[Federal Register: November 22, 2004 (Volume 69, Number 224)]
[Rules and Regulations]
[Page 68049-68052]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22no04-20]
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Part III
Department of Housing and Urban Development
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24 CFR Part 92
HOME Investment Partnerships Program; Amendments to Homeownership
Affordability Requirements; Interim Rule
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 92
[Docket No. FR-4940-I-01]
RIN 2501-AD06
HOME Investment Partnerships Program; Amendments to Homeownership
Affordability Requirements
AGENCY: Office of the Secretary, HUD.
ACTION: Interim rule.
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SUMMARY: This interim rule revises the homeownership affordability
requirements of the HOME Investment Partnership program. First, the
interim rule clarifies that, upon the sale of HOME-assisted
homeownership housing before the close of the required affordability
period, a participating jurisdiction may recapture an amount less than
or equal to the net proceeds of the sale. Second, the interim rule also
provides a participating jurisdiction with the flexibility to invest
additional HOME funds in homebuyer housing for which HOME funds have
already been used.
DATES: Effective Date: December 22, 2004.
Comment Due Date: January 21, 2005.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule to the Regulations Division, Office of General Counsel, Room
10276, Department of Housing and Urban Development, 451 Seventh Street,
SW., Washington, DC 20410-0500. Electronic comments may be submitted
through either:
The Federal eRulemaking Portal: at http://www.regulations.gov
; or
The HUD electronic Web site at: http://www.epa.gov/feddocket.
Follow the link entitled ``View Open HUD Dockets.''
Commenters should follow the instructions provided on that site to
submit comments electronically.
Facsimile (FAX) comments are not acceptable. In all cases,
communications must refer to the docket number and title. All comments
and communications submitted will be available for public inspection
and copying between 8 a.m. and 5 p.m. weekdays at the above address.
Copies are also available for inspection and downloading at http://www.epa.gov/feddocket
.
FOR FURTHER INFORMATION CONTACT: Virginia Sardone, Director, Program
Policy Division, Office of Affordable Housing Programs, Room 7164,
Department of Housing and Urban Development, 451 Seventh Street, SW.,
Washington, DC 20410-7000; telephone (202) 708-2470. (This is not a
toll-free number.) A telecommunications device for hearing- and speech-
impaired persons (TTY) is available at 800-877-8339 (Federal
Information Relay Service).
SUPPLEMENTARY INFORMATION:
I. Background
The HOME Investment Partnerships program (HOME program) is
authorized under Title II of the Cranston-Gonzalez National Affordable
Housing Act (Public Law 101-625, approved November 28, 1990) (NAHA).
Through the HOME program, HUD allocates funds by formula among eligible
state and local governments to strengthen public-private partnerships
and to expand the supply of decent, safe, sanitary, and affordable
housing for very low-income and low-income families. Generally, HOME
funds must be matched by non-federal resources. State and local
governments that become participating jurisdictions may use HOME funds
to carry out multi-year housing strategies through acquisition,
rehabilitation, and new construction of housing, and through tenant-
based rental assistance. Participating jurisdictions may provide
assistance in a number of eligible forms, including grants, loans,
advances, equity investments, interest subsidies, and other forms of
assistance that HUD approves. HUD's regulations for the HOME Program
are located in 24 CFR part 92.
Section 215(b) of NAHA establishes affordability requirements for
HOME-assisted homeownership housing. These requirements apply to both
the initial sale to a HOME-assisted homebuyer and to any subsequent
resale by that homebuyer during the applicable period of affordability.
Specifically, the statute provides that participating jurisdictions
must impose restrictions that either require that: (1) The HOME-
assisted housing be resold to another low-income homebuyer at an
affordable price; or (2) the HOME-assisted housing may be resold to any
homebuyer regardless of income, but the subsidy to the original
homebuyer must be recaptured unless the net proceeds of the sale are
insufficient.
Under the second provision discussed above (i.e., the recapture of
the subsidy), NAHA limits the amount of the recaptured assistance to an
amount equal to the net proceeds of the resale. Specifically, Section
215(b)(3)(B) of NAHA requires that a participating jurisdiction adopt
restrictions to recapture the HOME investment ``except where there are
no net proceeds or where the net proceeds are insufficient to repay the
full amount of the assistance.''
HUD has implemented the homeownership affordability requirements,
including the recapture provisions, at Sec. 92.254. The regulation
does not explicitly track the statutory language limiting recaptures to
the amount of the net proceeds. However, Sec. 92.254(a)(5)(ii)(3)
allows net proceeds to be shared if they are not sufficient to
recapture the full HOME investment and enables the homeowner to recover
the downpayment and any capital improvement investment.
II. This Interim Rule
This interim rule revises the affordability requirements for
homeownership housing assisted under the HOME program. This section of
the preamble describes the specific changes that will be made by this
interim rule.
A. Limitation of Recapture to Net Proceeds
This interim rule revises Sec. 92.254 to clarify that recaptures
are limited to the amount of the net proceeds and to more closely track
the statutory language of NAHA. Specifically, the interim rule
explicitly provides that when the recapture requirement is triggered by
a sale (voluntary or involuntary) of the housing, and there are no net
proceeds or the net proceeds are insufficient to repay the HOME
investment due, the participating jurisdiction may recapture an amount
less than or equal to the net proceeds. The net proceeds are the sales
price minus loan repayment (other than HOME funds) and any closing
costs. The new regulatory language conforms the regulation to the
statutory language in Section 215(b)(3)(B) of NAHA. That section limits
repayment of HOME assistance to recapture out of net proceeds when the
property is sold before the affordability restrictions expire. For
example, a low-income homebuyer receives $10,000 in HOME assistance to
purchase a home and sells the property during the period of
affordability. The net proceeds of the sale `` after the seller pays
the first mortgage and closing costs--is $7,500. The new regulatory
language reflects the statute in limiting the maximum amount that the
participating jurisdiction may recapture up to the $7,500 available
from the sale, as opposed to the entire $10,000.
B. Investment of Additional HOME Funds in Homeownership Projects
In addition to clarifying the repayment requirements, this interim
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rule will provide an additional tool for the participating jurisdiction
to preserve HOME-assisted homebuyer housing. Specifically, the interim
rule creates a new Sec. 92.254(a)(9) to provide flexibility to
participating jurisdictions to invest additional HOME funds to preserve
homebuyer housing for which HOME funds were already used.
The interim rule permits participating jurisdictions to use
additional HOME funds to acquire the housing through a purchase option,
right of first refusal or other preemptive right before foreclosure, to
acquire the housing at the foreclosure sale, to undertake any necessary
rehabilitation, and to provide assistance to another eligible
homebuyer. The participating jurisdiction may invest additional HOME
funds whether the housing was subject to resale restrictions or to
recapture requirements.
New Sec. 92.254(a)(9) authorizes the use of additional HOME funds
to preserve the HOME-assisted homeownership housing stock on which the
affordability requirements would lapse upon foreclosure. If a
participating jurisdiction forecloses on a HOME loan, it receives the
housing and can preserve affordability without additional cost to the
HOME program. Accordingly, the interim rule does not permit the use of
additional HOME funds in the case of foreclosure of a defaulted HOME
loan.
The per-unit HOME subsidy limit in Sec. 92.250 applies to the
total HOME funds used for the housing (i.e., the original amount plus
the additional amount). To provide some relief from this requirement,
the interim rule permits HOME ``administrative'' funds to be used so
long as they do not exceed the cap on administrative funds in Sec.
92.207. HUD believes this use of funds is a reasonable administrative
cost of the HOME program. To the extent administrative funds are used,
they can be reimbursed, in whole or in part, when the housing is sold
to a homebuyer. The reimbursement of administrative funds will be
considered a return of grant funds and all returned funds will continue
to be available for administrative and planning costs. Any additional
amount realized from the sale of the housing will be HOME program
income.
III. Justification for Interim Rulemaking
In general, before issuing a rule for effect, HUD publishes it for
public comment, in accordance with its own regulations on rulemaking in
24 CFR part 10. Part 10 provides for exceptions to the general rule if
HUD finds good cause to omit advanced notice and public participation.
The good cause requirement is satisfied when prior public procedure is
``impractical, unnecessary, or contrary to the public interest'' (see
24 CFR 10.1). For the following reasons, HUD has determined that good
cause exists to publish this rule for effect without soliciting prior
public comments.
The interim rule revises Sec. 92.254 to more closely track the
statutory language of NAHA regarding recapture of HOME homeownership
assistance. The amendment does not impose a new regulatory obligation,
nor modify an existing requirement. Rather, the new regulatory language
conforms the HOME program regulations to the statutory language in
Section 215(b)(3)(B) of NAHA. That section limits repayment of HOME
assistance to recapture out of net proceeds when the property is sold
before the affordability restrictions expire. Since the recapture
limitation is statutory in nature, HUD does not have the discretion to
revise the new regulatory language in response to public comments.
Accordingly, it is unnecessary to delay the effectiveness of this
regulatory change in order to solicit prior public comment.
In addition to clarifying the repayment requirements, this interim
rule will make a change to the HOME homeownership affordability
requirements. Specifically, the interim rule provides flexibility to
participating jurisdictions to invest additional HOME funds to preserve
homebuyer housing for which HOME funds were already used. This change
will not impose a new regulatory burden on participating jurisdictions
but, rather, provide them with an additional tool to preserve HOME-
assisted homebuyer housing. Accordingly, HUD believes it would be
contrary to the public interest to delay effectiveness of this change
to solicit public comment.
Although HUD believes that good cause exists to publish this rule
for effect without prior public comment, it recognizes the value of
public comment in the development of its regulations. Therefore, HUD
has issued these regulations on an interim basis and has provided the
public with a 60-day comment period. HUD welcomes comments on the
regulatory amendments made by this interim rule. The public comments
will be addressed in the final rule.
IV. Findings and Certifications
Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866 (entitled ``Regulatory Planning and Review'').
OMB determined that this rule is a ``significant regulatory action'' as
defined in Section 3(f) of the Order (although not an economically
significant regulatory action, as provided under Section 3(f)(1) of the
Order). Any changes made to the rule subsequent to its submission to
OMB are identified in the docket file, which is available for public
inspection in the Regulations Division, Room 10276, Office of General
Counsel, Department of Housing and Urban Development, 451 Seventh
Street, SW., Washington, DC 20410-0500.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for federal agencies to
assess the effects of their regulatory actions on state, local, and
tribal governments and the private sector. This interim rule does not
impose any federal mandate on any state, local, or tribal government or
the private sector within the meaning of UMRA.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on state and local governments and
is not required by statute or preempts state law, unless the relevant
requirements of Section 6 of the Executive Order are met. This rule
does not have federalism implications and does not impose substantial
direct compliance costs on state and local governments or preempt state
law within the meaning of the Executive Order.
Impact on Small Entities
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed and approved this interim rule and in so
doing certifies that this rule will not have a significant economic
impact on a substantial number of small entities for the following
reasons.
First, the majority of jurisdictions that are statutorily eligible
to receive HOME formula allocations are relatively larger cities,
counties or states. The new regulatory language regarding recaptures
will not have any impact on participating jurisdictions. Rather, the
change will conform the HOME program regulations to the statutory
language in Section 215(b)(3)(B) of NAHA. That section limits repayment
of HOME
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assistance to recapture out of net proceeds when the property is sold
before the affordability restrictions expire. Second, the interim rule
provides flexibility to participating jurisdictions to invest
additional HOME funds to preserve homebuyer housing for which HOME
funds were already used. To the extent this change has any impact on
participating jurisdictions, it will be a beneficial one of providing
them with an additional tool to preserve HOME-assisted homebuyer
housing.
Notwithstanding HUD's determination that this rule will not have a
significant economic impact on a substantial number of small entities,
HUD specifically invites comments regarding less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50,
which implement Section 102(2)(C) of the National Environmental Policy
Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant
Impact is available for public inspection between the hours of 8 a.m.
and 5 p.m. weekdays in the Regulations Division, Office of General
Counsel, Room 10276, Department of Housing and Urban Development, 451
Seventh Street, SW., Washington, DC 20410-0500.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number for the HOME
Program is 14.239.
List of Subjects in 24 CFR Part 92
Administrative practice and procedure, Grant programs--housing and
community development, Low- and moderate-income housing, Manufactured
homes, Rent subsidies, Reporting and recordkeeping requirements.
0
Accordingly, HUD amends 24 CFR part 92 as follows:
PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM
0
1. The authority citation for 24 CFR part 92 continues to read as
follows:
Authority: 42 U.S.C. 3535(d) and 12701-12839.
0
2. In Sec. 92.254, add two sentences at the end of paragraph
(a)(5)(ii)(A) and add new paragraph (a)(9) to read as follows:
Sec. 92.254 Qualification as affordable housing: Homeownership.
(a) * * *
(5) * * *
(ii) * * *
(A) * * * In establishing its recapture requirements, the
participating jurisdiction is subject to the limitation that when the
recapture requirement is triggered by a sale (voluntary or involuntary)
of the housing unit, and there are no net proceeds or the net proceeds
are insufficient to repay the HOME investment due, the participating
jurisdiction can only recapture the net proceeds, if any. The net
proceeds are the sales price minus superior loan repayment (other than
HOME funds) and any closing costs.
* * * * *
(9) Preserving affordability. (i) Notwithstanding Sec.
92.214(a)(6), to preserve the affordability of housing that was
previously assisted with HOME funds and subject to the requirements of
Sec. 92.254(a), a participating jurisdiction may use additional HOME
funds to acquire the housing through a purchase option, right of first
refusal, or other preemptive right before foreclosure, or to acquire
the housing at the foreclosure sale, to undertake any necessary
rehabilitation, and to provide assistance to another homebuyer. The
housing must be sold to a new eligible homebuyer in accordance with the
requirements of Sec. 92.254(a). Additional HOME funds may not be used
if the mortgage in default was funded with HOME funds.
(ii) The total amount of original and additional HOME assistance
may not exceed the maximum per-unit subsidy amount established under
Sec. 92.250. Alternatively to charging the cost to the HOME program
under Sec. 92.206, the participating jurisdiction may charge the cost
to 2 the HOME program under Sec. 92.207, as a reasonable
administrative cost of its HOME program, so that the additional HOME
funds for the housing are not subject to the maximum per-unit subsidy
amount.
* * * * *
Dated: October 22, 2004.
Alphonso Jackson,
Secretary.
[FR Doc. 04-25753 Filed 11-19-04; 8:45 am]
BILLING CODE 4210-32-P