25752 Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / Notices

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

[Docket No. FR–4064–N–01]

Office of the Assistant Secretary for

Housing—Federal Housing

Commissioner; Availability of

Additional Units for the Housing

Finance Agency Risk-Sharing Program

AGENCY: Office of the Assistant

Secretary for Housing—Federal Housing

Commissioner, HUD.

ACTION: Notice of the Availability of

Additional Units for the Housing

Finance Agency Risk-Sharing Program.

SUMMARY: This Notice announces the

availability of an additional 10,000 units

for the Housing Finance Agency RiskSharing program and invites qualified

Housing Finance Agencies (HFAs) that

are not yet approved to participate in

the program (new applicants) to apply

for approval to participate in the

program. HFAs that are currently

approved to participate in the program

will be notified by certified mail that

they may request additional units by

letter to the Department.

The Housing Finance Agency RiskSharing program is authorized under

section 542(c) of the Housing and

Community Development Act of 1992,

as amended. Section 8 of the Housing

Opportunity Program Extension Act of

1996 extends section 542(c) by

authorizing the Secretary to enter into

HUD mortgage insurance commitments

processed by State and local HFAs for

an additional 12,000 multifamily units

for Fiscal Year 1996. Ten thousand of

those units are being made available by

this invitation. The balance of the

12,000 new units (2,000) are being

retained by HUD Headquarters to meet

the immediate needs of current risksharing participants so that they can

maintain essential risk-sharing

operations and staff resources.

APPLICATION DEADLINE: The deadline for

receipt of applications from new

applicants to participate in this program

is 4:00 pm, Eastern Daylight Savings

Time on July 22, 1996. Applications

received after the date and time stated

herein will not be accepted and will be

returned to the sender. HFAs are

encouraged to submit applications prior

to the end of the 60-day period, as

applications will be reviewed and

approved as they are received.

Applicants should obtain a copy of the

program handbook (Handbook 4590.01

REV–1) and the program regulations at

24 CFR part 266 to become familiar with

program requirements. If there are

differences between the handbook and

this Notice, the requirements of this

Notice shall prevail. Qualified agencies

may call Jane Luton at 202–708–2556

for a copy of the handbook and

regulations. This is not a toll-free

number. Hearing- or speech-impaired

persons may access that number by

calling toll-free the Federal Information

Relay Service at (800) 877–8339.

ADDRESS FOR SUBMISSION: Applications

for participation in the program must be

identified on the envelope or wrapper

and be submitted as follows: Director,

Office of Multifamily Housing

Development, Application for Housing

Finance Agency Risk-Sharing Program,

U.S. Department of Housing and Urban

Development, 451 Seventh Street, SW.,

Room 6142, Washington, DC 20410.

HFAs shall submit an original and

three copies (a FAX copy is NOT

acceptable) of the application to the

above address by the application

deadline.

Note: Any new applicant that is not a

HUD-approved mortgagee at the time of its

application to participate in the program (see

2.(ii) under Application Requirements below)

must submit an Application for Approval as

a HUD-Approved Mortgagee. Such

applications must be identified on the

envelope or wrapper as such and submitted

by the application deadline to the following

address: Director, Office of Lender Activities

and Land Sales Registration, Application for

Housing Finance Agency Risk-Sharing

Program, U.S. Department of Housing and

Urban Development, Room 9156,

Washington, DC 20410.

APPLICATION FEE: New applicants must

submit an application fee of $10,000

through FEDWIRE. The Federal Deposit

System offers individual and corporate

remitters the ability to move funds

electronically from their bank account

to the Treasury. The remitter identifies

the payment and the Department of

Housing and Urban Development as the

government agency to be credited on the

funds transfer message. Instructions for

your bank to follow to complete a

FEDWIRE are listed in Attachment A.

FOR FURTHER INFORMATION CONTACT: Jane

Luton, Director, New Products Division,

Office of Multifamily Housing

Development, Room 6142, U.S.

Department of Housing and Urban

Development, Washington, D.C. 20410.

Telephone: (202) 708–2556; (This

number is not toll-free.) Hearing- or

speech-impaired persons may access

that number by calling toll-free the

Federal Information Relay Service at

(800) 877–8339.

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The information collection

requirements contained in this Notice

have been approved by the Office of

Management and Budget (OMB), under

the Paperwork Reduction Act of 1995

(44 U.S.C. 3501–3520), and assigned

OMB Control Number 2502–0500. An

agency may not conduct or sponsor, and

a person is not required to respond to,

a collection of information unless the

collection displays a valid control

number.

Purpose and Program Summary

Section 542(c) of the Housing and

Community Development Act of 1992

authorized the Department to

implement a multifamily mortgage

insurance risk-sharing pilot program

with qualified State and local Housing

Finance Agencies (HFAs). On December

3, 1993, the Department promulgated

interim regulations implementing the

pilot program, the purpose of which was

to demonstrate the effectiveness of

providing new forms of Federal credit

enhancement for the development of

affordable multifamily housing by State

and local HFAs. On December 5, 1994,

the Department promulgated final

regulations for the program. To date, the

Department has allocated 30,000 units

which were available for Fiscal Years

1993, 1994, and 1995 to 31 participating

HFAs. These HFAs have received HUD

Firm Approval Letters (notifications that

units have been reserved for proposed

projects) for over 14,000 units.

The program has been designed to

increase the supply of affordable

multifamily housing through

partnerships between HUD and State

and local housing finance agencies.

Qualified HFAs are authorized to

originate, underwrite, and close loans

for multifamily housing projects

requiring new construction and

substantial rehabilitation as well as

certain acquisitions and refinancings.

HUD will endorse such loans for full

mortgage insurance upon presentation

of appropriate certifications. HFAs will

be responsible for the full range of loan

management, servicing, and property

disposition activities associated with

these projects.

Through a Risk-Sharing Agreement

between HUD and the HFA, the HFA

contracts to assume a portion of the risk

on each loan it underwrites. HUD, in

turn, commits to pay 100 percent of the

outstanding principal mortgage balance

upon default of the loan and filing of a

claim. The HFA will issue a debenture

for the amount of the claim pending the

final settlement of the loss. HUD and the

HFA will share in any loss in

accordance with the amount of risk

assumed by each under the Risk-Sharing

Agreement.
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HFAs will be approved on one of the

following three levels: (1) Level I; (2)

Level II; or (3) a combination of Level

I and Level II. The primary distinction

between Level I and Level II is in the

level of risk apportionment an HFA

agrees to accept. HFAs participating at

Level I are those that will assume 50

percent or more of the risk associated

with a loan default. These HFAs may

use their own underwriting standards

and loan terms and conditions without

further approval from HUD. HFAs

participating at Level II will assume less

than 50 percent of the risk and must

have their underwriting standards and

loan terms and conditions approved by

HUD.

This document contains information

concerning: (a) Deadline and address for

submission of applications; (b)

eligibility requirements; (c) allocation of

units; (d) application requirements; (e)

establishment of dedicated account; (f)

application review procedures; (g)

approval of applications; and, (h)

authorization to use the unit set-aside.

Eligibility

To participate in the program, an HFA

must meet the qualifications set forth in

24 CFR 266.100 and the requirements in

24 CFR 266.105 (a).

Allocation of Units

HUD will set aside units for approved

HFAs as follows:

(1) Unit set-aside. Each approved HFA

will receive a set-aside of units based

upon an assessment of their previous

multifamily housing experience, their

current capacity to utilize the number of

units requested, the population size of

the HFA’s jurisdiction in comparison to

other new applicants and participating

HFAs, and the number of units

requested by the HFA. The unit setaside will be reserved in a Risk-Sharing

Agreement executed by the HFA and

HUD.

(2) Headquarters reserve. HUD may

hold back a small portion of the 10,000

units for future use in FY 1996 to meet

unforeseen needs of current and new

HFA participants.

(3) Credit subsidy. The set-aside of

units will be subject to the availability

of credit subsidy which will be

obligated and allocated in accordance

with outstanding Department

instructions.

Application Requirements

New applicants must submit an

application containing the following

information:

(1) Name, title, telephone and fax

numbers. Provide the name, title,

telephone and fax numbers of the

person most familiar with the material

contained in the application in case

HUD needs to contact the HFA for

clarification and/or further information.

(2) Evidence of eligibility. The HFA

must provide evidence that it meets the

following:

(i) Be a HUD-approved mortgagee in

good standing;

(Note: HFAs that are not HUD-approved

mortgagees at the time of their application to

participate in this program must submit,

concurrently, separate applications for

approval to participate in this program and

for approval to operate as a HUD-approved

mortgagee. An application for approval to

operate as a HUD-approved mortgagee must

be submitted to HUD in accordance with the

requirements established under 24 CFR

202.10 through 202.19);

(ii) Has at least five years experience

in multifamily underwriting; and

(iii) Carries the designation of ‘‘top

tier’’ or its equivalent, as evaluated by

Standard and Poors or any other

nationally recognized rating agency; OR

(iv) Has a current overall rating of ‘‘A’’

for its general obligation bonds from a

nationally recognized rating agency; OR

(v) For HFAs not qualifying as (iii) or

(iv), the Housing Finance Agency

Questionnaire (Attachment B to this

Notice)

(3) Application fee. Evidence that the

application fee of $10,000 has been

wire-transferred to the U.S. Treasury.

This fee will not be refunded once the

application has been accepted for

review.

(4) Units requested. A statement

indicating the number of units the HFA

is requesting as well as the number of

units the HFA proposes to process to

firm approval letter by September 30,

1997.

(5) Risk-sharing arrangement. HFA

declaration of the risk-sharing

arrangement it has selected, i.e., Level I,

Level II or both Level I and Level II.

(6) Legal opinion. A letter from the

HFA’s legal counsel providing its

opinion, after careful review of the

HFA’s program, that the HFA has the

necessary powers and ability to comply

with all program requirements. The

opinion for an HFA with an overall

rating of ‘‘A’’ on its general obligation

bonds must also state that the general

obligation will extend to the HFA’s

responsibilities under the Risk-Sharing

Agreement and any debenture issued by

the HFA to the Commissioner. If the

opinion of counsel does not include this

statement, the HFA must establish a

dedicated reserve account in the amount

of $500,000 in accordance with the

requirements in 24 CFR 266.110 (b).

(7) Underwriting procedures, loan

terms and conditions, investment

policies and business and financial

practices. A description of the

following: (i) The manner in which the

HFA will process mortgage loans,

including its underwriting procedures

and loan terms and conditions as

follows: (A) The approval process and

fee schedule, (B) maximum mortgage

term, (C) minimum debt service

coverage, (D) maximum loan-to-value

ratio, (E) maximum loan amount, (F)

minimum equity requirement, (G)

minimum income-to-expense ratio, (H)

prepayment requirements, (I) title

requirements, (J) escrow and reserves

(including replacement reserves), and

(K) hazard insurance requirements; (ii)

loan management, loan servicing and

property disposition activities; (iii) the

manner in which the HFA’s and

mortgagor’s reserves and escrows

(including letters of credit) will be

established and controlled; and (iv) a

description of the HFA’s investment

policies and overall business practices.

(8) Underwriting staff. Identification,

background description and years of

experience of individuals with final

underwriting approval authority (e.g.,

chief underwriter) and the individual

responsible for project management,

loan servicing and property disposition

(e.g., asset manager). These functions

may not be contracted out by the HFA.

(9) Default history. A description of

the default history (including workouts)

for all HFA-financed multifamily

projects.

(10) Oversight. A description of

oversight by State or local government

agencies.

(11) Financial statements. Copies of

audited financial statements for the

HFA’s last three fiscal years.

(12) Certification. A certification

(Attachment C to this Notice) signed by

an authorized official from the HFA that

certifies to the following:

(i) The HFA will at all times comply

with the financial requirements of 24

CFR 266.110 and, where applicable,

maintain required reserves in a

dedicated account in liquid funds (i.e.,

cash, cash equivalents, or readily

marketable securities) in a financial

institution acceptable to HUD;

(ii) The Department of Justice has not

brought a civil rights suit against the

Agency and no suit is pending;

(iii) There has not been an

adjudication of a civil rights violation in

a civil action brought against the

Agency by a private individual, unless

the Agency is operating in compliance

with a court order, or implementing a

HUD-approved compliance agreement

designed to correct the areas of noncompliance; and,
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(iv) There are no outstanding findings

of noncompliance with civil rights

statutes, Executive Orders, or

regulations as a result of formal

administrative procedures, or the

Secretary of HUD has not issued a

charge against the Agency under the

Fair Housing Act, unless the Agency is

operating under a compliance

agreement designed to correct the areas

of noncompliance.

(13) Sample debenture form issued by

the HFA.

(14) The Housing Finance Agency

Questionnaire (Attachment B) The

Questionnaire is to be completed only

by HFAs that do not carry the

designation ‘‘top-tier’’ or its equivalent,

or do not currently receive an overall

rating of ‘‘A’’ for their general obligation

bonds from a nationally recognized

rating agency.

Establishment of Dedicated Account

Prior to execution of the Risk-Sharing

Agreement, HFAs that do not have a

top-tier rating, have not received an

overall rating of ‘‘A’’ on their general

obligation bonds or those whose

opinion of legal counsel (required

above) did not state that the general

obligation will extend to the HFA’s

responsibilities under the Risk-Sharing

Agreement and any debenture issued by

the HFA to the Commissioner must

establish a specifically identified

dedicated account (see Attachment D).

This account must consist entirely of

liquid assets (i.e., cash, cash

equivalents, or readily marketable

securities) and be located in a financial

institution acceptable to HUD. Such an

institution has assets of not less than

$100,000,000; is organized under the

laws of the United States or a State

thereof; and is regulated and examined

by the Comptroller of the Currency,

Federal Deposit Insurance Corporation

or the Federal Reserve Board, has a

long-term bank deposit rating of ‘‘A–1’’

or better by Moody’s Investors Service

or ‘‘A+’’ rating by Standard and Poors.

Reserve requirements are set forth in 24

CFR 266.110 of the regulations.

Application Review Procedures

1. Additional Information. If HUD

requires additional data from a new

applicant, the new applicant will have

5 business days from the date of

notification to submit such data to the

appropriate HUD official. (If notification

is by mail, an HFA will be presumed to

receive notification five business days

from the date of such notification.)

2. Review Criteria. HUD will review

each application to determine if the

applicant meets all the requirements of

the regulation and this Notice and

demonstrates the ability to underwrite,

originate, process, close, service,

manage, and dispose of multifamily

loans in a prudent manner.

3. Acceptability Standards. HUD will

review the submissions of HFAs which

do not have a top-tier rating or have not

received an overall rating of ‘‘A’’ on

their general obligation bonds in

accordance with the above Review

Criteria and the standards set forth

below:

(i) Demonstrated capability to carry

out program responsibilities, including:

(A) continuity of management; (B) staff

qualifications and experience; and (C)

the HFA’s established track record of

performing multifamily loan processing,

servicing, loan management (including

capability to enforce regulatory

agreements and to perform workouts),

and property disposition for the types of

loans eligible under this program.

(ii) Adequacy of the HFA’s

administrative capabilities to ensure

sound underwriting and loan

management.

(iii) Soundness of the HFA’s

multifamily portfolio, including default

experience.

(iv) Strength of the relationship

between the HFA and the State or local

government.

(v) The HFA’s fiscal soundness,

including (A) amounts and sources of

revenues for housing activities and its

investment policies for fund balances (if

any); (B) how it proposes to meet any

monetary obligations required under

this program; and (C) the adequacy of

funding to commit to the level requested

in the application.

Approval of Applications

1. Notification. HUD will notify new

applicants of approval or disapproval

within 60 days of the deadline for

applications.

2. Approval Levels. HFAs will be

approved to operate under one of three

requested risk-sharing arrangements as

follows:

(i) Level I—the HFA is approved to

originate, service and dispose of

multifamily mortgages using its own

underwriting standards and loan terms

and conditions. The HFA assumes 50 to

90 percent of the risk in increments of

10 percent.

(ii) Level II—the HFA is approved to

originate, service and dispose of

multifamily mortgages where the HFA

uses underwriting standards and loan

terms and conditions approved by HUD,

and

A. When the loan-to-replacement cost

ratio for new construction and

substantial rehabilitation projects or the

loan-to-value ratio for existing projects

are greater than or equal to 75 percent,

the HFA shall assume at least 25 percent

of the risk.

B. When the loan-to-replacement cost

ratio for new construction and

substantial rehabilitation projects or the

loan-to-value ratio for existing projects

are less than 75 percent, the HFA shall

assume 10 percent or 25 percent of the

risk, at the HFA’s option.

(iii) Combined Levels I/II—For HFAs

which plan to use Level I and Level II

process, the underwriting standards and

loan terms and conditions to be used on

Level II loans must be approved by HUD

as described in (ii), above.

3. Risk-Sharing Agreement. When an

HFA is determined by HUD to be

qualified to participate in the program,

the Department will grant tentative

approval to the HFA and forward the

Risk-Sharing Agreement (similar to that

shown in Attachment E) to the HFA for

signature. The Risk-Sharing Agreement

will set aside the number of units for the

HFA. It will also set forth other

obligations of the HFA. The HFA must

return the executed document, along

with evidence that the dedicated reserve

account has been established (where

appropriate).

Authorization to Use Unit Set-Aside

After receipt of the signed RiskSharing Agreement, HUD will return a

copy of the Risk-Sharing Agreement

executed on behalf of the Department

and notify the HFA that it may begin

using its unit set-aside. No HFA will be

authorized to process loans for mortgage

insurance until it has received HUDapproved mortgagee status, been

approved under the Risk-Sharing

program, has executed a Risk-Sharing

Agreement and, where required,

provided evidence to the Department

that it has established a dedicated

reserve account.

Other Matters

Environmental Finding. A Finding of

No Significant Impact with respect to

the environment has been made in

accordance with HUD regulations at 24

CFR part 50 implementing section

102(2)(C) of the National Environmental

Policy Act of 1969 (42 U.S.C. 4332). The

Finding of No Significant Impact is

available for public inspection and

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

p.m. weekdays at the Office of the Rules

Docket Clerk, 451 Seventh Street, SW.,

Room 10276, Washington, DC 20410.

Executive Order 12612, Federalism.

The General Counsel, as the Designated

Official under section 6(a) of Executive

Order 12612, Federalism, has

determined that the policies and

procedures contained in this Notice will
Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / Notices 25755

not have substantial direct effects on

States or their political subdivisions, or

the relationship between the federal

government and the States, or on the

distribution of power and

responsibilities among the various

levels of government. As a result, the

Notice is not subject to review under the

Order.

Executive Order 12606, The Family.

The General Counsel, as the Designated

Official for Executive Order 12606, The

Family, has determined that this Notice

will likely have a beneficial impact on

family formation, maintenance and

general well-being. Accordingly, since

the impact on the family is beneficial,

no further review is considered

necessary.

Accountability in the Provision of

HUD Assistance. The Department has

promulgated a final rule to implement

section 102 of the Department of

Housing and Urban Development

Reform Act of 1989 (HUD Reform Act).

The final rule is codified at 24 CFR part

12. Section 102 contains a number of

provisions that are designed to ensure

greater accountability and integrity in

the provision of certain types of

assistance administered by the

Department. On January 16, 1992, the

Department published at 57 FR 1942,

additional information that gave the

public (including applicants for, and

recipients of, HUD assistance) further

information on the implementation,

public access, and disclosure

requirements of section 102. The

documentation, public access, and

disclosure requirements of section 102

are applicable to assistance awarded

under this Notice as follows:

(1) Documentation and Public Access.

The Department will ensure that

documentation and other information

regarding each application submitted

pursuant to this Notice are sufficient to

indicate the basis upon which

assistance was provided or denied. This

material, including any letters of

support, will be made available for

public inspection for a five-year period

beginning not less than 30 days after the

award of the assistance. Material will be

made available in accordance with the

Freedom of Information Act (5 U.S.C.

552) and HUD’s implementing

regulations at 24 CFR part 15. In

addition, HUD will include the

recipients of assistance pursuant to this

Notice in its Federal Register notice of

all recipients of HUD assistance

awarded on a competitive basis. (See 24

CFR 12.14(a) and 12.16(b), and the

notice published in the Federal Register

on January 16, 1992 (57 FR 1942), for

further information on these

requirements.)

(2) HUD Responsibilities—

Disclosures. The Department will make

available to the public for five years all

applicant disclosure reports (Form

HUD–2880) submitted in connection

with this Notice. Update reports (also

Form HUD–2880) will be made

available along with the applicant

disclosure reports, but in no case for a

period less than three years. All reports,

both applicant disclosures and updates,

will be made available in accordance

with the Freedom of Information Act (5

U.S.C. 552) and HUD’s implementing

regulations at 24 CFR part 15. (See 24

CFR part 12, Subpart C, and the notice

published in the Federal Register on

January 16, 1992 (57 FR 1942), for

further information on these disclosure

requirements.)

Prohibition Against Advance

Information on Funding Decisions.

HUD’s regulation implementing section

103 of the Department of Housing and

Urban Development Reform Act of 1989,

codified as 24 CFR part 4, applies to the

funding competition announced today.

The requirements of the rule continue to

apply until the announcement of the

selection of successful applicants. HUD

employees involved in the review of

applications and in the making of

funding decisions are limited by part 4

from providing advance information to

any person (other than an authorized

employee of HUD) concerning funding

decisions, or from otherwise giving any

applicant an unfair competitive

advantage. Persons who apply for

assistance in this competition should

confine their inquiries to the subject

areas permitted under 24 CFR part 4.

Applicants or employees who have

ethics related questions should contact

the HUD Office of Ethics (202) 708–

3815. Hearing- or speech-impaired

individuals may access this number via

TTY by calling the Federal Information

Relay Service at 1–800–877–8339. (With

the exception of the ‘‘800’’ number,

these are not toll-free numbers.) For

HUD employees who have specific

program questions, such as whether

particular subject matter can be

discussed with persons outside HUD,

the employee should contact the

appropriate Field Office Counsel, or

Headquarters counsel for the program to

which the question pertains.

Prohibition against Lobbying

Activities. The use of assistance under

this Notice is subject to the disclosure

requirements and prohibitions of

section 319 of the Department of the

Interior and Related Agencies

Appropriations Act for Fiscal Year 1990

(31 U.S.C. 1352)(the ‘‘Byrd

Amendment’’) and the implementing

regulations at 24 CFR part 87. These

authorities prohibit recipients of Federal

contracts, grants, or loans from using

appropriated funds for lobbying the

Executive or Legislative Branches of the

Federal Government in connection with

a specific contract, grant, or loan. The

prohibition also covers the awarding of

contracts, grants, cooperative

agreements, or loans unless the

recipient has made an acceptable

certification regarding lobbying. Under

24 CFR part 87, applicants, recipients

and subrecipients of assistance

exceeding $100,000 must certify that no

Federal funds have been or will be spent

on lobbying activities in connection

with the assistance.

Catalog of Federal Domestic Assistance

Program. The Catalog of Federal Domestic

Assistance program title and number is

14.188, Housing Finance Agency RiskSharing Program.

Authority: Section 542(c) of the Housing

and Community Development Act of 1992, as

amended, 12 U.S.C. 1707.

Dated: May 16, 1996.

Stephanie A. Smith,

Acting General Deputy Assistant Secretary

for Housing, Federal Housing Commissioner.

BILLING CODE 4210–27–P
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BILLING CODE 4210–27–C
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Attachment B—Housing Finance Agency

Questionnaire

Responses to this questionnaire fulfill the

documentation requirements pursuant to 24

CFR 266.10(d)(4)(iii). All Housing Finance

Agencies (HFAs) seeking approval to

participate in the HFA Risk-Sharing program

who do not have ‘‘top-tier’’ designation or an

overall rating of ‘‘A’’ on their general

obligation bonds from one of the nationally

recognized rating agencies must complete

this questionnaire.

The questionnaire addresses 5 different

aspects of the HFA and are consistent with

conditions set forth in Section 542(d)(2) of

the Housing and Community Development

Act of 1992. Applicants should be careful to

craft responses so that they clearly address

the issues set forth in the body of this Notice.

Responses should represent a summary of the

detailed information that may be found in the

HFA’s operating, administrative and quality

control manuals or guidelines. In order to

ensure that the Department can expeditiously

review and approve applications, ALL

NARRATIVE RESPONSES ARE LIMITED TO

15 PAGES. Responses to questions related to

the portfolio (item II) may be presented in

tabular form, where appropriate, and

attached as exhibits to the 15 page narrative

responses. The Department encourages HFAs

to prepare responses in a manner similar to

that which might be used for the HFAs

Annual Reports and reports to the Board of

Directors.

I. Organizational History

Describe the history and organizational

background of the HFA. Indicate how long it

has been in existence, when it began to

finance multifamily loans, and an overall

description of its multifamily lending

activities.

Describe the HFA’s relationship to the

State or local government, as appropriate.

Clearly indicate whether or not State or local

government officials serve on the HFA’s

board of directors and describe, if any, the

role State or local officials play in the HFA’s

program operations.

Discuss any State or local appropriations

for the past 5 years and any anticipated

appropriations over the next 3 years to

support the HFA’s multifamily housing goals.

II. Portfolio Information

Indicate how many multifamily loans have

been financed within the past 10 years (dates

specified), by year. Include the number and

type of projects (family, elderly, assisted

living, cooperative, etc.) and units in each,

type of loan (first mortgage, second, gap loan,

credit support, new construction,

rehabilitation, refinancing with or without

repairs, etc.) and original mortgage amounts,

outstanding principal balances, status

(current, default, foreclosed, workout) and

location (urban/suburban/central city/rural).

For the multifamily loans currently in the

HFA’s portfolio, indicate how many are HFA

owned, owned by other public agencies,

nonprofit organizations, privately owned and

other ownership types.

III. Staff Capacity

Describe general background and indicate

years of experience of individual responsible

for the overall underwriting decision (e.g.,

chief underwriter) and for project

management, loan servicing and property

disposition (e.g., Director of Asset

Management). Note that these functions may

not be contracted out by the HFA.

IV. Operating Procedures

A. Cost Certification

Describe the HFA’s cost certification

process. Explain how it will prevent fraud

and misrepresentation, ensure legitimate

costs and completion of repairs prior to

acceptance of certification. Describe how

mortgage excesses and mandatory

prepayments will be handled.

B. Loan Approval

Describe the loan approval process.

Describe circumstances if any, under which

the chief underwriter’s recommendations can

be overridden.

Describe any situations where loans are not

referred to a committee, what they are and to

whom they are referred.

C. Loan Servicing

Describe the HFA’s overall loan servicing

system and the procedures for enforcing the

Regulatory Agreement.

Describe the computerization of its

portfolio, project audits/reviews and

procedures for resolving deficiencies.

D. Workout Procedures

State the number of workout plans

developed by the HFA over the last five

years, elements of the agreement and current

status. If there is no previous experience with

workouts, describe plans, tools or strategies

proposed to establish workout agreements.

V. Financial Capability

Describe the amount and sources of funds

the HFA has available to support multifamily

housing programs. If funds are earmarked for

specific projects or programs, or otherwise

have a contingent liability, indicate how

much and for what purpose. Indicate how

much of the funds are unrestricted, how

those funds are governed (e.g., approval of

the board of directors or state or local

government) and the eligible uses of these

funds. Identify any funding sources available

to supplement less than break-even projects.

Indicate the overall percentage of total

unrestricted funds to total debt and the

percentage of liquid unrestricted funds to

total mortgages outstanding.

Describe the collateral the HFA will use if

it does not have the authority to pledge its

full faith and credit to back debentures

issued against claims.

Describe how the HFA intends to fund the

dedicated account, its procedures for

ensuring required balances are in place at all

times and that the amounts are increased at

each loan closing. Describe the funding

source (all funds in the account must be

liquid) for the dedicated account and identify

the financial institution in which the HFA

proposes to maintain these funds.

Describe the circumstances or conditions

under which other governmental entities or

public bodies have access to the HFA’s

funds.

Describe briefly, the types of financial and

quality control audits performed on the HFA.

Indicate the State or local HFA or authority

that has responsibility for conducting the

annual financial audit and when that audit

is conducted.

Describe the mechanism for disposing/

resolving audit findings.

Identify any periodic reports required for

the board of directors and/or other

organizational oversight body.

Describe the procedures in place to

generate financial reports, changes in fund

balances, and changes in financial position.

Describe procedures in place for the prompt

notification to HUD of negative changes in

the HFA’s financial position.

Attachment C—Certifications Housing

Finance Agency Letterhead

I lllll (name of authorized official)

hereby certify that I am the lllll (title)

of the lllll (name of housing finance

agency) lllll ‘‘the Agency’’, and that I

am authorized to make the certifications set

forth below on behalf of the Agency.

I hereby certify that:

(1) The Agency will at all times comply

with the financial requirements of 24 CFR

266.110 of the Risk-Sharing Program and,

where applicable, maintain required reserves

in a dedicated account in liquid funds (i.e.,

cash, cash equivalents, or readily marketable

securities) in a financial institution

acceptable to HUD.

(2) The Department of Justice has not

brought a civil rights suit against the Agency

and no suit is pending;

(3) There has not been an adjudication of

a civil rights violation in a civil action

brought against the Agency by a private

individual, unless the Agency is operating in

compliance with a court order, or

implementing a HUD-approved compliance

agreement designed to correct the areas of

noncompliance; and

(4) There are no outstanding findings of

noncompliance with civil rights statutes,

Executive Orders, or regulations as a result of

formal administrative procedures, or the

Secretary of HUD has not issued a charge

against the Agency under the Fair Housing

Act, unless the Agency is operating under a

compliance agreement designed to correct

the areas of non-compliance.

Dated: lllllllllllllllll

lllllllllllllllllllll

Name of Agency

By: lllllllllllllllllll

Title: llllllllllllllllll

Attachment D—Housing Finance Agency

Risk-Sharing Program Section 542(C)

Dedicated Reserve Account

The following information is required to

evidence establishment of a dedicated

reserve account in an initial amount of

$500,000 to be used solely in connection

with the Housing Finance Agency (HFA)

Risk-Sharing Program. Thereafter, the HFA

shall make additional deposits at each loan

closing in accordance with 24 CFR 266.110.

Duplicate originals of the attached

agreement and one copy must be forwarded

by the HFA to a financial institution with

whom it intends to establish a Dedicated

Reserve Account. In each of the attached

agreements and on the copy, such financial
Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / Notices 25759

institution will certify to the existence of the

dedicated reserve account by inserting the

date the account was established, the account

number, and the account balance. Upon

completion of the certification, the financial

institution shall sign and return an original

and one copy to the HFA which, in turn, will

forward the original to HUD. The HFA

should retain a duplicate copy for its records.

This information must be submitted to Linda

D. Cheatham, Director, Office of Multifamily

Housing Development, Room 6134, 451

Seventh Street, S.W., Washington, D. C.

20410 prior to the HFA’s approval to

participate in the program.

Agreement for HFA’s Dedicated Reserve

Account

HFA Name lllllllllllllll

Address llllllllllllllll

(Street Number)

lllllllllllllllllllll

(City, State and Zip Code)

Date llllllllllllllllll

lllllllllllllllllllll

(Name of Institution)

lllllllllllllllllllll

(Street)

lllllllllllllllllllll

(City, State, and Zip Code)

You are authorized and requested to

establish a Reserve Account to be specifically

designated ‘‘(HFA Name)/HUD RiskSharing’’. This account may be drawn upon

by the Department of Housing and Urban

Development (hereinafter ‘‘HUD’’) and may

be used by the HFA only with the prior

written approval of HUD for the purpose of

meeting the HFA’s risk-sharing obligations

under this program.

This letter is submitted to you in duplicate

originals. Please execute the duplicate

originals of the certification below,

acknowledging the existence of such account,

so that we may present an original signed by

you to HUD. Specimen signatures of HFA

representatives and identification of

authorized HUD signatory positions are

enclosed.

lllllllllllllllllllll

(Signature of HFA authorized official)

To Be Completed By the Financial Institution

To: The Department of Housing and Urban

Development

The undersigned institution certifies to

HUD that the above account was established

on llll in the amount of llll in this

institution under account number llll

and agrees with the HFA named above and

HUD to honor withdrawals from the account

as set forth above and agrees to send

quarterly statements regarding the account to

both HUD and the HFA. The financial

institution further certifies that it:

(1) has assets of not less than $100,000,000;

(2) is organized under the laws of the

United States or a State thereof;

(3) is regulated and examined by the

Comptroller of the Currency, Federal Deposit

Insurance Corporation or the Federal Reserve

Board; and

(4) has a long-term bank deposit rating of

‘‘A–1’’ or better by Moody’s Investors Service

or ‘‘A+’’ by Standard and Poor’s.

lllllllllllllllllllll

(Name of Institution)

By: lllllllllllllllllll

Title: llllllllllllllllll

Date: llllllllllllllllll

Authorized HUD Signatory Positions

Persons in the following positions are

authorized to withdraw from the HFA/HUD

Risk-Sharing Account on behalf of HUD and/

or approve on behalf of HUD, the withdrawal

of funds from the Account by the HFA:

Director, Office of Multifamily Housing

Development

Deputy Director, Office of Multifamily

Housing Development

Director, Office of Multifamily Asset

Management and Disposition

Associate Director for Program Management,

Office of Multifamily Asset Management

and Disposition

Associate Director for Program Operations,

Office of Multifamily Asset Management

and Disposition

Specimen Signatures of HFA Authorized

Officials

Based upon prior approval from HUD, the

following individuals are authorized to

withdraw funds from the HFA/HUD RiskSharing Account on behalf of the HFA:

(Name) lllllllllllllllll

(Title) lllllllllllllllll

(Name) lllllllllllllllll

(Title) lllllllllllllllll

Attachment E—Sample Risk-Sharing

Agreement and Addendum

(subject to revision)

This Risk-Sharing Agreement (hereinafter

referred to as ‘‘Agreement’’) is entered into

on this lll day of lll, 19lll, by

and between lll whose address is lll

and its successors (hereinafter referred to as

‘‘HFA’’) and the undersigned Secretary of

Housing and Urban Development and his/her

successors and assigns acting by and through

the Assistant Secretary for Housing-Federal

Housing Commissioner (hereinafter referred

to as ‘‘Commissioner’’).

WHEREAS, the Housing and Community

Development Act of 1992 authorizes, under

Section 542(c) thereof, the development of a

Risk-Sharing Pilot Program under which the

Commissioner will enter into Risk-Sharing

Agreements with qualified housing finance

agencies and provide for full mortgage

insurance through the Federal Housing

Administration of loans for affordable

housing originated by the qualified housing

finance agencies;

WHEREAS Section 8 of the Housing

Opportunity Program Extension Act of 1996

extends Section 542(c) through the end of

Fiscal Year 1996;

WHEREAS, under the authority of Section

542(c), the Commissioner has published

implementing regulations at 24 CFR Part 266.

WHEREAS, the HFA seeks to participate in

the Risk-Sharing Program, in accordance

with Section 542(c), the regulations issued

pursuant thereto and the terms set forth

herein, in order to obtain full insurance on

loans made by the HFA for affordable

multifamily housing for persons in its

community;

WHEREAS, the Commissioner seeks to

enter into this Agreement with the HFA in

order to test the effectiveness of Federal

credit enhancement for loans for affordable

multifamily housing through a system of risksharing agreements with the HFA; and

NOW THEREFORE, in consideration of the

foregoing, the parties agree as follows:

Article I—Allocation/Credit Subsidy

In furtherance of this Agreement,

A. The Commissioner has set aside lll

units of affordable multifamily housing to be

originated by the HFA.

B. The Commissioner reserves the right to

modify the number of units set forth in this

Agreement to: (1) Allocate additional units in

excess of the number set aside above, or (2)

to reduce such allocation based on the

Commissioner’s review of the HFA’s use of

its prior set-aside(s). Any such changes shall

be incorporated by an addendum to this

Agreement.

C. Credit subsidy is required for all insured

projects, including projects insured pursuant

to this Agreement. Credit subsidy is subject

to availability in accordance with the

Commissioner’s outstanding instructions.

The HFA shall be notified that the Firm

Approval Letter will be delayed if credit

subsidy has been exhausted.

Article II—Definitions

As used in this Agreement the term:

‘‘Addendum’’ means that document

attached to this Agreement, which shall be

used for reserving units and establishing the

risk share percentage for specific projects,

modifying the number of units set aside to

the HFA and for other purposes.

‘‘Amendment’’ means a modification of the

terms and conditions of this Agreement

requiring the consent of both the

Commissioner and the HFA or a modification

by HUD to 24 CFR Part 266.

‘‘Contract of Insurance’’ means the

agreement evidenced by the endorsement of

the Commissioner upon the credit instrument

given in connection with a mortgage,

incorporating by reference the regulations in

24 CFR Part 266 and the applicable

provisions of Section 542(c).

‘‘Credit Subsidy’’ means the cost of a direct

loan or loan guarantee under the Federal

Credit Reform Act of 1990 as defined in

Subpart B of Title 13 of the Omnibus Budget

Reconciliation Act of 1990 (Pub. L. 101–508,

approved November 5, 1990).

‘‘Dedicated Account’’ means an account

maintained in a financial institution

acceptable to the Commissioner which

consists entirely of liquid assets (i.e., cash or

cash equivalents or readily marketable

securities.)

‘‘Exhibit’’ means a document which

provides names, titles and/or specimen

signatures of principal staff of the HFA.

‘‘Firm Approval Letter’’ means a letter

issued by the Commissioner or his/her

designee to an HFA upon the positive

completion of the HUD-retained reviews

described in 24 CFR Section 266.210. The

letter will apportion units and obligate credit

subsidy to the property and provide that, so

long as the HFA complies with any

conditions included therein or attached
25760 Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / Notices

thereto, is in good standing, makes the

required certifications at the time of the HUD

closing, and absent fraud or

misrepresentation by the HFA, the

Commissioner shall endorse the property

mortgage for insurance.

‘‘Mortgage’’ means such single first lien

upon the real estate as is commonly given to

secure advances on, or the unpaid purchase

price of, real estate under the laws of the

jurisdiction where the real estate is situated,

together with the credit instrument, if any,

secured thereby.

‘‘Mortgagee’’ refers to the original lender

under a Mortgage and its successors

approved by the Commissioner.

‘‘Project’’ means the mortgaged property

and all assets wherever situated, used in or

owned by the owner of the Mortgaged

property in the business conducted on the

Mortgaged property.

‘‘Reservation’’ means the number of units

from an HFA’s set-aside committed upon

issuance of a Firm Approval Letter. The

number of units reserved may be adjusted

upon endorsement, for a specific project to be

insured under Section 542(c).

‘‘Set-aside’’ includes the total number of

units allocated for use by an HFA under

Section 542(c) which allocation may be

increased or decreased from time to time by

the Commissioner in accordance with the

Commissioner’s administrative instructions.

Article III—Certifications

In consideration of the endorsement for

full insurance by the Commissioner of loans

covering the units set aside in Article I,

Paragraph A of this Agreement, and in order

to comply with the requirements of the risksharing program established by Section

542(c) and the regulations adopted by the

Commissioner pursuant thereto, the HFA

agrees and certifies for itself, and its

successors, that in connection with any

mortgage insured under Section 542(c) and

so long as the Commissioner is obligated to

insure mortgages pursuant to this Agreement

that:

A. The HFA has been approved by the

Commissioner as a Level I ll and/or Level

IIll [check one or both, as appropriate]

Participant as defined in 24 CFR Sections

266.5 and 266.100(b).

B. The individuals (principal staff)

employed by the HFA as the persons

responsible for the overall underwriting

decision and for project management, loan

servicing and property disposition with

respect to loans insured or to be insured

under Section 542(c) are listed in Exhibit A

to this Agreement. The HFA agrees to notify

the Commissioner promptly in writing any

time the HFA changes principal staff.

C. The individuals, whose names, titles

and specimen signatures appear in Exhibit B

have authority to sign loan documents on

behalf of the HFA and otherwise commit the

HFA under the Section 542(c) Risk-Sharing

Program. The HFA agrees to notify the

Commissioner promptly in writing of any

changes of individuals authorized to sign

loan documents on behalf of the HFA and

provide the Commissioner with specimen

signatures of such new individuals.

D. The HFA shall allow periodic auditing

and review by the Commissioner, the

Inspector General and the General

Accounting Office or their duly authorized

agents regarding the HFA’s participation in

the risk-sharing program.

E. The HFA shall permit an inspection and

examination of its financial records and

records associated with loans insured under

Section 542(c) by the Commissioner and/or

his duly authorized agents upon reasonable

notice.

F. The HFA has fully disclosed and

provided copies of all of its underwriting

standards and procedures, loan terms and

conditions to the Commissioner, and, if the

HFA operates as, or originates or processes

any loans as a Level II agency, it has obtained

the Commissioner’s prior written approval to

utilize such underwriting standards and

procedures, loan terms and conditions. The

HFA’s originating, underwriting, closing,

project management, servicing and property

disposition procedures utilized in processing

and servicing the loans insured or to be

insured under Section 542(c) are

incorporated herein by reference and made a

part hereof.

G. The HFA shall notify the Commissioner

before implementing any amendment to the

HFA’s underwriting standards and

procedures, loan terms and conditions and

will provide the Commissioner with copies

of any amendments within ll business

days before implementation of such

amendments by the HFA. If the HFA operates

as, or originates or processes any loans as a

Level II agency, it shall also obtain the prior

written approval of the Commissioner before

implementing any amendment to its

underwriting standards and procedures, loan

terms and conditions.

H. If the HFA (a) does not meet the

qualification requirements of 24 CFR

266.110(a) (i.e., top-tier rating or equivalent

designation or has an overall ‘‘A’’ rating on

its general obligation bonds), or (b) has an

overall ‘‘A’’ rating but cannot provide the

necessary legal opinion of counsel requisite

to participation in the risk-sharing program,

it has established a specifically identified

Dedicated Account (meeting the

requirements of 24 CFR 266.110(b) and the

administrative requirements of the

Commissioner) in lllll (insert name of

financial institution) a financial institution

which has assets of not less than

$100,000,000, is organized under the laws of

the United States or a State thereof and is

regulated and examined by the Comptroller

of the Currency, Federal Deposit Insurance

Corporation or the Federal Reserve Board,

and has a long term bank deposit rating of

‘‘A–1’’ or better by Moody’s Investors Service

or ‘‘A+’’ by Standard and Poor’s. The

Commissioner may determine that higher

levels of reserves may be necessary.

I. If at any time the HFA loses the

designation or rating, as applicable, set forth

in 24 CFR 266.110(a), or can no longer

provide the legal opinion requisite to

participation in the program, it shall, within

5 business days, provide the Commissioner

with notice of the loss of its designation or

rating or of its inability to provide the

statement noted above. Within 15 business

days after the loss of the HFA’s designation

or rating or its inability to provide the

requisite legal opinion, the HFA shall

establish a Dedicated Account funded in

accordance with Paragraph H above. The

HFA must calculate the deposits to this

Dedicated Account in accordance with the

requirements of 24 CFR 266.110(b) so that the

account reflects all loans in the HFA’s

portfolio insured under Section 542(c).

J. Within 90 days following the end of its

fiscal year, the HFA shall furnish the

Commissioner with a complete annual

financial audit based upon an examination of

the books and records of the HFA prepared

and certified in accordance with the

requirements of the State or locality in which

the HFA is located.

K. The HFA shall at all times comply with

the financial requirements of the Section

542(c) program and it shall notify the

Commissioner of any pending or actual

changes in its financial status that would

adversely affect the HFA’s operating or

financial status within 5 business days after

becoming aware of such pending or actual

changes.

L. Within 90 days following the end of its

fiscal year, the HFA shall furnish the

Commissioner, along with a copy of the audit

specified in Paragraph J above, a certification

signed by an authorized official of the HFA

that there have been no changes that would

adversely affect the HFA’s organization,

business activities, financial status and other

information submitted with its application to

participate in the Section 542(c) program and

that the HFA has complied with all eligibility

requirements for participation in the program

during the past year. If there has been a

change in information submitted with the

HFA’s application relating to the HFA’s

organization, business activities, financial

status or other information submitted with its

application, the certification will state the

nature of the change.

M. The HFA shall comply with the Fair

Housing Act, as implemented by 24 CFR Part

100; titles II and III of the Americans with

Disabilities Act of 1990, as implemented by

28 CFR Part 35; Section 3 of the Housing and

Urban Development Act of 1968, (12 U.S.C.

Section 1701u), implemented by 24 CFR Part

135, the Equal Credit Opportunity Act,

implemented by 12 CFR Part 202; Executive

Order 11063, as amended, and implemented

by 24 CFR Part 107; Executive Order 11246,

as implemented by 41 CFR Part 60; other

applicable Federal laws and regulations

issued pursuant to these authorities; and

applicable State and local fair housing and

equal opportunity laws. In addition, the HFA

shall require that mortgagors which receive

Federal financial assistance must also certify

to the HFA that, so long as the mortgage is

insured under Section 542(c), it shall comply

with title VI of the Civil Rights Act of 1964,

as implemented by 24 CFR Part 1; the Age

Discrimination Act of 1975, as implemented

by 24 CFR 146; and section 504 of the

Rehabilitation Act of 1973, as implemented

by 24 CFR Part 8.

N. During the period that the

Commissioner is the insurer of any mortgage

endorsed under Section 542(c), the HFA shall

remain the mortgagee of record and shall

perform all functions in connection with

loans originated under the 542(c) program
Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / Notices 25761

1Pursuant to 24 CFR Section 266.415(b), this

certification is made at final closing only.

including loan servicing (including

workouts), property management and

property disposition functions. The

Commissioner shall have no obligation to

recognize or deal with anyone other than the

HFA in its role as mortgagee of record with

respect to the rights and obligations of the

HFA under the contract of mortgage

insurance and this agreement.

O. The HFA shall retain records pertaining

to origination and servicing of all mortgages

insured under Section 542(c) for as long as

the mortgage insurance remains in effect. In

the event of a default and mortgage insurance

claim, all records pertaining to the insured

mortgage, the mortgage default and insurance

claim shall be retained three (3) years after

the date of final settlement as final settlement

is described in 24 CFR Section 266.654.

P. The HFA shall maintain a Lender’s

Fidelity Bond/Surety Bond and Errors and

Omissions Insurance in a form and amount

satisfactory to the Commissioner.

Q. The HFA shall issue Debentures as

defined in 24 CFR Section 266.638

acceptable to the Commissioner as collateral

for the full amount of its risk-sharing

obligation under this agreement pending

final settlement of any insurance claim. The

Debentures shall be backed by the full faith

and credit of the HFA. If the HFA operates

as a department or division of the State in

which it is located, or as a unit of local

government, and the HFA cannot pledge the

full faith and credit of the HFA, the HFA

shall collateralize its obligation through a

letter of credit, reinsurance, or other form of

credit acceptable to the Commissioner.

R. Any reinsurance obtained by the HFA to

cover its portion of the risk shall: (i) Be

subordinate to the HUD-insured mortgage;

(ii) not affect reimbursement to the

Commissioner, notwithstanding the timing of

the actual settlement between the HFA and

the reinsurer; (iii) not be used to reduce any

reserve or fund balance requirements

established by the Commissioner; and (iv)

not result in the Federal Government

incurring any liability as a result of the

reinsurance agreement.

S. With respect to any project mortgage

endorsed for insurance under Section 542(c),

the HFA shall furnish to the Commissioner

project information in a format specified by

the Commissioner in HUD Handbook

4590.01. Basic underwriting and closing

information shall accompany the initial and

final closing dockets submitted for each

project. Information relating to project

management, servicing and disposition shall

be submitted to the Commissioner on a

periodic basis after endorsement in

accordance with the requirements set forth in

Handbook 4590.01.

T. The HFA shall enforce the Regulatory

Agreement between the HFA and mortgagor

and take action against the mortgagor for

violation of any provision(s) thereof.

U. The HFA shall perform annual physical

inspections of all projects insured under

Section 542(c) and shall submit a copy of the

inspection report to the Commissioner (i.e.,

showing and certifying that the project is in

safe and sanitary condition). If a project is

not in safe and sanitary condition, the HFA

will provide the Commissioner with a

summary of required actions, with target

dates, to correct unresolved findings.

V. The HFA shall analyze the project’s

annual audit and within 30 days of the date

of the audit, provide the Commissioner with

a summary of unresolved findings disclosed

in the audit and a summary of actions

planned, with target dates, to correct

unresolved findings. The HFA shall analyze

the project’s annual audit and within 6

months of the date of the audit, provide the

Commissioner with a summary of unresolved

findings disclosed in the audit and a

summary of actions planned, with target

dates, to correct unresolved fundings.

W. The HFA shall submit semi-annual

reports to the Commissioner for all projects

insured under Section 542(c) setting forth the

original mortgage amounts and outstanding

principal balances on mortgages the HFA has

underwritten, the status of all projects (e.g.,

whether current, in default, acquired, under

workout agreement, in bankruptcy, etc.). For

projects where the mortgagor has declared

bankruptcy, the HFA will submit information

containing the date the bankruptcy was filed

and the date the HFA requested the Court to

dismiss the bankruptcy proceedings.

X. All appraisal functions will be

completed by Certified General Appraisers

licensed in the state in which the property

is located, and all appraisal functions will be

completed in accordance with the Uniform

Standards of Professional Appraisal Practice.

Y. In the event of a default on a

multifamily mortgage insured under Section

542(c) which results in the Commissioner

having to pay a claim under a Contract of

Insurance to the HFA, the HFA will, upon

determination of the loss, assume the

percentage of loss specified in an Addendum

to this Agreement (such Addendum being

made a part of this Agreement) and in the

endorsement panel of the mortgage note, and

reimburse the Commissioner, pursuant to

administrative instructions of the

Commissioner, the amount based on that

percentage pursuant to 24 CFR Section

266.654. (The HFA’s percentage of loss

specified in the Addendum for a particular

project must be consistent with the

percentage of loss associated with the HFA’s

approval level specified in Paragraph A of

Article III of this Agreement. A loan which

refinances an HFA-financed loan which was

in monetary default (as that term is defined

in 24 CFR Section 266.626) 12 months prior

to the application for refinancing hereunder,

the HFA’s percentage of loss specified in the

Addendum shall be at least 50 percent of the

risk). An HFA-financed loan which goes into

default after the submission of an application

for refinancing of such loan under Section

542(c) will not be eligible for insurance

under Section 542(c).

Z. The HFA shall require that the

mortgagor keep the improvements now

existing or hereafter erected on the mortgaged

property insured against loss by fire and such

other hazards, casualties, and contingencies,

as may be stipulated by the Commissioner

upon the insurance of the mortgage and other

hazards as may be required from time to time

by the HFA. All such insurance shall be

evidenced by a standard Fire and Extended

Coverage Insurance Policy or policies, in

amounts not less than necessary to comply

with the applicable coinsurance clause

percentage, but in no event shall the amounts

of coverage be less than eighty per centum

(80%) of the actual cash value of the

insurable improvements and equipment of

the project, and in default thereof the HFA

shall have the right to obtain such insurance

in accordance with the mortgage. Such

hazard insurance policies shall be endorsed

with the standard mortgagee clause with loss

payable to the HFA. The hazard insurance

policy shall be deposited with the HFA.

AA. The HFA shall ensure that loans

insured hereunder shall be on properties

which comply with the affordable housing

requirements defined in 24 CFR 266.5.

Article IV—Mortgage Insurance Endorsement

Absent fraud or material misrepresentation

on the part of the HFA, the Commissioner

shall endorse any mortgage presented for

mortgage insurance by the HFA in

accordance with the provisions of Section

542(c), subject to the Commissioner’s right to

adjust the amount of mortgage insurance in

accordance with 24 CFR Section 266.417, so

long as the HFA is in good standing with the

Commissioner, has been issued a Firm

Approval Letter pursuant to 24 CFR Section

266.300(c) and/or Section 266.305(c), and

complies with any conditions therein or

attached thereto, and submits with each loan

to be endorsed a closing docket in

accordance with 24 CFR Section 266.420(b)

and written certifications that:

a. The property covered by the mortgage is

free from all liens other than the lien of the

FHA insured mortgage, except that the

property may be subject to such inferior lien

or liens, as approved by the HFA, as long as

the insured mortgage has first priority for

payment.

b. All contractual obligations in connection

with the mortgage transaction, including the

purchase of the property and the

improvements to the property, have been

paid. An exception is made for obligations

that are approved by the HFA and

determined by the HFA to be inferior to the

lien of the insured mortgage.1

c. The property owner has submitted and

the HFA has approved an Affirmative Fair

Housing Marketing Plan which complies

with the provisions set forth in 24 CFR Part

200, Subpart M.

d. Equal employment requirements were

followed by the property owner pursuant to

Executive Order 11246 as implemented by 41

CFR Part 60.

e. The property owner has executed the

regulatory agreement which complies with

the provisions set forth in 24 CFR Section

266.505.

f. The property has been processed,

prudently underwritten (including a

determination that a market exists for the

project), cost certified (if the loan is being

submitted for final endorsement) and closed

in full compliance with the HFA’s standards

and requirements and are in full compliance

with HUD standards established in

connection with approval of advances for
25762 Federal Register / Vol. 61, No. 100 / Wednesday, May 22, 1996 / Notices

insurance and cost certification. (Note: For

mortgages originated under Level II, the

certification will state ‘‘in full compliance

with the underwriting standards and loan

terms and conditions as approved by the

Commissioner.’’) Further, the loan shall be

serviced and the property managed in

accordance with procedures disclosed and

made a part of this Agreement.

g. For periodic advances cases, that each

advance made was proportionate to

construction progress as evidenced by HFA

inspection prior to approval of the advance.

h. The HFA’s Dedicated Account, if

required, has been established and has been

increased by the amounts required pursuant

to 24 CFR Section 266.110(b).

i. For properties subject to Davis-Bacon

requirements under 24 CFR Section 266.225,

laborers and mechanics employed in the

construction of the project have been paid

not less than the prevailing wages

determined by the Secretary of Labor in

accordance with 24 CFR Section 266.225(a).

Article V—Sanctions

Upon a violation of any of the provisions

of this Agreement by the HFA, or upon

commission of any violation cited in 24 CFR

Section 266.120, or of the administrative

requirements established by the

Commissioner for the Section 542(c)

program, the Commissioner or his designee

may declare a default under this agreement

and impose any of the sanctions set forth at

24 CFR Section 266.125. Any sanction

imposed by the Commissioner will be in

accordance with the provisions of 24 CFR

Section 266.125(d). Any sanction involving a

suspension or withdrawal of the HFA’s

participation in the Section 542(c) program

will not affect any mortgage insurance

endorsement in effect on the date of the

suspension or withdrawal action.

Article VI—Amendments/Modifications

A. This Agreement shall not be modified

or amended without the consent of both

parties hereto, except for changes made by

the Commissioner to items covered by Article

VII, and amendments or modifications that

may be made by the Commissioner as set

forth in the attached Addendum to this

Agreement which: (1) Specify the number of

units set aside to the HFA, and (2) other

changes that conform to statutory or

regulatory amendments. No such

modification or amendment will adversely

affect the interest of a HFA for any project

for which a Firm Approval letter has been

issued.

B. The HFA hereby agrees that its written

consent to an Addendum executed by the

Commissioner which modifies this

Agreement to list: (1) Changes in its principal

staff or individuals with authority to sign

loan documents; (2) changes to existing HFA

underwriting standards and procedures, loan

terms and conditions; and/or (3) a change in

the financial institution in which the

Dedicated Account is deposited, will not be

necessary if such change(s) was requested by

the HFA in writing.

Article VII—Incorporation of Regulations

The regulations set forth in 24 CFR Part

266 are incorporated into this Agreement by

reference and made a part hereof. The HFA

shall, at all times, comply with the applicable

regulations and with all other applicable

Federal laws, rules and regulations.

Article VIII—Warranty

The HFA warrants that it has not, and will

not, execute any other agreement with

provisions contradictory to, or in opposition

to, the provisions hereof, and that, in any

event, the requirements of this Agreement

and the regulations set forth in 24 CFR Part

266 and any administrative requirements

established by the Commissioner are

paramount and controlling as to the rights

and obligations set forth herein and

supersede any other requirements in conflict

herewith.

Article IX—Miscellaneous

The Article headings set forth in this

Agreement are not intended to be a limitation

on what materials are included within each

Article.

This Agreement shall bind, and the

benefits shall inure to, the parties, their

successors and assigns so long as any

Contract of Insurance remains in full force

and effect.

The invalidity of any clause, part or

provision of this Agreement shall not affect

the validity of the remaining portions hereof.

In witness hereof, the undersigned have

caused this Agreement to be duly executed

as of the date and year first written above.

Department of Housing and Urban

Development

By: lllllllllllllllllll

Name: lllllllllllllllll

Title: llllllllllllllllll

Housing Finance Agency

By: lllllllllllllllllll

Name: lllllllllllllllll

Title: llllllllllllllllll

Warning: U.S. Criminal Code, Section

1001, Title 18 U.S.C., ‘‘Whoever, in any

matter within the jurisdiction of any

department or agency of the United States

knowingly and willfully * * * makes any

false, fictitious or fraudulent statements or

representations, or makes or uses any false

writing or document knowing the same to

contain any false, fictitious or fraudulent

statement or entry, shall be fined not more

than $10,000 or imprisoned not more than

five years, or both.’’

Addendum to Risk-Sharing Agreement

HQ [ ]

FO [ ]

Number lllllllllllllllll

This addendum modifies the Risk-Sharing

Agreement, and/or any addendum thereto, by

and between lllll (HFA) whose

address is lllll and the Assistant

Secretary for Housing—Federal Housing

Commissioner (the Commissioner) dated the

ll day of lllll, 199ll.

The purpose of this addendum is to [check

one]:

A. ( ) Reserve units and to establish the riskshare percentage between the HFA and

Commissioner for Project Number

llll located at lllll.

Units reserved llll

Risk-share apportionment

HUD lll/HFA lll

B. ( ) Modify the present set-aside of units.

The number of units presently set-aside is

lll, which is ( ) increased by lll

units, ( ) decreased by lll units to

a total of lll units.

C. ( ) New principal staff or individuals

with authority to sign loan documents or

commit the HFA under the Section

542(c) program are:

D. ( ) New provisions, or changes to

existing, HFA underwriting standards

and procedures, loan terms and

conditions are incorporated by reference

into the Risk-Sharing Agreement and are

as follows:

E. ( ) The name and address of the new

financial institution in which dedicated

account is deposited is:

lllllllllllllllllllll

(Name of Financial Institution)

lllllllllllllllllllll

(Address)

F. [Reserved for other purposes.]

Department of Housing and Urban

Development

lllllllllllllllllllll

Authorized Agent

Date llllllllllllllllll

Exhibit A

The following individuals (principal staff)

are employed by the HFA as the persons

responsible for the overall underwriting

decision and for project management, loan

servicing and property disposition with

respect to loans insured or to be insured

under Section 542(c):

lllllllllllllllllllll

(Name and Title)

lllllllllllllllllllll

(Name and Title)

Exhibit B

The following individuals, whose names,

titles and specimen signatures appear below,

have the authority to sign loan documents on

behalf of the HFA and otherwise commit the

HFA under the Section 542(c) Risk-Sharing

Program.

lllllllllllllllllllll

(Name and Title)

lllllllllllllllllllll

(Signature)

lllllllllllllllllllll

(Name and Title)

lllllllllllllllllllll

(Signature)

[FR Doc. 96–12795 Filed 5–21–96; 8:45 am]

BILLING CODE 4210–27–P