11844 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

Office of Assistant Secretary for

Housing—Federal Housing

Commissioner

24 CFR Parts 290 and 886

[Docket No. R–95–1753; FR–3715–I–01]

RIN 2502–AG30

Disposition of Multifamily Projects and

HUD-Held Multifamily Mortgages

AGENCY: Office of the Assistant

Secretary for Housing—Federal Housing

Commissioner, HUD.

ACTION: Interim rule.

SUMMARY: This interim rule amends the

Department’s multifamily property

disposition regulations to incorporate

statutory amendments affecting the

management and disposition of HUDowned properties and properties with

delinquent HUD-held mortgages, and

the sale of HUD-held multifamily

mortgages.

DATES: Effective date: March 2, 1995.

Comments due date: May 1, 1995.

ADDRESSES: Interested persons are

invited to submit comments regarding

this interim rule to the Rules Docket

Clerk, Office of General Counsel, Room

10278, Department of Housing and

Urban Development, 451 Seventh Street

SW., Washington, DC 20410.

Communications should refer to the

above docket number and title. A copy

of each communication submitted will

be available for public inspection and

copying between 7:30 a.m. and 5:30

p.m. weekdays at the above address.

Faxed comments will not be accepted.

FOR FURTHER INFORMATION CONTACT:

Frank Malone, Director, Office of

Multifamily Housing Preservation and

Property Disposition, Department of

Housing and Urban Development, Room

6164, 451 7th Street SW, Washington,

DC 20410. Telephone (202) 708–3555;

TDD (202) 708–4594. (These are not tollfree numbers.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act Statement

The information collection

requirements contained in this interim

rule were approved by the Office of

Management and Budget (OMB) under

the Paperwork Reduction Act of 1980

and were assigned OMB control number

2502–0204 (expiration date: 9/30/96).

I. Introduction

On August 17, 1993 (58 FR 43708),

the Department published a final rule

amending its requirements for the

management and disposition of HUDowned multifamily housing projects.

The regulation, at 24 CFR part 290,

implemented HUD’s statutory authority,

contained in section 207(k) and (l) of the

National Housing Act and in section 203

of the Housing and Community

Development Amendments of 1978, to

handle and dispose of such real

property.

Section 203 was amended by section

181 of the Housing and Community

Development Act of 1987 (1987 Act),

section 1010 of the Stewart B.

McKinney Homeless Assistance

Amendments Act of 1988 (1988 Act),

and section 579 of the National

Affordable Housing Act of 1990

(NAHA). The final rule published on

August 17, 1993 implemented the

NAHA amendments.

Generally, the statutory amendments

specified the type of assistance to be

provided when the Department

determines to preserve units as

affordable low- and very low-income

housing, and included certain projects

with HUD-held mortgages within the

scope of section 203. The Department

has been carrying out its multifamily

property disposition program and its

servicing of delinquent HUD-held

multifamily mortgages on a project-byproject basis in conformity with the

requirements of section 203, as

amended.

In the Multifamily Housing Property

Disposition Reform Act of 1994

(MHPDRA) (Pub. L. 102–233, approved

April 11, 1994), section 203 was

completely revised. This interim rule, in

turn, completely revises 24 CFR part

290 to reflect the new statutory

amendments.

Before turning to a discussion of

specific details of the implementation of

the revised section 203 in this interim

rule, a general comment on the overall

format of this interim rule is in order.

HUD is attempting to implement this

complex legislation in a manner that is

more accessible and ‘‘user friendly’’

than the typical government regulation,

with the goal of providing clear

guidance within a legally binding

context. The structure of the statute has

been reorganized in the regulation to

correspond more with the flow of the

disposition process as it actually

happens, from general, guiding

principles, through notification

requirements, plan development, and

the various actions the Department will

take to facilitate the disposition process.

The section headings in this interim

rule are posed in the form of questions,

to invite a broader spectrum of users for

the interim rule and to permit all of its

users to scan it and identify more

quickly their areas of concern. Certain

portions of the interim rule, which

present an extended series of

requirements or alternatives, have been

summarized with the use of tables that

appear within the permanent text of the

interim rule itself. These tables,

covering the subjects of rents,

notification requirements, methods of

disposition, and actions to facilitate

disposition, provide a shorthand

overview of major portions of the

interim rule that will permit users to

comprehend the interim rule and the

disposition process more easily. The

tables are cross referenced to the

sections of interim rule text that provide

a fuller explication of the requirements.

HUD specifically invites comments on

whether the public finds such

innovations to be helpful, and welcomes

suggestions for additional innovations.

A discussion of the revisions to the

multifamily property disposition

program, organized section-by-section

according to the amended section 203,

follows.

II. Implementation of Amended Section

203

Section 203(a)—Goals

The goals of the interim rule, which

provide the general guidelines within

which HUD makes its determinations

for the management or disposition of

multifamily housing projects, are listed

in section 203(a). They closely resemble

the goals previously listed at 24 CFR

290.5, but include three new factors.

Protecting the financial interests of the

Federal Government, adhering to fair

housing requirements, and disposing of

projects in a manner consistent with

local housing market conditions are

now explicitly listed among the goals

which are set forth in § 290.3 of this

regulation.

Section 203(b)—Definitions

Several of the nine definitions

included in this section are combined

and otherwise modified in the interim

rule at § 290.5. The Department believes

that its modifications provide additional

precision and simplify the structure of

the interim rule. For example, the

interim rule defines the term

multifamily housing project as a subset,

with references to specific statutory

authorities, of multifamily project,

which is defined in very broad terms to

cover most non-single family projects

insured or subject to a loan under one

of HUD’s statutory authorities,

including such properties as hospitals,

intermediate care facilities, and nursing

homes. The actions the Department may

take to facilitate disposition (i.e., the
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11845

assistance to be provided or the

restrictions to be imposed) depend upon

the type of multifamily housing project

involved, and the statute provides

definitions of subsidized project,

formerly subsidized project, and

unsubsidized project, for this purpose.

The interim rule cuts back on the

number of cross references necessary to

determine what actions may be taken by

combining the definitions for subsidized

and formerly subsidized into a single

definition of subsidized project.

Subsidized project includes projects

both before foreclosure and after HUD

assumes ownership of the project, when

the mortgage which governs the project

has been extinguished. Subsidized

projects and unsubsidized projects are

the subsets within the category of

multifamily housing projects.

Although section 203(b)(8) lists

market area among the definitions, its

meaning is left to the determination of

the Department. The Department has

determined that this is a term best

defined on a case-by-case basis at the

local level, particularly when the new

goal of disposing of projects in a manner

consistent with local housing market

conditions is taken into consideration.

The interim rule provides for the market

area for a project to be defined by the

local HUD Office, which would have the

best grasp of local conditions, in terms

of the area from which a multifamily

housing project may reasonably be

expected to draw a substantial number

of its tenants.

The statute also permits HUD to

define the term useful life, used to

determine how long certain

requirements will apply to a project.

The Department has determined to

define useful life as 20 years, the period

adopted in the August 17, 1993 final

rule for maintaining a project as rental

or cooperative housing, but it may be

more or less, as determined by the

Department.

Section 203(c)—Disposition of Property

Section 203(c)(1) lists ‘‘negotiated,

competitive bid, or other basis’’ as

methods of disposition. The interim rule

at § 290.30 lists the basic methods of

disposition as: (1) Foreclosure sales, (2)

sale of HUD-owned projects, and (3)

transfer for use under other HUD

programs.

Method (3) is taken from section

203(f), entitled ‘‘Discretionary

Assistance,’’ where ‘‘transfer for use

under other HUD programs’’ is listed as

an action the Department may take to

facilitate disposition. However, in the

Department’s analysis, a transfer is

actually a method of disposition, rather

than a form of assistance or restriction

such as the other actions given in

section 203(f).

The transfer option permits the

Department, ‘‘notwithstanding the

provisions of subsection (e)’’ (which

lists the basic actions and the

alternatives to the basic actions to

facilitate disposition), to transfer a

multifamily housing project for use as

public housing or supportive housing,

subject to any terms, conditions, and

limitations determined to be appropriate

by the Department. The disposition is

complete upon the transfer.

Section 203(c) also lists the qualities

of an eligible purchaser (incorporated in

the interim rule at § 290.32); and

requirements for an initial disposition

plan and initial sales price (§ 290.34 of

the interim rule). Section 203(c)(2)(D)

requires the Department to obtain timely

and appropriate input into disposition

plans from the community and tenants.

This requirement is stated in § 290.34,

and is also laid out in more detail at

§ 290.26 in subpart C of the interim rule

where the notification requirements are

gathered. HUD views the requirement

for community and tenant input into the

disposition plan as a process similar to

providing public notice and an

opportunity for comment in rulemaking.

Just as a proposed rule is published for

comment, followed by consideration of

the comments before a final rule is

issued, HUD will make an initial

disposition plan available to the

community and tenants, consider the

comments it receives, and then issue its

final disposition plan.

A requirement for a pre-foreclosure

notification is included in section

203(c)(3), which appears in subpart C of

the interim rule as § 290.22.

Section 203(d)—Management and

Maintenance of Properties

This subsection of the statute is the

only one that explicitly addresses

management and maintenance of HUDowned projects, or projects where HUD

is the mortgagee in possession (MIP).

These provisions, which provide

management standards and permit HUD

to contract or require an owner to

contract for management services, are

basically identical to those in § 290.51

of the August 17, 1993 final rule, and

are incorporated in this interim rule at

§§ 290.10 (standards) and 290.12

(contracting), under subpart B, titled,

‘‘Management Provisions.’’ Also

included in subpart B are provisions for

determining occupancy (§ 290.14) and

rental rates (§ 290.16) while a project is

managed by HUD. These provisions are

based largely on the August 17, 1993

final rule and, in general, provide that

the requirements of the project’s

mortgage insurance program before

HUD assumed management will

continue to apply.

Actions to Facilitate Disposition

Section 203(e)—Required Assistance;

Section 203(f)—Discretionary

Assistance; Section 203(g)—Protection

for Very Low-Income Tenants; Section

203(j)—Displacement of Tenants and

Relocation Assistance

Sections 203 (e), (f), (g), and (j) are

discussed together because of their close

interrelationship. The actions the

Department may take to facilitate

disposition are the common subject

matter of these sections. The regulation

organizes the statutorily permitted

actions into four categories: ‘‘required,’’

‘‘basic,’’ ‘‘alternatives to basic,’’ and

‘‘additional.’’ The table which

immediately precedes subpart E

provides an overview of these assistance

and restrictions provisions.

Section 203(e) is divided into three

sections, each delineating actions that

the statute requires HUD to take

separately, or in combination with each

other or with actions under section

203(f). These actions are the assistance

that may be provided or the restrictions

(mainly to preserve affordability) that

may be imposed. The basic actions are

established by section 203(e)(1), which

identifies the units in subsidized

projects and unsubsidized projects that

are to receive project-based Section 8

assistance or that are to be subject to use

or rent restrictions. The alternatives to

these basic actions appear in: (1) Section

203(e)(1)(C), which permits projectbased Section 8 assistance and/or use

and rent restrictions in unsubsidized

projects to be substituted for the ‘‘basic’’

project-based Section 8 assistance in

subsidized projects; (2) section

203(e)(2), which permits tenant-based

Section 8 assistance to be provided to

tenants instead of the project-based

Section 8 assistance required under

(e)(1); and (3) section 203(e)(3), which

provides that the additional actions

listed in section 203(f) may be used as

long as, first, affordability use and rent

restrictions are imposed on units that

otherwise would have received the basic

project-based Section 8 assistance under

(e)(1), and second, very low-income

tenants in units that otherwise would

have received project-based Section 8

assistance under (e)(1) receive tenantbased Section 8 assistance.

Section 203(f) then lists the additional

actions that may be used in subsidized

and unsubsidized projects. Included by

this interim rule in the category of

additional actions are provisions taken

from the August 17, 1993 final rule.
11846 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

These provisions, entitled

‘‘determination not to preserve,’’ are

included to provide criteria under

which the Department will take the

action of a determination not to preserve

a project, or a part of a project, as

affordable rental or cooperative housing,

resulting primarily in demolition.

In addition to these basic, alternative,

and additional categories of actions is

the category of required actions. Section

203(g) provides for required assistance

for very-low income tenants, and 203(j)

provides for required displacement

assistance. The displacement assistance

requirements in this interim rule are

based upon the requirements of the

August 17, 1993 final rule. An action

from the August 17, 1993 final rule is

also included as required, the

nondiscrimination against Section 8

certificate holders and voucher holders

provisions of section 183(c) of the

Housing and Community Development

Act of 1987.

The interim rule organizes this

complex system of actions to facilitate a

disposition according to the type of

project involved in a disposition—

separate subparts address which actions

are applicable to all multifamily

housing projects, or to subsidized

projects, or to unsubsidized projects, as

follows. Subpart E contains the required

actions applicable to all multifamily

housing projects under sections 203 (g)

and (j), as well as the nondiscrimination

requirements of section 183(c) of the

Housing and Community Development

Act of 1987. Subpart F contains the

basic and alternative actions applicable

to subsidized projects under section

203(e), with a reference to the additional

section 203(f) actions listed in subpart

H. Subpart G contains the same

information for unsubsidized projects as

subpart F does for subsidized projects.

Subpart H lists the additional actions

under 203(f) that are applicable to all

multifamily housing projects. All of the

actions to facilitate disposition are set

out in abbreviated form in a table that

precedes subpart E, to permit users of

this interim rule to follow more easily

the options for assistance and

restrictions that would apply to a

particular project.

Section 203(h)—Contract Requirements

This section states the contract

requirements applicable to project-based

Section 8 assistance provided in

accordance with a disposition. These

requirements are implemented by

revising the appropriate Section 8

regulations at 24 CFR 886.310 and

886.311.

Section 203(i)—Right of First Refusal for

Local and State Government Agencies

This right of first refusal provision is

included among the notification

requirements in subpart C as § 290.24.

III. Sale of HUD-Held Multifamily

Mortgages

On September 22, 1994 (59 FR 48726),

the Department published a final rule

that amended 24 CFR part 290 to set

forth the basic policies and procedures

that govern the disposition of HUD-held

multifamily project mortgages. This

final rule implemented a proposed rule

published on April 13, 1994 (59 FR

17500) and also incorporated

amendments made by the MHPDRA.

The provisions of the mortgage sale final

rule are included in this interim rule as

subpart I, with only slight modifications

to conform to the new format of this

interim rule.

IV. Other Amendments in This Interim

Rule

Section 101(d) of the MHPDRA

amended the definition of owner under

the United States Housing Act of 1937

to include ‘‘an Agency of the Federal

Government.’’ The purpose and effect of

this amendment is to permit HUD to

collect Section 8 rental payments when

it owns or manages a project. The

conforming change to the definition of

owner is made in 24 CFR 886.302.

The definition of eligible project or

project in 24 CFR 886.302 is also

amended to include a multifamily

housing project under 24 CFR part 290.

Section 886.319 is amended to

conform to § 886.120 and state explicitly

that HUD may contract for the

administration of its Section 8 contract

functions.

V. Other Matters

Any assistance made available to a

purchaser under this interim rule,

whether rental or other financial

assistance, will be subject to scrutiny

under section 102(d) of the HUD Reform

Act, insofar as that statutory provision

has been implemented by guidelines

issued by the Office of Housing under

24 CFR part 12, subpart D (see, e.g., a

Federal Register Notice published April

9, 1991 (56 FR 14436) entitled

‘‘Administrative Guidelines; Limitations

on Combining Other Government

Assistance with HUD Housing

Assistance’’).

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. The Finding is available for public

inspection between 7:30 a.m. and 5:30

p.m. weekdays in the Office of the Rules

Docket Clerk, Office of the General

Counsel, Department of Housing and

Urban Development, Room 10276, 451

Seventh Street SW., Washington, DC

20410.

Executive Order 12866

This interim rule has been reviewed

and approved by the Office of

Management and Budget in accordance

with Executive Order 12866, issued by

the President on September 30, 1993 (58

FR 51735, October 4, 1993). Any

changes to the interim rule resulting

from this review are available for public

inspection between 7:30 a.m. and 5:30

p.m. weekdays in the Office of the Rules

Docket Clerk.

Regulatory Flexibility Act

The Secretary, in accordance with

provisions of the Regulatory Flexibility

Act (5 U.S.C. 605(b)), has reviewed this

interim rule before publication and by

approving it certifies that it will not

have a significant economic impact on

a substantial number of small entities.

These revisions to the policies

governing the management and

disposition of HUD-owned multifamily

housing projects should not affect the

ability of small entities, relative to larger

entities, to bid for and acquire projects

that HUD determines to sell.

Executive Order 12612, Federalism

HUD has determined, in accordance

with Executive Order 12612,

Federalism, that this interim rule will

not have a substantial, direct effect on

the States or on the relationship

between the Federal government and

the States, or on the distribution of

power or responsibilities among the

various levels of government. While the

interim rule would impose terms and

conditions on States that acquire

projects under this interim rule, that is

clearly the intent of the authorizing

legislation, and therefore no further

review is necessary or appropriate.

Executive Order 12606, the Family

HUD has determined that this interim

rule will not have a significant impact

on family formation, maintenance, and

general well-being within the meaning

of Executive Order 12606, The Family,

because it does not affect the eligibility

of families for admission into

multifamily housing projects that are

subject to this rulemaking.
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11847

Justification for Interim Rulemaking

This publication of this interim rule

for effect upon issuance is required by

MHPDRA section 101(f).

Regulatory Agenda

This interim rule was listed as item

number 1802 in the Department’s

Semiannual Agenda of Regulations

published on November 14, 1994 (59 FR

57632, 57657) under Executive Order

12866 and the Regulatory Flexibility

Act.

The Catalog of Federal Domestic

Assistance Program number and title is

14.156, Lower Income Housing

Assistance Program (Section 8).

List of Subjects

24 CFR Part 290

Low and moderate-income housing,

Mortgage insurance.

24 CFR Part 886

Grant programs—housing and

community development, Lead

poisoning, Rent subsidies, Reporting

and recordkeeping requirements.

Accordingly, for the reasons stated in

the preamble, part 290 of chapter II and

part 886 of chapter VIII of title 24 of the

Code of Federal Regulations, are

amended as follows:

1. Part 290 is revised to read as

follows:

PART 290—DISPOSITION OF

MULTIFAMILY PROJECTS AND SALE

OF HUD-HELD MULTIFAMILY

MORTGAGES

Subpart A—General Provisions

Sec.

290.1 What subjects does this regulation

cover?

290.3 What are the goals of this regulation?

290.5 What definitions apply in this

regulation?

290.7 May any of the provisions of this

regulation be waived?

Subpart B—Management and Maintenance

Provisions

290.10 What maintenance and management

standards apply to multifamily housing

projects?

290.12 How may HUD contract for

management services, or require the

owner of a multifamily project to

contract for management services?

290.14 What occupancy requirements apply

under this regulation?

290.16 How will rental rates be set when

HUD is mortgagee-in-possession (MIP) or

owner of a multifamily housing project?

Subpart C—Notification Requirements

290.20 How will HUD provide the

notifications that are required under this

regulation?

290.22 What notification must be given

before foreclosure?

290.24 Who has a right of first refusal for

properties that HUD is selling, and what

kind of notice must HUD provide?

290.26 What kind of notice must HUD

provide to tenants and the community

when HUD is selling a project?

Subpart D—Disposition Procedures

290.30 What are the different methods that

may be used for the disposition of a

multifamily housing project?

290.32 What qualities does HUD look for in

a purchaser?

290.34 What kind of disposition plan will

HUD prepare before selling a project?

Subpart E—All Multifamily Housing

Projects—Required Actions

290.40 Are there any required actions that

must be taken in the disposition of all

multifamily housing projects?

290.42 What actions must be taken

concerning tenants who are displaced by

the disposition of a multifamily housing

project?

290.44 What actions must be taken

concerning very low-income tenants in

the disposition of a multifamily housing

project?

290.46 What restrictions concerning

nondiscrimination against Section 8

certificate holders and voucher holders

apply in the disposition of a multifamily

housing project?

Subpart F—Subsidized Projects—Basic and

Alternative Actions to Facilitate Disposition

290.54 What are the basic actions that may

be taken in the disposition of a

subsidized project?

290.56 What alternatives to the basic

actions are available in the disposition of

subsidized projects?

Subpart G—Unsubsidized Projects—Basic

and Alternative Actions to Facilitate

Disposition

290.64 What are the basic actions that may

be taken in the disposition of an

unsubsidized project?

290.66 What alternatives to the basic

actions are available in the disposition of

an unsubsidized projects?

Subpart H—All Multifamily Housing

Projects—Additional Actions to Facilitate

Disposition

290.70 What guidelines will HUD apply in

determining which additional actions to

take in the disposition of a multifamily

housing project?

290.72 May HUD reduce the sales price for

a project?

290.74 May HUD require additional use and

rent restrictions?

290.76 May HUD provide short-term loans

to facilitate the sale of a project?

290.78 Under what conditions may HUD

provide up-front grants?

290.80 What additional tenant-based

assistance may HUD offer?

290.82 How may HUD provide for

alternative uses of units in the

disposition of a multifamily housing

project?

290.84 What disposition assistance may be

available to rebuild a multifamily

housing project?

290.86 What emergency assistance funds

may be provided to tenants?

290.88 Under what circumstances may

HUD make a determination not to

preserve a project or a part of a project?

Subpart I—Sale of HUD-Held Multifamily

Mortgages

290.100 What is the purpose of this

subpart?

290.102 What affect does this subpart have

on the applicability of Civil Rights

requirements?

290.104 What tenant protections will apply

in the sale of HUD-held subsidized

mortgages?

290.106 How will HUD sell current

subsidized mortgages?

290.108 How will HUD sell delinquent

subsidized mortgages?

290.110 What is HUD’s policy for selling

HUD-held unsubsidized mortgages?

Authority: 12 U.S.C. 1701z–11, 1701z–12,

1713, 1715b, 1715z–1b; 42 U.S.C. 3535(d).

Subpart A—General Provisions

§ 290.1 What subjects does this regulation

cover?

(a) Except as provided in paragraph

(b) of this section, this part applies to

the sale of multifamily projects which

are or were, before being acquired by the

Department, assisted or had a mortgage

insured under the National Housing

Act, or which were subject to a loan or

a capital advance under Section 202 of

the Housing Act of 1959. Subpart I of

this part applies to the sale of HUD-held

multifamily mortgages.

(b) This part does not apply to

multifamily projects being foreclosed by

HUD for which the decision to foreclose

has been made before the effective date

of this part, nor to HUD-owned projects

where the initial disposition program

has been approved before the effective

date of this part. For such projects, the

procedures in the regulations at 24 CFR

part 290 in effect immediately prior to

the effective date of this regulation

apply, unless HUD determines, on a

case-by-case basis, to apply the new

regulations.

(c) This part applies to the sale of

multifamily projects which are or were,

before being acquired by the

Department, assisted or insured under

the National Housing Act, or which

were subject to a loan under section 202

of the Housing Act of 1959. It also

applies to the sale of certain loans and

mortgages, and to the management of

certain multifamily properties.

§ 290.3 What are the goals of this

regulation?

(a) The goals of this part are to

provide for the management and
11848 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

disposition of HUD-owned multifamily

projects, and multifamily projects

subject to HUD-held mortgages, in a

manner that:

(1) Is consistent with the National

Housing Act, section 203 of the Housing

and Community Development

Amendments of 1978, and other

relevant statutes;

(2) Will protect the financial interests

of the Federal Government; and

(3) Will, in the least costly fashion

among reasonable available alternatives,

address the goals of:

(i) Preserving certain housing so that

it can remain available to and affordable

by low-income persons;

(ii) Preserving and revitalizing

residential neighborhoods;

(iii) Maintaining the existing housing

stock in a decent, safe, and sanitary

condition;

(iv) Minimizing the involuntary

displacement of tenants;

(v) Maintaining housing for the

purpose of providing rental housing,

cooperative housing, and

homeownership opportunities for lowincome persons;

(vi) Minimizing the need to demolish

multifamily housing projects;

(vii) Adhering to fair housing

requirements; and

(viii) Disposing of such projects in a

manner consistent with local housing

market conditions.

(b) The goals of this part, with respect

to HUD-held mortgages, are to sell such

mortgages in a manner that:

(1) Reduces losses to the FHA fund;

(2) Decreases HUD’s inventory of

project mortgages;

(3) Improves the servicing of these

mortgages; and

(4) Improves the rental services

provided by properties securing HUDinsured and HUD-held mortgages.

(c) Competing goals. In determining

the manner in which a project is to be

managed and disposed of, HUD may

balance competing goals relating to

individual projects in a manner that will

further the purposes of this part.

§ 290.5 What definitions apply in this

regulation?

The following definitions apply to

this part:

Affordable means, with respect to a

unit of a multifamily housing project:

(1) For a unit occupied by a very-low

income family, the unit rent does not

exceed 30 percent of 50 percent of the

area median income (not the income of

the family), as determined by the

Department, with adjustments for

smaller and larger families; or

(2) For a unit occupied by a lowincome family other than a very lowincome family, the unit rent does not

exceed 30 percent of 80 percent of the

area median income (not the income of

the family), as determined by the

Department, with adjustments for

smaller and larger families; or

(3) The unit, or the family residing in

the unit, is receiving assistance under

Section 8 of the United States Housing

Act of 1937.

Cooperative means a nonprofit,

limited equity, or consumer cooperative

as defined under 24 CFR part 213. It

may include mutual housing

associations.

Department means the United States

Department of Housing and Urban

Development, or HUD.

HUD-owned project means a

multifamily project that has been

acquired by HUD.

Low-income family means a lowincome family as defined at 24 CFR part

813.

Market area means the area from

which a multifamily housing project

may reasonably be expected to draw a

substantial number of its tenants, as

determined by HUD, taking into

consideration the knowledge of the

HUD office with jurisdiction over the

project of the local real estate market

and HUD’s project underwriting

experience. Submarkets may be used in

large, complex metropolitan areas.

Multifamily housing project means a

multifamily project that is or was

insured under sections 207, 213, 220,

221(d)(3) 221(d)(4), 223(f), 231, 236, or

608 of the National Housing Act (12

U.S.C. 1701 et seq.); or is or was subject

to a loan under section 202 of the

Housing Act of 1959 (12 U.S.C. 1701q);

or was a Real Estate Owned (REO)

multifamily project transferred by the

Government National Mortgage

Association to the Department.

Multifamily housing project does not

include projects consisting of one to

eleven units insured under section

220(d)(3)(A) of the National Housing

Act (12 U.S.C. 1715k); or mobile home

parks under section 207(m) of that Act

(12 U.S.C. 1713); or vacant land; or

property covered by a homeownership

program approved under the

Homeownership and Opportunity for

People Everywhere (‘‘HOPE’’) program.

Multifamily project means a project

consisting of five or more units that has

or had a mortgage (even if subordinate

to other mortgages) insured under the

National Housing Act or is or was

subject to a loan under section 202 of

the Housing Act of 1959, or a hospital,

intermediate care facility, nursing home,

group practice facility, or board and care

facility that has or had a mortgage

insured, or is or was subject to a loan

under, these authorities. Multifamily

project does not include projects

consisting of one to eleven units insured

under section 220(d)(3)(A) of the

National Housing Act, which are

classified as single family homes.

Nonprofit organization means a

corporation or association organized for

purposes other than making a profit or

gain for itself. Stockholders or trustees

do not share in profits or losses. Profits

are used to accomplish the charitable,

humanitarian, or educational purposes

of the corporation.

Preexisting tenant means a family that

resides in a unit in a multifamily

housing project immediately before the

project is acquired under this part by a

purchaser other than the Department.

Project-based assistance means

assistance that is attached to a structure.

Subsidized mortgage means a

mortgage, including a purchase money

mortgage, on a subsidized project.

Subsidized project means a

multifamily housing project that is

receiving, or immediately before its

mortgage was foreclosed by HUD or the

project was acquired by HUD, pursuant

to this regulation, was receiving any of

the following types of assistance:

(1) Below market interest rate

mortgage insurance under the proviso of

section 221(d)(5) of the National

Housing Act (12 U.S.C. 1715l)

(hereinafter, a BMIR project);

(2) Interest reduction payments made

in connection with mortgages insured

under section 236 of the National

Housing Act (hereinafter, a 236 project);

(3) Direct loans made under section

202 of the Housing Act of 1959

(hereinafter, a 202 project);

(4) Assistance, to more than 50

percent of the units in the project, in the

form of:

(i) Rent supplement payments under

section 101 of the Housing and Urban

Development Act of 1965 (12 U.S.C.

1701s) (hereinafter, Rent Supp);

(ii) Additional assistance payments

under section 236(f)(2) of the National

Housing Act (hereinafter, RAP);

(iii) Housing assistance payments

under section 23 of the United States

Housing Act of 1937 (as in effect before

January 1, 1975) (hereinafter, Sec. 23);

or

(iv) Housing assistance payments

under Section 8 of the United States

Housing Act of 1937 (42 U.S.C. 1437f

note) (excluding payments of tenantbased Section 8 assistance) (hereinafter,

project-based Section 8 assistance).

Sufficient habitable, affordable, rental

housing is available means that the

HUD office with jurisdiction determines

that there is an adequate supply of

habitable, affordable housing for low-
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11849

and very low-income families available

in the market area. Submarkets,

consisting of portions of units of general

local government, may be used in large,

complex metropolitan areas. Local

housing markets having an adequate

supply of standard-quality rental

housing would include housing markets

in which the supply of rental housing

available and in production is adequate

to meet the anticipated demand (e.g.,

the housing market is balanced), as well

as those in which there is an excess

supply of rental housing (e.g., the

housing market is soft). Rental markets

that do not have an adequate supply

(e.g., tight markets) are characterized by

low rental vacancy rates, low levels of

production and turnover of rental

housing, and, usually, by high levels of

rent inflation. HUD will make the

determination of whether sufficient

habitable, affordable, rental housing is

available using established market

analysis techniques, and will consider

information that demonstrates:

(1) The rental housing vacancy rate is

at a low level relative to the rate

required for a balanced market, typically

a four percent vacancy rate; except that

a rate lower than four percent may be

considered in unusual circumstances if

it can be demonstrated that there is an

adequate supply of affordable housing

for low-income families;

(2) The number of rental housing

units being produced on an annual basis

is not large enough to satisfy demand

arising from the increase in households,

or, in markets where there is little or no

growth, evidence that the number of

additional rental units being supplied is

not sufficient to meet the demand

arising from net losses to the available

inventory and the inadequate supply of

rental housing has inhibited growth;

(3) The shortage of housing is

resulting in rent increases that exceed

normal increases commensurate with

the costs of operating rental housing;

(4) A significant number, or

proportion, of the households holding

Section 8 certificates or rental vouchers

are unable to find adequate housing

because of the shortage of rental

housing, including PHA data showing a

lower than average percentage of units

under lease and a longer than average

time required to find units.

Tenant-based assistance means rental

assistance that is not attached to a

structure.

Unit of general local government

means a city, town, township, county,

parish, village, or other general purpose

political subdivision of a State.

Unsubsidized mortgage means any

HUD-held multifamily mortgage that is

not a subsidized mortgage.

Unsubsidized project means a

multifamily housing project that is not

a subsidized project.

URA means the Uniform Relocation

Assistance and Real Property

Acquisition Policies Act of 1970 (42

U.S.C. 4601–4655).

Useful life means, generally, twenty

years, but it may be more or less, as

determined by the Department.

Very low-income family means a very

low-income family as defined at 24 CFR

part 813.

§ 290.7 May any of the provisions of this

regulation be waived?

The Assistant Secretary for Housing

may waive any provision of this part,

subject only to statutory limitations.

Each waiver must be in writing, and

must be supported by documentation of

the facts and reasons which formed the

basis for the waiver. HUD will publish

a Federal Register notice informing the

public of all waivers granted under this

section in accordance with the HUD

Reform Act of 1989 and HUD policies

regarding publication of waivers.

Subpart B—Management and

Maintenance Provisions

§ 290.10 What maintenance and

management standards apply to multifamily

housing projects?

(a) Scope. The provisions of this

section apply to any multifamily

housing project:

(1) That is HUD-owned;

(2) For which HUD is mortgagee-inpossession; or

(3) That is subject to a mortgage held

by HUD.

(b) Maintenance and management

standards. With respect to projects

within the scope of this section, HUD or

the owner, as appropriate, shall:

(1) To the greatest extent possible,

maintain all occupied projects in a

decent, safe, and sanitary condition, and

in compliance with any standards

established by the Department and

under applicable State or local laws,

rules, ordinances, or regulations relating

to the accessibility and physical

condition of the housing;

(2) Maintain full occupancy;

(3) Maintain projects for purposes of

providing rental or cooperative housing;

and

(4) Manage projects in accordance

with the requirements of the Fair

Housing Act (42 U.S.C. 3601–19) and

implementing regulations at 24 CFR

parts 100 et al, which prohibit

discrimination in the sale or rental of

housing and in related transactions on

the basis of race, color, religion, sex,

national origin, handicap, or familial

status; section 504 of the Rehabilitation

Act of 1973 (29 U.S.C. 794) and

implementing regulations at 24 CFR part

8 that prohibit discrimination against

disabled individuals in Federallyassisted activities, and 24 CFR part 9,

which prohibit discrimination against

disabled individuals in Federallyconducted activities; Title VI of the

Civil Rights Act of 1964 and

implementing regulations at 24 CFR part

1, which prohibit discrimination based

on race, color, or national origin in

programs receiving Federal financial

assistance; the Age Discrimination Act

of 1975 and implementing regulations at

24 CFR part 146, which prohibit

discrimination based on age in programs

receiving Federal financial assistance;

and Executive Order 11063, as amended

by Executive Order 12259 (Equal

Opportunity in Housing) and

implementing regulations at 24 CFR part

107.

§ 290.12 How may HUD contract for

management services, or require the owner

of a multifamily project to contract for

management services?

(a) Scope. The provisions of this

section apply to any multifamily

housing project:

(1) That is HUD-owned;

(2) For which HUD is mortgagee-inpossession; or

(3) That is subject to a mortgage held

by HUD.

(b) Contracting for management

services. (1) With respect to projects

within the scope of this section, HUD

may, or may require the owner to,

contract for management services for the

project with for-profit and nonprofit

entities and public agencies, including

public housing agencies, on a

negotiated, competitive bid, or other

basis, at a price determined by HUD to

be reasonable, with a manager

determined by HUD to be capable of:

(i) Implementing a sound financial

and physical management program that

is designed to enable the project to meet

anticipated operating and maintenance

expenses to ensure that the project will

remain in a decent, safe, and sanitary

condition, and in compliance with any

standards under applicable State or

local laws, rules, ordinances, or

regulations relating to the accessibility

and physical condition of the housing,

and any such standards established by

HUD;

(ii) Responding to the needs of tenants

and working cooperatively with tenant

organizations;

(iii) Providing adequate

organizational, staff, and financial

resources to the project; and

(iv) Meeting such other requirements

as HUD may determine to be necessary

or appropriate.
11850 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

(2) HUD will conduct outreach efforts

to minority-owned and female-owned

businesses to become managers of the

HUD-owned projects covered by this

section, in accordance with Executive

Order 11625, as amended by Executive

Order 12007 (Minority Business

Enterprises), Executive Order 12432

(Minority Business Enterprise

Development), and Executive Order

12138 (National Women’s Business

Enterprise Policy).

§ 290.14 What occupancy requirements

apply under this regulation?

(a) Multifamily housing project that is

HUD-owned or for which HUD is

mortgagee-in-possession. Occupancy in

a multifamily housing project that is

HUD-owned or for which HUD is

mortgagee-in-possession shall be

available on a basis that is comparable

to the occupancy requirements that

applied to the project immediately

before HUD acquired the project or

became mortgagee-in-possession, except

that preference shall be given to tenants

of other HUD-owned multifamily

housing projects who are eligible for

assistance in accordance with the

displacement and relocation provisions

at § 290.42.

(b) Evictions. Eviction from a HUDowned multifamily housing project is

governed by 24 CFR part 247, subpart B.

(c) Threat to health and safety.

Whenever HUD determines that there is

an immediate threat to the health and

safety of the tenants, HUD may require

the tenants to vacate the premises and

shall provide temporary relocation

benefits as provided in § 290.42 to

tenants required to vacate the premises.

PROJECT RENTS WHILE HUD IS MIP OR OWNER

Unit rents ............................. Unit rents set in accordance with the rent setting requirements of the project’s mortgage insurance or direct loan

program while HUD is mortgagee-in-possession (MIP), or in accordance with the rent setting requirements of

the project’s mortgage insurance or direct loan program in effect immediately before HUD became the owner of

the project (§ 290.16(a)).

Rents payable by tenants ... 1. Tenant rent. Rent the tenant pays will be based on the income certification and the rent payment requirements

of the project’s mortgage insurance or direct loan program in effect while HUD is MIP or immediately before

HUD became the owner of the project (§ 290.16(b)(1)).

2. Rent when tenant does not certify income. If a tenant does not certify income, the tenant must pay the unit rent

(§ 290.16(b)(1)).

3. Utility allowance. For a tenant whose rent is based on a percentage of adjusted income, HUD will use a utility

allowance to reduce the rent (§ 290.16(b)(2)).

4. Project viability. HUD may adjust the rent to promote project viability (§ 290.16(b)(3)).

5. Tenants with rental vouchers or certificates. Tenant pays rent in accordance with policies and procedures governing such assistance (§ 290.16(b)(4)).

§ 290.16 How will rental rates be set when

HUD is mortgagee-in-possession (MIP) or

owner of a multifamily housing project?

Because of the subsidies involved in

making multifamily housing projects

affordable, the setting of rents involves

two steps: first, establishing the rent on

a unit that will be paid to the owner,

and second, determining the rent that

the tenant pays (with the difference

made up by a subsidy), using a number

of procedures to obtain income

verification and notify tenants of

changes in rent. These procedures are

explained below.

(a) Setting unit rents. Except as

modified by this section, for a property

where HUD is mortgagee-in-possession

(MIP), HUD will set unit rents in

accordance with the rent setting

requirements of the project’s mortgage

insurance or direct loan program; or for

a property owned by HUD, rents will be

set in accordance with the rent setting

requirements of the project’s mortgage

insurance or direct loan program in

effect immediately before HUD became

the owner of the project.

(b) Setting rents payable by tenants—

(1) Tenant rent. The rent the tenant pays

will be based on the income

certification and the rent payment

requirements of the project’s mortgage

insurance or direct loan program in

effect while HUD is MIP or immediately

before HUD became the owner of the

project, as affected by any of the factors

in paragraphs (b)(2) through (b)(4) of

this section. However, if a tenant does

not certify income as required by this

section, the tenant must pay the unit

rent as determined under the rent

setting requirements in paragraph (a) of

this section.

(2) Utility allowance. For a tenant

whose rent is based on a percentage of

adjusted income (except for rental

voucher or rental certificate holders), if

the cost of utilities (except telephone)

and other housing services for the unit

is the responsibility of the tenant to pay

directly to the provider of the utility or

service, HUD will deduct from the rent

to be paid by the tenant to HUD a utility

allowance, which is an amount equal to

HUD’s estimate of the monthly costs of

a reasonable consumption of the

utilities and other services for the unit

for an energy-conservative household of

modest circumstances consistent with

the requirement of a safe, sanitary, and

healthful living environment. If the

utility allowance exceeds the percentage

of the tenant’s adjusted income payable

as rent, HUD will pay the difference

between the amount payable as rent and

the utility allowance to the tenant or,

with the consent of the tenant and the

utility company, either jointly to the

tenant and the utility company or

directly to the utility company.

(3) Rent adjustments for project

viability. For a HUD-owned project,

HUD may adjust the rent provided for

in paragraphs (b)(1) or (b)(2) of this

section if necessary or desirable to

maintain the existing economic mix in

the project, prevent undesirable

turnover, or increase occupancy.

(4) Tenants who are rental voucher or

rental certificate holders. Tenants

assisted with rental vouchers or

certificates certify their income to the

public housing agency (PHA)

administering the assistance, and pay

rent pursuant to the policies and

procedures governing such assistance.

(c) Income verification and rent

notification procedures.

(1) Income certification by tenants—

(i) In subsidized projects. (A) For

families residing in subsidized projects,

when HUD becomes MIP or owner,

HUD will request an income

certification from each family as soon as

practicable after HUD initially assumes

management, unless the family’s income

has been examined by the owner or by

HUD not more than four months before

HUD’s assumption of management.

(B) For each family applying for

admission to subsidized projects, HUD

will request an income certification to

determine the family’s eligibility for a

subsidized rent, and (if the rent is based

on a percentage of adjusted income) the
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11851

family’s subsidized rent, in accordance

with part 813 of this title.

(ii) In unsubsidized projects. (A) For

tenants in occupancy when HUD

becomes mortgagee-in-possession or

owner of an unsubsidized project, HUD

may request an income certification

from families who are not paying a

subsidized rent.

(B) For families applying for

admission to such projects, HUD will

request sufficient information for

income verification to determine the

family’s ability to pay the unit rent.

(2) Notice of increases in the amount

of rent payable. Whenever HUD

proposes an increase in rents in a HUDowned multifamily project or a project

where HUD is mortgagee-in-possession,

HUD will provide tenants 30 days

notice of the proposed changes and an

opportunity to review and comment on

the new rent and supporting

documentation. After HUD considers

the tenants’ comments and has made a

decision with respect to its proposed

rent change, HUD shall notify the

tenants of its decision, with the reasons

for the decision. A tenant in occupancy

before the effective date of any revised

rental rate must be given 30 days notice

of the revised rate, and any change in

the tenant’s rent is subject to the terms

of an existing lease. Notices to each

tenant must be personally delivered or

sent by first class mail. General notices

to all tenants must be posted in the

project office and in appropriate

conspicuous and accessible locations

around the project.

(3) Disclosure and verification of

Social Security numbers. Any

certifications or reexaminations of the

income of tenants or prospective tenants

in connection with tenancy under this

section are subject to the requirements

for the disclosure and verification of

Social Security Numbers, as provided

by part 200, subpart T, of this title.

(4) Signing of consent forms for

income verification. Any certifications

or reexaminations of the income of

tenants or prospective tenants in

connection with tenancy under this

section are subject to the requirements

for the signing and submitting of

consent forms for the obtaining of wage

and claim information from State Wage

Information Collection Agencies, as

provided by part 200, subpart V, of this

title. (Approved by Office of

Management and Budget under control

number 2502–0204.)

PRE-DISPOSITION NOTIFICATION REQUIREMENTS

Pre-foreclosure (§ 290.22) .. 1. Timing. Not later than 60 days before foreclosure on any mortgage.

2. Recipients.

(i) Tenants of the project, and

(ii) The unit of general local government in which the project is located.

3. Contents.

(i) General terms and conditions concerning the sale, future use, and operation of the project that HUD proposes

to impose; and,

(ii) Whether temporary or permanent relocation is anticipated, and, if so, available displacement and relocation assistance.

Right of first refusal

(§ 290.24).

1. Timing. Not later than 30 days after HUD acquires title to a multifamily housing project.

2. Recipients.

(i) The appropriate unit of general local government;

(ii) Public housing agencies in the project’s market area;

(iii) The State agency or agencies designated to receive such notice by the chief executive officer of the State in

which the project is located.

3. Contents.

(i) Description of the project;

(ii) Invitation to recipients to make bona fide offers to purchase the project;

(iii) Offer of right of first refusal for period of up to 90 days;

(iv) Method by which the recipient may respond to HUD.

Notice to tenants and the

community (§ 290.26).

1. Timing. Not later than 60 days after HUD acquires title to a multifamily housing project.

2. Recipients.

(i) To the tenants of the project;

(ii) To the unit of general local government in which the project is located; and

(iii) To the community in which the project is located.

3. Contents.

(i) Description of the project;

(ii) Proposed general terms and conditions concerning the sale, future use, and operation of the project;

(iii) Invitation for tenants and their organizations, units of general local government, and other public or nonprofit

entities to submit comments on the disposition plan, and/or proposals for disposition which will be considered by

HUD in making its property disposition determination.

Subpart C—Notification Requirements

§ 290.20 How will HUD provide the

notifications that are required under this

regulation?

(a) In general. HUD may combine two

or more of the notifications required by

this subpart, as appropriate, to simplify

the disposition process.

(b) Methods of notification— (1) To

tenants. The notices required to be

made to tenants under this subpart will

be delivered to each unit in the project,

or sent to each unit by first class mail.

Where HUD is mortgagee-in-possession

or owner of a project, the notice will

also be posted in the project office and

in appropriate conspicuous and

accessible locations around the project.

(2) To the unit of general local

government. The notice required to be

made to a unit of general local

government under this section will be

sent to the chief executive officer of the

unit of general local government by first

class mail. For purposes of receiving or

sending any notices or information

under this subpart, the unit of general

local government is its chief executive

officer, or the person designated by the

chief executive officer to receive or send

the notice or information.

(3) To the community or any other

party. HUD will consult with tenants

and their organizations, officials of units

of general local government, and other

entities as HUD determines to be

appropriate, to identify community

recipients of any notification required

by this subpart. Any notice required to

be made to any party other than a tenant
11852 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

or a unit of general local government

will be sent by first class mail.

§ 290.22 What notification must be given

before foreclosure?

(a) Timing and recipients of notice.

Not later than 60 days before foreclosing

on any mortgage held by the Department

on any multifamily housing project,

HUD will provide notice of the

proposed foreclosure sale to the tenants

of the project and to the unit of general

local government in which the project is

located.

(b) Contents of notice. The notice will

describe the general terms and

conditions concerning the sale, future

use, and operation of the project that

HUD proposes to impose on a purchaser

other than HUD through the foreclosure.

The notice will also state whether

temporary or permanent relocation is

anticipated as a result of repairs or the

proposed disposition, including any

anticipated conversion of use, and, if so,

the levels of displacement and

relocation assistance available under

§ 290.42.

§ 290.24 Who has a right of first refusal for

properties that HUD is selling, and what

kind of notice must HUD provide?

(a) Timing and recipients of notice.

Not later than 30 days after HUD

acquires title to a multifamily housing

project, HUD will provide notice of the

right of first refusal to the appropriate

unit of general local government, as well

as public housing agencies in the

project’s market area, and the State

agency or agencies designated to receive

such notice by the chief executive

officer of the State in which the project

is located.

(b) Content of notice. The notice will

describe the project acquired by HUD,

and contain an invitation to recipients

to make bona fide offers to purchase the

project. The notice will state:

(1) That for a period specified in the

notice, not to exceed 90 days from the

time the notification is made, HUD will

not sell or offer to sell the project other

than to a recipient of the notice, unless

the recipients notify HUD sooner that

they will not make an offer to purchase

the project;

(2) That if a recipient expresses

interest within the specified period in

acquiring the project, HUD will consult

with the interested parties in the

preparation of the disposition plan and

the terms and conditions of the sale of

the project. HUD will accept a bona fide

offer to purchase the project if the offer

complies with the terms and conditions

of the disposition plan for the project,

or is otherwise acceptable to HUD;

(3) The method by which the

recipient may respond to HUD with an

expression of interest or a bona fide

offer, or by which the recipient may

notify HUD that an offer will not be

made.

§ 290.26 What kind of notice must HUD

provide to tenants and the community when

HUD is selling a project?

(a) Timing and recipients of notice.

Not later than 30 days after HUD

acquires title to a multifamily housing

project, HUD will provide notice of

HUD’s acquisition and proposed

disposition of the project to the tenants

of the project, to the unit of general local

government, and to the community in

which the project is located.

(b) Content of notice. The notice will

describe the project acquired by HUD,

and the general terms and conditions

concerning the sale, future use, and

operation of the project as proposed by

HUD. The notice will, as appropriate,

state:

(1) HUD has acquired the project.

(2) During HUD’s ownership, HUD

will, to the extent feasible, assure that

the project is maintained in a decent,

safe, and sanitary condition.

(3) HUD is developing a final

disposition plan for the project.

(4) HUD normally seeks to sell HUDowned projects as rapidly as possible.

(5) HUD’s interest in learning of

tenant, community, and local

government plans and capacity for the

acquisition of the project for use as

rental or cooperative housing.

(6) HUD’s final determination of the

terms and conditions to be imposed on

the disposition of the project will not be

made until after HUD considers the

comments received from tenants, the

community, and the unit of general

local government within the specified

comment period.

(7) A brief description of a proposed

manner of disposition of the project.

(8) A description of the pending

notice of the right of first refusal to

purchase the project made under

§ 290.24.

(9) That alternative uses of units in

the project may be part of the project’s

disposition, and that:

(i) Some of the units in the project

may be made available for uses other

than rental or cooperative uses,

including low-income homeownership

opportunities, or community space,

office space for tenant or housingrelated service providers or security

programs, or small business uses, if

such uses benefit the tenants of the

project;

(ii) Some of the units in the project

may be used in any manner, if the

Department and the unit of general local

government or area-wide governing

body determine that such use will

further fair housing, community

development, or neighborhood

revitalization goals;

(iii) Such alternative uses of units

may only take place if:

(A) Tenant-based Section 8 rental

assistance is made available to each

eligible family residing in the project

that is displaced as a result of such

actions; and

(B) The Department determines that

sufficient habitable, affordable rental

housing is available in the market area

in which the project is located to ensure

use of such assistance.

(10) That any very low-income family

who is a preexisting tenant of the

project who upon disposition of the

project would be required to pay rent in

an amount in excess of 30 percent of the

adjusted income of the family:

(i) For a period of 2 years beginning

upon the date of the acquisition of the

project under the disposition, the rent

for the unit occupied by the family may

not be increased above the rent charged

immediately before the acquisition; and

(ii) The family shall be considered

displaced for purposes of the

preferences for assistance under

sections 6(c)(4)(A)(i), 8(d)(1)(A)(i), and

8(o)(3)(B) of the United States Housing

Act of 1937.

(11) Whether temporary or permanent

relocation is anticipated as a result of

repairs or the proposed disposition,

including any anticipated conversion of

use, and, if so, the levels of relocation

assistance available under § 290.42.

(12) That tenants and their

organizations, units of general local

government, and other public or

nonprofit entities are invited to submit

comments on the disposition plan, and/

or proposals (e.g., expressions of interest

to convert the project to a cooperative or

other form of resident-controlled

ownership, or other resident initiative),

which will be considered by HUD in

making its property disposition

determination.

(13) That comments must be

submitted to HUD within 30 days of

receipt of the notice.

(14) That the full disposition

recommendation and analysis and other

supporting information will be available

for inspection and copying at the HUD

field office.
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11853

METHODS OF DISPOSITION

Foreclosure sales.

(§ 290.30(a)).

HUD may dispose of a project at a foreclosure sale:

1. In accordance with the Multifamily Mortgage Foreclosure Act, or

2. In accordance with other Federal or State foreclosure law.

Sale of HUD-owned

projects. (§ 290.30(b)).

HUD may sell a HUD-owned project using any of the following procedures:

1. Competitive bid;

2. Auction;

3. Request for proposals;

4. Negotiated sale, as permitted under § 290.30(b)(1) and (2); or

5. Any other method, on such terms as HUD considers appropriate.

Transfer for use under other

HUD programs.

(§ 290.30(c)).

HUD, under an agreement, may transfer a multifamily housing project:

1. To a public housing agency (PHA) for use of the project as public housing; or

2. To an entity eligible to own or operate 202 or 811 supportive housing.

Subpart D—Disposition Procedures

§ 290.30 What are the different methods

that may be used for the disposition of a

multifamily housing project?

HUD may use any of the following

methods, as appropriate, for the

disposition of a multifamily housing

project:

(a) Foreclosure sales. Foreclosure

sales will be conducted, at HUD’s

discretion, in accordance with the

Multifamily Mortgage Foreclosure Act,

or other Federal or State foreclosure

law, on such terms as HUD considers

appropriate to further the purpose stated

in § 290.3.

(b) Sale of HUD-owned projects. HUD

may dispose of a HUD-owned

multifamily project by competitive bid,

auction, request for proposals, or other

method, on such terms as HUD

considers appropriate to further the

purpose stated in § 290.3. When HUD

conducts a negotiated sale involving the

disposition of a project to a person or

entity without a public offering, the

following provisions apply:

(1) HUD may negotiate the sale of any

project to an agency of the Federal,

State, or local government.

(2) When HUD determines that a

purchaser can demonstrate the capacity

to own and operate a project in

accordance with standards set by HUD,

and/or a competitive offering will not

generate offers of equal merit from

qualified purchasers, HUD may approve

a negotiated sale of a subsidized project

to:

(i) A resident organization wishing to

convert the project to a nonprofit or

limited equity cooperative;

(ii) A cooperative (e.g., nonprofit

limited equity, consumer cooperative,

mutual housing organization) with

demonstrated experience in the

operation of nonprofit (and preferably

low- to moderate-income) housing;

(iii) A nonprofit entity that will

continue to operate the project as lowto moderate-income rental housing and

whose governing board is composed of

project residents;

(iv) A State or local governmental

entity with the demonstrated capacity to

acquire, manage, and maintain the

project as rental or cooperative housing

available to and affordable by low- and

moderate-income residents;

(v) A State or local governmental or

nonprofit entity with the demonstrated

capacity to acquire, manage, and

maintain the project as a shelter for the

homeless or other public purpose,

generally when the project is vacant or

has minimal occupancy and is not

needed in the area for continued use as

rental housing for the elderly or

families; or

(vi) Other nonprofit organizations.

(c) Transfer for use under other HUD

programs.—(1) In general. Subject only

to the requirements of an agreement

under paragraph (c)(2) of this section,

HUD may transfer a multifamily

housing project:

(i) To a public housing agency (PHA)

for use of the project as public housing;

or

(ii) To an entity eligible to own or

operate housing assisted under section

202 of the Housing Act of 1959 or under

section 811 of the Cranston-Gonzalez

National Affordable Housing Act for use

as supportive housing under either of

those sections.

(2) Transfer agreement. An agreement

providing for the transfer of a project as

described in paragraph (c)(1) of this

section must:

(i) Contain such terms, conditions,

and limitations as HUD determines to be

appropriate, including requirements to

ensure use of the project as public

housing, supportive housing under

section 202 of the Housing Act of 1959,

or supportive housing under section 811

of the Cranston-Gonzalez National

Affordable Housing Act, as applicable;

and

(ii) Ensure that no tenant of the

project will be displaced as a result of

the transfer.

§ 290.32 What qualities does HUD look for

in a purchaser?

(a) Foreclosure sales. HUD will

dispose of a multifamily housing project

through a foreclosure sale only to a

purchaser that the Department

determines is capable of implementing

a sound financial and physical

management program that is designed to

enable the project to meet anticipated

operating and repair expenses to ensure

that the project will remain in decent,

safe, and sanitary condition and in

compliance with any standards under

applicable State or local laws, rules,

ordinances, or regulations relating to the

physical condition of the housing and

any such standards established by the

Department.

(b) HUD-owned multifamily housing

projects. Sales of HUD-owned

multifamily housing projects may be

made only to a purchaser determined by

the Department to be capable of:

(1) Satisfying the conditions of the

disposition plan developed under

§ 290.34 for the project;

(2) Implementing a sound financial

and physical management program that

is designed to enable the project to meet

anticipated operating and repair

expenses to ensure that the project will

remain in decent, safe, and sanitary

condition and in compliance with any

standards under applicable State or

local laws, rules, ordinances, or

regulations relating to the physical

condition of the housing and any such

standards established by the

Department;

(3) Responding to the needs of the

tenants and working cooperatively with

tenant organizations;

(4) Providing adequate organizational,

staff, and financial resources to the

project; and

(5) Meeting such other requirements

as HUD may determine to be

appropriate for the particular project.

§ 290.34 What kind of disposition plan will

HUD prepare before selling a project?

(a) In general. Before disposing of a

HUD-owned multifamily housing
11854 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

project, HUD will develop an initial and

a final disposition plan for the project

that specifies the minimum terms and

conditions for the disposition of the

project, the sales price that is acceptable

to HUD, and the assistance that HUD

plans to make available to a prospective

purchaser.

(b) Market-wide plans. In developing

the disposition plan under this section

for a HUD-owned multifamily housing

project located in a market area in

which at least 1 other HUD-owned

multifamily housing project is located,

HUD may coordinate the disposition of

HUD-owned multifamily housing

projects located within the same market

area to the extent and in such a manner

as the Department determines

appropriate to carry out the goals under

§ 290.3.

(c) Sales price. The sales price in the

disposition plan will be reasonably

related to the intended use of the project

after the sale, any rehabilitation

requirements for the project, the rents

for units in the project that can be

supported by the market, the amount of

rental assistance available for the project

under Section 8 of the United States

Housing Act of 1937, the occupancy

profile of the project (including family

size and income levels for tenant

families), and any other factors that

HUD considers appropriate.

(d) Community and tenant input. In

developing the initial and final

disposition plans, HUD will consider

any timely input from officials of the

unit of general local government

affected, the community in which the

project is situated, and the tenants of the

project, including the comments

received in response to the notice

required by § 290.26. To obtain this

input, HUD may provide technical

assistance, directly or indirectly, and

may use amounts available for technical

assistance under the Emergency Low

Income Housing Preservation Act of

1987, subtitle C of the Low-Income

Housing Preservation and Resident

Homeownership Act of 1990, subtitle B

of title IV of the Cranston-Gonzalez

National Affordable Housing Act, or this

part, for the provision of such technical

assistance. Recipients of technical

assistance funding under the provisions

referred to in this subparagraph may

provide technical assistance to the

extent of such funding, notwithstanding

the source of the funding.

(e) Environmental requirements. HUD

will perform, and include in the final

disposition plan, the environmental

reviews required by 24 CFR part 50.

TABLE OF ACTIONS TO FACILITATE DISPOSITION

All Multifamily Housing

Projects [Subpart E].

Required Actions

1. Displacement requirements (§ 290.42).

2. Very-low income preexisting tenant—2 year rent freeze if rent after disposition more than 30 percent of adjusted income (§ 290.44).

3. Nondiscrimination against Section 8 certificate holders and voucher holders (§ 290.46).

Subsidized Projects [Subpart F].Basic Actions

1. Provide project-based Section 8 assistance to at least all units that, before acquisition or foreclosure, received:

Rent Supp, RAP, Sec. 23, project-based Section 8 (§ 290.54(a)).

2. Vacancy in any assisted unit must be filled by a family that is eligible for the assistance (§ 290.54(b)).

3. Rent and use restrictions on BMIR, 236, or 202 subsidized project units that were not covered before acquisition or foreclosure by Rent Supp, RAP, Sec. 23, or project-based Section 8 (§ 290.54(c)).

Alternatives to Basic Actions

1. Assistance to, or restrictions on, units in unsubsidized projects instead of assistance to units in subsidized

projects (§ 290.56(a)).

2. Substitution of tenant-based Section 8 assistance to low-income families instead of Project-based assistance to

units (§ 290.56(b)).

3. Use of the additional assistance and restrictions permitted in subpart H (§ 290.56(c)).

Unsubsidized Projects [Subpart G]

Basic Actions

1. Provide project-based Section 8 assistance for all units that, before acquisition or foreclosure, received assistance under:

(i) The new construction and substantial rehabilitation program under section 8(b)(2) of the United States Housing

Act of 1937 (as in effect before October 1, 1983);

(ii) The property disposition program under section 8(b) of such Act;

(iii) The project-based certificate program under section 8 of such Act;

(iv) The moderate rehabilitation program under section 8(e)(2) of such Act;

(v) Section 23 of such Act (as in effect before January 1, 1975);

(vi) The rent supplement program under section 101 of the Housing and Urban Development Act of 1965; or

(vii) Section 8 of the United States Housing Act of 1937, following conversion from assistance under section 101

of the Housing and Urban Development Act of 1965 (§ 290.64(a)).

2. Provide tenant-based Section 8 assistance to preexisting tenants of LMSA-assisted units (§ 290.64(b)).

Alternatives to Basic Actions

1. Substitution of tenant-based Section 8 assistance to low-income families instead of project-based assistance to

units (§ 290.66(a)).

2. Use of the additional assistance and restrictions permitted in subpart H (§ 290.66(b)).

All Multifamily Housing

Projects [Subpart H].

Additional Actions

1. Discounted sales price (§ 290.72).

2. Additional use and rent restrictions (§ 290.74).

3. Short-term loans (§ 290.76).

4. Up-front grants (§ 290.78).

5. Additional tenant-based assistance (§ 290.80).

6. Alternative uses (§ 290.82)

6. Rebuilding (§ 290.84).

7. Emergency assistance funds (§ 290.86).

8. Determination not to preserve (§ 290.88).
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11855

Subpart E—All Multifamily Housing

Projects—Required Actions

§ 290.40 Are there any required actions

that must be taken in the disposition of all

multifamily housing projects?

Yes, the requirements regarding

tenants who are displaced (explained in

§ 290.42), unassisted very low-income

tenants (explained in § 290.44), and

nondiscrimination against Section 8

certificate holders and voucher holders

(explained in § 290.46), apply in the

disposition of all multifamily housing

projects.

§ 290.42 What actions must be taken

concerning tenants who are displaced by

the disposition of a multifamily housing

project?

(a) Scope of section. This section

applies to all HUD-owned multifamily

housing projects and all multifamily

housing projects subject to HUD-held

mortgages. When HUD is not the

mortgagee-in-possession or owner, the

owner of the project shall comply with

this section, if HUD has authorized the

demolition of, repairs to, or conversion

of the use of the multifamily housing

project.

(b) Minimizing displacement.

Consistent with the other goals and

objectives of this part, all reasonable

steps shall be taken to minimize the

displacement of persons (families,

individuals, businesses, and nonprofit

organizations) from a project covered by

this part. If displacement or temporary

relocation will occur in connection with

the disposition of a project, HUD may

require the purchaser of the project to

provide assistance in accordance with

this section.

(c) Relocation assistance at non-URA

levels. Whenever the displacement of a

residential tenant (family or individual)

occurs in connection with the

management or disposition of a

multifamily project, but is not subject to

paragraph (d) of this section (e.g., occurs

as a direct result of HUD repair or

demolition of all or a part of a HUDowned multifamily project or as a direct

result of the foreclosure of a HUD-held

mortgage on a multifamily housing

project or sale of a HUD-owned project

without federal financial assistance), the

displaced tenant shall be eligible for the

following relocation assistance:

(1) Advance written notice of the

expected displacement. The notice shall

be provided at least 60 days before

displacement, describe the assistance

and the procedures for obtaining the

assistance, and contain the name,

address and phone number of an official

responsible for providing the assistance;

(2) Other advisory services, as

appropriate, including counseling,

referrals to suitable (and where

appropriate, accessible), decent, safe,

and sanitary replacement housing, and

fair housing-related advisory services;

(3) Payment for actual reasonable

moving expenses, as determined by

HUD;

(4) For displaced eligible families and

individuals—

(i) The opportunity to relocate to a

suitable (and where appropriate,

accessible), decent, safe, and sanitary

dwelling unit in a HUD-owned

multifamily project, in a public housing

project, or in another HUD subsidized

multifamily housing project; or

(ii) Assistance under the Section 8

Certificate program (see

§ 882.209(a)(4)(ii)(B) of this title) or the

Housing Voucher program (see

§ 887.155(c) of this title), if the

assistance is available; and

(5) Such other federal, State or local

assistance as may be available.

(d) Relocation assistance at URA

levels—(1) General. Whenever

assistance under 24 CFR part 886,

subpart C (or other federal financial

assistance, as defined in 49 CFR 24.2(j))

is provided in connection with the

purchase, demolition, or rehabilitation

of a multifamily property by a third

party, any resulting displacement is

subject to paragraph (d) of this section.

A displaced person (defined in

paragraph (d)(3) of this section) must be

provided relocation assistance at the

levels described in, and in accordance

with the requirements of, the URA,

implementing regulations at 49 CFR part

24, and this section.

(2) Definition of ‘‘initiation of

negotiations’’. Under the URA, for

purposes of determining the method for

computing the replacement housing

assistance to be provided to a residential

tenant displaced as a direct result of

privately undertaken rehabilitation,

demolition, or acquisition of the real

property, the term ‘‘initiation of

negotiations’’ means the transfer of title

to the purchaser.

(3) Definition of displaced person. (i)

The term ‘‘displaced person’’ means any

person (family, individual, business, or

nonprofit organization) that moves from

the real property, or moves personal

property from the real property,

permanently, as a direct result of

acquisition, rehabilitation or demolition

for a federally assisted project. This

includes, but is not limited to:

(A) A person that moves permanently

from the real property after receiving

notice requiring such move, if the move

occurs on or after the date of the transfer

of title to the purchaser.

(B) Any person that HUD determines

was displaced as a direct result of

acquisition, rehabilitation or demolition

for an assisted project.

(C) A tenant-occupant of a dwelling

unit who moves from the building/

complex, permanently, after the transfer

of title to the purchaser, if the move

occurs before the tenant is provided

notice offering him or her the

opportunity to lease and occupy a

suitable, decent, safe, sanitary, and

where appropriate, accessible dwelling

in the same building/complex, under

reasonable terms and conditions, upon

completion of the project. Such

reasonable terms and conditions shall

include a monthly rent, including

estimated average monthly utility costs,

that does not exceed the greater of the

tenant’s monthly rent before transfer of

title to the purchaser and estimated

average monthly utility costs, or that is

affordable, as defined in this part.

(D) A tenant-occupant of a dwelling

unit who is required to relocate

temporarily for the project, but does not

return to the building/complex, if either

the tenant is not offered payment for all

reasonable out-of-pocket expenses

incurred in connection with the

temporary relocation, or other

conditions of the temporary relocation

are not reasonable.

(E) A tenant-occupant who moves

from the building/complex permanently

after he or she has been required to

move to another unit in the same

building/complex for the project, if

either the tenant is not offered

reimbursement for all reasonable out-ofpocket expenses incurred in connection

with the move, or other conditions of

the move are not reasonable.

(ii) Notwithstanding the provisions of

paragraph (d)(3)(i) of this section, a

person does not qualify as a ‘‘displaced

person’’ if:

(A) The person is excluded under 49

CFR 24.2(g)(2).

(B) The person has been evicted for a

serious or repeated violation of the

terms and conditions of the lease or

occupancy agreement, violation of

applicable Federal, State, or local law,

or other good cause, and HUD

determines that the eviction was not

undertaken for the purpose of evading

the obligation to provide relocation

assistance.

(C) The person moves into the

property after transfer of title to the

purchaser.

(D) HUD determines that the person

was not displaced as a direct result of

acquisition, rehabilitation, or

demolition for an assisted project.

(e) Temporary relocation (URA and

non-URA relocation assistance).

Residential tenants, who will not be

required to move permanently, but who
11856 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

must relocate temporarily (e.g., to

permit property repairs), shall be

provided:

(1) Reimbursement for all reasonable

out-of-pocket expenses incurred in

connection with the temporary

relocation, including the cost of moving

to and from the temporary housing and

any increase in monthly rent or utility

costs. The party responsible for this

requirement may, at its option, perform

the services involved in temporarily

relocating the tenants or pay for such

services directly; and

(2) Appropriate advisory services,

including reasonable advance written

notice of the date and approximate

duration of the temporary relocation;

the suitable (and where appropriate,

accessible), decent, safe, and sanitary

housing to be made available for the

temporary period; the terms and

conditions under which the tenant may

lease and occupy a suitable, decent,

safe, and sanitary dwelling in the

building/complex following completion

of the repairs; and the right to financial

assistance provided under paragraph

(e)(1) of this section.

(f) Appeals. If a person disagrees with

the purchaser’s determination

concerning the person’s eligibility for

relocation assistance or the amount of

the assistance for which the person is

eligible, the person may file a written

appeal of that determination with the

owner or purchaser. A person who is

dissatisfied with the purchaser’s

determination on his or her appeal may

submit a written request for review of

that decision to the HUD Field Office

responsible for administering the URA

in the area.

§ 290.44 What actions must be taken

concerning very low-income tenants in the

disposition of a multifamily housing

project?

HUD will require that for a period of

2 years, beginning upon the date of

disposition of a multifamily housing

project, the rent for any unit occupied

by a very low-income family, that is a

preexisting tenant and that would be

required to pay a rent that is more than

30 percent of the adjusted income (as

defined in part 813) of the family, may

not be increased above the rent charged

immediately before the acquisition.

Such a family will also be considered

displaced for purposes of the

preferences for assistance under

sections 6(c)(4)(A)(i), 8(d)(1)(A)(i), and

8(o)(3)(B) of the United States Housing

Act of 1937.

§ 290.46 What restrictions concerning

nondiscrimination against Section 8

certificate holders and voucher holders

apply in the disposition of a multifamily

housing project?

The purchaser of any multifamily

housing project shall not refuse

unreasonably to lease a dwelling unit

offered for rent, offer to sell cooperative

stock, or otherwise discriminate in the

terms of tenancy or cooperative

purchase and sale because any tenant or

purchaser is the holder of a Certificate

of Family Participation or a Voucher

under Section 8 of the United States

Housing Act of 1937 (42 U.S.C. 1437f),

or any successor legislation. This

provision is limited in its application,

for tenants or applicants with Section 8

Certificates or their equivalent (other

than Vouchers), to those units which

rent for an amount not greater than the

Section 8 Fair Market Rent, as

determined by HUD. The purchaser’s

agreement to this condition must be

contained in any contract of sale and

also may be contained in any regulatory

agreement, use agreement, or deed

entered into in connection with the

disposition.

Subpart F—Subsidized Projects—

Basic and Alternative Actions to

Facilitate Disposition

§ 290.54 What are the basic actions that

may be taken in the disposition of a

subsidized project?

The basic assistance that HUD will

provide and the basic restrictions HUD

will require in the disposition of a

subsidized project depend upon the

profile of the project’s units and tenants,

as follows:

(a) Assisted units—provision of

project-based Section 8 assistance.

Except as noted in § 290.56, and to the

extent budget authority is available,

HUD will provide project-based Section

8 assistance to assist at least all of a

subsidized project’s units that were

covered, before acquisition or

foreclosure, by the rent subsidies (Rent

Supp, RAP, Sec. 23, project-based

Section 8) included in the definition of

a subsidized project.

(b) Assisted units—tenant eligibility

restrictions. The contract for projectbased Section 8 assistance in

accordance with paragraph (a) of this

section, will provide that when a

vacancy occurs in any unit that requires

such assistance, but which was

occupied by a family ineligible for such

assistance, the owner will lease the

available unit to a family that is eligible

for the assistance.

(c) Unassisted units—use and rent

restrictions. HUD will require use or

rent restrictions on BMIR, 236, or 202

subsidized projects to ensure that units

that were not covered before acquisition

or foreclosure by Rent Supp, RAP, Sec.

23, or project-based Section 8 rent

subsidies remain available and

affordable for the remaining useful life

of the project.

§ 290.56 What alternatives to the basic

actions are available in the disposition of

subsidized projects?

In the disposition of a subsidized

project, HUD may take the following

alternative actions instead of the basic

actions listed in § 290.54:

(a) Unit substitution: Assistance to, or

restrictions on, units in unsubsidized

projects instead of assistance to units in

subsidized projects. Instead of providing

project-based Section 8 assistance as

required by § 290.54(a), HUD may, in

unsubsidized projects located in the

same market area, provide project-based

Section 8 assistance to units to be

occupied by very low-income persons,

or impose use and rent restrictions to

assure that units remain available to and

affordable by very low-income families

for the remaining useful life of the

project. When this unit substitution

procedure is used, the total number of

unsubsidized project units provided

with assistance and/or placed under use

and rent restrictions must be at least

equal to the number of subsidized

projects units that would have received

project-based Section 8 in the absence of

unit substitution. In addition, HUD will

make tenant-based Section 8 assistance

available to low-income families

residing in the subsidized project’s units

that would have received project-based

Section 8 assistance if this unit

substitution alternative had not been

used.

(b) Substitution of tenant-based

Section 8 assistance to low-income

families instead of project-based

assistance to units. Instead of providing

project-based Section 8 assistance as

required under § 290.54(a), HUD may

enter into annual contribution contracts

with public housing agencies to provide

tenant-based Section 8 assistance to all

low-income families who reside, on the

date that the project is acquired by a

purchaser other than HUD, in units that

would have been eligible for the projectbased Section 8 assistance under

§ 290.54. Tenant-based Section 8

assistance may be used in this way as

a substitute for project-based Section 8

assistance in not more than 10 percent

of the aggregate number of subsidized

project units disposed of by HUD in any

fiscal year, and only if HUD determines

that there is available in the market area

in which the project is located an

adequate supply of habitable, affordable
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11857

housing for very low-income families

and other low-income families using

tenant-based assistance. The number of

units eligible for this form of

substitution within the 10 percent limit

will be estimated at the beginning of

each fiscal year, taking into

consideration the aggregate number of

subsidized project units disposed of by

HUD in the immediately preceding

fiscal year and the disposition activity

planned for the current fiscal year.

(c) Additional actions under subpart

H. Instead of, or in addition to,

providing project-based Section 8

assistance in the disposition of a

subsidized project as required under

§ 290.54(a), HUD may make use of the

additional actions to facilitate the

disposition of multifamily housing

projects permitted in subpart H of this

part.

Subpart G—Unsubsidized Projects—

Basic and Alternative Actions to

Facilitate Disposition

§ 290.64 What are the basic actions that

may be taken in the disposition of an

unsubsidized project?

The basic assistance that HUD will

provide and the basic restrictions HUD

will require in the disposition of an

unsubsidized project depend upon the

profile of the project’s units and tenants,

as follows:

(a) Assisted units—provision of

project-based Section 8 assistance.

Except as noted in § 290.66, and to the

extent budget authority is available,

HUD will provide project-based Section

8 assistance for all of an unsubsidized

project’s units that were covered, before

acquisition or foreclosure, by an

assistance contract under:

(1) The new construction and

substantial rehabilitation program under

section 8(b)(2) of the United States

Housing Act of 1937 (the 1937 Act) (as

in effect before October 1, 1983);

(2) The property disposition program

under section 8(b) of the 1937 Act;

(3) The project-based certificate

program under section 8 of the 1937

Act;

(4) The moderate rehabilitation

program under section 8(e)(2) of the

1937 Act;

(5) Section 23 of the 1937 Act (as in

effect before January 1, 1975);

(6) The rent supplement program

under section 101 of the Housing and

Urban Development Act of 1965; or

(7) Section 8 of the 1937 Act,

following conversion from assistance

under section 101 of the Housing and

Urban Development Act of 1965.

(b) LMSA-assisted units—provision of

tenant-based section 8 assistance. HUD

will provide tenant-based Section 8

assistance for families that are

preexisting tenants of unsubsidized

projects in units that, immediately

before foreclosure or acquisition of the

project by HUD, were covered by an

assistance contract under the loan

management set-aside program under

section 8(b) of the United States

Housing Act of 1937.

§ 290.66 What alternatives to the basic

actions are available in the disposition of

unsubsidized projects?

In disposing of an unsubsidized

project, HUD may take the following

alternative actions instead of the basic

actions listed in § 290.64:

(a) Substitution of tenant-based

Section 8 assistance to low-income

families instead of project-based

assistance to units. Instead of providing

project-based Section 8 assistance as

required under § 290.64, HUD may enter

into annual contribution contracts with

public housing agencies to provide

tenant-based Section 8 assistance to all

low-income families who reside, on the

date that the project is acquired by a

purchaser other than HUD, in units

eligible for the project-based Section 8

assistance under § 290.64. Tenant-based

Section 8 assistance may be used in this

way as a substitute for project-based

Section 8 assistance only if HUD

determines that there is available in the

market area in which the project is

located an adequate supply of habitable,

affordable housing for very low-income

families and other low-income families

using tenant-based assistance.

(b) Additional actions under subpart

H. Instead of, or in addition to,

providing project-based Section 8

assistance in the disposition of an

unsubsidized project as required under

§ 290.64, HUD may make use of the

additional assistance and restrictions for

the disposition of multifamily housing

projects permitted in subpart H of this

part.

Subpart H—All Multifamily Housing

Projects—Additional Actions to

Facilitate Disposition

§ 290.70 What guidelines will HUD apply in

determining which additional actions to

take in the disposition of a multifamily

housing project?

The additional actions to facilitate

disposition available under this subpart

are intended to replace, supplement or

make more cost effective the Section 8

assistance that would otherwise be

required, and are to be provided in a

manner consistent with the goals of

§ 290.3 and unless otherwise noted:

(a) On terms that will ensure that at

least the units in the project otherwise

required to receive project-based

Section 8 assistance in accordance with

§ 290.54(a) (for a subsidized project) and

§ 290.64(a) (for an unsubsidized project)

are available to and affordable by lowincome persons for the remaining useful

life of the project, with use or rent

restrictions as HUD may prescribe; and

(b) With tenant-based Section 8

assistance to any very low-income

families who would have received

project-based assistance under Section 8

in accordance with § 290.54(a) (for a

subsidized project) and § 290.64(a) (for

an unsubsidized project), but because of

action taken under subpart H of this

part, did not receive such assistance,

and are left residing in units of the

project with rents that exceed the

amount payable as rent under section

3(a) of the United States Housing Act of

1937 for very low-income families.

§ 290.72 May HUD reduce the sales price

for a project?

HUD may reduce the selling price of

a project. The sales price for a project

will be reasonably related to the

intended use of the property as

affordable housing for very low-income

tenants after sale, any rehabilitation

requirements for the project, the rents

for units in the project that can be

supported by the market, the amount of

project-based Section 8 assistance being

made available by HUD in the

disposition of the project, the

occupancy profile of the project

(including family size and income levels

for tenant families), and any other

factors that the Department considers

appropriate.

§ 290.74 May HUD require additional use

and rent restrictions?

Consistent with the guidelines in

§ 290.70, HUD may require units in a

project to be subject to use or rent

restrictions to provide that the units will

be available to and affordable by lowand very low-income persons for the

remaining useful life of the project.

§ 290.76 May HUD provide short-term

loans to facilitate the sale of a project?

HUD may provide short-term loans to

facilitate the sale of a HUD-owned

multifamily housing project if:

(a) Authority for such loans is

provided in advance in an appropriation

Act;

(b) The loan has a term of not more

than 5 years;

(c) HUD determines, based upon

documentation provided by the

purchaser, that the purchaser has

obtained a commitment of permanent

financing to replace the short-term loan

from a lender who meets standards

established by the Department; and
11858 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

(d) The terms of the loan are

consistent with prevailing practices in

the marketplace or the provision of the

loan results in no cost to the

Government, as defined in section 502

of the Congressional Budget Act of 1974.

§ 290.78 Under what conditions may HUD

provide up-front grants?

For a HUD-owned multifamily

housing project, HUD may utilize the

budget authority provided for contracts

issued under this part for project-based

Section 8 assistance to (in addition to

providing project-based Section 8 rental

assistance) provide up-front grants for

the necessary cost of rehabilitation and

other HUD-approved related

development costs to reduce the level of

Section 8 contract rents if HUD

determines that action under this

section is more cost-effective than

providing project-based Section 8

assistance in accordance with

§ 290.54(a) (for a subsidized project) and

§ 290.64(a) (for an unsubsidized

project).

§ 290.80 What additional tenant-based

assistance may HUD offer?

To facilitate the sale of a multifamily

housing project, HUD may make tenantbased Section 8 assistance available to

families eligible to receive such

assistance residing in a multifamily

housing project that do not otherwise

qualify for project-based assistance.

§ 290.82 How may HUD provide for

alternative uses of units in the disposition

of a multifamily housing project?

(a) In general. Notwithstanding any

other provision of law, after providing

notice to and an opportunity for

comment by preexisting tenants, HUD

may allow up to:

(1) 10 percent of the total number of

rental housing units in multifamily

housing projects that are disposed of by

the Department during any fiscal year to

be made available for uses other than

rental or cooperative uses, such as, lowincome homeownership opportunities,

or in any particular project, community

space, office space for tenant or

housing-related service providers or

security programs, or small business

uses, if such uses benefit the tenants of

the project; and

(2) 5 percent of the total number of

rental housing units in multifamily

housing projects that are disposed of by

the Department during any fiscal year to

be used in any manner, if HUD and the

unit of general local government or areawide governing body determine that

such use will further fair housing,

community development, or

neighborhood revitalization goals.

(b) Computation of number of eligible

units. The number of units eligible for

alternate uses in any fiscal year will be

determined at the beginning of the fiscal

year as the applicable percentages in

paragraph (a) (1) or (2) of this section

(i.e., either 10 percent or 5 percent) of

the estimated total number of units to be

disposed of in the fiscal year, taking into

consideration the total number of units

in multifamily housing projects

disposed of by the Department in the

immediately preceding fiscal year, and

the extent of the disposition activity

planned in the current fiscal year.

(c) Displacement protection. HUD

may take actions under paragraph (a) of

this section only if:

(1) Tenant-based Section 8 assistance

is made available to each family eligible

for such assistance residing in the

project that is displaced as a result of

such actions; and

(2) HUD determines that sufficient

habitable, affordable rental housing is

available in the market area in which

the project is located to ensure use of

such assistance.

§ 290.84 What disposition assistance may

be available to rebuild a multifamily

housing project?

(a) Notwithstanding any provision of

section 8 of the United States Housing

Act of 1937, HUD may provide projectbased assistance up to the levels

required in § 290.54(a) (for a subsidized

project) and § 290.64(a) (for an

unsubsidized project) to support the

rebuilding of a HUD-owned multifamily

housing project rebuilt or to be rebuilt

(in whole or in part and on-site, off-site,

or in a combination of both) in

connection with a disposition under

this part, if HUD determines all of the

following:

(1) The project is not being

maintained in a decent, safe, and

sanitary condition;

(2) The costs to HUD for rebuilding

are such that the monthly debt service

needed to amortize the cost of relocating

tenants, demolition, site preparation,

rebuilding, operating expenses, and a

reasonable return to the purchaser

cannot be provided with rents that are

within 120 percent of the most recently

published Section 8 Fair Market Rents

for Existing Housing (24 CFR part 888,

subpart A), and would be less expensive

than rehabilitation;

(3) The unit of general local

government in which the project is

located approves the rebuilding and

makes a financial contribution or other

commitment to the project determined

by HUD to be satisfactory;

(4) The rebuilding is a part of a local

neighborhood revitalization plan

approved by the unit of general local

government.

(b) The provisions of § 290.42 apply to

any tenants of the project who are

displaced through an action taken under

paragraph (a) of this section.

§ 290.86 What emergency assistance

funds may be provided to tenants?

HUD may make arrangements with

State agencies and units of general local

government of States receiving

emergency assistance under part A of

title IV of the Social Security Act for the

provision of assistance under that Act

on behalf of eligible families who would

reside in any multifamily housing

projects.

§ 290.88 Under what circumstances may

HUD make a determination not to preserve

a project or a part of a project?

HUD may determine to demolish, or

otherwise dispose of, a HUD-owned

multifamily housing project, or any

portion of such a project, or to foreclose

a HUD-held mortgage on a multifamily

housing project, without ensuring its

continued availability as affordable

rental or cooperative housing for lowand very low-income families under

appropriate circumstances which may

include one or more those listed in

paragraphs (a) through (g) of this

section. If HUD decides not to preserve

an occupied multifamily housing

project at a foreclosure sale or sale of a

HUD-owned project, tenants must be

provided relocation assistance as

described in § 290.42.

(a) The costs to HUD of rehabilitation

are such that the monthly debt service

needed to amortize the cost of

rehabilitation, operating expenses, and a

reasonable return to the purchaser

cannot be provided with rents that are,

for subsidized and formerly subsidized

projects, within 120 percent of the most

recently published Section 8 Fair

Market Rents for Existing Housing (24

CFR part 888, subpart A) or, for

unsubsidized and formerly

unsubsidized projects, within rents

obtainable in the market.

(b) Construction is substantially

incomplete.

(c) Preservation is not feasible because

of environmental factors that cannot be

mitigated by HUD or the purchaser. For

example, when the project is located on

a site that cannot be made to comply

with the Section 8 Site and

Neighborhood standards in 24 CFR

886.307(k) because of factors that

adversely affect the health, safety and

general welfare of residents such as air

pollution; smoke; mud slides; fire or

explosion hazards. Preservation may

also be infeasible because of
Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations 11859

significantly deteriorated surrounding

neighborhood conditions with

inadequate police or fire protection;

high crime rates; drug infestation; or

lack of public community services

needed to support a safe and healthy

living environment for residents.

(d) HUD determines the project is

unfit for rehabilitation.

(e) Rehabilitation would cost more

than constructing comparable new

housing.

(f) A reduction in the number of units

in the project will enhance long-term

project viability, for example,

demolition of a building to provide

space for a playground, open space, or

combining one-bedroom units to create

larger units for families.

(g) Continued preservation of the

project as rental or cooperative housing

is not compatible with State or local

land use plans for the area in which the

project is located.

Subpart I—Sale of HUD-Held

Multifamily Mortgages

§ 290.100 What is the purpose of this

subpart?

The purpose of this subpart is to set

out HUD’s policy regarding the sale of

subsidized and unsubsidized HUD-held

mortgages. Except as otherwise

provided in § 290.106(a)(2), the

Department will sell these mortgages on

a competitive basis. HUD retains full

discretion to offer any qualifying

mortgage for sale and to withhold or

withdraw any offered mortgage from

sale. However, when a qualifying

mortgage is offered for sale, the

procedures set out in this part will

govern the sale.

§ 290.102 What effect does this subpart

have on the applicability of Civil Rights

requirements?

Nothing in this subpart relieves HUD

or housing that receives federal

financial assistance from federal civil

rights requirements, including section

504 of the Rehabilitation Act, Title VI of

the Civil Rights Act of 1964, Title VIII

of the Civil Rights Act of 1968, the Age

Discrimination Act of 1975, Executive

Order 11063, and related regulations

and requirements. This includes

housing in which less than 50% of the

units are receiving housing assistance

payments under either Section 23 or

Section 8 of the United States Housing

Act of 1937 and housing in which the

rent of any unit is paid by a Section 8

certificate or voucher.

§ 290.104 What tenant protections will

apply in the sale of HUD-held subsidized

mortgages?

HUD will only sell subsidized

mortgages if the sale is part of a

transaction that will ensure that the

project subject to the mortgage will

continue to operate, at least until the

maturity date of the mortgage, in a

manner that will provide rental housing

on terms at least as advantageous to

existing and future tenants as the terms

required by the program under which

the mortgage was insured prior to its

assignment.

§ 290.106 How will HUD sell current

subsidized mortgages?

HUD will sell current mortgages, as

follows:

(a) Current mortgages with FHA

mortgage insurance will be sold either:

(1) On a competitive basis to FHAapproved mortgagees; or

(2) On a negotiated basis, to State or

local governments, or to a group of

investors that includes an agency of a

State or local government, if:

(i) The terms of the sale include an

agreement by the State or local

government, or an agency of the State or

local government, to:

(A) Act as mortgagee or owner of a

beneficial interest in the mortgage; and

(B) Ensure that the project will

maintain occupancy by the tenant group

originally intended to be served by the

subsidized housing program; and

(ii) The sales price is the best price

that HUD can obtain from an agency of

a State or local government while

maintaining occupancy for the tenant

group originally intended to be served

by the subsidized housing program.

(b) Current mortgages without FHA

mortgage insurance will be sold if HUD

can offer protections equivalent to those

listed for an insured sale in paragraph

(a) of this section.

§ 290.108 How will HUD sell delinquent

subsidized mortgages?

Delinquent mortgages will be sold

only if, as part of the sales transaction:

(a) The mortgages are restructured;

and

(b) Either FHA mortgage insurance or

equivalent protections are provided.

§ 290.110 What is HUD’s policy for selling

HUD-held unsubsidized mortgages?

HUD’s policy for selling HUD-held

unsubsidized mortgages is as follows:

(a) Current mortgages may be sold

with or without FHA mortgage

insurance.

(b) Delinquent mortgages may be sold

without FHA mortgage insurance.

However, delinquent mortgages will not

be sold if:

(1) HUD believes that foreclosure is

unavoidable; and

(2) The project securing the mortgage

is occupied by very low-income tenants

who are not receiving housing

assistance and would be likely to pay

rent in excess of 30 percent of their

adjusted monthly income if HUD sold

the mortgage.

PART 886—SECTION 8 HOUSING

ASSISTANCE PAYMENTS

PROGRAM—SPECIAL ALLOCATIONS

2. The authority citation for 24 CFR

part 886 continues to read as follows:

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

3535(d), and 13611–13619.

3. Section 886.302 is amended by

revising the definitions of the terms

‘‘Eligible project or project’’, and

‘‘Owner’’, to read as follows:

§ 886.302 Definitions.

* * * * *

Eligible project or project. A

multifamily housing project (see 24 CFR

part 290):

(1) For which the disposition in

accordance with the provisions of 24

CFR part 290 involves sale with Section

8 housing assistance to enable the

project to be used, in whole or in part,

to provide housing for lower income

families; and

(2) The units of which are decent,

safe, and sanitary.

* * * * *

Owner. The purchaser, including a

cooperative entity or an agency of the

Federal Government, under this subpart,

of a HUD-owned project; or the

purchaser, including a cooperative

entity or an agency of the Federal

Government, through a foreclosure sale

of a project that was subject to a HUDheld mortgage.

* * * * *

4. Section 886.310 is revised to read

as follows:

§ 886.310 Initial contract rents.

HUD will establish contract rents at

levels that, together with other resources

available to the purchasers, provide

sufficient amounts for the necessary

costs of rehabilitating and operating the

multifamily housing project and do not

exceed 120 percent of the most recently

published Section 8 Fair Market Rents

for Existing Housing (24 CFR part 888,

subpart A).

5. Section 886.311 is revised to read

as follows:

§ 886.311 Term of contract.

The contract term for any unit shall

not exceed 15 years, except that the

term may be less than 15 years as
11860 Federal Register / Vol. 60, No. 41 / Thursday, March 2, 1995 / Rules and Regulations

provided under either paragraph (a) or

(b) of this section.

(a) The contract term may be less than

15 years if HUD finds that, based on the

rental charges and financing for the

multifamily housing project to which

the contract relates, the financial

viability of the project can be

maintained under a contract having a

term less than 15 years. Where a

contract of less than 15 years is

provided under this paragraph, the

amount of rent payable by tenants of the

project for units assisted under such a

contract shall not exceed the amount

payable for rent under section 3(a) of the

United States Housing Act of 1937 for

a period of at least 15 years.

(b) The contract term may be less than

15 years if the assistance is provided

under a contract authorized under

section 6 of the HUD Demonstration Act

of 1993, and pursuant to a disposition

plan under this part for a project that is

determined by the HUD to be otherwise

in compliance with this part.

6. Section 886.319 is revised to read

as follows:

§ 886.319 Responsibility for contract

administration.

HUD is responsible for administration

of the Contract. HUD may contract with

another entity for the performance of

some or all of its Contract

administration functions.

Dated: October 13, 1995.

Jeanne K. Engel,

General Deputy Assistant Secretary for

Housing—Federal Housing Commissioner.

[FR Doc. 95–5093 Filed 3–1–95; 8:45 am]

BILLING CODE 4210–27–P