32292 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Parts 92 and 954

[Docket No. FR–3567–I–01]

RIN 2577–AB35

Office of the Assistant Secretary for

Public and Indian Housing; Indian

HOME Program Streamlining

AGENCY: Office of the Assistant

Secretary for Public and Indian

Housing, (HUD).

ACTION: Interim rule.

SUMMARY: This interim rule moves the

Indian HOME Program from 24 CFR part

92 to 24 CFR part 954, and includes

clarifications and simplifications

intended to facilitate the use of the rule

by interested parties, increase similarity

with the Indian Community

Development Block Grant (ICDBG)

program, and simplify administration of

Native American Tribal Programs.

DATES: Effective date: July 22, 1996.

Comments due date: August 20, 1996.

ADDRESSES: Interested persons are

invited to submit comments regarding

this interim rule to the Rules Docket

Clerk, Office of General Counsel, Room

10276, Department of Housing and

Urban Development, 451 Seventh Street,

SW, Washington, DC 20410–0500.

Communications should refer to the

above docket number and title.

Facsimile (FAX) comments are not

acceptable. 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.

FOR FURTHER INFORMATION CONTACT:

David Pass, Housing & Community

Development Division, Office of Native

American Programs, Public and Indian

Housing, Room B–133, Department of

Housing and Urban Development, 451

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

20410, telephone (202) 755–0102, ext.

119; Email: DavidlPass@hud.gov

Hearing- or speech-impaired persons

may use a Telecommunications Device

for the Deaf (TTY) by contacting the

Federal Information Relay Service on 1–

800–877–TDDY (1–800–877–8339)(a

toll-free number).

SUPPLEMENTARY INFORMATION:

I. Paperwork Burden

The information collection

requirements contained in §§ 954.106,

954.505, 954.506, 954.507 of this

interim rule have been approved by the

Office of Management and Budget in

accordance with the Paperwork

Reduction Act of 1995 (44 U.S.C. 3501–

3520), and assigned OMB control

number 2577–0191. 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.

II. Background

The HOME Investment Partnerships

Act (the HOME Act)(Title II of the

Cranston-Gonzalez National Affordable

Housing Act) was signed into law on

November 28, 1990 (Pub. L. 101–625),

and created the HOME Investment

Partnerships (or HOME) Program that

provides funds to the Indian HOME

program to expand the supply of

affordable housing for very low-income

and low-income persons. Interim

regulations for the HOME Investment

Partnerships Program were published

on December 16, 1991 (56 FR 65313)

and are codified at 24 CFR part 92. The

requirements of 24 CFR part 92, subpart

A and subpart M (§§ 92.600–92.652)

apply specifically to the Indian HOME

program.

The HOME Act was amended October

28, 1992 by title II of the Housing and

Community Development Act of 1992

(HCDA 1992) (P.L. 102–550, approved

October 28, 1992). The Multifamily

Housing Property Disposition Reform

Act of 1994 (MHPDRA) (Pub. L. 103–

233, approved April 11, 1994) included

an additional number of amendments to

the HOME Act. Amendments to the

HOME rule at 24 CFR part 92 were

published on December 11, 1992 (57 FR

58862); December 22, 1992 (57 FR

60960); June 23, 1993 (58 FR 34130);

April 19, 1994 (59 FR 18626); August

26, 1994 (59 FR 44258); March 10, 1995

(60 FR 13348); July 12, 1995 (60 FR

36020); January 23, 1996 (61 FR 1824);

and March 6, 1996 (61 FR 9036).

In accordance with section 217(a)(2)

of the HOME Act, each Fiscal Year (FY)

HUD shall provide funds for the Indian

HOME program totaling one percent (or

such other percentage or amount as

authorized by Congress) of the amount

appropriated for the HOME program to

expand the supply of affordable

housing.

The initial regulatory requirements for

the Indian HOME program were similar

to the rule for the HOME program for

State and local governments. During the

years since the publication of the

December 16, 1991, interim rule in the

Federal Register, there have been four

complete funding cycles (FY 92, FY 93,

FY 94 and FY 95) of the Indian HOME

program. The Indian HOME program

has gradually developed its own

particular characteristics to serve its

constituency, and the Office of Indian

Housing has become the Office of Native

American Programs (ONAP), receiving

Community Planning and Development

field office staff and administering both

the Indian Community Development

Block Grant (ICDBG) program and the

Indian HOME program.

This interim rule includes

clarifications and simplifications

intended to eliminate confusion and

facilitate the use of the rule by

interested parties, increases similarity

with the Indian Community

Development Block Grant (ICDBG)

program, and simplifies administration

of Native American Tribal Programs. In

addition, the regulation is relocated

from part 92 to part 954 of title 24. The

Department is consolidating all of its

Native American programs in the 950

series of title 24.

III. Regulatory Reinvention

Consistent with Executive Order

12866 and President Clinton’s

memorandum of March 4, 1995 to all

Federal Departments and Agencies on

regulatory reinvention, HUD has

reviewed all its regulations to determine

whether certain regulations can be

eliminated, streamlined, or consolidated

with other regulations. The changes in

the Indian HOME Program are a part of

this regulatory reinvention effort. The

Department is inviting comments on

these changes and any other provision

in part 954. HUD intends to issue a final

rule taking into account comments on

this interim rule and comments received

by HUD on part 92—the HOME program

for State and local governments. The

following discussion of sections in the

new 24 CFR part 954 describes the

changes made to the part 92 provisions

as part of the move to part 954:

Subpart A—General Provisions

Section 954.1 Overview and Purpose

Section 954.1, based upon § 92.1, is

edited so that it applies to only the

Indian HOME program. References to

participants in the HOME program for

State and local governments are deleted.

Section 954.2 Definitions

Section 954.2, based upon § 92.2, is

edited so that it applies to only the

Indian HOME program. Definitions for

and references to participants in the

HOME program for State and local

governments are deleted.

Section 954.4 Other Federal

Requirements

Indian preference

To increase similarity between tribal

assistance programs, § 92.631 (now

§ 954.4) is revised to conform with the
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32293

Indian preference as described in 24

CFR part 953. The language of this

section has been revised to: correct

inaccuracies in certain referenced

definitions; include a definition of

‘‘Indian’’ as this word is defined in the

Indian Self-Determination and

Education Assistance Act (25 U.S.C.

450e(b)); delete subsection (e),

Additional Indian preference

requirements (this subsection is being

deleted since its provisions have never

been used and, upon analysis, did not

appear to be meaningful); and, to add a

subsection, Complaint procedures, in

which the specific process to be

followed is clarified and in which the

grantee is identified as the final arbiter.

Environmental Review

Section 92.633 is relocated to § 954.4.

Displacement, relocation, and

acquisition.

Section 92.634, now included in

§ 954.4, is revised to conform to 24 CFR

953.602 for the ICDBG program.

Labor

Section 92.635, now in § 954.4, is

revised to conform to § 92.354, the

regulation for the HOME program for

State and local governments which was

revised in the April 19, 1994 and

August 26, 1994 rules. Also, the

regulation includes information about

force account and Davis-Bacon; the

grantee is responsible for compliance

rather than requiring prior HUD

approval.

Lead-based paint

ONAP considered replacing the text at

§ 92.636 (now § 954.4) with the text

from the CDBG program at § 570.608.

However, HUD is in the process of

revising the lead-based paint

requirements for all HUD programs in

accordance with recent statutory

amendments to the lead-based paint

statute, and no change is made here.

Debarment and Suspension

ONAP considered similar sections on

debarment and suspension (HOME

§ 92.638; CDBG § 570.609) for both the

Indian HOME and ICDBG programs. The

HOME regulation refers to part 24,

which prohibits awards to ineligible

entities. ICDBG, too, prohibits awards to

ineligible entities. Section 92.638 has

not been revised in its move to § 954.4.

Subpart B—Applying for Assistance

Section 954.100 General

Section 92.600, now § 954.100, is

edited to reflect the Department’s

change in nomenclature from Field

Offices to Area Offices of Native

American Programs.

Section 954.101 Allocation of Funds

Section 92.601 (now § 954.101),

Regional allocation of funds, was

changed to Allocation of funds and

amended in the process. No formula for

the distribution of funds to the regions

is included. The decision whether to

hold a regional competition or a

national competition will be announced

in NOFAs for the Indian HOME

Program.

Section 954.102 Eligible Applicants

This section reflects § 92.602, except

that paragraph (e), which dealt with

administrative capacity, has been

deleted because it is already covered in

§ 954.104(b) as a factor for selection.

Section 954.106 Announcement of

Competition

Section 92.605 (now § 954.106),

Deadline and other information, is

changed to Announcement of

competition. Section 92.606,

Certifications, is eliminated. This

requirement will be in the NOFA.

Section 954.107 Project Amendment

Section 954.107 is added to provide

for an amendment to a project.

Subpart C—Eligible Activities and

Affordability

Section 954.300 Eligible Activities

Section 92.611, Eligible activities, is

now § 954.300, except § 92.611(c),

Termination before completion, which

is placed in § 954.500, Repayment of

investment, and revised to clarify the

account to which repaid HOME funds

are to be deposited. Sections 92.614(e),

and 92.615(c), which both dealt with

manufactured housing, have also been

moved to § 954.300.

Section 954.303 Eligible Project Costs

Section 92.612 (now § 954.303) is

revised to expand eligible costs to

include the cost to provide a security

deposit in tenant-based rental

assistance. The meaning of site

improvements is clarified, as is the prorata development cost of facilities.

Impact fees on housing are eligible

under the HOME program for State and

local governments. See § 92.206(c)(7).

There is no reason to treat grantees in

the Native American program

differently. Therefore, the payment of

reasonable impact fees that are charged

to all housing, not just HOME-assisted

housing, is now eligible.

The clarification in § 954.303(a)(4)

states unexpended funds in reserve

must be reprogrammed or returned to

HUD; previously, § 92.612(a)(4) only

stated that the funds should be returned

to the grantee’s local HOME account.

The clarification in § 954.303(b)

Acquisition costs expands the previous

§ 92.612(b) coverage from ‘‘Costs of

acquiring improved or unimproved real

property’’ to ‘‘Costs of acquiring

improved or unimproved real property,

including acquisition by homebuyers.’’

Section 954.304 Eligible

Administrative Costs

A new § 954.304 is added to clarify

program administrative costs, with

reference to OMB Circular A–87.

Section 954.305 Tenant-based Rental

Assistance

In § 954.305 (formerly § 92.613), the

explanation of what a community-wide

exception rent is has been relocated

from paragraph (f)(3) (where it appeared

in § 92.613) to the definitions section

(§ 954.2). To facilitate flexibility, an

alternative rent standard has been added

in paragraph (f)(3), which permits the

grantee’s rent standard for a unit size to

be based on local market conditions.

The provision in § 92.613(g), Housing

Quality Standards, that allowed for

variations has been dropped as not

necessary. Grantees may always propose

and request HUD approval of justifiable

variations through waivers.

Section 954.307 Homeownership:

Qualification as Affordable Housing

Section 954.307discusses affordability

restrictions, recapture of the HOME

investment, and use of recaptured

HOME funds.

Section 954.308 Prohibited Activities

Section 954.308 (formerly § 92.616)

includes a prohibition related to the

provision of assistance in connection

with programs authorized under part

950 (Indian Housing Programs) of title

24. The HOME statute does not

specifically prohibit the use of HOME

funds for Indian housing, mutual help

housing, new construction of public

housing or related costs. However, the

statutory affordability requirements of

HOME present problems of

compatibility with these programs. The

HOME rent restrictions apply for the

period of affordability specified in the

regulation. The HOME affordability

period for new construction is 20 years.

The Indian Housing Programs under

part 950 are large and separately

funded; ONAP does not contemplate

accepting applications for assistance

which combine HOME with these other

programs.

Subpart E—Program Administration

This subpart has been reorganized.

Previously in part 92, it followed the

Other Federal requirements section.
32294 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

Section 954.500 Repayment of

Investment

Section 954.500 (formerly § 92.643)

has been changed to clarify existing

terms.

Section 954.502 Applicability of

Uniform Administrative Requirements

A new paragraph (c) has been added

to § 954.502 (formerly § 92.645) to

provide for alternatives to bond

requirements.

Section 954.504 Closeout

Section 954.504 has revised § 92.647

to provide that—except for the special

case of closeouts subject to audit—grant

closeout may not occur until all the

funds to be closed out have been

audited, and, if the U.S. Department of

Interior (DOI) review results in

significant delays, the Area ONAP may

request a signed copy of the audit prior

to DOI review.

Section 954.505 Recordkeeping

To streamline the rule, the detailed

list of records is deleted. It will appear

in a program guide.

Section 954.506 Performance Reports

Section 954.506 (formerly § 92.649)

has been amended to add a financial

status report to the annual performance

report requirement.

Section 954.507 Submission of Project

Completion Reports

This new section provides for the

submission of project completion

reports.

Subpart F—Performance Reviews and

Sanctions

Section 954.601 Corrective and

Remedial Actions

Section 954.601 (formerly § 92.651)

has been expanded to include

immediate temporary lockout of the

grantee from the grant funds.

In addition, the treatment of the

following sections in part 92 has

changed as discussed below:

Section 92.625 Elder cottage housing

opportunity (ECHO) units—This subject

need not be dealt with separately in the

regulation.

Section 92.632 Methods of

procurement—This subject is generic

(see 24 CFR Part 85) and need not be

repeated in this program regulation.

Section 92.640 HOME account—

Reference to a grantee local HOME

account has been dropped.

Section 92.641 HOME Investment

Partnership—There is no discussion of

this concept in the regulation.

Section 92.642 Cash Management

Information System: disbursement of

HOME funds—This system is no longer

used.

IV. Other Matters

Regulatory Flexibility Act

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this interim rule

before publication and by approving it

certifies that this interim rule does not

have a significant economic impact on

a substantial number of small entities.

The interim rule provides revisions to

the existing Indian HOME program

under which Indian tribes receive grant

assistance from HUD to increase the

number of housing opportunities for

low-income and very low-income

people. HUD does not anticipate a

significant economic impact on small

entities since Indian tribes will continue

to carry out their Indian HOME program

activities as they now do.

Executive Order 12606—Impact on the

Family

The General Counsel, as the

Designated Official under Executive

Order 12606, The Family, has

determined that this interim rule does

not have potential for significant impact

on family formation, maintenance, and

general well-being, and, thus, is not

subject to review under the order. No

significant change in existing HUD

policies or programs will result from

promulgation of this interim rule, as

those policies and programs relate to

family concerns. To the extent there is

an impact on families, it will be

beneficial in that additional affordable

housing will be available. The interim

rule does not have the potential for

significant impact on family formation,

maintenance, or general well-being,

since its effect is limited to revising

program procedures for Indian tribes

applying for Indian HOME program

grants.

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 contained

in this interim rule will 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

rule is not subject to review under the

order. The rule is limited to providing

funds to Indian tribes in accordance

with a program to expand the supply of

affordable housing.

Environmental Review

A Finding of No Significant Impact

with respect to the environment has

been made in accordance with HUD

regulations at 24 CFR part 50 that

implement section 102(2)(C) of the

National Environmental Policy Act of

1969 (NEPA). The Finding of No

Significant Impact is available for public

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

p.m. weekdays in the Office of the Rules

Docket Clerk at the above address.

Justification for Interim Rulemaking

HUD generally publishes a rule for

public comment before issuing a rule for

effect, in accordance with its own

regulations on rulemaking in 24 CFR

part 10. However, part 10 provides for

exceptions to the general rule if the

agency finds good cause to omit

advance notice and public participation.

The good cause requirement is satisfied

when prior public procedure is

‘‘impracticable, unnecessary, or contrary

to the public interest’’ (24 CFR 10.1).

HUD finds that good cause exists to

publish this interim rule for effect

without first soliciting public comment.

This interim rule merely moves the

Indian HOME rule to a new part 954 in

title 24, and removes unnecessary

regulatory provisions but does not

establish or affect substantive policy.

Therefore, prior public comment is

unnecessary.

The Catalog of Federal Domestic

Assistance Number for the HOME

Program is 14.239.

List of Subjects

24 CFR Part 92

Administrative practice and

procedure, Grant programs—housing

and community development, Grant

programs—Indians, Indians, Low and

moderate income housing,

Manufactured homes, Rent subsidies,

Reporting and recordkeeping

requirements.

24 CFR Part 954

Administrative practice and

procedure, Grant programs—housing

and community development, Grant

programs—Indians, Indians, Low and

moderate income housing,

Manufactured homes, Rent subsidies,

Reporting and recordkeeping

requirements.

Accordingly, in title 24 of the Code of

Federal Regulations, part 92 is amended

and a new part 954 is added, as follows:

PART 92—HOME INVESTMENT

PARTNERSHIPS PROGRAM

1. The authority citation for part 92

continues to read as follows:
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32295

Authority: 42 U.S.C. 3535(d) and 12701–

12839.

Subpart M—[Removed and Reserved]

2. Subpart M, consisting of §§ 92.600

through 92.652, is removed and

reserved.

3. A new part 954 is added to title 24,

to read as follows:

PART 954—INDIAN HOME PROGRAM

Subpart A—General Provisions

Sec.

954.1 Overview.

954.2 Definitions.

954.3 Waivers.

954.4 Other Federal Requirements.

Subpart B—Applying for Assistance

954.100 General.

954.101 Allocation of funds.

954.102 Eligible applicants.

954.103 Housing strategy.

954.104 Performance thresholds.

954.105 Criteria for selection.

954.106 Announcement of competition.

954.107 Grant conditions.

954.108 Project amendment.

Subpart C—Eligible Activities and

Affordability

954.300 Eligible activities.

954.301 Religious organizations.

954.302 Income determinations.

954.303 Eligible project costs.

954.304 Eligible administrative costs.

954.305 Tenant-based rental assistance.

954.306 Rental housing: qualification as

affordable housing and income targeting.

954.307 Homeownership: qualification as

affordable housing.

954.308 Prohibited activities.

Subpart D—Project Requirements

954.400 Maximum per-unit subsidy

amount.

954.401 Property standards.

954.402 Tenant and participant protections.

Subpart E—Program Administration

954.500 Repayment of investment.

954.501 Grantee responsibilities; written

agreements; monitoring.

954.502 Applicability of uniform

administrative requirements.

954.503 Audit.

954.504 Closeout.

954.505 Recordkeeping.

954.506 Performance reports.

954.507 Submission of project completion

reports.

Subpart F—Performance Reviews and

Sanctions

954.600 Performance reviews.

954.601 Corrective and remedial actions.

954.602 Notice and opportunity for hearing;

sanctions.

Authority: 42 U.S.C. 3535(d) and 12701–

12839.

Subpart A—General Provisions

§ 954.1 Overview.

This part implements the Indian

HOME Investment Partnerships

Program. In general, under the Indian

HOME Investment Partnerships

Program, HUD awards funds

competitively to eligible applicants to

provide more affordable housing.

Grantees may use HOME funds to carry

out projects through acquisition,

rehabilitation, and new construction of

housing, and tenant-based rental

assistance. Grantees are able to provide

assistance in a number of eligible forms,

including loans, advances, equity

investments, interest subsidies and

other forms of investment that HUD

approves.

§ 954.2 Definitions.

Adjusted income. See 24 CFR part

950.

Annual income. See 24 CFR part 950.

Area Office of Native American

Programs (ONAP). See 24 CFR part 950.

Certification means a written

assertion, based on supporting evidence,

which must be kept available for

inspection by HUD, the Inspector

General and the public, which assertion

is deemed to be accurate for purposes of

this part, unless HUD determines

otherwise after inspecting the evidence

and providing due notice and

opportunity for comment.

Community-wide exception rents are

maximum gross rents approved by HUD

for the Rental Certificate program under

§ 882.106(a)(3) of this title for a

designated municipality, county, or

similar locality, which apply to the

whole IHA jurisdiction.

Family. See 24 CFR part 950.

HOME funds means funds made

available under this part through grants,

plus all repayments and interest or other

return on the investment of these funds.

Homeownership means ownership in

fee simple title or a leasehold interest of

not less than 50 years (including 25

years, automatically renewable for an

additional term of 25 years) in a one-tofour unit dwelling or in a condominium

unit, ownership or membership in a

cooperative, or equivalent form of

ownership approved by HUD. The

ownership interest may be subject only

to the restrictions on resale required

under § 954.307(a); mortgages, deeds of

trust, or other liens or instruments

securing debt on the property as

approved by the tribe; or any other

restrictions or encumbrances that do not

impair the good and marketable nature

of title to the ownership interest.

Household means one or more

persons occupying a housing unit.

Housing includes site constructed,

modular, manufactured housing and

housing lots.

HUD. See 24 CFR part 950.

Indian housing authority (IHA). See

24 CFR part 950.

Low-income family See 24 CFR part

950.

Monthly adjusted income. See 24 CFR

part 950.

Monthly income. See 24 CFR part 950.

NOFA means notice of funding

availability.

Project means housing developed,

acquired, or assisted with HOME funds,

and the improvement of this housing. It

includes the site on which the housing

is located and all of the HOME-assisted

activities associated with the building

and the site.

Project completion means that all

necessary title transfer requirements and

construction work have been performed

and the project complies with the

requirements of this part (including the

property standards adopted under

§ 954.401); the final drawdown has been

disbursed for the project; a Project

Completion Report has been submitted

and a final accounting of project

expenses is provided by the grantee as

prescribed by HUD. For tenant-based

rental assistance, it also means the final

drawdown has been disbursed for the

project and the final payment

certification has been submitted and

processed as prescribed by HUD.

Secretary means the Secretary of

Housing and Urban Development.

Single room occupancy (SRO)

housing means housing consisting of

single room dwelling units that is the

primary residence of its occupant or

occupants. The unit may contain either

food preparation facilities or sanitary

facilities, or both. Alternatively, sanitary

facilities may be located outside the unit

and be shared by tenants in the project.

SRO does not include facilities for

students.

Subgrantee means a public agency or

nonprofit organization retained by the

grantee under a written agreement to

administer all or a portion of the

grantee’s program for its HOME grant. A

public agency or nonprofit organization

that receives HOME funds solely as a

developer or owner of housing is not a

subgrantee. The grantee’s selection of a

subgrantee is not subject to the

procurement procedures and

requirements.

Tenant-based rental assistance is a

form of rental assistance in which the

assisted tenant may move from a

dwelling unit with a right to continued

assistance.

Transitional housing means housing

that—
32296 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

(1) Is designed to provide housing and

supportive services to persons,

including (but not limited to)

deinstitutionalized individuals with

disabilities, homeless individuals with

disabilities, and homeless families with

children; and

(2) Has as its purpose facilitating the

movement of individuals and families to

independent living within a time period

that is set by the grantee before

occupancy.

Very low-income family. See 24 CFR

part 950.

§ 954.3 Waivers.

Upon determination of good cause,

HUD may waive any provision of this

part not required by statute. Each waiver

must be in writing and must be

supported by documentation of the

pertinent facts and grounds.

§ 954.4 Other Federal Requirements.

(a) Equal opportunity. (1) Section 282.

Pursuant to the requirements of Section

282 of the Cranston-Gonzales National

Affordable Housing Act (42 U.S.C.

12832), no person in the United States

shall on the grounds of race, color,

national origin, religion, or sex be

excluded from participation in, be

denied the benefits of, or be subjected

to discrimination under any program or

activity funded in whole or in part with

HOME funds. In addition, HOME funds

must be made available in accordance

with the prohibitions against

discrimination on the basis of age under

the Age Discrimination Act of 1975 (42

U.S.C. 6101–6107) and implementing

regulations at 24 CFR part 146, and the

prohibitions against discrimination

against handicapped individuals under

section 504 of the Rehabilitation Act of

1973 (29 U.S.C. 794) and implementing

regulations at 24 CFR part 8.

(2) Civil Rights Act. Title VI of the

Civil Rights Act of 1964 (42 U.S.C.

2000d–2000d–4), which prohibits

discrimination on the basis of race,

color or national origin in federally

assisted programs, the Fair Housing Act

(42 U.S.C. 3601–3620), which prohibits

discrimination based on race, color,

religion, sex, or national origin in the

sale or rental of housing, and Executive

Order 11063 (27 FR 11527, 3 CFR 1959–

1963 Comp., p. 652), which provides for

equal opportunity in housing, do not

apply to grantees exercising recognized

powers of self-government. Indian tribes

and tribal organizations applying on

behalf of Indian tribes that do not

exercise recognized powers of selfgovernment must make HOME funds

available in accordance with Title VI of

the Civil Rights Act of 1964, the Fair

Housing Act, and Executive Order

11063.

(b) Indian Civil Rights Act. The Indian

Civil Rights Act (title II of the Civil

Rights Act of 1968, 25 U.S.C. 1301–

1303) provides, among other things, that

‘‘no Indian tribe in exercising powers of

self-government shall. . . deny to any

person within its jurisdiction the equal

protection of its laws or deprive any

person of liberty or property without

due process of law.’’ The Indian Civil

Rights Act (ICRA) applies to any tribe,

band, or other group of Indians subject

to the jurisdiction of the United States

in the exercise of recognized powers of

self-government.

(c) Indian preference requirements. (1)

Applicability. HUD has determined that

grants under this part are subject to

Section 7(b) of the Indian SelfDetermination and Education

Assistance Act (25 U.S.C. 450e(b)).

Section 7(b) provides that any contract,

subcontract, grant or subgrant pursuant

to an act authorizing grants to Indian

organizations or for the benefit of

Indians shall require that, to the greatest

extent feasible:

(i) Preference and opportunities for

training and employment shall be given

to Indians; and

(ii) Preference in the award of

contracts and subcontracts shall be

given to Indian organizations and

Indian-owned economic enterprises as

defined in section 3 of the Indian

Financing Act of 1974 (25 U.S.C. 1452).

(2) Definitions. (i) The Indian SelfDetermination and Education

Assistance Act (25 U.S.C. 450e(b))

defines ‘‘Indian’’ to mean a person who

is a member of an Indian tribe and

defines ‘‘Indian tribe’’ to mean any

Indian tribe, band, nation, or other

organized group or community

including any Alaska native village or

regional or village corporation as

defined or established pursuant to the

Alaska Native Claims Settlement Act,

which is recognized as eligible for the

special programs and services provided

by the United States to Indians because

of their status as Indians.

(ii) In section 3 of the Indian

Financing Act of 1974 (25 U.S.C. 1452)

‘‘economic enterprise’’ is defined as any

Indian-owned commercial, industrial, or

business activity established or

organized for the purpose of profit,

except that Indian ownership must

constitute not less than 51 percent of the

enterprise. This act defines ‘‘Indian

organization’’ to mean the governing

body of any Indian tribe or entity

established or recognized by such

governing body.

(3) Preference in administration of

grant. To the greatest extent feasible,

preference and opportunities for

training and employment in connection

with the administration of grants

awarded under this part shall be given

to Indians.

(4) Preference in contracting. To the

greatest extent feasible, grantees shall

give preference in the award of contracts

for projects funded under this part to

Indian organizations and Indian-owned

economic enterprises.

(i) Each grantee shall:

(A) Advertise for bids or proposals

limited to qualified Indian organizations

and Indian-owned enterprises; or

(B) Use a two-stage preference

procedure, as follows:

(1) Stage 1. Invite or otherwise solicit

Indian-owned economic enterprises to

submit a statement of intent to respond

to a bid or proposal announcement

limited to Indian-owned firms.

(2) Stage 2. If responses are received

from more than one Indian enterprise

found to be qualified, advertise for bids

or proposals limited to Indian

organizations and Indian-owned

economic enterprises; or

(C) Develop, subject to area ONAP

one-time approval, the grantee’s own

method of providing preference.

(ii) If the grantee selects a method of

providing preference that results in

fewer than two responsible qualified

organizations or enterprises submitting

a statement of intent, a bid or a proposal

to perform the contract at a reasonable

cost, then the grantee shall:

(A) Re-bid the contract, using any of

the methods described in paragraph

(d)(1) of this section; or

(B) Re-bid the contract without

limiting the advertisement for bids or

proposals to Indian organizations and

Indian-owned economic enterprises; or

(C) If one approvable bid is received,

request area ONAP review and approval

of the proposed contract and related

procurement documents, in accordance

with 24 CFR 85.36, in order to award

the contract to the single bidder.

(iii) Procurements that are within the

dollar limitations established for small

purchases under 24 CFR 85.36 need not

follow the formal bid procedures of

paragraph (d) of this section, since these

procurements are governed by the small

purchase procedures of 24 CFR 85.36.

However, a grantee’s small purchase

procurement shall, to the greatest extent

feasible, provide Indian preference in

the award of contracts.

(iv) All preferences shall be publicly

announced in the advertisement and

bidding or proposal solicitation and the

bidding or proposal documents.

(v) A grantee, at its discretion, may

require information of prospective

contractors seeking to qualify as Indian
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32297

organizations or Indian-owned

economic enterprises. Grantees may

require prospective contractors to

include the following information prior

to submitting a bid or proposal, or at the

time of submission:

(A) Evidence showing fully the extent

of Indian ownership and interest;

(B) Evidence of structure,

management and financing affecting the

Indian character of the enterprise,

including major subcontracts and

purchase agreements; materials or

equipment supply arrangements; and

management salary or profit-sharing

arrangements; and evidence showing

the effect of these on the extent of

Indian ownership and interest; and

(C) Evidence sufficient to demonstrate

to the satisfaction of the grantee that the

prospective contractor has the technical,

administrative, and financial capability

to perform contract work of the size and

type involved.

(vi) The grantee shall incorporate the

following clause (referred to as the

Section 7(b) clause) in each contract

awarded in connection with a project

funded under this part:

(A) The work to be performed under

this contract is on a project subject to

Section 7(b) of the Indian SelfDetermination and Education

Assistance Act (25 U.S.C. 450e(b))

(Indian Act). Section 7(b) requires that

to the greatest extent feasible

preferences and opportunities for

training and employment shall be given

to Indians, and preferences in the award

of contracts and subcontracts shall be

given to Indian organizations and

Indian-owned economic enterprises.

(B) The parties to this contract shall

comply with the provisions of Section

7(b) of the Indian Act.

(C) In connection with this contract,

the contractor shall, to the greatest

extent feasible, give preference in the

award of any subcontracts to Indian

organizations and Indian-owned

economic enterprises, and preferences

and opportunities for training and

employment to Indians.

(D) The contractor shall include this

Section 7(b) clause in every subcontract

in connection with the project, and

shall, at the direction of the grantee,

take appropriate action pursuant to the

subcontract upon a finding by the

grantee or HUD that the subcontractor

has violated the Section 7(b) clause of

the Indian Act.

(5) Complaint procedures. The

following complaint procedures are

applicable to complaints arising out of

any of the methods of providing for

Indian preference contained in this part,

including alternate methods enacted

and approved in a manner described in

this section.

(i) Each complaint shall be in writing,

signed, and filed with the grantee.

(ii) A complaint must be filed with

the grantee no later than 20 calendar

days from the date of the action (or

omission) upon which the complaint is

based.

(iii) Upon receipt of a complaint, the

grantee shall promptly stamp the date

and time of receipt upon the complaint,

and immediately acknowledge its

receipt.

(iv) Within 20 calendar days of receipt

of a complaint, the grantee shall either

meet, or communicate by mail or

telephone, with the complainant in an

effort to resolve the matter. The grantee

shall make a determination on a

complaint and notify the complainant,

in writing, within 30 calendar days of

the submittal of the complaint to the

grantee. The decision of the grantee

shall constitute final administrative

action on the complaint.

(d) Environmental review. The Indian

tribe must assume responsibility for

environmental review, decisionmaking,

and action for each activity that it

carries out with HOME funds, in

accordance with the requirements

imposed on a recipient under 24 CFR

part 58. The grantee shall also be

responsible for compliance with flood

insurance, coastal barrier resource and

airport clear zone requirements under

24 CFR 58.6.

(e) Displacement, relocation, and

acquisition. (1) Minimizing

displacement. Consistent with the other

goals and objectives of this part, the

grantee must ensure that it has taken all

reasonable steps to minimize the

displacement of persons (families,

individuals, businesses, nonprofit

organizations, and farms) as a result of

a project assisted with HOME funds. To

the extent feasible, residential tenants

must be provided a reasonable

opportunity to lease and occupy a

suitable, decent, safe, sanitary, and

affordable dwelling unit in the building/

complex upon completion of the

project.

(2) Temporary relocation. The

following policies cover residential

tenants who will not be required to

move permanently but who must

relocate temporarily for the project.

Such tenants must be provided:

(i) Reimbursement for all reasonable

out-of-pocket expenses incurred in

connection with the temporary

relocation, including the cost of moving

to and from the temporarily occupied

housing and any increase in monthly

rent/utility costs.

(ii) Appropriate advisory services,

including reasonable advance written

notice of—

(A) The date and approximate

duration of the temporary relocation;

(B) The location of the suitable,

decent, safe, and sanitary dwelling to be

made available for the temporary

period;

(C) The terms and conditions under

which the tenant may lease and occupy

a suitable, decent, safe, and sanitary

dwelling in the building/complex upon

completion of the project; and

(D) The provisions of paragraph

(e)(2)(i) of this section.

(3) Relocation assistance for displaced

persons. (i) General. A displaced person

(defined in paragraph (e)(3)(ii) of this

section) must be provided relocation

assistance at the levels described in, and

in accordance with the requirements of,

the Uniform Relocation Assistance and

Real Property Acquisition Policies Act

of 1970 (URA) (42 U.S.C. 4201–4655)

and 49 CFR part 24.

(ii) Displaced Person. (A) For

purposes of paragraph (c) of this section,

the term displaced person means a

person (family individual, business,

private nonprofit organization, or farm,

including any corporation, partnership

or association) that moves from real

property or moves personal property

from real property, permanently, as a

direct result of acquisition,

rehabilitation, or demolition for a

project assisted with HOME funds. This

includes any permanent, involuntary

move for an assisted project, including

any permanent move from the real

property that is made:

(1) After notice by the owner to move

permanently from the property, if the

move occurs on or after:

(i) The date of the submission of an

application to the grantee or HUD, if the

applicant has site control and the

application is later approved; or

(ii) The date the grantee approves the

applicable site, if the applicant does not

have site control at the time of the

application; or

(2) Before the date described in

paragraph (e)(3)(ii)(A)(1) of this section,

if the grantee or HUD determines that

the displacement resulted directly from

acquisition, rehabilitation, or

demolition for the project; or

(3) By a tenant-occupant of a dwelling

unit, if any one of the following three

situations occurs:

(i) The tenant moves after execution

of the agreement covering the

acquisition, rehabilitation, or

demolition and the move occurs before

the tenant is provided written notice

offering the tenant the opportunity to

lease and occupy a suitable, decent,
32298 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

safe, and sanitary dwelling in the same

building/complex upon completion of

the project under reasonable terms and

conditions. Such reasonable terms and

conditions must include a term of at

least one year at a monthly rent and

estimated average monthly utility costs

that do not exceed the greater of: the

tenant’s monthly rent before such

agreement and estimated average

monthly utility costs; or the total tenant

payment, as determined under 24 CFR

part 5, if the tenant is low-income, or 30

percent of gross household income, if

the tenant is not low-income; or

(ii) The tenant is required to relocate

temporarily, does not return to the

building/complex, and 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;

or

(iii) The tenant is required to move to

another dwelling unit in the same

building/complex but 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.

(B) Notwithstanding paragraph

(e)(3)(ii)(A) of this section, a person

does not qualify as a displaced person

if:

(1) The person has been evicted for

cause based upon a serious or repeated

violation of the terms and conditions of

the lease or occupancy agreement,

violation of applicable Federal or tribal

law (or state law, which may apply if

the grantee is not exercising recognized

powers of self-government), or other

good cause, and the grantee determines

that the eviction was not undertaken for

the purpose of evading the obligation to

provide relocation assistance. The

effective date of any termination or

refusal to renew must be preceded by at

least 30 days advance written notice to

the tenant specifying the grounds for the

action.

(2) The person moved into the

property after the submission of the

application but, before signing a lease

and commencing occupancy, was

provided written notice of the project,

its possible impact on the person (e.g.,

the person may be displaced,

temporarily relocated, incur a rent

increase), and the fact that the person

would not qualify as a ‘‘displaced

person’’ (or for any assistance under this

section) as a result of the project;

(3) The person is ineligible under 49

CFR 24.2(g)(2); or

(4) HUD determines that the person

was not displaced as a direct result of

acquisition, rehabilitation, or

demolition for the project.

(C) The grantee may, at any time, ask

HUD to determine whether a

displacement is or would be covered by

this part.

(iii) Initiation of negotiations. For

purposes of determining the formula for

computing replacement housing

assistance to be provided under

paragraph (e)(3) of this section to a

tenant displaced from a dwelling as a

direct result of private-owner

rehabilitation, demolition or acquisition

of the real property, the term initiation

of negotiations means the execution of

the agreement covering the acquisition,

rehabilitation, or demolition.

(4) Optional relocation assistance.

The grantee may provide relocation

payments and other relocation

assistance to families, individuals,

businesses, nonprofit organizations, and

farms displaced by a project assisted

with HOME funds where the

displacement is not subject to paragraph

(e)(3) of this section. The grantee may

also provide relocation assistance to

persons covered under paragraph (e)(3)

of this section beyond that required. For

any such assistance that is not required

by tribal law (or state law, which may

apply if the grantee is not exercising

recognized powers of self-government),

the grantee must adopt a written policy

available to the public that describes the

optional relocation assistance that it has

elected to furnish and provides for equal

relocation assistance within each class

of displaced persons.

(5) Real property acquisition

requirements. The acquisition of real

property for a project is subject to the

URA and the requirements of 49 CFR

part 24, subpart B.

(6) Appeals. A person who disagrees

with the grantee’s determination

concerning whether the person qualifies

as a displaced person, or the amount of

relocation assistance for which the

person may be eligible, may file a

written appeal of that determination

with the grantee.

(7) Responsibility of grantee. (i) The

grantee must certify that it will comply

with the URA, the regulations at 49 CFR

part 24, and the requirements of this

section, and must ensure such

compliance notwithstanding any third

party’s contractual obligation to the

grantee to comply.

(ii) The cost of required relocation

assistance is an eligible project cost.

This cost also may be paid from tribal

funds, or funds available from other

sources.

(f) Labor. (1) General. (i) Every

contract for the construction

(rehabilitation or new construction) of

housing that includes 12 or more units

assisted with HOME funds must contain

a provision requiring the payment of not

less than the wages prevailing in the

locality, as predetermined by the

Secretary of Labor pursuant to the

Davis-Bacon Act (40 U.S.C. 276a–276a–

5), to all laborers and mechanics

employed in the development of any

part of the housing. Such contracts must

also be subject to the overtime

provisions, as applicable, of the

Contract Work Hours and Safety

Standards Act (42 CFR 327–332).

(ii) The contract for construction must

contain these wage provisions if HOME

funds are used for any project costs (as

defined in subpart C of this part),

including construction or nonconstruction costs, of housing with 12

or more HOME-assisted units. When

HOME funds are only used to assist

homebuyers to acquire single-family

housing, and not for any other project

costs, the wage provisions apply to the

construction of the housing if there is a

written agreement with the owner or

developer of the housing that HOME

funds will be used to assist homebuyers

to buy the housing and the construction

contract covers 12 or more housing

units to be purchased with HOME

assistance. The wage provisions apply

to any construction contract that

includes a total of 12 or more HOMEassisted units, whether one or more than

one project phase is covered by the

construction contract. Once they are

determined to be applicable, the wage

provisions must be contained in the

construction contract so as to cover all

laborers and mechanics employed in the

development of the entire project,

including portions other than the

assisted units. Arranging multiple

construction contracts within a single

project for the purpose of avoiding the

wage provisions is not permitted.

(iii) Grantees, contractors,

subcontractors, and other participants

must comply with regulations issued

under these Acts and with other Federal

laws and regulations pertaining to labor

standards and HUD Handbook 1344.1

(Federal Labor Standards Compliance in

Housing and Community Development

programs), as applicable. Grantees must

require certification as to compliance

with the provisions of this section

before making any payment under such

contract.

(2) Volunteers. The prevailing wage

provisions of paragraph (f)(1) of this

section do not apply to an individual

who receives no compensation or is

paid expenses, reasonable benefits, or a

nominal fee to perform the services for

which the individual volunteered and

who is not otherwise employed at any
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32299

time in the construction work. See 24

CFR part 70.

(3) Sweat equity. The prevailing wage

provisions of paragraph (f)(1) of this

section do not apply to members of an

eligible family who provide labor in

exchange for acquisition of a property

for homeownership or provide labor in

lieu of, or as a supplement to, rent

payments.

(4) Force account. (i) The grantee is

responsible for compliance with

regulatory requirements in the use of

grantee work forces for construction or

renovation activities performed as part

of the activities funded under this part.

The grantee must provide for its files the

following:

(A) Documentation to indicate that it

has carried out or can carry out

successfully a project of the size and

scope of the proposal;

(B) Documentation to indicate that it

has obtained or can obtain adequate

supervision for the workers to be used;

(C) Information showing that the

workers to be used are, or will be, listed

on the grantee payroll and are employed

directly by the grantee.

(ii) Any and all excess funds derived

from the force account construction or

renovation activities shall accrue to the

grantee and shall be reprogrammed for

other activities eligible under this part

or returned to HUD promptly.

(iii) Insurance coverage for force

account workers and activities shall,

where applicable, include worker’s

compensation, public liability, property

damage, builder’s risk, and vehicular

liability.

(iv) The grantee shall specify and

apply reasonable labor performance,

construction, or renovation standards to

work performed under the force

account.

(v) The contracting and procurement

standards set forth in 24 CFR 85.36

apply to material, equipment, and

supply procurement from outside

vendors under this section.

(vi) In force account there is no

contract. If the grantee which has

received the HOME grant to construct

the housing units performs the

construction work using force account,

i.e., with its own employees, the work

is not covered by Davis-Bacon and

related Acts. If the grantee contracts out

the work or part of the work, that work

is covered.

(g) Lead-based paint. Housing assisted

with HOME funds constitutes HUDassociated housing for the purpose of

the Lead-Based Paint Poisoning

Prevention Act (42 U.S.C. 4821, et seq.)

and is, therefore, subject to 24 CFR part

35. Grantees are responsible for testing

and abatement activities.

(h) Conflict of interest. (1)

Applicability. (i) The conflict of interest

provisions in 24 CFR part 84 and 24

CFR 85.36 apply to the procurement of

supplies, equipment, construction, and

services by grantees and their

subgrantees.

(ii) The provisions of this section

apply to all cases not governed by 24

CFR part 84 and 24 CFR 85.36. These

cases include the acquisition and

disposition of real property and the

provision of assistance by the grantee,

by subgrantees, or to individuals,

housing developers, and other private

entities under eligible activities which

authorize such assistance (e.g.,

rehabilitation of housing).

(2) Conflicts prohibited. The general

rule is that no persons described in

paragraph (h)(3) of this section who

have or had any functions or

responsibilities with respect to activities

assisted under this part, or who are in

a position to participate in a decision,

or gain inside information about such

activities, may obtain a financial interest

or benefit from these activities. Further,

these persons may not have an interest

in any contract, subcontract, or

agreement concerning such activities;

and these persons may not, during their

employment or tenure in office and for

one year thereafter, have an interest in

the proceeds from these activities, either

for themselves or for those with whom

they have family or business ties. This

paragraph does not apply to approved

eligible administrative or personnel

costs.

(3) Persons covered. The conflict of

interest provisions of paragraph (h)(2) of

this section apply to any person who is

an employee, agent, consultant, officer,

or elected or appointed official of the

grantee or subgrantee receiving HOME

funds.

(4) Exceptions requiring HUD

approval. (i) Threshold requirements.

Upon the written request of a grantee,

HUD may grant an exception to the

provisions of paragraph (h)(2) of this

section on a case-by-case basis, when it

determines that such an exception will

serve to further the purposes of the

HOME program and the effective and

efficient administration of the grantee’s

project. An exception may be

considered only after the grantee has

provided the following:

(A) A disclosure of the nature of the

possible conflict, accompanied by an

assurance that there has been public

disclosure of the conflict and a

description of how the public disclosure

was made; and

(B) An opinion of the grantee’s

attorney that the interest for which the

exception is sought would not violate

tribal laws on conflict of interest (or

State law on conflict of interest, which

may apply if the grantee is not

exercising recognized powers of selfgovernment).

(ii) Factors to be considered for

exceptions. In determining whether to

grant a requested exception after the

grantee has satisfactorily met the

requirements of paragraph (h)(4)(i) of

this section, HUD shall consider the

cumulative effect of the following

factors, where applicable:

(A) Whether the exception would

provide a significant cost benefit or

essential expert knowledge to the

project which would otherwise not be

available;

(B) Whether the affected person has

withdrawn from his or her functions or

responsibilities, or from the decisionmaking process, with reference to the

specific assisted activity in question;

(C) Whether the interest or benefit

was present before the affected person

was in a position as described in

paragraph (h)(2) of this section;

(D) Whether undue hardship will

result, either to the grantee or to the

person affected, when weighed against

the public interest served by avoiding

the prohibited conflict; and

(E) Any other relevant considerations.

(5) Circumstances under which the

conflict prohibition does not apply. (i)

In instances where a person who might

otherwise be deemed to be included

under the conflict prohibition is a

member of a group or class of

beneficiaries of the assisted activity and

receives generally the same interest or

benefits as are being made available or

provided to the group or class, the

prohibition does not apply, except that

if, by not applying the prohibition

against conflict of interest, a violation of

tribal (or State) laws on conflict of

interest would result, the prohibition

does apply.

(ii) A public disclosure of the nature

of the grant assistance to be provided

and the specific basis for the selection

of the proposed beneficiaries must be

made prior to the submission of an

application to HUD. Evidence of this

disclosure must be provided as a

component of the application.

(i) Debarment and suspension. As

required by 24 CFR part 24, each grantee

must require participants in lower tier

covered transactions (e.g., subcontractors) to include the certification

in appendix B of 24 CFR part 24 (that

neither it nor its principals is presently

debarred, suspended, proposed for

debarment, declared ineligible, or

voluntarily excluded from participation

from the covered transaction) in any

proposal submitted in connection with
32300 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

the lower tier transactions. A grantee

may rely on the certification, unless it

knows the certification is erroneous.

Subpart B—Applying for Assistance

§ 954.100 General.

For each fiscal year, HUD will provide

funds for the Indian HOME program,

totaling one percent (or such other

percentage or amount as authorized by

Congress) of the amount appropriated

for the HOME program to expand the

supply of affordable housing. The funds

will be awarded competitively and will

be made available pursuant to a NOFA

published in the Federal Register, in

accordance with the requirements of

this part.

§ 954.101 Allocation of funds.

Unless HUD determines for

administrative convenience based on

the amount of HOME funds available to

hold a nationwide competition, HOME

funds will be allocated to the HUD Area

ONAPs responsible for the Indian

HOME program competition based upon

relative need for housing as measured

by the most recent and reliable data

available.

§ 954.102 Eligible applicants.

(a) Eligible applicants for HOME

funds for Indian tribes are any Indian

Tribe, band, group, or nation, including

Alaskan Indians, Aleuts, and Eskimos,

and any Alaska native village of the

United States which is considered an

eligible recipient under Title I of the

Indian Self-Determination and

Education Assistance Act (25 U.S.C.

450). Eligible recipients under the

Indian Self-Determination and

Education Assistance Act are

determined by the Bureau of Indian

Affairs.

(b) Tribal organizations which are

eligible under Title I of the Indian SelfDetermination and Education

Assistance Act may apply for funds on

behalf of any Indian Tribe, band, group,

nation, or Alaska native village eligible

under that Act when one or more of

these entities have authorized the tribal

organization to do so through

concurring resolutions. Such resolutions

must accompany the application for

funding. Eligible tribal organizations

under Title I of the Indian SelfDetermination and Education

Assistance Act will be determined by

the Bureau of Indian Affairs or Indian

Health Service, as appropriate.

(c) Only eligible applicants shall

receive grants. However, eligible

applicants may contract or otherwise

agree with non-eligible entities such as

States, cities, counties, or other

organizations to assist in the preparation

of applications and to help implement

assisted activities.

(d) To apply for funding in a given

fiscal year, an applicant must be eligible

as an Indian Tribe or Alaska native

village, as provided in paragraph (a) of

this section, or as a tribal organization,

as provided in paragraph (b) of this

section, by the application submission

date.

§ 954.103 Housing strategy.

Grantees are not required to submit a

housing strategy to receive HOME

funds. However, the application must

demonstrate how the proposed

project(s) will contribute to a

comprehensive approach for expanding

the supply of affordable housing for

members of the Indian tribe.

§ 954.104 Performance thresholds.

Applicants must have the

administrative capacity to undertake the

project proposed, including systems of

internal control necessary to administer

these projects effectively. In addition, an

applicant that has participated in the

HOME program must have performed

adequately. In cases of previously

documented deficient performance, the

applicant must have taken appropriate

corrective action to improve its

performance prior to submitting a

HOME application to HUD. The Area

ONAP will determine whether or not a

grantee is eligible to participate in a

particular funding round. Examples of

deficient performance may include

unresolved serious audit findings and

failure to initiate a previous grant.

§ 954.105 Criteria for selection.

There are four categories of projects

that may be funded under the HOME

Indian program: housing rehabilitation;

acquisition of housing; new housing

construction; and tenant-based rental

assistance. Each project must be

evaluated using the following three

criteria:

(a) Project need and design. The

degree to which the proposed project

addresses the housing need(s) of the

grantee as identified in the application,

and the degree to which the proposed

project is feasible while maximizing

benefits to low-income families.

(b) Planning and implementation. The

degree to which the financial,

administrative, and legal actions

necessary to undertake the proposed

project have been considered and

addressed in the application, and the

degree to which the grantee has the

administrative staff to carry out the

project successfully.

(c) Leveraging. The degree to which

other sources of assistance, including

mortgage insurance, State funds, other

Federal grants, and private

contributions, are used in conjunction

with HOME funds to carry out the

proposed project.

§ 954.106 Announcement of competition.

A NOFA will describe the maximum

points for each of the selection criteria

and any special factors to be evaluated

in awarding points under the selection

factors. The NOFA will also state the

deadline for the submission of

applications, the total funding available

for the competition and any maximum

amount of individual awards.

[Approved by the Office of Management and

Budget under OMB control number 2577–

0191]

§ 954.107 Grant conditions.

HUD may impose reasonable

conditions on grant awards.

§ 954.108 Project amendment.

(a) Grantees shall request prior HUD

approval for all project amendments.

(b) HUD can approve an amendment

to a project if:

(1) The amendment is due to factors

beyond the control of the grantee; and

(2) The request for approval for a

project amendment which involves

$100,000 or more includes all

application components required by the

NOFA published for the last application

cycle (not necessarily the year in which

the project was rated and ranked) and

the modified project scores high enough

to have been funded in the competition

for the last application cycle. A rating

equal to or greater than the lowest rating

received by a funded project during the

last rating cycle must be attained by the

modified project. The request for

approval of an amendment for a project

which involves less than $100,000 does

not have to include the components

which address the selection criteria. It

does require a description of and the

reason for the modification.

(c) Approval of an amendment request

is subject to the following:

(1) Demonstration by the grantee of

the capacity to promptly complete the

modified or new project.

(2) The preparation of an amended or

new environmental review in

accordance with Part 58 of this title, if

there is a significant change in the scope

or location of approved project.

(d) If a project amendment fails to be

approved and the original project is no

longer feasible, the grant funds

proposed for amendment shall be

deobligated by HUD and recaptured.
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32301

Subpart C—Eligible Activities and

Affordability

§ 954.300 Eligible activities.

(a) Eligible activities. (1) General.

HOME funds may be used by a grantee

to provide incentives to develop and

support affordable rental housing and

homeownership affordability and to

provide payment of reasonable

administrative and planning costs. The

housing must be permanent or

transitional housing, and includes

permanent housing for disabled

homeless persons, and single-room

occupancy housing. The specific

eligible costs for these activities are set

forth in § 954.303 and § 954.304.

(2) Acquisition of vacant land or

demolition must be undertaken only as

an integral part of a particular HOME

new construction project.

(3) Manufactured housing. Purchase

and/or rehabilitation of a manufactured

housing unit qualifies as affordable

housing only if, at the time of project

completion, the unit:

(i) Is situated on a permanent

foundation (except—for rehabilitation

not involving purchase—when assisting

existing unit owners who rent the lot on

which their unit sits);

(ii) Is connected to permanent utility

hook-ups;

(iii) Is located on land that is held in

fee-simple title, land-trust, or long-term

ground lease with a term at least equal

to that of the appropriate affordability

period;

(iv) Meets the construction standards

established under 24 CFR part 3280 if

produced after June 15, 1976. If the unit

was produced prior to June 16, 1976, it

must comply with applicable tribal,

State or local codes; and

(v) In cases where the owner of a

manufactured housing unit does not

hold fee-simple title to the land on

which the unit is located, the owner

may be assisted in purchasing the land

under provisions governing

rehabilitation not involving purchase.

(b) Forms of assistance. A grantee may

invest HOME funds as equity

investments, interest-bearing loans or

advances, noninterest-bearing loans or

advances, interest subsidies consistent

with the purposes of this part, deferred

payment loans, grants, or other forms of

assistance that HUD determines to be

consistent with the purposes of this

part. Each grantee has the right to

establish the terms of assistance, subject

to the requirements of this part.

§ 954.301 Religious organizations.

HOME funds may not be provided to

primarily religious organizations, such

as churches, for any activity including

secular activities. In addition, HOME

funds may not be used to rehabilitate or

construct housing owned by primarily

religious organizations or to assist

primarily religious organizations in

acquiring housing. However, HOME

funds may be used by a secular entity

to acquire housing from a primarily

religious organization, and a primarily

religious entity may transfer title to

property to a wholly secular entity and

the entity may participate in the HOME

program in accordance with the

requirements of this part. The entity

may be an existing or newly established

entity (which may be an entity

established, but not controlled, by the

religious organization). The completed

housing project must be used

exclusively by the owner entity for

secular purposes, available to all

persons regardless of religion. In

particular, there must be no religious or

membership criteria for tenants of the

property.

§ 954.302 Income determinations.

Whenever a grantee makes a

determination under this part based on

family income or adjusted family

income, it must use the definitions of

annual income, adjusted income,

monthly income, and monthly adjusted

income, as those terms are defined in 24

CFR part 950, except when determining

the income of a homeowner for an

owner-occupied rehabilitation project,

the equity in the homeowner’s principal

residence is excluded from ‘‘Net Family

Assets.’’

§ 954.303 Eligible project costs.

HOME funds may be used to pay the

following eligible costs:

(a) Development hard costs. The

actual cost of constructing or

rehabilitating housing. These costs

include the following:

(1) For new construction, costs to

meet the applicable new construction

standards of the grantee and the Model

Energy Code referred to in § 954.401;

(2) For rehabilitation, costs:

(i) To meet the applicable

rehabilitation standards of the grantee or

correcting substandard conditions

(minimally, the housing quality

standards at § 882.109 of this title), to

make essential improvements including

energy-related repairs or improvements,

improvements necessary to permit the

use by handicapped persons, and the

abatement of lead-based paint hazards,

as required by § 954.4, and to repair or

replace major housing systems in danger

of failure; and

(ii) To refinance existing debt secured

by a single-family owner-occupied unit

when loaning HOME funds to

rehabilitate the unit, if the overall

housing costs of the borrower will be

reduced and made more affordable.

(3) For both new construction and

rehabilitation, costs to demolish existing

structures and for improvements to the

project site that are in keeping with

improvements of surrounding, standard

projects, and costs to make utility

connections. The ‘‘site’’ of the

improvements may include property

adjacent to or near the immediate site of

the housing if this property and the

housing are owned by the same entity

(e.g., the housing is owned—at least

until sold to homebuyers—by the

grantee and the housing and the

improvements are located on a

reservation). If the site improvements

will benefit other housing (existing or

future) in addition to housing assisted

with the particular Indian HOME grant,

only a pro-rated share of the site

improvements may be charged against

the HOME grant. Site improvements

include roads, streets, sidewalks, curbs,

gutters, and connections to utilities,

such as storm and sanitary sewers,

water supply, gas, and electricity, and

the pro rata development cost of

facilities for water supply and sewerage

collection utilities.

(4) For new construction or

substantial rehabilitation (an

expenditure of $25,000 or more per

home) the cost of funding an initial

operating deficit reserve, which is a

reserve to meet any shortfall in project

income during the period of project

rent-up (not to exceed 18 months) and

which may only be used to pay

operating expenses, reserve for

replacement payments, and debt

service. Any HOME funds placed in an

operating deficit reserve that remain

unexpended when the reserve

terminates must be returned to the

grantee’s account and shall be

reprogrammed for other activities

eligible under this part or returned to

HUD promptly.

(b) Acquisition costs. Costs of

acquiring improved or unimproved real

property, including acquisition by

homebuyers.

(c) Related soft costs. Other

reasonable and necessary costs incurred

by the owner and associated with the

financing, or development (or both) of

new construction, rehabilitation or

acquisition of housing assisted with

HOME funds. These costs include, but

are not limited to:

(1) Architectural, engineering or

related professional services required to

prepare plans, drawings, specifications,

or work write-ups;

(2) Costs to process and settle the

financing for a project, such as private
32302 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

lender origination fees, credit reports,

fees for title evidence, fees for

recordation and filing of legal

documents, building permits, attorneys’

fees, private appraisal fees and fees for

an independent cost estimate, builder

and developer fees;

(3) Costs of a project audit that the

grantee may require with respect to the

development of a specific project; and

(4) Costs to pay impact fees that are

charged to all housing.

(d) Relocation costs. Costs of

relocation payments and other

relocation assistance for permanently

and temporarily relocated individuals,

families, businesses, private nonprofit

organizations, and farm operations

where assistance is required under

§ 954.4 or determined by the grantee to

be appropriate under § 954.4.

(e) Costs related to tenant-based

rental assistance. Eligible costs are the

rental assistance and security deposit

payments made to provide tenant-based

rental assistance for a family.

§ 954.304 Eligible administrative costs.

Eligible administrative costs means

reasonable and necessary costs, as

described in OMB Circular A–87,

(available from the Executive Office of

the President, Publication Service, 725

17th Street, N.W., Suite G–2200,

Washington, DC 20503; Telephone,

(202) 395–7332)) incurred by the grantee

and related to the planning and

execution of HOME activities assisted in

whole or in part with funds provided

under this part. The grantee may use up

to 15 percent of the HOME funds for the

payment of eligible administrative costs.

§ 954.305 Tenant-based rental assistance.

(a) General. A grantee may use HOME

funds for tenant-based rental assistance

only if the grantee selects families in

accordance with written tenant

selection policies and criteria that are

consistent with the purpose of

providing housing to very low- and lowincome families and are reasonably

related to preference rules established

under section 6(c)(4)(A) of the U.S.

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

The grantee may select eligible families

currently residing in units that are

designated for rehabilitation or

acquisition under the grantee’s HOME

program without requiring that the

family meet the written tenant selection

policies and written criteria. Families so

selected may use the tenant-based

assistance in the rehabilitated or

acquired unit or in other qualified

housing.

(b) Program operation. The grantee

may operate the program, or may

contract with another entity with the

capacity to operate a rental assistance

program. The tenant-based rental

assistance may be provided through an

assistance contract to an owner that

leases a unit to an assisted family or

directly to the family.

(c) Term of rental assistance contract.

The term of the rental assistance

contract providing assistance with

HOME funds may not exceed 24

months, but may be renewed, subject to

the availability of HOME funds. The

term of the rental assistance contract

must begin on the first day of the term

of the lease. For a rental assistance

contract between a grantee and an

owner, the term of the contract must

terminate on termination of the lease.

For a rental assistance contract between

a grantee and a family, the term of the

contract need not end on termination of

the lease, but no payments may be made

after termination of the lease until a

family enters into a new lease.

(d) Rent reasonableness. The grantee

must disapprove a lease if the rent is not

reasonable, based on rents that are

charged for comparable unassisted

rental units.

(e) Lease requirements. The lease

must comply with the requirements in

§ 954.402 of this part.

(f) Maximum subsidy. (1) The amount

of the monthly assistance that a grantee

may pay to, or on behalf of, a family

may not exceed the difference between

a rent standard for the unit size

established by the grantee and 30

percent of the family’s monthly adjusted

income.

(2) The grantee must establish a

minimum dollar amount tenant

contribution to rent.

(3) The grantee’s rent standard for a

unit size may not be less than 80

percent of the published section 8

existing housing fair market rent (in

effect when the payment standard

amount is adopted) for the unit size, nor

more than the section 8 fair market rent

or HUD-approved community-wide

exception rent (in effect when the

grantee adopts its rent standard amount)

for the unit size. Alternatively, the

grantee’s rent standard for a unit size

may be based on local market

conditions. Further, a grantee may

approve on a unit-by-unit basis a

subsidy based on a rent standard that

exceeds the applicable section 8 fair

market rent by up to 10 percent for 20

percent of units assisted.

(g) Housing quality standards.

Housing occupied by a family receiving

tenant-based assistance under this

section must meet the performance

requirements and acceptability criteria

set forth in § 882.109 of this title.

(h) Use of section 8 assistance. In any

case where assistance under section 8 of

the United States Housing Act of 1937

becomes available to a grantee,

recipients of tenant-based rental

assistance under this part will qualify

for tenant selection preferences to the

same extent as when they received the

tenant-based rental assistance under this

part.

(i) Security deposits. (1) A grantee

may use HOME funds provided for

tenant-based rental assistance to provide

loans or grants to very low- and lowincome families for security deposits for

rental of dwelling units whether or not

the grantee provides any other tenantbased rental assistance under this

section.

(2) The relevant tribe, State or local

definition of ‘‘security deposit’’ in the

jurisdiction where the unit is located is

applicable for the purposes of this part,

except that the amount of HOME funds

that may be provided for a security

deposit may not exceed the equivalent

of two month’s rent for the unit.

(3) Only the prospective tenant may

apply for HOME security deposit

assistance, although the grantee may

pay the funds directly to the tenant or

to the landlord.

(4) The lease between a tenant and an

owner of rental housing for which

HOME security deposit assistance is

provided must comply with the

requirements of § 954.402.

(5) HOME funds for security deposits

may be provided as a grant or a loan. If

they are provided as a loan, the

provisions at § 954.501 for repayment of

HOME investments apply.

§ 954.306 Rental housing: qualification as

affordable housing and income targeting.

(a) Rent limitation. A rental housing

project (including the non-owneroccupied units in housing purchased

with HOME funds in accordance with

§ 954.306) qualifies as affordable

housing under this part only if the

project:

(1) Bears rents not greater than the

lesser of—

(i) The section 8 fair market rent for

existing housing for comparable units in

the area as established by HUD under

§ 888.111 of this title, less the monthly

allowance for the utilities and services

(excluding telephone and cable TV) to

be paid by the tenant; or

(ii) A rent that does not exceed 30

percent of the adjusted income of a

family whose gross income equals 65

percent of the median income for the

area, as determined by HUD, with

adjustment for number of bedrooms in

the unit, except that HUD may establish

income ceilings higher or lower than 65
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32303

percent of the median for the area on the

basis of HUD’s findings that such

variations are necessary because of

prevailing levels of construction costs or

section 8 fair market rents, or unusually

high or low family incomes. In

determining the maximum monthly rent

that may be charged for a unit that is

subject to this limitation, the owner or

grantee must subtract a monthly

allowance for any utilities and services

(excluding telephone and cable TV) to

be paid by the tenant. HUD will provide

average occupancy costs per unit and

adjusted income assumptions to be used

in calculating the maximum rent

allowed under this paragraph (a)(1)(ii)

of this section;

(2) Has, in the case of projects with

three or more rental units, not less than

20 percent of the units—

(i) Occupied by very low-income

families who pay as a contribution

toward rent (excluding any Federal,

State, or tribal rental subsidy provided

on behalf of the family) not more than

30 percent of the family’s monthly

adjusted income as determined by HUD.

To obtain the maximum monthly rent

that may be charged for a unit that is

subject to this limitation, the owner or

grantee multiplies the annual adjusted

income of the tenant family by 30

percent and divides by 12 and, if

applicable, subtracts a monthly

allowance for the utilities and services

(excluding telephone and cable TV) to

be paid by the tenant; or

(ii) Occupied by very low-income

families and bearing rents not greater

than 30 percent of the gross income of

a family whose income equals 50

percent of the median income for the

area, as determined by HUD, with

adjustment for smaller and larger

families, except that HUD may establish

income ceilings higher or lower than 50

percent of the median for the area on the

basis of HUD’s findings that such

variations are necessary because of

prevailing levels of construction costs or

section 8 fair market rents, or unusually

high or low family incomes. In

determining the maximum monthly rent

that may be charged for a unit that is

subject to this limitation, the owner or

grantee must subtract a monthly

allowance for any utilities and services

(excluding telephone and cable TV) to

be paid by the tenant. HUD will provide

average occupancy per unit assumptions

to be used in calculating the maximum

rent allowed under paragraph (a)(2)(ii)

of this section;

(3) Is occupied only by households

that qualify as low-income families;

(4) Is not refused for leasing to a

holder of a certificate of family

participation under 24 CFR part 882

(rental certificate program) or a rental

voucher under 24 CFR part 887 (rental

voucher program) or to the holder of a

comparable document evidencing

participation in a HOME tenant-based

assistance program because of the status

of the prospective tenant as a holder of

such certificate of family participation,

rental voucher, or comparable HOME

tenant-based assistance document; and

(5) Will remain affordable without

regard to the term of any mortgage or the

transfer of ownership, pursuant to deed

restrictions, covenants running with the

land, or other mechanisms approved by

HUD, for not less than the appropriate

period, beginning after project

completion, as specified in the

following table, except that the

affordability restrictions may terminate

upon foreclosure or transfer in lieu of

foreclosure. The tribe may use purchase

options, rights of first refusal or other

preemptive rights to purchase the

housing before foreclosure or deed in

lieu of foreclosure to preserve

affordability. The affordability

restrictions shall be revived according to

the original terms if, during the

affordability period, the owner of record

before the foreclosure, or deed in lieu of

foreclosure, or any entity that includes

the former owner or those with whom

the former owner has or had family of

business ties, obtains an ownership

interest in the project or property.

Activity

Minimum

period of affordability in

years

Rehabilitation or acquisition of existing housing per unit amount of HOME funds: Under $15,000 ...................................................... 5

$15,000 to $40,000 .................................................................................................................................................................................. 10

Over $40,000 ........................................................................................................................................................................................... 15

New construction or acquisition of newly constructed housing ............................................................................................................... 20

(b) Rent schedule and utility

allowances. The grantee must review

and approve rents proposed by the

owner for units with ‘‘flat rents,’’ i.e.,

units subject to the maximum rent

limitations in paragraphs (a)(1)(i),

(a)(1)(ii), or (a)(2)(ii) of this section, and,

if applicable, must review and approve,

for all units subject to the maximum

rent limitations paragraph (a) of this

section, the monthly allowances,

proposed by the owner, for utilities and

services to be paid by the tenant. The

owner must reexamine the income of

each tenant household living in lower

income units at least annually. The

maximum monthly rent must be

recalculated by the owner and reviewed

and approved by the grantee annually,

and may change as changes in the

applicable gross rent amounts, the

income adjustments, or the monthly

allowance for utilities and services

warrant. Any increase in rents for lowincome units is subject to the provisions

of outstanding leases; in any event, the

owner must provide tenants of those

units not less than 30 days prior written

notice before implementing any increase

in rents.

(c) Increases in tenant income. Rental

housing qualifies as affordable housing

despite a temporary noncompliance

with paragraphs (a)(2) or (a)(3) of this

section, if the noncompliance is caused

by increases in the incomes of existing

tenants and if actions satisfactory to

HUD are being taken to ensure that all

vacancies are filled in accordance with

this section until the noncompliance is

corrected. Tenants who no longer

qualify as low-income families must pay

as rent the lesser of the amount payable

by the tenant under tribal, State or local

law or 30 percent of the family’s

adjusted monthly income, as recertified

annually. The preceding sentence shall

not apply with respect to funds made

available under this part for units that

have been allocated a low-income

housing tax credit by a housing credit

agency pursuant to section 42 of the

Internal Revenue Code 1986 (26 U.S.C.

7805).

(d) Adjustment of qualifying rent.

HUD may adjust the qualifying rent

established for a project under

paragraph (a)(1) of this section, only if

HUD finds that an adjustment is

necessary to support the continued

financial viability of the project and

only by an amount that HUD determines

is necessary to maintain continued

financial viability of the project. HUD

expects that this authority will be used

sparingly. Adjustments in section 8 fair
32304 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

market rents and in median income over

time should help maintain the financial

viability of a project within the

qualifying rent standard in paragraph

(a)(1) of this section. Regardless of

changes in fair market rents and in

median income over time, the qualifying

rents are not required to be lower than

the HOME rent for the project in effect

at the time of project commitment.

§ 954.307 Homeownership: qualification as

affordable housing.

(a) Purchase with or without

rehabilitation. Housing that is for

purchase by a family qualifies as

affordable housing only if the housing:

(1)(i) Has an initial purchase price that

does not exceed 95% of the median

purchase price for the type of single

family housing (1- to 4-family residence,

condominium unit, cooperative unit,

combination manufactured home and

lot, or manufactured home lot) for the

area as determined by HUD, and which

may be appealed in accordance with 24

CFR 203.18b; and

(ii) Has an estimated appraised value

at acquisition, if standard, or after any

repair needed to meet property

standards in § 954.401, that does not

exceed the limit described in paragraph

(a)(1)(i) of this section.

(2) Is the principal residence of an

owner whose family qualifies as a lowincome family at the time of purchase;

and

(3) Is subject—for minimum periods

of: 5 years where the per unit amount

of HOME funds provided is less than

$15,000; 10 years where the per unit

amount of HOME funds provided is

$15,000 to $40,000; and 15 years where

the per unit amount of HOME funds

provided is greater than $40,000—to

resale restrictions, as described in

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

recapture provisions, as described in

paragraph (a)(3)(ii) of this section, that

are established by the grantee and

determined by HUD to be appropriate.

(i) Resale restrictions must make the

housing available for subsequent

purchase only to a low income family

that will use the property as its

principal residence; and

(A) Provide the owner with a fair

return on investment, including any

improvements; and

(B) Ensure that the housing will

remain affordable, pursuant to deed

restrictions, covenants running with the

land, or other similar mechanisms to

ensure affordability, to a reasonable

range of low-income homebuyers. The

affordability restrictions must terminate

upon occurrence of any of the following

termination events: foreclosure, transfer

in lieu of foreclosure or assignment of

an FHA insured mortgage to HUD. The

grantee may use purchase options,

rights of first refusal or other preemptive

rights to purchase the housing before

foreclosure to preserve affordability.

The affordability restrictions shall be

revived according to the original terms

if, during the original affordability

period, the owner of record before the

termination event reacquires title to the

property.

(ii) A grantee’s recapture provisions

must provide for the recapture of the

full HOME investment out of net

proceeds, except as provided in

paragraph (a)(3)(ii)(B) of this section.

(A) Net proceeds means the sales

price minus loan repayment and closing

costs.

(B) If the net proceeds are not

sufficient to recapture the full HOME

investment plus enable the homeowner

to recover the amount of the

homeowner’s downpayment, principal

payments, and any capital improvement

investment, the grantee’s recapture

provisions may allow the HOME

investment amount that must be

recaptured to be reduced. The HOME

investment amount may be reduced pro

rata based on the time the homeowner

has owned and occupied the unit

measured against the required

affordability period; except that the

grantee’s recapture provisions may not

allow the homeowner to recover more

than the amount of the homeowner’s

downpayment, principal payments, and

any capital improvement investment.

(C) The HOME investment that is

subject to recapture is the HOME

assistance that enabled the first

homebuyer to buy the dwelling unit.

This includes any HOME assistance,

whether a direct subsidy to the

homebuyer or a construction or

development subsidy, that reduced the

purchase price from fair market value to

an affordable price. The recaptured

funds must be used to carry out HOMEeligible activities. If no HOME funds

will be subject to recapture, the

provisions at § 954.306(a)(3)(i) apply.

(D) Upon recapture of the HOME

funds used in a single-family,

homebuyer project with two to four

units, the affordability period on rental

units may be terminated at the

discretion of the tribe.

(b) Rehabilitation not involving

purchase. Housing that is currently

owned by a family qualifies as

affordable housing only if—

(1) The value of the property, after

rehabilitation, does not exceed 95% of

the median purchase price for the type

of single family housing (1- to 4-family

residence, condominium unit,

combination manufactured home and

lot, or manufactured home lot) for the

area as determined by HUD, and which

may be appealed in accordance with 24

CFR 203.18b; and

(2) The housing is the principal

residence of an owner whose family

qualifies as a low-income family at the

time HOME funds are committed to the

housing.

§ 954.308 Prohibited activities.

(a) HOME funds may not be used to—

(1) Provide a project reserve account

for replacements, a project reserve

account for unanticipated increases in

operating costs, or operating subsidies;

except as authorized under § 954.302;

(2) Provide nonfederal matching

contributions required under any other

Federal program;

(3) Provide assistance in connection

with programs authorized under part

950 (Indian Housing Programs) of this

title;

(4) Provide assistance to eligible lowincome housing under part 248

(Prepayment of Low Income Housing

Mortgages) of this title; or

(5) Provide assistance (other than

tenant-based rental assistance or

assistance to a homebuyer to acquire

housing previously assisted with HOME

funds) to a project previously assisted

with HOME funds during the period of

affordability established by the grantee

under § 954.306 or § 954.307. However,

additional HOME funds may be

committed to a project up to one year

after project completion (see § 954.500),

but the amount of HOME funds in the

project may not exceed the maximum

per-unit subsidy amount established

under § 954.400.

(b) Grantees may not charge

monitoring, servicing and origination

fees in HOME-assisted projects.

However, grantees may charge nominal

application fees (although these fees are

not an eligible HOME cost) to project

owners to discourage frivolous

applications.

Subpart D—Project Requirements

§ 954.400 Maximum per-unit subsidy

amount.

The amount of HOME funds that a

grantee may invest on a per-unit basis

in affordable housing may not exceed

the total development cost standard for

the area, as issued by HUD under 24

CFR 950.220. These total development

cost standards are available from HUD

Area ONAPs.

§ 954.401 Property standards.

(a) Housing that is assisted with

HOME funds, at a minimum, must meet

the housing quality standards in

§ 882.109 of this title. In addition,
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32305

housing that is newly constructed or

substantially rehabilitated with HOME

funds must meet all applicable local

codes, rehabilitation standards,

ordinances, and zoning ordinances. The

grantee must have written standards for

rehabilitation. Newly constructed

housing must meet the current edition

of the Model Energy Code published by

the Council of American Building

Officials.

(b) The following requirements apply

to housing for homeownership that is to

be rehabilitated after transfer of the

ownership interest:

(1) Before the transfer of the

ownership interest, the grantee must:

(i) Inspect the housing for any defects

that pose a danger to health; and

(ii) Notify the prospective purchaser

of the work needed to cure the defects

and the time by which defects must be

cured and applicable property standards

met.

(2) The housing must be free from all

noted health and safety defects before

occupancy and not later than 6 months

after the transfer for completion of the

transitional housing tenancy period.

(3) The housing must meet the

applicable property standards (at a

minimum, the housing quality

standards in § 882.109 of this title) not

later than 2 years after transfer of the

ownership interest.

§ 954.402 Tenant and participant

protections.

(a) Lease. The lease between a tenant

and an owner of rental housing assisted

with HOME funds must be for not less

than one year, unless by mutual

agreement between the tenant and the

owner.

(b) Prohibited lease terms. The lease

may not contain any of the following

provisions:

(1) Agreement to be sued. Agreement

by the tenant to be sued, to admit guilt,

or to a judgment in favor of the owner

in a lawsuit brought in connection with

the lease;

(2) Treatment of property. Agreement

by the tenant that the owner may take,

hold, or sell personal property of

household members without notice to

the tenant and a court decision on the

rights of the parties. This prohibition,

however, does not apply to an

agreement by the tenant concerning

disposition of personal property

remaining in the housing unit after the

tenant has moved out of the unit. The

owner may dispose of this personal

property in accordance with tribal law

(or State law, which may apply if the

Indian tribe is not exercising recognized

powers of self-government);

(3) Excusing owner from

responsibility. Agreement by the tenant

not to hold the owner or the owner’s

agents legally responsible for any action

or failure to act, whether intentional or

negligent;

(4) Waiver of notice. Agreement of the

tenant that the owner may institute a

lawsuit without notice to the tenant;

(5) Waiver of legal proceedings.

Agreement by the tenant that the owner

may evict the tenant or household

members without instituting a civil

court proceeding in which the tenant

has the opportunity to present a

defense, or before a court decision on

the rights of the parties;

(6) Waiver of a jury trial. Agreement

by the tenant to waive any right to a trial

by jury;

(7) Waiver of right to appeal court

decision. Agreement by the tenant to

waive the tenant’s right to appeal, or to

otherwise challenge in court, a court

decision in connection with the lease;

and

(8) Tenant chargeable with cost of

legal actions regardless of outcome.

Agreement by the tenant to pay

attorney’s fees or other legal costs even

if the tenant wins in a court proceeding

by the owner against the tenant. The

tenant, however, may be obligated to

pay costs if the tenant loses.

(c) Termination of tenancy. An owner

may not terminate the tenancy or refuse

to renew the lease of a tenant of rental

housing assisted with HOME funds

except for serious or repeated violation

of the terms and conditions of the lease;

for violation of applicable Federal, or

tribal law (or State law, which may

apply if the grantee is not exercising

recognized powers of self-government);

or for other good cause. Any termination

or refusal to renew must be preceded by

not less than 30 days by the owner’s

service upon the tenant of a written

notice specifying the grounds for the

action.

(d) Maintenance and replacement. An

owner of rental housing assisted with

HOME funds must maintain the

premises in compliance with all

applicable housing quality standards

and local code requirements.

(e) Tenant selection. An owner of

rental housing assisted with HOME

funds must adopt written tenant

selection policies and criteria that—

(1) Are consistent with the purpose of

providing housing for very low-income

and low-income families;

(2) Are reasonably related to program

eligibility and the applicant’s ability to

perform the obligations of the lease;

(3) Give reasonable consideration to

the housing needs of families that

would have a preference under section

6(c)(4)(A) of the U.S. Housing Act of

1937 (Federal selection preferences for

admission to public housing); and

(4) Provide for—

(i) The selection of tenants from a

written waiting list in the chronological

order of their application, insofar as is

practicable; and

(ii) The prompt written notification to

any rejected applicant of the grounds for

any rejection.

Subpart E—Program Administration

§ 954.500 Repayment of investment.

(a) HOME funds will be made

available pursuant to a HOME

Investment Partnership Agreement. The

agreement ensures that HOME funds

invested in affordable housing are

repayable if the housing ceases to

qualify as affordable housing before the

period of affordability expires. The

amount of HOME funds expended on

housing assisted with HOME funds that

does not meet the affordability

requirements for the period specified in

§ 954.306 or § 954.307, as applicable,

must be repaid in accordance with

paragraph (b) of this section.

(b) Any repayment of HOME funds

(including repayment required if the

housing no longer qualifies as affordable

housing), and any payment of interest or

other return on the investment of HOME

funds, that is made before grant close

out must be deposited in the grantee’s

account and used in accordance with

the requirements of this part. A grantee

may retain repayments, interest, and

other return on investment of HOME

funds that are made after grant closeout

if the grantee agrees to use the funds for

eligible activities.

(c) HUD will recapture HOME funds

that are not expended within five years

after the last day of the month in which

it obligated the funds.

(d) Termination before completion. If

a project is terminated before its

completion, whether voluntarily by the

grantee or otherwise, an amount equal

to the HOME funds disbursed for the

project must be paid by the grantee to

its HOME account. If the HOME funds

were disbursed by HUD, the amount

must be paid to HUD; if the HOME

funds were disbursed from the grantee’s

account, the amount must be paid to the

grantee’s account. If the amount is not

repaid, the grantee will be subject to

actions under § 954.600 Performance

reviews, § 954.601 Corrective and

remedial actions, and § 954.602 Notice

and opportunity for hearing; sanctions.

§ 954.501 Grantee responsibilities; written

agreements; monitoring.

(a) Responsibilities. The grantee is

responsible for ensuring that HOME
32306 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

funds are used in accordance with all

program requirements. The use of

subgrantees and contractors does not

relieve the grantee of this responsibility.

(b) Executing a written agreement.

Before disbursing any HOME funds to

any entity (e.g., for-profit housing

developer, nonprofit organization,

homeowner, or IHA) the grantee must

enter into a written agreement with the

entity ensuring compliance with the

requirements of this part. A subgrantee

and a contractor must also enter into a

written agreement before it disburses

funds to any entity. The agreement

remains in effect during the period for

affordability under § 954.306 or

§ 954.307, as applicable, or if the entity

is a subgrantee, during any period that

the entity has control over HOME funds.

(c) Provisions in written agreement. At

a minimum, the written agreement must

include applicable provisions

concerning the following items:

(1) Use of the HOME funds. The

agreement must describe the use of the

HOME funds, including the tasks to be

performed, a schedule for completing

the tasks, and a budget. These items

must be in sufficient detail to provide a

sound basis for the grantee effectively to

monitor performance under the

agreement.

(2) Affordability. The agreement must

require housing assisted with HOME

funds to meet the affordability

requirements of § 954.306 or § 954.307,

as applicable, and must require

repayment of the funds if the housing

does not meet the affordability

requirements for the specified time

period.

(3) Repayments. If the entity is a

subgrantee, the agreement must state if

repayment, interest, and other return on

the investment of HOME funds are to be

remitted to the grantee or are to be

retained for additional eligible activities

by the entity.

(4) Uniform administrative

requirements. If the entity is a

subgrantee, the agreement must require

the entity to comply with applicable

uniform administrative requirements, as

described in § 954.502.

(5) Project requirements. The

agreement must require compliance

with project requirements in § 954.400

through § 954.402 of this part, as

applicable in accordance with the type

of project assisted.

(6) Housing quality standard. The

agreement must require owners of rental

housing assisted with HOME funds to

maintain the housing in compliance

with applicable Housing Quality

Standards and local housing code

requirements for the duration of the

agreement.

(7) Other program requirements. The

agreement must require the entity to

carry out each activity in compliance

with all Federal laws and regulations

described in § 954.4.

(8) Conditions for religious

organizations. Where applicable, the

agreement must include the conditions

prescribed in § 954.301 for the use of

HOME funds by religious organizations.

(9) Requests for disbursements of

funds. The agreement must specify that

the entity may not request disbursement

of funds under the agreement until the

funds are needed for payment of eligible

costs. The amount of each request must

be limited to the amount needed.

(10) Reversion of assets. If the entity

is a subgrantee, the agreement must

specify that upon expiration of the

agreement, the entity must transfer to

the grantee any HOME funds on hand at

the time of expiration and any accounts

receivable attributable to the use of

HOME funds.

(11) Records and reports. The

agreement must specify the particular

records that must be maintained and

any information or reports that must be

submitted in order to assist the grantee

in meeting its recordkeeping and

reporting requirements.

(12) Enforcement of the agreement.

The agreement must provide for a

means of enforcement by the grantee or

the intended beneficiaries. In addition,

the agreement must specify remedies for

breach of the provisions of the

agreement. If the entity is a subgrantee,

the agreement must specify that, in

accordance with 24 CFR 85.43,

suspension or termination may occur if

the entity materially fails to comply

with any term of the agreement, and that

the agreement may be terminated for

convenience in accordance with 24 CFR

85.44.

(13) Duration of the agreement. The

agreement must specify that the

agreement is in effect for the period of

affordability required by the grantee

under § 954.306 or § 954.307.

(d) Monitoring. The grantee is

responsible for managing the day-to-day

operations of its HOME program, for

monitoring the performance of all

entities receiving HOME funds from the

grantee to assure compliance with the

requirements of this part, and for taking

appropriate action when performance

problems arise.

(1) Not less than annually, the grantee

must review the activities of owners of

rental housing assisted with HOME

funds to assess compliance with the

requirement of this part, as set forth in

the written agreement under paragraphs

(b) and (c) of this section. For

multifamily housing, each review must

include on-site inspection to determine

compliance with housing codes and the

requirements of this part. For rental

housing containing one- to fourdwelling units, an on-site review must

be made once within each two-year

period. The results of each review must

be included in the grantee’s

performance report.

(2) Not less than annually, the grantee

must review the performance of each

contractor and subgrantee.

§ 954.502 Applicability of uniform

administrative requirements.

(a) Governmental entities. The

requirements of OMB Circular No. A–87

and the following requirements of 24

CFR part 85 apply to the grantee and

any governmental subgrantee receiving

HOME funds: §§ 85.6, 85.12, 85.20,

85.21, 85.22, 85.26, 85.32, 85.33, 85.35,

85.36, 85.43, 85.44, 85.51, and 85.52.

(b) Non-profit organizations. The

requirements of OMB Circular No. A–

122 (available from the Executive Office

of the President, Publication Service,

725 17th Street, N.W., Suite G–2200,

Washington, DC 20503; Telephone,

(202) 395–7332)) and the following

requirements of 24 CFR part 84 apply to

subgrantees receiving HOME funds that

are private nonprofit organizations:

§§ 84.12, 84.22, 84.23, 84.25, 84.51,

84.52, and 84.71.

(c) Alternatives to bonding. For

construction contracts that exceed the

amount for small purchase under 24

CFR 85.36, each contractor shall be

required to provide bid guarantees and

adequate assurance of performance and

payment acceptable to HUD in

accordance with 24 CFR 85.36(h).

Performance and payment bonds for 100

percent of the total contract price are

acceptable to HUD. There may be

circumstances under which the bonding

requirements of § 85.36(h) are

inconsistent with other responsibilities

and obligations of the grantee.

Alternative methods to provide

performance and payment assurance

may include:

(1) Deposit with the grantee of a cash

escrow of not less than 20 percent of the

total contract price, subject to reduction

during the warranty period,

commensurate with potential risk;

(2) Letter of credit for 25 percent of

the total contract price, unconditionally

payable upon demand of the grantee,

subject to reduction during the warranty

period commensurate with potential

risk.

§ 954.503 Audit.

Audits of the grantee and subgrantees

must be conducted in accordance with

24 CFR parts 44 and 45, as applicable.
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32307

§ 954.504 Closeout.

(a) A grant will be closed out when all

the following criteria have been met:

(1) All funds to be closed out have

been drawn down and expended for

completed project costs, or funds not

drawn down and expended have been

deobligated by HUD;

(2) Project Completion Reports for all

projects using funds to be closed out

have been submitted. HUD will use data

contained in the project completion

reports in the preparation of the

Closeout Reports;

(3) The grantee has been reviewed and

audited and HUD has determined that

all requirements, including affordability

(for which also see paragraph (b)(2) of

this section), are met or all monitoring

and audit findings have been resolved.

(i) A signed copy of the grantee’s most

recent audit report—covering all funds

to be closed out—must be received by

HUD. If the audit review by the

Department of Interior (DOI) results in

significant delays, the Area ONAP may

request a signed copy of the audit prior

to DOI review and use it as the

document needed prior to closeout. If

the audit does not cover all funds to be

closed out, the closeout may proceed,

provided the grantee agrees in the

Closeout Report that any costs paid with

the funds that were not audited must be

subject to the grantee’s next single audit

and that the grantee may be required to

repay to HUD any disallowed costs

based on the results of the audit.

(ii) The on-site monitoring of the

grantee by the Area ONAP must include

verification of data reflected in the

Closeout Report and reconciliation of

any discrepancies which may exist

between HUD data and grantee records.

(b) The Closeout Report contains the

final data on the funds and must be

signed by the grantee and HUD. In

addition, the report must contain:

(1) A provision regarding unaudited

funds (‘‘closeout subject to audit’’),

required by paragraph (a)(3)(i) of this

section; and

(2) A provision requiring the grantee

to continue to meet the requirements

applicable to housing projects for the

period of affordability specified in

§ 954.306 or § 954.307, to keep records

demonstrating that the requirements

have been met and to repay the HOME

funds, as required by § 954.500, if the

housing fails to remain affordable for

the required period.

§ 954.505 Recordkeeping.

(a) General. Each grantee must

establish and maintain sufficient

records to enable HUD to determine

whether the grantee has met the

requirements of this part. Records must

be kept in a manner that identifies the

source and use of funds for each project.

(b) Period of record retention. (1)

Except as provided in paragraphs (b)(2),

(b)(3), or (b)(4) of this section, records

must be retained for three years after

closeout of the funds.

(2) If any litigation, claim, negotiation,

audit, or other action has been started

before the expiration of the regular

period specified in paragraph (b)(1) of

this section, the records must be

retained until completion of the action

and resolution of all issues which arise

from it, or until the end of the regular

period, whichever is later.

(3) Records regarding project

requirements (§ 954.400 to § 954.402)

and other federal requirements (§ 954.4)

that apply for the duration of the period

of affordability, as well as the written

agreement and inspection and

monitoring reports must be retained for

three years after the required period of

affordability specified in § 954.306 or

§ 954.307, as applicable.

(4) Records covering displacements

and acquisition must be retained for at

least three years after the date by which

all persons displaced from the property

and all persons whose property is

acquired for the project have received

the final payment to which they are

entitled in accordance with § 954.4(e).

(c) Access to records. (1) The grantee

must provide citizens, public agencies,

and other interested parties with

reasonable access to records, consistent

with applicable tribal laws (or State law,

which may apply if the Indian tribe is

not exercising recognized powers of

self-government) regarding privacy and

obligations of confidentiality.

(2) HUD and the Comptroller General

of the United States, or any of their

representatives, have the right of access

to any pertinent books, documents,

papers or other records of the grantees

and subgrantees, in order to make

audits, examinations, excerpts, and

transcripts.

[Approved by the Office of Management and

Budget under OMB control number 2577–

0191]

§ 954.506 Performance reports.

(a) Management reports. Each grantee

must submit management reports on its

HOME program in such format and at

such time as HUD may prescribe. Each

grantee must submit a ‘‘Financial Status

Report,’’ SF–269A, short form, at the

same time it submits the Semi-Annual

Performance Report, described below. A

separate ‘‘Financial Status Report’’ is to

be submitted for each Indian HOME

program grant that the grantee has

received.

(b) Semi-Annual performance report.

(1) Submission. A grantee must submit

a semi-annual performance report on its

HOME activities to the responsible Area

ONAP at such time as HUD may

prescribe. Single copies of the report

must be provided to the public upon

request at no charge.

(2) Elements of the semi-annual

performance report. The report must

contain such information and be in such

form as HUD may prescribe, and must

include at least the following:

(i) A report on the proposed use of

HOME funds from the grant application,

consisting of the number of additional

housing opportunities to be created for

low-income and very low-income

families, by project category (housing

rehabilitation, acquisition of housing,

new housing construction, and tenantbased rental assistance);

(ii) A report on the actual use of

HOME funds, consisting of the number

of additional housing opportunities

created for low-income and very lowincome families, by project category

(housing rehabilitation, acquisition of

housing, new housing construction, and

tenant-based rental assistance). This

includes a report on project income and

includes data on the amount of

repayments, interest, and other return

on investment of HOME funds and the

use of the funds for projects, including

number of projects assisted, and

characteristics of tenants and owners;

(iii) An assessment of the

effectiveness of the efforts in providing

the preferences and opportunities under

section 7(b) of the Indian SelfDetermination and Education

Assistance Act (25 U.S.C. 450e(b)); and

(iv) Data on the total number of

households (families and individuals)

and business and nonprofit

organizations displaced as a result of

investments of HOME funds, including

the cost of relocation payments (moving

expenses and replacement housing), and

the number and cost of real property

acquisitions.

[Approved by the Office of Management and

Budget under OMB control number 2577–

0191]

§ 954.507 Submission of project

completion reports.

A Project Completion Report must be

submitted to HUD within 120 days of

the final drawdown request for the

project. If a satisfactory Project

Completion Report is not submitted by

the due date, HUD will suspend further

HOME disbursements and grant

approvals for the grantee.

Disbursements and grant approvals will

remain suspended until a satisfactory

Project Completion Report is received.
32308 Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations

[Approved by the Office of Management and

Budget under OMB control number 2577–

0191]

Subpart F—Performance Reviews and

Sanctions

§ 954.600 Performance reviews.

(a) General. HUD will review the

performance of each grantee in carrying

out its responsibilities under this part

whenever determined necessary by

HUD, but at least annually. In

conducting performance reviews, HUD

will rely primarily on information

obtained from the grantee’s records and

reports, findings from on-site

monitoring, audit reports, and

information generated from fund

requisition systems. Where applicable,

HUD may also consider relevant

information pertaining to a grantee’s

performance gained from other sources,

including citizen comments, complaint

determinations, and litigation. Reviews

to determine compliance with specific

requirements of this part will be

conducted as necessary, with or without

prior notice to the grantee.

Comprehensive performance reviews

under the standards in paragraph (b) of

this section will be conducted after

prior notice to the grantee.

(b) Standards for comprehensive

performance review. A grantee’s

performance will be comprehensively

reviewed periodically, as prescribed by

HUD, to determine whether the grantee:

(1) Has committed the HOME funds in

the HUD account as required and

expended the funds as required; and

(2) Has met the requirements of the

grant agreement and this part,

particularly eligible activities and

affordability.

§ 954.601 Corrective and remedial actions.

(a) General. HUD will use the

procedures in this section in conducting

the performance review as provided in

§ 954.600 and in taking corrective and

remedial actions. However, HUD may

temporarily suspend payments based

upon HUD’s preliminary determination

that the grantee has failed to comply

with the requirements of the Act,

regulations, or grant agreement if

suspension is necessary to preclude the

further expenditure of funds for

activities affected by the failure to

comply.

(b) Performance review. (1) If HUD

determines preliminarily that the

grantee has not met a requirement of

this part, the grantee will be given

notice of this determination and an

opportunity to demonstrate, within the

time prescribed by HUD (not to exceed

30 days) and on the basis of substantial

facts and data, that it has done so.

(2) If the grantee fails to demonstrate

to HUD’s satisfaction that it has met the

requirement, HUD will take corrective

or remedial action in accordance with

this section or § 954.602.

(c) Corrective and remedial actions.

Corrective or remedial actions for a

performance deficiency (failure to meet

a provision of this part) will be designed

to prevent a continuation of the

deficiency; mitigate, to the extent

possible, its adverse effects or

consequences; and prevent its

recurrence.

(1) HUD may request the grantee to

submit and comply with proposals for

action to correct, mitigate and prevent a

performance deficiency, including:

(i) Preparing and following a schedule

of actions for carrying out the affected

activities, consisting of schedules,

timetables, and milestones necessary to

implement the affected activities;

(ii) Establishing and following a

management plan that assigns

responsibilities for carrying out the

remedial actions;

(iii) Cancelling or revising activities

likely to be affected by the performance

deficiency, before expending HOME

funds for the activities;

(iv) Reprogramming HOME funds in

the HUD account that have not yet been

expended from affected activities to

other eligible activities;

(v) Reimbursing the HUD account in

any amount not used in accordance

with the requirements of this part; and

(vi) Suspending disbursement of

funds in the HUD account for affected

activities.

(2) HUD may also—

(i) Change the method of payment

from an advance to reimbursement

basis; and

(ii) Take other remedies that may be

legally available.

§ 954.602 Notice and opportunity for

hearing; sanctions.

(a) If HUD finds after reasonable

notice and opportunity for hearing that

a grantee has failed to comply with any

provision of this part and until HUD is

satisfied that there is no longer any such

failure to comply:

(1) HUD shall reduce the funds in the

HUD account by the amount of any

expenditures that were not in

accordance with the requirements of

this part; and

(2) HUD may—

(i) Prevent withdrawals from the HUD

account for activities affected by the

failure to comply; or

(ii) Prohibit the grantee from

competing for HOME funds under

§ 954.104; Provided, however, that HUD

may on due notice suspend payments

from the HUD account at any time after

the issuance of a notice of opportunity

for hearing pursuant to paragraph (b)(1)

of this section, pending such hearing

and a final decision, to the extent HUD

determines such action necessary to

preclude the further expenditure of

funds for activities affected by the

failure to comply.

(b) Proceedings. When HUD proposes

to take action pursuant to this section,

the respondent in the proceedings will

be the grantee.

(1) Notice of opportunity for hearing.

HUD shall notify the respondent in

writing of the proposed action and of

the opportunity for a hearing. The

notice shall be sent by first class mail.

The notice shall specify:

(i) In a manner which is adequate to

allow the respondent to prepare its

response, the basis upon which HUD

determined that the respondent failed to

comply with a provision of this part;

(ii) That the hearing procedures are

governed by these rules;

(iii) That the respondent has 14 days

from receipt of the notice within which

to provide a written request for a

hearing to the Chief Docket Clerk, Office

of Administrative Law Judges, and the

address and telephone number of the

Chief Docket Clerk;

(iv) The action HUD proposes to take

and that the authority for this action is

§ 954.602; and

(v) That if the respondent fails to

request a hearing within the time

specified, HUD’s determination that the

respondent failed to comply with a

provision of this part shall be final and

HUD may proceed to take the proposed

action.

(2) Initiation of hearing. The

respondent shall be allowed 14 days

from receipt of the notice within which

to notify the Chief Docket Clerk, Office

of Administrative Law Judges, of its

request for a hearing. If no request is

received within the time specified,

HUD’s determination that the

respondent failed to comply with a

provision of this part shall be final and

HUD may proceed to take the proposed

action.

(3) Administrative Law Judge.

Proceedings conducted under these

rules shall be presided over by an

Administrative Law Judge (ALJ),

appointed as provided by section 11 of

the Administrative Procedures Act (5

U.S.C. 3105). The case shall be referred

to the ALJ at the time a hearing is

requested. The ALJ shall promptly

notify the parties of the time and place

at which the hearing will be held. The

ALJ shall conduct a fair and impartial

hearing and take all action necessary to

avoid delay in the disposition of
Federal Register / Vol. 61, No. 121 / Friday, June 21, 1996 / Rules and Regulations 32309

proceedings and to maintain order. The

ALJ shall have all powers necessary to

those ends, including but not limited to

the power to:

(i) Administer oaths and affirmations;

(ii) Issue subpoenas as authorized by

law;

(iii) Rule upon offers of proof and

receive relevant evidence;

(iv) Order or limit discovery before

the hearing as the interests of justice

may require;

(v) Regulate the course of the hearing

and the conduct of the parties and their

counsel;

(vi) Hold conferences for the

settlement or simplification of the issues

by consent of the parties;

(vii) Consider and rule upon all

procedural and other motions

appropriate in adjudicative proceedings;

and

(viii) Make and file initial

determinations.

(4) Ex parte communications. An ex

parte communication is any

communication with an ALJ, direct or

indirect, oral or written, concerning the

merits or procedures of any pending

proceeding which is made by a party in

the absence of any other party. Ex parte

communications are prohibited except

where the purpose and content of the

communication have been disclosed in

advance or simultaneously to all parties,

or the communication is a request for

information concerning the status of the

case. Any ALJ who receives an ex parte

communication which the ALJ knows or

has reason to believe is unauthorized

shall promptly place the

communication, or its substance, in all

files and shall furnish copies to all

parties. Unauthorized ex parte

communications shall not be taken into

consideration in deciding any matter in

issue.

(5) The hearing. All parties shall have

the right to be represented at the hearing

by counsel. The ALJ shall conduct the

proceedings in an expeditious manner

while allowing the parties to present all

oral and written evidence which tends

to support their respective positions, but

the ALJ shall exclude irrelevant,

immaterial or unduly repetitious

evidence. HUD has the burden of proof

in showing by a preponderance of the

evidence that the respondent failed to

comply with a provision of this part.

Each party shall be allowed to crossexamine adverse witnesses and to rebut

and comment upon evidence presented

by the other party. Hearings shall be

open to the public. So far as the orderly

conduct of the hearing permits,

interested persons other than the parties

may appear and participate in the

hearing.

(6) Transcripts. Hearings shall be

recorded and transcribed only by a

reporter under the supervision of the

ALJ. The original transcript shall be a

part of the record and shall constitute

the sole official transcript. Respondents

and the public, at their own expense,

may obtain copies of the transcript.

(7) The ALJ’s decision. At the

conclusion of the hearing, the ALJ shall

give the parties a reasonable

opportunity to submit proposed

findings and conclusions and

supporting reasons therefor. Generally

within 60 days after the conclusion of

the hearing, the ALJ shall prepare a

written decision which includes a

statement of findings and conclusions,

and the reasons or basis therefor, on all

the material issues of fact, law or

discretion presented on the record and

the appropriate sanction or denial

thereof. The decision shall be based on

consideration of the whole record or

those parts thereof cited by a party and

supported by and in accordance with

the reliable, probative, and substantial

evidence. A copy of the decision shall

be furnished to the parties immediately

by first class mail and shall include a

notice that any requests for review by

the Secretary must be made in writing

to the Secretary within 30 days of the

receipt of the decision.

(8) The record. The transcript of

testimony and exhibits, together with

the decision of the ALJ and all papers

and requests filed in the proceeding,

constitutes the exclusive record for

decision and, on payment of its

reasonable cost, shall be made available

to the parties. After reaching the initial

decision, the ALJ shall certify to the

complete record and forward the record

to the Secretary.

(9) Review by the Secretary. The

decision by the ALJ shall constitute the

final decision of the Secretary unless,

within 30 days after the receipt of the

decision, either the respondent or the

Assistant Secretary files an exception

and request for review by the Secretary.

The excepting party must transmit

simultaneously to the Secretary and the

other party the request for review and

the basis of the party’s exceptions to the

findings of the ALJ. The other party

shall be allowed 30 days from receipt of

the exception to provide the Secretary

and the excepting party with a written

reply. The Secretary shall then review

the record of the case, including the

exceptions and the reply. On the basis

of such review, the Secretary shall issue

a written determination, including a

statement of the rationale therefor,

affirming, modifying or revoking the

decision of the ALJ. The Secretary’s

decision shall be made and transmitted

to the parties within 60 days after the

decision of the ALJ was furnished to the

parties.

Dated: May 10, 1996.

Michael B. Janis,

General Deputy Assistant Secretary for Public

and Indian Housing.

[FR Doc. 96–15712 Filed 6–20–96; 8:45 am]

BILLING CODE 4210–33–P