[Federal Register: December 14, 2004 (Volume 69, Number 239)]
[Rules and Regulations]
[Page 74893-74895]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de04-22]
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Part IV
Department of Housing and Urban Development
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24 CFR Part 200
Distribution of Tax Credit Proceeds; Final Rule
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 200
[Docket No. FR-4792-F-02]
RIN 2502-AH91
Distribution of Tax Credit Proceeds
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This rule adopts as final an interim rule that amended the
Department's regulations with respect to funding for project
completion. The regulatory change allows the proceeds from syndication
of low-income housing tax credits and historic tax credits to be
treated in the same manner as loan or grant funding provided through
federal, state, or local government agencies. This final rule follows
an interim rule that was published in the Federal Register of July 30,
2003. Two comments were received in response to the interim rule's
invitation for public comment. After careful consideration of the two
comments received, HUD is adopting the interim rule without change.
DATES: Effective date: January 13, 2005.
FOR FURTHER INFORMATION CONTACT: Michael McCullough, Director, Office
of Multifamily Development, Office of the Deputy Assistant Secretary
for Multifamily Housing, Room 6148, Department of Housing and Urban
Development, 451 Seventh Street, SW., Washington, DC 20410-8000.
Telephone (202) 708-1142, extension 5426 (this is not a toll-free
number). Hearing- or speech-impaired persons may access this number by
calling the Federal Information Relay Service at 800-877-8339 (this is
a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
On July 30, 2003, (68 FR 44844) HUD published an interim rule to
revise the Department's regulations at 24 CFR 200.54. Readers are
referred to the July 30, 2003, interim rule for a full discussion of
the basis and rationale advanced by the Department for adopting the
revised regulations.
II. This Final Rule
This final rule follows publication of the July 30, 2003, interim
rule, and takes into consideration the two public comments received on
the interim rule. The two comments received during the public comment
period were from an association representing mortgage bankers and an
association of home builders, respectively.
Comment: Support for interim rule. One commenter strongly supported
the rule, applauding HUD for taking a proactive step to simplify and
improve the process of using low-income housing tax credits with FHA-
insured multifamily loans. The commenter also encouraged HUD to seek
additional ways to streamline the approval process for FHA-insured
loans that fund low-income tax credit properties.
HUD Response. HUD appreciates the commenter's support. As suggested
by the commenter, HUD will continue to pursue ways to make the approval
process for FHA-insured loans more efficient.
Comment: Clarify amount of tax credit proceeds to be escrowed. The
commenter requested that HUD's implementing instructions clarify that
only the tax credit proceeds required for the front money escrow be
placed in escrow with the mortgagee prior to the start of construction.
HUD Response. HUD agrees with the comment and has made the
clarification in the implementing instructions in the Multifamily
Accelerated Processing (MAP) guide.
Comment: A letter of credit should satisfy the tax credit proceeds
required at closing. The second commenter recommended that to make FHA
insurance a more attractive and cost-effective financing vehicle for
projects with low-income housing tax credits, HUD allow tax credit
proceeds required at closing to be held by the mortgagee in the form of
an unconditional, irrevocable letter of credit issued by a banking
institution. The commenter wrote that if this recommendation were
adopted, it would conform the policy for tax credit proceeds with that
now allowed where grant or loan funds such as funds provided under
HUD's HOME or Community Development Block Grant (CDBG) program are
provided from a government agency or instrumentality. If there is a
problem with collecting on the letter of credit, the mortgagee would be
at risk and required to provide the funds necessary to complete the
project. The commenter concluded that HUD would be at risk only if both
the banking institution and the mortgagee failed to meet their
obligations.
HUD Response: HUD disagrees with the recommendation and, as noted
above, adopts the interim rule without change. Where FHA has insured
loans with funds from a governmental agency, the agency executes a
commitment that is binding on present and future administrations. Under
the commenter's recommendation, if the lending institution that issued
the letter of credit failed to honor its letter of credit, FHA's sole
reliance would be on the mortgagee. FHA permits mortgagees to accept
letters of credit in lieu of cash for items such as initial operating
deficit, working capital, and assurance of completion. In a tax credit
transaction, a mortgagee that accepted a letter of credit would be
backing major equity (sometimes at least 50 percent of the cost of the
transaction).
Multifamily mortgagees are currently required to have only $250,000
of net worth. For FHA to consider an arrangement such as the one
suggested by the commenter, FHA would have to evaluate the current net
worth of the mortgagee at the time of the transaction or establish a
separate category of mortgagees with much higher net worth that could
handle such financial risk. Either solution would be too
administratively burdensome for the Department to undertake at this
time.
III. Findings and Certifications
Environmental Review
A Finding of No Significant Impact with respect to the environment
for this rule was made at the interim stage, in accordance with HUD
regulations at 24 CFR part 50, which implement section 102(2)(C) of the
National Environmental Policy Act of 1969. That Finding of No
Significant Impact remains applicable to this final rule and is
available for public inspection between 8 a.m. and 5 p.m. weekdays in
the Regulations Division, Office of the General Counsel, Room 10276,
Department of Housing and Urban Development, Room 10276, 451 Seventh
Street, SW., Washington, DC 20410-0500.
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
establishes requirements for federal agencies to assess the effects of
their regulatory actions on state, local, and tribal governments and
the private sector. This final rule does not impose a federal mandate
that will result in expenditure by state, local, or tribal government,
within the meaning of the Unfunded Mandates Reform Act of 1995.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally
requires an agency to conduct a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements unless the
agency certifies that the rule will not have a significant economic
impact on a substantial
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number of small entities. There are no anti-competitive discriminatory
aspects of the rule with regard to small entities, and there are no
unusual procedures that would need to be complied with by small
entities. Rather, this rule amends 24 CFR 200.54(b) to allow the
proceeds from syndication of low-income housing tax credits and
historic tax credits to be treated in the same manner as loan or grant
funds provided through federal, state, or local government agencies. To
the extent that the rule has an impact on program participants, it will
be the beneficial impact of simplifying the use of tax credits with the
FHA mortgage insurance programs by allowing the pro-rata distribution
of the required borrower equity and of the mortgage proceeds. As a
result, this rule will not have a significant economic impact on a
substantial number of small entities. Accordingly, the undersigned
certifies that this rule will not have a significant economic impact on
a substantial number of small entities.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the order. This rule does not have federalism
implications and will not impose substantial direct compliance costs on
state and local governments nor preempt state law within the meaning of
the order.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance numbers for 24 CFR part
200 are 14.135 and 14.139.
List of Subjects in 24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Housing standards, Lead poisoning, Loan
programs-housing and community development, Manufactured homes,
Mortgage insurance, Reporting and recordkeeping requirements.
0
Accordingly, for the reasons stated in the preamble, the interim rule
for part 200 of title 24 of the Code of Federal Regulations, published
on July 30, 2003 at 68 FR 44844, is promulgated as final without
change.
Dated: November 15, 2004.
John C. Weicher,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 04-27208 Filed 12-13-04; 8:45 am]
BILLING CODE 4210-27-P