[Federal Register Volume 61, Number 121 (Friday, June 21, 1996)]
[Rules and Regulations]
[Pages 32292-32309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-15712]




[[Page 32291]]


_______________________________________________________________________

Part IX





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Parts 92 and 954



Indian HOME Program Streamlining; Final Rule

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

[[Page 32292]]



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: David__P<a href="/cdn-cgi/l/email-protection#4a2b39390a223f2e642d253c"><span class="__cf_email__" data-cfemail="c5a4b6b685adb0a1eba2aab3">[email protected]</span></a> 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 Secs. 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 (Secs. 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 Sec. 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 Sec. 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, 
Sec. 92.631 (now Sec. 954.4) is revised to conform with the

[[Page 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 Sec. 954.4. Displacement, 
relocation, and acquisition.
    Section 92.634, now included in Sec. 954.4, is revised to conform 
to 24 CFR 953.602 for the ICDBG program.
Labor
    Section 92.635, now in Sec. 954.4, is revised to conform to 
Sec. 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 Sec. 92.636 (now Sec. 954.4) 
with the text from the CDBG program at Sec. 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 
Sec. 92.638; CDBG Sec. 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 
Sec. 954.4.
Subpart B--Applying for Assistance

Section 954.100  General

    Section 92.600, now Sec. 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 Sec. 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 Sec. 92.602, except that paragraph (e), which 
dealt with administrative capacity, has been deleted because it is 
already covered in Sec. 954.104(b) as a factor for selection.

Section 954.106  Announcement of Competition

    Section 92.605 (now Sec. 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 Sec. 954.300, except 
Sec. 92.611(c), Termination before completion, which is placed in 
Sec. 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 Sec. 954.300.

Section 954.303  Eligible Project Costs

    Section 92.612 (now Sec. 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 pro-rata development cost of facilities.
    Impact fees on housing are eligible under the HOME program for 
State and local governments. See Sec. 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 Sec. 954.303(a)(4) states unexpended funds in 
reserve must be reprogrammed or returned to HUD; previously, 
Sec. 92.612(a)(4) only stated that the funds should be returned to the 
grantee's local HOME account.
    The clarification in Sec. 954.303(b) Acquisition costs expands the 
previous Sec. 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 Sec. 954.304 is added to clarify program administrative 
costs, with reference to OMB Circular A-87.

Section 954.305  Tenant-based Rental Assistance

    In Sec. 954.305 (formerly Sec. 92.613), the explanation of what a 
community-wide exception rent is has been relocated from paragraph 
(f)(3) (where it appeared in Sec. 92.613) to the definitions section 
(Sec. 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 Sec. 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 Sec. 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.

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Section 954.500  Repayment of Investment

    Section 954.500 (formerly Sec. 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 Sec. 954.502 (formerly 
Sec. 92.645) to provide for alternatives to bond requirements.

Section 954.504  Closeout

    Section 954.504 has revised Sec. 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 Sec. 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 Sec. 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:


[[Page 32295]]


    Authority: 42 U.S.C. 3535(d) and 12701-12839.

Subpart M--[Removed and Reserved]

    2. Subpart M, consisting of Secs. 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


Sec. 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.


Sec. 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 Sec. 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-to-four 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 Sec. 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 Sec. 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--

[[Page 32296]]

    (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.


Sec. 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.


Sec. 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 self-government 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 Self-Determination 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 Self-Determination 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

[[Page 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 Self-Determination 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,

[[Page 32298]]

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-of-pocket 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 non-construction 
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 HOME-assisted 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

[[Page 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 
HUD-associated 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 self-government).
    (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 decision-making 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., sub-contractors) 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

[[Page 32300]]

the lower tier transactions. A grantee may rely on the certification, 
unless it knows the certification is erroneous.

Subpart B--Applying for Assistance


Sec. 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.


Sec. 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.


Sec. 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 Self-Determination 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 
Self-Determination 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.


Sec. 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.


Sec. 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.


Sec. 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.


Sec. 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]


Sec. 954.107  Grant conditions.

    HUD may impose reasonable conditions on grant awards.


Sec. 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.

[[Page 32301]]

Subpart C--Eligible Activities and Affordability


Sec. 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 
Sec. 954.303 and Sec. 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.


Sec. 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.


Sec. 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.''


Sec. 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 Sec. 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 Sec. 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 Sec. 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

[[Page 32302]]

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 Sec. 954.4 or 
determined by the grantee to be appropriate under Sec. 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.


Sec. 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.


Sec. 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 low-income 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 Sec. 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 
Sec. 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 low-income families for security deposits for rental of 
dwelling units whether or not the grantee provides any other tenant-
based 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 Sec. 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 Sec. 954.501 
for repayment of HOME investments apply.


Sec. 954.306  Rental housing: qualification as affordable housing and 
income targeting.

    (a) Rent limitation. A rental housing project (including the non-
owner-occupied units in housing purchased with HOME funds in accordance 
with Sec. 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 Sec. 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

[[Page 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.

------------------------------------------------------------------------
                                                              Minimum   
                                                             period of  
                         Activity                          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 
low-income 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

[[Page 32304]]

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.


Sec. 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 Sec. 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 low-income 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 HOME-eligible activities. If 
no HOME funds will be subject to recapture, the provisions at 
Sec. 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.


Sec. 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 Sec. 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 low-income 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 
Sec. 954.306 or Sec. 954.307. However, additional HOME funds may be 
committed to a project up to one year after project completion (see 
Sec. 954.500), but the amount of HOME funds in the project may not 
exceed the maximum per-unit subsidy amount established under 
Sec. 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


Sec. 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.


Sec. 954.401  Property standards.

    (a) Housing that is assisted with HOME funds, at a minimum, must 
meet the housing quality standards in Sec. 882.109 of this title. In 
addition,

[[Page 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 Sec. 882.109 of this title) 
not later than 2 years after transfer of the ownership interest.


Sec. 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


Sec. 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 Sec. 954.306 or Sec. 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 Sec. 954.600 Performance reviews, Sec. 954.601 
Corrective and remedial actions, and Sec. 954.602 Notice and 
opportunity for hearing; sanctions.


Sec. 954.501  Grantee responsibilities; written agreements; monitoring.

    (a) Responsibilities. The grantee is responsible for ensuring that 
HOME

[[Page 32306]]

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 
Sec. 954.306 or Sec. 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 Sec. 954.306 or 
Sec. 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 
Sec. 954.502.
    (5) Project requirements. The agreement must require compliance 
with project requirements in Sec. 954.400 through Sec. 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 Sec. 954.4.
    (8) Conditions for religious organizations. Where applicable, the 
agreement must include the conditions prescribed in Sec. 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 Sec. 954.306 or Sec. 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 four-dwelling 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.


Sec. 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: 
Secs. 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: Secs. 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 Sec. 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.


Sec. 954.503  Audit.

    Audits of the grantee and subgrantees must be conducted in 
accordance with 24 CFR parts 44 and 45, as applicable.

[[Page 32307]]

Sec. 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 Sec. 954.306 or Sec. 954.307, to keep 
records demonstrating that the requirements have been met and to repay 
the HOME funds, as required by Sec. 954.500, if the housing fails to 
remain affordable for the required period.


Sec. 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 (Sec. 954.400 to 
Sec. 954.402) and other federal requirements (Sec. 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 
Sec. 954.306 or Sec. 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 Sec. 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]


Sec. 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 tenant-based 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 low-income 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 Self-Determination 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]


Sec. 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.


[[Page 32308]]


[Approved by the Office of Management and Budget under OMB control 
number 2577-0191]

Subpart F--Performance Reviews and Sanctions


Sec. 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.


Sec. 954.601  Corrective and remedial actions.

    (a) General. HUD will use the procedures in this section in 
conducting the performance review as provided in Sec. 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 Sec. 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.


Sec. 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 
Sec. 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 Sec. 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

[[Page 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 cross-examine 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

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