Source: https://www.federalregister.gov/articles/2010/11/12/2010-28420/hud-multifamily-rental-projects-regulatory-revisions
Timestamp: 2016-08-27 10:01:44
Document Index: 202790593

Matched Legal Cases: ['arts 200', 'art 200', '§ 200', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', '§ 200', 'art 50', '§ 200', '§ 200', '§ 207', '§ 207', '§ 207', '§ 207', 'art 200', '§ 207', '§ 207', '§ 207', '§ 207', '§ 207', 'art 200', '§ 207', '§ 207', '§ 207']

Federal Register | HUD Multifamily Rental Projects: Regulatory Revisions
-69369 (7 pages)
Shorter URL: https://federalregister.gov/a/2010-28420 Related Topics
HUD Multifamily Rental Projects: Regulatory Revisions (FR-5393) 1 action from June 2011 June 2011
In addition to the closing documents, the update effort that commenced in 2004 included a proposed rule published on August 2, 2004 (69 FR 46210) that would update certain FHA regulations, which like many of the closing documents, did not reflect current real estate and lending practices. This proposed rule issued in today's Federal Register restarts the process to update regulations first identified in 2004 as needing revisions to be consistent with revised closing documents. The regulatory changes proposed in this rule are similar to those proposed in 2004, and arise from HUD's review of the closing documents over the last several years. This proposed rule identifies the changes that HUD intends to make to its regulations in 24 CFR parts 200 and 207. The preamble to this proposed rule also includes a discussion of the public comments formally submitted on the August 2, 2004 proposed rule, and provides HUD's response to those comments. While HUD addresses the prior public comments received, HUD emphasizes that it is starting anew with this proposed rule process and welcomes comments on all issues.
Section 200.5. Regulatory changes to part 200, subpart A, prompted by the review and updating of the closing documents pertain to natural persons and “tenants in common” as eligible mortgagor entities. In the August 2004 rule, HUD had proposed removing tenancies in common as eligible mortgagor entities, except for tenancies in common comprised only of natural persons. In this rule, HUD proposes to amend § 200.5, which defines an eligible mortgagor under HUD's multifamily mortgage insurance programs, to reflect the removal of natural persons and the complete removal of tenants in common as eligible mortgagor entities.
In addition to reflecting the new two-tiered default system, § 207.255 would be revised to clarify that the purpose of the section is to define “default” and “date of default” for purposes of filing an insurance claim with the FHA Commissioner. Also, editorial revisions would be made to improve the readability of this section.
Section 207.256. Minor editorial changes would also be made to § 207.256 to improve readability and to clarify which provisions in § 207.255 would be cross-referenced in § 207.256.
Section 207.258. HUD is also proposing to amend § 207.258, which provides insurance claim requirements, to provide, consistent with existing HUD practice and policy, that the mortgagee request a three-month extension of the 45-day deadline prescribed by § 207.258 for a mortgage funded with the proceeds of state or local bonds, Government National Mortgage Association (Ginnie Mae) mortgage-backed securities, or other bond obligations specified by HUD, any of which contains a lock-out or penalty provision.
Section 207.259. HUD is proposing to amend § 207.259 by adding a new paragraph (b)(2)(vi). This proposed amendment would pertain to cases of a covenant default when the Commissioner, pursuant to § 207.257, has requested the mortgagee to accelerate payment of the outstanding principal balance due under an insured mortgage, and the mortgagee does not comply promptly with such request. In such cases, mortgage insurance benefits, if requested, will be reduced by an amount equal to the difference between the project's market value as of the date of the Commissioner's request and the project's market value on the date the mortgagee makes an election to assign the mortgage, or convey title to the project, as determined by appraisal procedures established by the Commissioner.
III. Discussion of Public Comments on 2004 Proposed Rule Back to Top
Comment: Commenters stated that tenants in common (TICs) should not be eliminated as eligible mortgagors and that the option should remain open. Commenters pointed out that at the time comments were solicited in 2004 Fannie Mae and Freddie Mac were seeing an increasing number of TICs borrowers due to a growing number of Like-Kind exchanges. They suggested that HUD require a Tenants-in-Common Agreement dealing with such issues as serial bankruptcy, dispute resolution and forced sale and partition and that failure to comply with the Agreement would be an event of default under the Security Instrument.
Comment: One commenter noted that there is no definition of “other bond obligations” here, although “other bond obligation” is defined in Mortgagee Letter 87-9 Mortgage Prepayment Provisions for HUD-Insured and Coinsured Multifamily Projects (Mortgagee Letter 87-9) and in Chapter 12 of the Multifamily Accelerated Processing (MAP) Guide. At least “participation certificates,” a commonly used arrangement, should be added.
HUD response: HUD is sympathetic to the concern expressed by the commenter. To address this issue, HUD proposed to add a sentence to § 207.258(b) providing that a mortgagee may consider failure to receive an extension notice within 30 days, a denial of the request for an extension. In addition, HUD has taken the opportunity afforded by this proposed rule to reorganize § 207.258(b) by breaking down the lengthy paragraph into several shorter paragraphs. The reorganization does not affect the substance of § 207.258(b) but will clarify and improve the readability of the regulatory provision.
IV. Justification for Shortened Comment Period Back to Top
In this case, with one exception and minor changes, HUD is resubmitting for public comment the same regulatory amendments presented in HUD's proposed rule published on August 2, 2004 (69 FR 46210). The one regulatory amendment not proposed in 2004, was the proposed amendment to § 200.88. All other regulatory provisions presented for public comment in this rule are the same as those proposed for amendment in 2004, with minor changes, in a few places, with some of the proposed language changes. As discussed in this preamble, HUD received only 10 public comments on the proposed regulatory amendments in the 2004 proposed rule.
A Finding of No Significant Impact with respect to the environment for this rule has been made in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant Impact is available for public inspection between 8 a.m. and 5 p.m. weekdays in the Regulations Division, Room 10276, Office of the General Counsel, Department of Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 20410-0500. Due to security measures at the HUD Headquarters building, please schedule an appointment to review the docket file by calling the Regulations Division at 202-402-3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number via TTY by calling the Federal Information Relay Service at 800-877-8339.
2. Revise § 200.5 to read as follows:
3. Revise § 200.88 to read as follows:
5. Revise § 207.255 to read as follows:
6. Revise § 207.256 to read as follows:
(a) If a default as defined in § 207.255(a) or (b) is not cured within the grace period of 30 days provided under § 207.255(c), the mortgagee must, within 30 days after the date of the end of the grace period, notify the Commissioner of the default, in the manner prescribed in 24 CFR part 200, subpart B.
7. Revise § 207.256a to read as follows:
8. Revise § 207.256b to read as follows:
9. Revise § 207.257 to read as follows:
10. Amend § 207.258, as follows:
(a) Alternative election by mortgagee. When the mortgagee becomes eligible to receive mortgage insurance benefits pursuant to § 207.255(c), the mortgagee must, within 45 days after the date of eligibility, give the Commissioner notice, in the manner prescribed in 24 CFR part 200, subpart B, of its intention to file an insurance claim and of its election either to assign the mortgage to the Commissioner, as provided in paragraph (b) of this section, or to acquire and convey title to the Commissioner, as provided in paragraph (c) of this section. For mortgages funded with the proceeds of State or local bonds, GNMA mortgage-backed securities, participation certificates, or other bond obligations specified by HUD (such as an agreement under which the insured mortgagee has obtained the mortgage funds from third party investors and has agreed in writing to repay such investors at a stated interest rate and in accordance with a fixed repayment schedule), any of which contains a lock-out or penalty provision, the mortgagee must, in the event of a default during the term of the prepayment lock-out or penalty (i.e., prior to the date on which prepayments may be made with a penalty):
11. In § 207.259, add a new paragraph (b)(2)(vi) to read as follows:
(vi) When there is a covenant default as defined in § 207.255(a)(2) and a mortgagee refuses to comply promptly with the Commissioner's request to accelerate payment pursuant to § 207.257, an amount equal to the difference between the project's market value as of the date of the Commissioner's request and the project's market value as of the date the mortgagee makes an election to assign the mortgage, or convey title to the project, as determined by appraisal procedures established by the Commissioner.