[Federal Register Volume 59, Number 166 (Monday, August 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-21260]


[[Page Unknown]]

[Federal Register: August 29, 1994]


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Part X





Department of Housing and Urban Development





_______________________________________________________________________



Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity



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24 CFR Part 125




Fair Housing Initiatives Program; Proposed Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity

24 CFR Part 125

[Docket No. R-94-1657; FR-3480-P-02]
RIN 2529-AA62

 
Fair Housing Initiatives Program

AGENCY: Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the Fair Housing Initiatives 
Program (FHIP) regulation to provide for the implementation of 
statutory amendments pertaining to private enforcement initiatives; the 
funding of fair housing organizations; and the implementation of 
national (including national fair housing month), regional and local, 
and community-based education and outreach programs.

DATES: Comment due date: October 28, 1994.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rulemaking to the Rules Docket Clerk, Office of General 
Counsel, Room 10278, Department of Housing and Urban Development, 451 
Seventh Street, S.W., Washington, D.C. 20410. Communications should 
refer to the above docket number and title. 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: Jacquelyn J. Shelton, Director, Office 
of Fair Housing Assistance and Voluntary Programs, Room 5234, 451 
Seventh Street, S.W., Washington, D.C. 20410-2000. Telephone number 
(202) 708-0800. A telecommunications device (TDD) for hearing and 
speech impaired persons is available at (202) 708-0455. (These are not 
toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act Statement

    The information collection requirements contained in this rule have 
been approved by the Office of Management and Budget, under section 
3504(h) of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520), 
and assigned OMB control number 2529-0033.

II. Background

A. Program Authority and Description

    The Fair Housing Act--Title VIII of the Civil Rights Act of 1968, 
as amended, 42 U.S.C. 3601-19--charges the Secretary of Housing and 
Urban Development with responsibility to accept and investigate 
complaints alleging discrimination based on race, color, religion, sex, 
handicap, familial status or national origin in the sale, rental, or 
financing of most housing, and in other real estate-related 
transactions. In addition, the Fair Housing Act directs the Secretary 
to coordinate with State and local agencies administering fair housing 
laws, and to cooperate with and render technical assistance to public 
or private entities carrying out programs to prevent and eliminate 
discriminatory housing practices.
    Section 561 of the Housing and Community Development Act of 1987 
(1987 Act), 42 U.S.C. 3616 note, established the Fair Housing 
Initiatives Program (FHIP) to strengthen the Department's enforcement 
of the Fair Housing Act and to further fair housing. This program 
assists projects and activities designed to enhance compliance with the 
Fair Housing Act and substantially equivalent State and local fair 
housing laws. Implementing regulations are found at 24 CFR part 125.
    Section 905 of the Housing and Community Development Act of 1992 
(HCDA 1992) (Pub. L. 102-550, approved October 28, 1992), substantially 
amends section 561 of the Housing and Community Development Act of 
1987. On April 1, 1993, the Department published an Advance Notice of 
Proposed Rulemaking (ANPR) (58 FR 17172) requesting comment on HUD's 
implementation of section 905 of the Housing and Community Development 
Act of 1992. The Department received three comments in response to the 
ANPR, and is taking them into consideration, as discussed in the 
relevant contexts below, in this proposed rule to implement the HCDA 
1992 amendments in 24 CFR part 125.

B. General Effect of Section 905 on 24 CFR 125

    In general, the section 905 amendments do not replace the original 
section 561 provisions of the Housing and Community Development Act of 
1987 (except for the demonstration period sunset provision of 
subsection (h), as discussed below in this preamble), but rather, 
supplement those provisions by authorizing additional activities. Thus, 
the original section 561(a) provisions that provided the authority to 
establish and fund the Administrative and Private Enforcement 
Initiatives and the Education and Outreach Initiative are still in 
effect. The entities eligible for funding under section 561(a) (State 
or local governments or their agencies, public or private nonprofit 
organizations or institutions, or other public or private entities that 
are formulating or carry out programs to prevent or eliminate 
discriminatory housing practices) remain eligible for funding under 
these initiatives. The present regulations at 24 CFR 125 that implement 
section 561(a) are not superseded and would not be removed by this 
rule.
    One provision of 24 CFR 125 that would be affected is Sec. 125.405, 
entitled, ``Guidelines for private enforcement testing.'' These 
guidelines were issued to implement section 561((c)(2) of the 1987 Act, 
which required the Department to establish guidelines for testing 
activities for use during the authorized demonstration period for FHIP. 
As originally promulgated, FHIP was a demonstration program authorized 
to expire on September 30, 1992. The passage of section 905 establishes 
FHIP as a permanent program, and with the expiration of the 
demonstration period, the requirement for testing guidelines is 
removed. The Department considered two factors to be significant and 
determinative in the decision to eliminate testing guidelines from the 
regulation. First, in the original authorizing statute for FHIP, 
Congress specifically limited the requirement for testing guidelines to 
the demonstration period; and second, Congress did not include this 
requirement in its permanent authorization of FHIP by section 905. The 
revised Sec. 125.405 proposed here would remove the testing guidelines, 
but would still require that testers must not have prior felony 
convictions or convictions of crimes involving fraud or perjury, and 
that they receive training or be experienced in testing procedures and 
techniques. To provide consistency in the regulation, this provision 
regarding testers would also be added to the Administrative Enforcement 
Initiative at Sec. 125.204, and to the new Fair Housing Organizations 
Initiative at Sec. 125.504.
    The areas in which section 905 makes additions to the Fair Housing 
Initiatives Program are: 1) private enforcement initiatives; 2) funding 
of fair housing organizations; and 3) education and outreach 
activities.

C. Section By Section Analysis and Implementation of Section 905

    Section 905(a) is a statement of Congressional findings, which 
provides insight into the considerations behind the statutory revisions 
to FHIP. Sections 905(a) (1) through (4) list statutory initiatives 
that address the issue of discrimination in housing markets: the Fair 
Housing Act; the Home Mortgage Disclosure Act; and the Americans with 
Disabilities Act. Sections 905(a) (5) and (6) cite recent evidence of 
pervasive discrimination in mortgage lending markets, and against 
Hispanic and African American homeseekers in at least half of their 
encounters with sales and rental agents. Sections 905(a) (7) through 
(9), proceeding within the context of the statutory initiatives and the 
recent evidence of discrimination, provide specific direction for FHIP: 
it should be revised and expanded to reflect the significant changes in 
the areas of fair housing and fair lending that have taken place since 
the Program's initial authorization in the Housing and Community 
Development Act of 1987; continuing educational efforts by the real 
estate industry are a useful way to increase understanding by the 
public of their fair housing rights and responsibilities; and the 
proven efficacy of private nonprofit fair housing enforcement 
organizations and community-based efforts makes support for these 
organizations a necessary component of the fair housing enforcement 
system.
    Section 905(b) makes the substantive amendments to section 561 of 
the Housing and Community Development Act of 1987 (42 U.S.C. 3616 note) 
that Congress enacted in light of the findings of section 905(a). 
Structurally, section 905(b)(1) redesignates subsections (b) through 
(e) of section 561 as subsections (e) through (h). Then, section 
905(b)(2) inserts new subsections (b) through (d), which list eligible 
activities and applicants for FHIP funding. Section 905(b)(3) replaces 
the previous authorizations in redesignated subsection (g) of section 
561 with new program funding authorization amounts that include 
specific set-asides for the newly added activities. Finally, section 
905(b)(4) strikes the FHIP demonstration program sunset provision of 
redesignated subsection (h) (formerly subsection (e) of section 561), 
replaces it with two new definitions, and adds new subsections (i), a 
prohibition on the use of FHIP funds, and (j), which enumerates the 
requirements for a Congressional report by the Department. The proposed 
implementation of these amendments is discussed in detail below.
    As mentioned above, two new definitions for purposes of FHIP are 
added by section 905. Each defines an eligible applicant for program 
funding. The first of these is, ``qualified fair housing enforcement 
organization,'' (QFHO) defined in the statute to mean any organization 
that--
    (1) Is organized as a private, tax-exempt, nonprofit, charitable 
organization;
    (2) Has at least 2 years experience in complaint intake, complaint 
investigation, testing for fair housing violations and enforcement of 
meritorious claims; and
    (3) Is engaged in all the activities listed in paragraph (2) at the 
time of application for FHIP assistance.
    In addition, an organization which is not solely engaged in fair 
housing enforcement activities may qualify as a qualified fair housing 
enforcement organization, provided that the organization is actively 
engaged in each of the activities listed in paragraph (2) (that is, 
complaint intake, complaint investigation, testing for fair housing 
violations and enforcement of meritorious claims). The Department does 
not interpret this provision to mean that an organization which is not 
solely engaged in fair housing enforcement activities may qualify as a 
QFHO just by being actively engaged in the necessary activities. The 
threshold of two years experience in the necessary activities must be 
met as well. Without such a reading, it would be more difficult for 
organizations that exclusively concentrate their efforts on fair 
housing enforcement activities to qualify as QFHOs than organizations 
that pursue fair housing along with any number of other activities. The 
Department believes that this provision was included in the statute to 
avoid excluding organizations that should be considered qualified even 
though they are engaged in a broader range of activities than are 
eligible under FHIP. The proposed rule would clarify this point by 
including organizations in the definition of QFHO whether or not they 
are solely engaged in fair housing enforcement activities as long as 
they meet the other qualifications, including the requirement for two 
years of experience.
    The second newly defined term is, ``fair housing enforcement 
organization,'' (FHO) which, pursuant to the statute, means any 
organization that--
    (1) Is organized as a private, tax-exempt, nonprofit, charitable 
organization;
    (2) Is currently engaged in complaint intake, complaint 
investigation, testing for fair housing violations and enforcement of 
meritorious claims;
    (3) Upon the receipt of FHIP funds will continue to be engaged in 
all of the activities specified in paragraph (2); and
    (4) For purposes of funding under FHIP's Private Enforcement 
Initiative, has at least one year of experience in the activities 
specified in paragraph (2).
    From the above definitions, based on the statutory language, it is 
apparent that the only difference between a QFHO and an FHO is the 
length of time the organization has been involved in all of the cited 
necessary activities, with two years being the threshold for a QFHO and 
one year being the threshold for an FHO applying for Private 
Enforcement Initiative funding. The statute does not address the issue 
of whether the threshold lengths of time must be consecutive, or 
whether they may be aggregated over a period of time. Another issue not 
addressed by the statute is whether all of the necessary activities 
must be performed simultaneously, or whether the threshold period of 
time may be individually computed for each activity.
    The Department has determined that these definitions were included 
to ensure that the applying organizations met a certain level of 
experience, but not to exclude experienced organizations on purely 
technical grounds. To add clarification to the definitions along these 
lines, the proposed rule would add that for the purpose of meeting the 
threshold times, it is not necessary that the activities were conducted 
simultaneously, so long as each activity meets the threshold period. 
The rule would further provide that it is not necessary, for purposes 
of satisfying the threshold period, that the activities were conducted 
over a consecutive two year period of time. An organization may 
aggregate its experience in each activity over the three year period 
preceding its application to meet the two year threshold for QFHO 
status. Similarly, for purposes of meeting the one year of experience 
requirement for FHOs applying for funding under FHIP's Private 
Enforcement Initiative, the rule would permit an FHO to aggregate its 
experience in each activity over the two year period preceding its 
application.
    One of the comments on the FHIP ANPR recommended that the term 
``meritorious claims,'' which is used in the definitions of both 
``qualified fair housing enforcement organization'' and ``fair housing 
enforcement organization,'' should itself be defined. The comment 
suggested defining ``meritorious claims,'' as enforcement activities, 
not more than two years old, that resulted in lawsuits, consent 
decrees, legal settlements, HUD conciliations and agency initiated 
settlements with the outcome of monetary awards for compensatory and/or 
punitive damages to plaintiffs or complaining parties, or affirmative 
relief and monitoring. The comment further called for the demonstration 
of a continued effort in effective enforcement by an organization 
through the continued filing of verified claims of discrimination with 
HUD, the Department of Justice, State or local agencies and in federal 
or State court.
    The Department agrees that defining ``meritorious claims'' would 
provide appropriate guidance for identifying QFHOs and FHOs. The 
Department would adopt the suggested language, with the following 
modifications. The suggested requirements for a demonstration of a 
continued effort in effective enforcement, and that the activities be 
not more than two years old, would not be included in the definition. 
This is because, with regard to QFHOs, limiting meritorious claims to a 
two year period would conflict with this rule's provision to permit 
organizations to aggregate their experience over a three year period. 
With regard to FHOs, limiting activities in the definition of 
``meritorious claims'' to those not more than two years old is 
redundant and unnecessary, since the rule only permits activities 
within two years of applying to be considered for purposes of 
qualifying as an FHO.
    The comment also recommends that an organization not solely 
involved in fair housing enforcement that wishes to qualify as a QFHO 
must document its enforcement activity with copies of lawsuits, 
settlements, or conciliations in which it has been involved. The 
Department agrees in part, with this comment. The Department did not 
plan to require such documentation from any organizations claiming to 
be QFHOs, FHOs, or from organizations not solely involved in fair 
housing enforcement that wish to qualify as QFHOs. Following this 
comment, the Department proposes to include in the rule a provision 
that the Department may request an organization to supply documentation 
to support its claimed status. This approach would be minimally 
burdensome, while still permitting further inquiry where it may be 
warranted.
    These definitions, as discussed above, would be added to the 
Definitions section of the FHIP rule at 24 CFR 125.103. In addition, 
the requirement for one year of enforcement experience by FHOs that 
wish to apply for Private Enforcement Initiatives funding will be 
included in Sec. 125.402, which lists eligible applicants for this 
Initiative.
    Under the new section 561(b), entitled Private Enforcement 
Initiatives, as added by HCDA section 905, the Department is required 
to make FHIP funds available to conduct, through contracts with private 
nonprofit fair housing enforcement organizations, investigations of 
violations of the rights granted under the Fair Housing Act, and 
appropriate enforcement activities to remedy such violations. The 
Department is further authorized to enter into multi-year contracts and 
take other appropriate action to enhance the effectiveness of such 
investigations and enforcement activities. The statute goes on to 
specify that funds made available for Private Enforcement Initiatives 
be used to conduct, through contracts with private nonprofit fair 
housing enforcement organizations, a range of investigative and 
enforcement activities designed to--
    (1) Carry out testing and other investigative activities, including 
building the capacity for housing investigative activities in unserved 
or underserved areas;
    (2) Discover and remedy discrimination in the public and private 
real estate markets and real estate-related transactions, including, 
but not limited to, the making or purchasing of loans or the provision 
of other financial assistance in sales and rentals of housing and 
housing advertising;
    (3) Carry out special projects, including the development of 
prototypes to respond to new or sophisticated forms of discrimination 
against persons protected under the Fair Housing Act;
    (4) Provide technical assistance to local fair housing 
organizations, and assist in the formation and development of new fair 
housing organizations; and
    (5) Provide funds for the costs and expenses of litigation, 
including expert witness fees.
    Concerning the provision of funds for expert witness fees, the rule 
would define ``expert witness'' in a way that recognizes that courts in 
different jurisdictions may vary in their qualification requirements 
for expert witnesses. The definition would also take into account the 
possibility that an expert witness may prepare testimony and bill an 
organization for a trial in which a settlement or other resolution is 
achieved before a verdict, and before the expert has an opportunity to 
testify. ``Expert witness'' would be defined to mean a person who 
testifies, or who would have testified but for a resolution of the case 
before a verdict is entered, and who qualifies as an expert witness 
under the rules of the court where the litigation funded by this part 
is brought.
    There were a number of comments regarding the Private Enforcement 
Initiative submitted in response to the FHIP ANPR. One of the comments 
strongly opposed allocating further funds to support the use of testers 
under the FHIP Private Enforcement Initiative. The comment argued that 
the use of testers provides unreliable information regarding illegal 
lending discrimination, and that funding education and training 
programs for lenders and borrowers would better effect the purpose of 
delivering more housing. The comment recommended that if testers are 
funded, procedures should be adopted to ensure that:
    (1) Safeguards are implemented to distinguish between an isolated 
incident and patterns and practices of unlawful discrimination:
    (2) A thorough review of the procedures and results of the May 1992 
FHIP Notice of Funding Availability (NOFA) for testing discriminatory 
mortgage lending practices is conducted and made public prior to 
additional funding;
    (3) A public comment period for annual reviews of listed non-profit 
organizations eligible for funding is established to provide the public 
with the opportunity to comment on the integrity of the organizations 
listed prior to any grant agreements; and
    (4) Procedures are established to rescind funding awards for 
grantees that do not meet specific performance measures determined by 
HUD in the grant process.
    In response to this comment, the Department first of all wants to 
make it clear that testing activities will continue to be funded. Both 
Congress and the Department have determined that testing is a valid and 
necessary component of fair housing investigative and enforcement 
activities. Congress had the choice of permitting FHIP to expire at the 
end of its demonstration period, or of establishing it as a permanent 
program, and it chose the latter option. In establishing FHIP as a 
permanent program with section 905, Congress explicitly cites testing, 
and it cites it first, in the listing of Private Enforcement Initiative 
activities. Further, the definitions of QFHOs and FHOs added by section 
905 require testing as an activity that organizations must be engaged 
in to qualify as QFHOs or FHOs. The role of testing as a basic fair 
housing investigative and enforcement activity is firmly established.
    Having acknowledged the integral status of testing in the Fair 
Housing Initiatives Program, the Department makes the following 
responses to this comment's four recommendations. First, regarding the 
implementation of safeguards to distinguish between an isolated 
incident and patterns and practices of unlawful discrimination, this 
recommendation appears to miss the point that it is not necessary to 
have a pattern of unlawful discrimination to constitute a violation of 
the Fair Housing Act. A single instance of unlawful discrimination 
would be just that: unlawful and a violation.
    The comment's second recommendation, to wait for a thorough review 
of the results of the testing funded by the May 1992 NOFA before 
funding additional testing, will not be followed, in light of the 
central role of testing in the FHIP. The May 1992 funding is limited to 
testing of mortgage lending practices, one of many permissible 
activities under the FHIP, and is incorrectly characterized by this 
comment as a ``pilot-program.'' It provides no basis on which to delay 
the funding of additional testing.
    The comment's third recommendation, to provide an opportunity for 
public comment on the integrity of non-profit organizations eligible 
for funding, requests a procedure that is highly inappropriate. Such a 
procedure impugns the entire class of applicants, and has nothing to do 
with the quality of the applications submitted for funding, the sole 
consideration in awarding funds.
    The Department agrees with this comment's fourth recommendation, 
and believes it is particularly appropriate in the context of multi-
year contracts, where the opportunity is present for an annual 
performance review. The rule would make funding of multi-year contracts 
not only contingent upon the availability of funds, but also subject to 
a performance review of the previous year's activities.
    Another of the comments also addressed the Private Enforcement 
Initiative changes made by section 905. This comment recognized the two 
broad categories of eligible activities under this initiative as 
investigative activities and enforcement activities. It suggested that 
investigations include, but not be limited to, testing, and that 
enforcement activities should also be interpreted broadly to provide 
complainants with a range of resolutions for fair housing complaints. 
The comment included lists of specific investigative and enforcement 
activities that should be eligible for FHIP funding.
    As explained below, the Department intends to implement the 
statutory requirements of section 905 in this rule, and to provide more 
specific guidance within this statutory framework in NOFAs that will be 
published as funds are appropriated. This NOFA guidance would include a 
listing of specific activities, and to that extent, the Department 
agrees with the recommendation of this comment.
    The comment also addresses the issues of multi-year funding, and 
recommends that this funding be limited to organizations that meet the 
definition of a QFHO and that have successfully performed fair housing 
enforcement activities for two or more consecutive years immediately 
preceding their application. While section 905 does not itself limit 
multi-year funding in this way, it does permit the Department to ``take 
such other action as is appropriate to enhance the effectiveness of 
such investigations and enforcement activities.'' Limiting the class of 
eligible organizations, if it enhanced the effectiveness of the 
activities, would, therefore, be permissible. However, to allow for 
program flexibility, because the Department cannot foresee every 
instance in which such a limitation might or might not be appropriate, 
this rule would not include the limitation. Such a limitation may 
appear in program NOFAs, to the extent determined appropriate to 
enhance effectiveness.
    The comment then suggests that all of the kinds of activities 
listed in the Private Enforcement Initiatives should be eligible for 
funding and weighted equally, ``unless a finding is made that the 
rental and sales discrimination investigation needs are met.'' The 
Department takes this to mean that where rental and sales investigation 
activities are already being vigorously pursued, other activities will 
be given priority consideration for funding. This is sensible, and the 
Department would adopt such an approach, as appropriate, in individual 
NOFAs.
    The comment later states that, ``Because matching funds for fair 
housing are very difficult to come by and many organizations providing 
fair housing education and enforcement activities rely upon Community 
Development Block Grant funds, [the comment] recommends that HUD state 
clearly that no groups eligible for FHIP funds will be penalized or 
disqualified because they receive Community Development Block Grants to 
perform similar activities in their communities.''
    The Department recognizes that the FHIP resources made available to 
meet fair housing needs are very limited. Because of this, grant 
applicants are encouraged, under the current regulations, to seek other 
public and private resources. Section 125.105(d) includes as an 
application requirement, ``an estimate of such other public or private 
resources as may be available to assist the proposed activities.'' One 
of the selection criteria (at Sec. 125.106(a)(2)) is, ``The extent to 
which the project utilizes other public or private resources that may 
be available.'' The Department's current policy is to favor applicants 
who are able to obtain other resources. Under this policy, the receipt 
of CDBG funds for fair housing purposes should assist, rather than 
penalize or disqualify, an applicant.
    However, the Department recognizes that where resources are scarce, 
difficult resource allocation decisions must be made. The Department is 
considering changing its policy to reserve the right, when choosing 
between two otherwise equally deserving applicants, to consider the 
resources presently available to each. This approach ties in with the 
earlier comment concerning ordering priorities where rental and sales 
discrimination investigation needs are being met. That comment 
suggested giving priority to other activities where investigation 
activities were adequate. Similarly, although fair housing resource 
needs may not be adequate for either of two competing applicants, the 
Department may decide that an applicant receiving CDBG or other funds 
for fair housing activities is in a better, though still inadequate, 
position than an equally-qualified applicant that does not receive such 
funds. In such an instance, the award of FHIP funds would be made to 
the applicant that is most resource-poor. This would not be done to 
penalize an applicant that has funds available from sources other than 
FHIP, but to distribute scarce resources in the most equitable and 
efficient manner. The Department specifically invites comment on this 
issue.
    To implement the new investigative and enforcement provisions, 
subpart D of 24 CFR part 125 , entitled ``Private Enforcement 
Initiative'', would be amended. Because the original statutory language 
authorizing private enforcement initiatives is not removed but, rather, 
is supplemented by HCDA section 905, the present statements of purpose, 
eligible applicants, and eligible activities at Secs. 125.401, 125.402, 
and 125.403, respectively, would not be replaced. Instead, new language 
taken directly from section 905, as discussed above, would be added.
    To permit flexibility in the funding of FHIP activities and permit 
the Department to allocate resources in response to developments in the 
field, the Department intends to provide more specific guidance as to 
particular activities and such issues as the availability and terms of 
multi-year funding in Notices of Funding Availability (NOFAs) rather 
than in the rule. Emphasis in separate NOFAs may be placed on more 
standard investigation and enforcement activities, such as testing, 
providing or securing private legal representation, and filing 
complaints; or on pursuing innovations in such areas as analysis and 
mapping of HMDA and census data, appraisal and credit reports, 
underwriting standards, and title searches. Similarly, depending on the 
Department's identification of significant long term efforts that need 
to be undertaken with the resources expected to be available, the NOFAs 
would provide information on such multi-year funding issues as 
applicants, activities, performance stages, amounts, and duration. The 
use of NOFAs in this way is consistent with the current regulations at 
Secs. 125.104(d), 125.105(h), and 125.106(b). Each of these sections 
provides for more specific information concerning eligible activities, 
application requirements, and selection criteria, respectively, to be 
included in NOFAs. This proposed rule would provide for additional 
flexibility in making FHIP funds available, as follows. Besides adding 
the new Fair Housing Organizations Initiative, discussed immediately 
below, to the list of FHIP Initiatives at Sec. 125.104(c), a clarifying 
change would be made to Sec. 125.104(d) so that requirements related to 
eligible applicants are specifically included in the list of items for 
which NOFAs will provide guidance. Section 125.104(d) would also be 
amended for the purpose of promoting flexibility to provide that the 
specific selection criteria for funding will be included in FHIP NOFAs. 
The rule would provide that the selection criteria announced in NOFAs 
will be designed to permit the Department to respond to and target 
areas of concern and will promote the purposes of the Fair Housing 
Initiatives Program in an equitable and cost efficient manner. Section 
125.106, which in the current rule contains the provisions concerning 
selection criteria, would be revised to provide instead for a general 
waiver provision, permitting the Department to waive, in a published 
NOFA or other Federal Register notice, any program requirement in the 
rule that is not required by statute.
    Section 905 next establishes the Fair Housing Organizations 
Initiative, which has two purposes: continued development of existing 
fair housing organizations, and the establishment of new fair housing 
organizations. For the purpose of continued development of existing 
fair housing organizations, it authorizes the funding of contracts or 
cooperative agreements with qualified fair housing enforcement 
organizations, other private nonprofit fair housing enforcement 
organizations, and nonprofit groups organizing to build their capacity 
to provide fair housing enforcement, for the purpose of supporting the 
continued development or implementation of initiatives which enforce 
the rights granted under the Fair Housing Act. The statute specifies 
that these contracts or cooperative agreements may not provide more 
than 50 percent of the operating budget of the recipient organization 
for any one year.
    Funds made available under the Fair Housing Organizations 
Initiative are also to be used to help establish, organize, and build 
the capacity of fair housing enforcement organizations, particularly in 
those areas of the country which are currently underserved by fair 
housing enforcement organizations, as well as those areas where large 
concentrations of protected classes exist. To meet the objectives of 
this ``establishing new organizations'' purpose, the Department is 
permitted to enter into contracts or cooperative agreements with 
qualified fair housing enforcement organizations.
    One comment recommends that this section 905 provision should be 
regarded as establishing a ``non-competitive, entitlement category to 
provide general operating funds'' for QFHOs, for the continued 
development or implementation of initiatives which enforce the rights 
granted under the Fair Housing Act. The Department may, in the future, 
consider such an approach, depending upon the size of the 
appropriations for this purpose, and the number of QFHOs that would 
receive assistance. Given the present level of available FHIP funding, 
entitlement funding would not seem to be an efficient method of 
implementing FHIP. The crucial issue, apart from developing a formula 
that would distribute funds equitably and with the flexibility to 
respond to new developments and perceptions, is whether such a funding 
procedure would provide a meaningful level of support for qualifying 
organizations. The Department specifically invites comment on the issue 
of distributing FHIP funds according to an allocation formula, and on 
what criteria might be used to provide for the fair and equitable 
distribution of funds on such a basis. Although the Department will 
continue to award FHIP funds on a competitive basis through the 
publication of NOFAs, consistent with the current regulation at 
Sec. 125.104(b), this section would be amended to permit the Department 
to award funds through the publication of a NOFA, or through a contract 
or cooperative agreement.
    A new subpart E, entitled ``Fair Housing Organizations 
Initiative'', would be added to 24 CFR 125 to implement these 
provisions. Section 125.501 would state the two-fold purpose, derived 
from section 905, of this initiative: 1) to develop or expand the 
ability of existing eligible organizations to provide fair housing 
enforcement, and 2) to establish new fair housing enforcement 
organizations where they are most needed. These two purposes would be, 
titled, respectively, ``Continued Development of Existing 
Organizations'' and ``Establishing New Organizations.''
    Section 125.502 would list the eligible applicants and give the 
parameters of the activities for the purpose of Continued Development 
of Existing Organizations. Eligible applicants for funding under this 
purpose would be: (1) Qualified fair housing enforcement organizations, 
(2) other private nonprofit fair housing enforcement organizations, and 
(3) nonprofit groups organizing to build their capacity to provide fair 
housing enforcement. The third category of applicants would consist of 
already existing non-profit organizations that do not presently have 
the capacity to perform fair housing enforcement activities, but that 
will use FHIP funds to develop that capacity.
    The activities for which these organizations would be able to apply 
would be any activities listed as eligible at Sec. 125.403 under the 
Private Enforcement Initiative. It is significant to note that, but for 
the establishment of the Fair Housing Organizations Initiative, non-
profit groups in the third category of eligible applicants listed in 
the preceding paragraph would not be eligible for funding to undertake 
Private Enforcement Initiative activities. The Fair Housing 
Organizations Initiative expands the scope of fair housing enforcement 
by giving such groups the opportunity to enter the field. In this way, 
the total number of private nonprofit fair housing enforcement 
organizations is increased. With respect to private nonprofit fair 
housing enforcement organizations, whether or not ``qualified,'' who 
are eligible to apply for Private Enforcement Initiative funding, the 
Department believes that the Fair Housing Organizations Initiative is 
intended to permit them to maintain or increase the magnitude of their 
current activities, or to undertake initiatives in new areas.
    Section 125.502 would also include the statutory prohibition, 
applicable only to the ``Continued Development of Existing 
Organizations'' purpose of this Initiative, against providing more than 
50 percent of the operating budget of a recipient organization for any 
one year. One comment recommended that ``operating budget'' for the 
purpose of this provision should be defined to mean: ``Funds spent on 
activities reasonably related to fair housing enforcement, including in 
kind or pro-bono services such as (but not limited to) volunteer tester 
services, board and staff time; pro-bono or reduced rate legal 
services; and donation of office space and other overhead expenses.'' 
This definition appears to include in the total size of the operating 
budget not only the actual expenditures of an organization in providing 
services, but the value of materials and services donated to the 
organization. This would have the effect of enlarging the total size of 
the operating budget, and thereby increase the amount an organization 
would be eligible to receive, taking into account the statutory 50 
percent limitation.
    This rule would adopt an even broader definition of ``operating 
budget'' than proposed in the comment. The recommendation that only 
``funds spent on activities reasonably related to fair housing 
enforcement'' be counted would not be followed, because such a 
provision would have a disproportionate impact on eligible applicants 
in the statutory category of ``nonprofit groups organizing to build 
their capacity to provide fair housing enforcement.'' The Department 
proposes to define ``operating expenses'' as, ``the applicant's total 
planned budget expenditures from all sources, including the value of 
in-kind and monetary contributions, in the year for which funding is 
sought.'' Comments on this issue are specifically invited.
    Section 125.503 would be added to implement the ``Establishing New 
Organizations'' purpose of the Fair Housing Organizations Initiative. 
The eligible activity under this purpose would be ``to help establish, 
organize, and build the capacity of fair housing enforcement 
organizations.'' Priority would be given for such efforts ``in those 
areas of the country which are currently underserved by fair housing 
enforcement organizations, as well as those areas where large 
concentrations of protected classes exist.''
    The statute states the Department ``may enter into contracts or 
cooperative agreements with qualified fair housing enforcement 
organizations'' for purposes of meeting the objectives of establishing 
new organizations. The Department has inferred that the use of the 
permissive term ``may'' rather than the mandatory term ``shall'' (which 
is used, for example, in listing the eligible applicants for the 
purpose of continued development) in citing qualified fair housing 
enforcement organizations as eligible for funding under this purpose 
means that QFHOs were not intended to have an exclusive eligibility for 
``Establishing New Organizations'' funding. Addressing the national 
need for private fair housing enforcement organizations, ``particularly 
in those areas of the country which are currently underserved by fair 
housing enforcement organizations as well as those areas where large 
concentrations of protected classes exist'' as required by section 905, 
would best be served by making this category of funding broadly 
available. This rule would make funding to establish enforcement 
organizations in targeted areas available to any eligible applicant 
under any of the other FHIP Initiatives.
    The Department proposes to use a comparatively simple process to 
determine where the very limited amount of funds available for 
establishing new fair housing enforcement organizations will be made 
available, consistent with the statutory priority of targeting 
underserved areas with large concentrations of protected classes. 
Target areas will be identified by the Department on the basis of a 
number of factors including, for example, the amount of funds 
available; the absence in an area of substantially equivalent State or 
local agencies, or private enforcement groups; and the presence of 
large concentrations of protected classes. To encourage establishing 
organizations where they are needed most, not only underserved, but 
also, unserved areas would be identified for funding by the Department. 
Addressing both underserved and unserved areas here would be consistent 
with the new Private Enforcement Initiative activity, added by section 
905, of carrying out testing and other investigative activities, 
including building the capacity for housing investigative activities in 
unserved or underserved areas. The target areas identified in this way 
would be announced in the FHIP Notices of Funding Availability as they 
are published in the Federal Register.
    Section 905 also makes a number of additions to the Education and 
Outreach Initiative of FHIP, addressing national (including national 
fair housing month), regional and local, and community-based programs 
or activities. As with most of the other section 905 amendments, the 
existing subpart C--Education and Outreach Initiative at 24 CFR 125 is 
not superseded but augmented with these statutory changes.
    All three of the comments received were enthusiastic in their 
endorsement of education and outreach activities. One of the comments 
included lists of specific activities to be considered as national, 
regional and local, or community-based programs. The Department intends 
to include the statutory requirements in this rule, and then provide 
more specific guidance in the NOFAs published for the Fair Housing 
Initiatives Program. This is the approach used under the current FHIP 
regulation and that would continue to be used to allow for flexibility 
in the administration of the program.
    The statutory amendments require that national education and 
outreach programs be designed to provide a centralized, coordinated 
effort for the development and dissemination of fair housing media 
products, including--
    (1) public service announcements, both audio and video;
    (2) television, radio and print advertisements;
    (3) posters; and
    (4) pamphlets and brochures.

In addition, a portion of the amounts provided for a national program 
would be designated for activities related to the annual national fair 
housing month, which would also be made eligible activities in the 
proposed rule.
    Eligible for national program funding are qualified fair housing 
enforcement organizations, other fair housing enforcement 
organizations, and other nonprofit organizations representing groups of 
persons protected under the Fair Housing Act. Cooperation with real 
estate industry organizations in national education and outreach 
programs is encouraged by the statute, although they are not 
specifically listed as eligible for funding. These organizations would 
be eligible for Education and Outreach Initiative funding as ``other 
public or private entities that are formulating or carrying out 
programs to prevent or eliminate discriminatory housing practices'' 
under the current FHIP regulation, which generally is not superseded, 
but augmented, by the HCDA 1992 section 905 amendments. To implement 
the statutory mandate to encourage cooperation, a preference in FHIP 
NOFAs of several points would be given to applicants that demonstrate 
cooperation with real estate industry organizations.
    The statute specifically encourages the dissemination in national 
programs of educational information and technical assistance to support 
compliance with the housing adaptability and accessibility requirements 
contained in the Fair Housing Amendments Act of 1988. This goal would 
also be addressed by providing a preference of several points in FHIP 
NOFAs to applications that proposed such activities.
    With respect to regional and local programs, section 905 cites as 
eligible to receive FHIP funds State and local agencies certified by 
the Department under section 810(f) of the Fair Housing Act, or other 
public or private entities that are formulating or carrying out 
programs to prevent or eliminate discriminatory housing practices. 
Unlike the case of the national program, section 905 does not 
specifically list any eligible activities for regional and local 
programs. The rule would make any activities eligible as national 
program activities also eligible as regional or local activities. The 
rule would define activities that are ``local'' in scope as activities 
that are limited to a single unit of general local government, meaning 
a city, town, township, county, parish, village, or other general 
purpose political subdivision of a State. Activities that are 
``regional'' in scope would be defined as activities that cover 
adjoining States or two or more units of general local government 
within a state.
    Finally, section 905 makes FHIP funding eligible to support 
community-based education and outreach activities, including school, 
church, and community presentations, conferences, and other educational 
activities. The rule would make any activities eligible as national 
program activities also eligible as community-based activities. 
Eligible for community-based program funding are fair housing 
organizations and other nonprofit organizations representing groups of 
persons protected under the Fair Housing Act, or other public or 
private entities that are formulating or carrying out programs to 
prevent or eliminate discriminatory housing practices. The rule would 
define activities that are ``community-based'' in scope as those which 
are primarily focused on a particular geographic area within a unit of 
general local government.
    To implement these statutory amendments, Sec. 125.302(b) would be 
amended to include qualified fair housing enforcement organizations, 
other fair housing enforcement organizations, and other nonprofit 
organizations representing groups of persons protected under the Fair 
Housing Act, to the list of eligible applicants. Section 125.303, 
entitled ``Eligible activities'', would be more extensively revised. 
The current listings of eligible activities, categorized according to 
educational projects and outreach projects, would be combined into a 
single category under Sec. 125.303(a) with the paragraph heading, ``In 
general.'' This change would recognize that the current regulation has 
been augmented and not superseded. It would also recognize that the 
distinction between ``education'' activities and ``outreach'' 
activities is not hard and fast. This rule would consider ``education 
and outreach'' as a phrase modifying a single category of activities.
    Paragraphs (b) through (d) of Sec. 125.303 would be organized to 
cover, respectively, national (including national fair housing month), 
regional and local, and community-based programs, as discussed above.

III. Findings and Certifications

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, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969. 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.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this proposed rule before publication and 
by approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. The purpose 
of the rule is to provide funding for fair housing investigation and 
enforcement, and education and outreach activities.

Regulatory Agenda

    This proposed rule was listed as item number 1666 in the 
Department's Semiannual Agenda of Regulations published on April 25, 
1994 (59 FR 20424, 20465) pursuant to Executive Order 12291 and the 
Regulatory Flexibility Act.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this 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 implementing statutorily required revisions to the existing Fair 
Housing Initiatives Program Regulation.

Impact on the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, The Family, has determined that this rule has potential 
for a beneficial, although indirect, impact on family formation, 
maintenance, and general well-being. By promoting the values of fair 
housing, the rule would benefit families by seeking to end 
discrimination as a factor in the availability of housing. Accordingly, 
since the impact on the family is beneficial, although indirect, no 
further review is considered necessary.

    The Catalog of Federal Domestic Assistance Numbers for the Fair 
Housing Initiatives Program are 14.408, 14.409, 14.410 and 14.413.

List of Subjects in 24 CFR Part 125

    Fair housing, Grant programs--housing and community development, 
Reporting and recordkeeping requirements.

    Accordingly, the Department proposes to amend part 125 of title 24 
of the Code of Federal Regulations as follows:

PART 125--FAIR HOUSING INITIATIVES PROGRAM

    1. The authority citation for part 125 would be revised to read as 
follows:

    Authority: 42 U.S.C. 3616 note; 42 U.S.C. 3535(d).

    2. In Sec. 125.103, the paragraph designations (a) through (h) 
would be removed, and the definitions of expert witness, fair housing 
enforcement organization, meritorious claims, and qualified fair 
housing enforcement organization would be added in alphabetical order 
to read as follows:


Sec. 125.103  Definitions.

* * * * *
    Expert witness means a person who testifies, or who would have 
testified but for a resolution of the case before a verdict is entered, 
and who qualifies as an expert witness under the rules of the court 
where the litigation funded by this part is brought.
* * * * *
    Fair housing enforcement organization (FHO) means any organization 
that--
    (1) Is organized as a private, tax-exempt, nonprofit, charitable 
organization;
    (2) Is currently engaged in complaint intake, complaint 
investigation, testing for fair housing violations and enforcement of 
meritorious claims; and
    (3) Upon the receipt of FHIP funds will continue to be engaged in 
complaint intake, complaint investigation, testing for fair housing 
violations and enforcement of meritorious claims.
    (4) To be eligible to receive assistance under the Private 
Enforcement Initiative, a fair housing enforcement organization must 
have at least 1 year of experience in complaint intake, complaint 
investigation, testing for fair housing violations and enforcement of 
meritorious claims. For the purpose of meeting this 1 year 
qualification period, it is not necessary that the activities were 
conducted simultaneously, as long as each activity was conducted for 1 
year. It is also not necessary for the activities to have been 
conducted for a continuous year. An organization may aggregate its 
experience in each activity over the 2 year period preceding its 
application to meet this 1 year qualification period requirement.
    (5) The Department may request an organization to submit 
documentation to support its claimed status as an FHO.
* * * * *
    Meritorious claims means enforcement activities that resulted in 
lawsuits, consent decrees, legal settlements, HUD conciliations and 
agency initiated settlements with the outcome of monetary awards for 
compensatory and/or punitive damages to plaintiffs or complaining 
parties, or affirmative relief and monitoring.
* * * * *
    Qualified fair housing enforcement organization (QFHO) means any 
organization, whether or not it is solely engaged in fair housing 
enforcement activities, that:
    (1) Is organized as a private, tax-exempt, nonprofit, charitable 
organization:
    (2) Has at least 2 years experience in complaint intake, complaint 
investigation, testing for fair housing violations and enforcement of 
meritorious claims; and
    (3) Is engaged in complaint intake, complaint investigation, 
testing for fair housing violations and enforcement of meritorious 
claims at the time of application for FHIP assistance.
    (4) For the purpose of meeting the 2 year qualification period for 
the activities included in paragraph (2) of this definition, it is not 
necessary that the activities were conducted simultaneously, as long as 
each activity was conducted for 2 years. It is also not necessary for 
the activities to have been conducted for 2 consecutive or continuous 
years. An organization may aggregate its experience in each activity 
over the 3 year period preceding its application to meet the 2 year 
qualification period requirement.
    (5) The Department may request an organization to submit 
documentation to support its claimed status as a QFHO.
* * * * *
    3. In Sec. 125.104, paragraphs (b), (c)(2), (c)(3), and (d) would 
be revised, and paragraph (c)(4) would be added, to read as follows:


Sec. 125.104  Program administration.

* * * * *
    (b) Funding in the Fair Housing Initiatives Program will be awarded 
through a Notice of Funding Availability under a grant or other funding 
instrument.
    (c) * * *
    (2) The Education and Outreach Initiative (subpart C);
    (3) The Private Enforcement Initiative (subpart D); and
    (4) The Fair Housing Organizations Initiative (subpart E).
    (d) Notices of Funding Availability under this program will be 
published periodically in the Federal Register. Such notices will 
announce the amount of funds available and the funding available for 
any Initiative, and may limit funding to one or more of the Initiatives 
or categories of eligible applicants. The Notice of Funding 
Availability will include the specific factors for award which will be 
used in the selection of recipients to be funded, and will indicate the 
relative weight of all selection criteria. The selection criteria 
announced in Notices of Funding Availability will be designed to permit 
the Department to respond to and target areas of concern, and will 
promote the purposes of the Fair Housing Initiatives Program in an 
equitable and cost efficient manner.
* * * * *
    4. Section 125.106 would be revised to read as follows:


Sec. 125.106  Waivers.

    The Department may waive, in a published Notice of Funding 
Availability or other Federal Register notice, any requirement in this 
part that is not required by statute.
    5. Section 125.204 would be added to read as follows:


Sec. 125.204  Testers.

    Testers in testing activities funded with Administrative 
Enforcement Initiative funds must not have prior felony convictions or 
convictions of crimes involving fraud or perjury, and they must receive 
training or be experienced in testing procedures and techniques.
    6. In Sec. 125.302, paragraph (b) would be revised to read as 
follows:


Sec. 125.302  Eligible applicants.

* * * * *
    (b) Public or private non-profit organizations or institutions, 
including qualified fair housing enforcement organizations, fair 
housing enforcement organizations, and other nonprofit organizations 
representing groups of persons protected under the Fair Housing Act, 
and other public or private entities that are formulating or carrying 
out programs to prevent or eliminate discriminatory housing practices.
    7. Section 125.303 would be revised to read as follows:


Sec. 125.303  Eligible activities.

    (a) In general. Projects that may be funded as national, regional 
and local, or community-based programs under the Education and Outreach 
Initiative may include (but are not limited to) the following:
    (1) Developing informative material on fair housing rights and 
responsibilities;
    (2) Developing fair housing and affirmative marketing instructional 
material for education programs for national, regional and local 
housing industry groups;
    (3) Providing educational seminars, curricula, and working sessions 
for schools, civic associations, community-based organizations, and 
other groups;
    (4) Developing educational material targeted at persons in need of 
specific or additional information on their fair housing rights;
    (5) Developing national, regional or local media campaigns 
regarding fair housing;
    (6) Bringing housing industry and civic or fair housing groups 
together to identify illegal real estate practices and to determine how 
to correct them;
    (7) Designing specialized outreach projects to inform all persons 
of the availability of housing opportunities;
    (8) Developing and implementing a response to new or more 
sophisticated practices that result in discriminatory housing 
practices;
    (9) Providing housing, mortgage lending, appraisal, and insurance 
counseling services; and
    (10) Developing mechanisms for the identification of, and quick 
response to, housing discrimination cases involving the threat of 
physical harm.
    (b) National programs. (1) Activities eligible to be funded as 
national programs shall be designed to provide a centralized, 
coordinated effort for the development and dissemination of fair 
housing media products, including:
    (i) Public service announcements, both audio and video;
    (ii) Television, radio and print advertisements;
    (iii) Posters;
    (iv) Pamphlets and brochures; and
    (v) Activities related to the annual national fair housing month.
    (2) National program applications, including those for Fair Housing 
Month funding, may be eligible to receive, as provided for in Notices 
of Funding Availability published for the Fair Housing Initiatives 
Program, a preference consisting of additional points if they:
    (i) Demonstrate cooperation with real estate industry 
organizations; and/or
    (ii) Provide for the dissemination of educational information and 
technical assistance to support compliance with the housing 
adaptability and accessibility guidelines contained in the Fair Housing 
Amendments Act of 1988.
    (c) Regional and local programs. (1) Activities eligible to be 
funded as regional and local programs include any of the activities, to 
be implemented on a regional and/or local basis, listed in paragraphs 
(a) and (b)(1) of this section.
    (2) Activities that are ``local'' are activities whose 
implementation is limited to a single unit of general local government, 
meaning a city, town, township, county, parish, village, or other 
general purpose political subdivision of a State. Activities that are 
``regional'' are activities that are implemented in adjoining States or 
two or more units of general local government within a state.
    (d) Community-based programs. (1) Activities eligible to be funded 
as community-based programs include any of the activities, to be 
implemented on a regional or local basis, listed in paragraphs (a) and 
(b)(1) of this section, with an emphasis on school, church, and 
community presentations, conferences, and other educational activities.
    (2) Activities that are ``community-based'' in scope are those 
which are primarily focused on a particular geographic area within a 
unit of general local government.
    (e) Classes of competition. Notices of Funding Availability 
published for the Fair Housing Initiatives Program may divide Education 
and Outreach Initiative funding into separate competitions for each of 
the separate types of programs (i.e., national, regional and/or local, 
community-based) eligible under this Initiative.
    (f) Coordination of activities. Each non-governmental applicant for 
funding which is located within the jurisdiction of a State or local 
enforcement agency or agencies administering a fair housing law that 
has been certified by the Department under part 115 of this subchapter 
as being a substantially equivalent fair housing law must provide with 
its application evidence that it has consulted with the agency or 
agencies to coordinate activities to be funded under the Education and 
Outreach Initiative.
    8. Section 125.401 would be revised to read as follows:


Sec. 125.401   Purpose.

    The Private Enforcement Initiative of the Fair Housing Initiatives 
Program provides funding to non-profit organizations and other private 
entities that are formulating or carrying out programs to prevent or 
eliminate discriminatory housing practices. The purpose of these awards 
is to assist in developing, implementing, carrying out, or coordinating 
programs or activities designed to obtain enforcement of the rights 
granted by the Fair Housing Act or State or local laws that provide 
rights and remedies for alleged discriminatory housing practices that 
are substantially equivalent to the rights and remedies provided in the 
Fair Housing Act, and to conduct, through funding of private nonprofit 
fair housing enforcement organizations on a single- or multi-year basis 
(subject to annual appropriations and annual performance reviews upon 
which further funding would be contingent), investigations of 
violations of the rights granted under the Fair Housing Act, and 
appropriate enforcement activities to remedy such violations.
    9. Section 125.402 would be revised to read as follows:


Sec. 125.402   Eligible applicants.

    Organizations which are eligible to receive assistance under the 
Private Enforcement Initiative are:
    (a) Qualified fair housing organizations.
    (b) Fair housing enforcement organizations with at least 1 year of 
experience in complaint intake, complaint investigation, testing for 
fair housing violations and enforcement of meritorious claims. For the 
purpose of meeting this 1 year qualification period, it is not 
necessary that the activities were conducted simultaneously, as long as 
each activity was conducted for 1 year. It is also not necessary for 
the activities to have been conducted for a continuous year. An 
organization may aggregate its experience in each activity over the 2 
year period preceding its application to meet this 1 year qualification 
period requirement.
    (c) Private non-profit organizations and other private entities 
that are formulating or carrying out programs to prevent or eliminate 
discriminatory housing practices. Organizations which can be eligible 
include, for example, private nonprofit fair housing and civil rights 
groups.
    10. In Sec. 125.403, paragraphs (c) and (d) would be revised, and 
new paragraphs (e) through (i) would be added to read as follows:


Sec. 125.403   Eligible activities.

* * * * *
    (c) Linking fair housing organizations regionally in enforcement 
activities designed to combat broader housing market discriminatory 
practices;
    (d) Establishing effective means of meeting legal expenses in 
support of litigation of fair housing cases;
    (e) Testing and other investigative activities, including building 
the capacity for fair housing investigative activities in unserved or 
underserved areas;
    (f) Discovering and providing remedies for discrimination in the 
public and private real estate markets and real estate-related 
transactions, including, but not limited to, the making or purchasing 
of loans or the provision of other financial assistance sales and 
rentals of housing and housing advertising;
    (g) Carrying out special projects, including the development of 
prototypes to respond to new or sophisticated forms of discrimination 
against persons protected under the Fair Housing Act;
    (h) Providing technical assistance to local fair housing 
organizations, and assisting in the formation and development of new 
fair housing organizations; and
    (i) Providing funds for the costs and expenses of litigation, 
including expert witness fees.
    10. Section 125.405 would be revised to read as follows:


Sec. 125.405   Testers.

    Testers in testing activities funded with Private Enforcement 
Initiative funds must not have prior felony convictions or convictions 
of crimes involving fraud or perjury, and they must receive training or 
be experienced in testing procedures and techniques.
    11. A new subpart E, consisting of Secs. 125.501 through 125.504, 
entitled Fair Housing Organizations Initiative, would be added to part 
125 to read as follows:

Subpart E--Fair Housing Organizations Initiative

Sec.
125.501  Purpose.
125.502  Continued development of existing organizations.
125.503  Establishing new organizations.
125.504  Testers.

Subpart E--Fair Housing Organizations Initiative


Sec. 125.501   Purpose.

    The Fair Housing Organizations Initiative of the Fair Housing 
Initiatives Program provides funding to develop or expand the ability 
of existing eligible organizations to provide fair housing enforcement, 
and to establish new fair housing enforcement organizations where they 
are most needed.


Sec. 125.502   Continued development of existing organizations.

    (a) Eligible applicants. Applicants eligible for funding under this 
component of the Fair Housing Organizations Initiative are:
    (1) Qualified fair housing enforcement organizations;
    (2) Other private nonprofit fair housing enforcement organizations; 
and
    (3) Nonprofit groups organizing to build their capacity to provide 
fair housing enforcement.
    (b) Eligible activities. Activities eligible for funding under this 
component of the Fair Housing Organizations Initiative are any 
activities listed as eligible at Sec. 125.403 under the Private 
Enforcement Initiative.
    (c) Operating budget limitation. (1) Funding under this component 
of the Fair Housing Organizations Initiative may not be used to provide 
more than 50 percent of the operating budget of a recipient 
organization for any one year.
    (2) For purposes of the limitation in this paragraph, operating 
budget means the applicant's total planned budget expenditures from all 
sources, including the value of in-kind and monetary contributions, in 
the year for which funding is sought.


Sec. 125.503   Establishing new organizations.

    (a) Eligible applicants. Any applicants eligible under any of the 
other FHIP Initiatives are eligible applicants for funding under this 
component of the Fair Housing Organizations Initiative.
    (b) Eligible activities. Eligible for funding under this component 
of the Fair Housing Organizations Initiative are activities that help 
establish, organize, and build the capacity of fair housing enforcement 
organizations, particularly in those areas of the country which are 
currently underserved by fair housing enforcement organizations, as 
well as those areas where large concentrations of protected classes 
exist.
    (c) Targeted areas. FHIP Notices of Funding Availability will 
identify those areas of the country targeted for funding under this 
component of the Fair Housing Organizations Initiative.


Sec. 125.504   Testers.

    Testers in testing activities funded with Fair Housing 
Organizations Initiative funds must not have prior felony convictions 
or convictions of crimes involving fraud or perjury, and they must 
receive training or be experienced in testing procedures and 
techniques.

    Dated: July 29, 1994.
Roberta Achtenberg,
Assistant Secretary for Fair Housing and Equal Opportunity.
[FR Doc. 94-21260 Filed 8-26-94; 8:45 am]
BILLING CODE 4210-28-P