancy term: 

(a) Continue to own, and live in as 

his/her sole residence, the home 

purchased through the GNND Sales 

Program; and 

(b) Certify initially and once annually 

thereafter during and at the conclusion 

of the owner-occupancy term that 

paragraph (a) of this section continues 

to be true. 

Dated: July 8, 2005. 

Brian D. Montgomery, 

Assistant Secretary for Housing-Federal 

Housing Commissioner. 

[FR Doc. 05–17642 Filed 9–7–05; 8:45 am] 

BILLING CODE 4210–27–P