[Federal Register Volume 64, Number 82 (Thursday, April 29, 1999)]
[Rules and Regulations]
[Pages 23014-23016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10160]
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FEDERAL HOUSING FINANCE BOARD
12 CFR Part 960
[No. 99-25]
RIN 3069-AA-73
Amendment of Affordable Housing Program Regulation
AGENCY: Federal Housing Finance Board.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Board (Finance Board) is adopting
as final, with several changes, the Interim Final Rule which amended
its regulation governing the operation of the Affordable Housing
Program (AHP or Program) to make certain technical revisions clarifying
Program requirements and improving the operation of the AHP.
EFFECTIVE DATE: The final rule shall be effective on June 1, 1999.
FOR FURTHER INFORMATION CONTACT: Richard Tucker, Deputy Director, (202)
408-2848, or Janet M. Fronckowiak, Associate Director, (202) 408-2575,
Program Assistance Division, Office of Policy, Research and Analysis;
or Sharon B. Like, Senior Attorney-Advisor, (202) 408-2930, Office of
General Counsel, Federal Housing Finance Board, 1777 F Street, N.W.,
Washington, D.C. 20006.
SUPPLEMENTARY INFORMATION:
I. Regulatory Background
On August 4, 1997, the Finance Board published a final rule
adopting comprehensive revisions to the AHP regulation, see 12 CFR part
960, which, among other changes, authorized the 12 Federal Home Loan
Banks (Banks), rather than the Finance Board, to approve applications
for AHP subsidies beginning January 1, 1998. See 62 FR 41812 (Aug. 4,
1997) (1997 AHP Regulation). On May 20, 1998, the Finance Board
published an Interim Final Rule amending the 1997 AHP Regulation to
make certain technical revisions clarifying Program requirements and
improving the operation of the AHP. See 63 FR 27668 (May 20, 1998). The
Interim Final Rule provided for a 60-day comment period.
The Finance Board received nine comment letters on the Interim
Final Rule. Commenters included: three Banks, two Bank Advisory
Councils, one Bank member, and one financial institutions trade
association. Because the purpose of the Interim Final Rule was to make
certain technical clarifying revisions, comments that raised issues
beyond the scope of the Interim Final Rule changes are not addressed in
this final rule, but will be considered by the Finance Board in any
future rulemaking under the AHP. The provisions of the Interim Final
Rule on which significant comments were received are discussed below.
II. Analysis of Final Rule
A. Minimum Credit Product Usage Limit--Secs. 960.5(b)(10)(i)(C), (ii)
Section 960.5(b)(10)(i)(C) of the 1997 AHP Regulation authorized a
Bank, in its discretion, after consultation with its Advisory Council,
to establish a requirement that a member submitting an AHP application
have made use of ``a credit product'' offered by the Bank, other than
AHP or Community Investment Program (CIP) credit products, within the
previous 12 months (single credit product usage limit). One of the
arguments the Finance Board considered in determining to allow
imposition of such a limit was that AHP subsidies are derived from a
Bank's earnings and, therefore, fairness suggests that availability of
subsidies may be linked to the extent to which a member contributes to
the Bank's earnings through the single purchase of a Bank credit
product. The Finance Board determined, after weighing the arguments,
that giving the Banks the discretion, after consultation with their
Advisory Councils, to adopt a single credit product usage limit would
enable the Banks to be most responsive to the needs and views in their
Districts. However, in the course of the Banks' implementation of this
change under the AHP, the Banks indicated to the Finance Board that a
member's single use of a Bank credit product does not make a meaningful
contribution to Bank earnings, from which AHP subsidies are derived.
The Banks argued instead for authority to adopt a credit product usage
limit based on the member's use of a minimum amount of a Bank's credit
product. The Banks also proposed that the required level of credit
product usage be linked to a member's asset size.
In response to these arguments, the Interim Final Rule revised
Sec. 960.5(b)(10)(i)(C) to permit a Bank, after consultation with its
Advisory Council, to establish a requirement that a member submitting
an AHP application must have made use of a minimum amount of a credit
product offered by the Bank, other than AHP or CIP credit products,
within the previous 12 months, provided that such a minimum threshold
for credit product usage established by a Bank shall not exceed 1.5
percent of the member's total assets, and all members shall have access
to some amount of AHP subsidy, as determined by the Bank, regardless of
whether they meet the Bank's minimum threshold for credit product usage
(minimum credit product usage limit).
Two commenters opposed this change, for some of the same reasons
evaluated and discussed by the Finance Board in the 1997 AHP
rulemaking. See 61 FR 57799, 57808-09 (Nov. 8, 1996); 62 FR 41812,
41819 (August 4, 1997); see also, 60 FR 55487, 55490-91 (Nov. 1, 1995).
The commenters have not presented new arguments that were not
considered by the Finance Board in the 1997 AHP rulemaking. The Finance
Board continues to believe that the Banks should have the discretion,
after consultation with their Advisory Councils, to adopt a minimum
credit product usage limit as appropriate based on the needs and views
in the Bank's District. Accordingly, the minimum credit product usage
limit provision contained in the Interim Final Rule is adopted without
change in the final rule.
The Interim Final Rule also clarified in Sec. 960.5(b)(10)(ii) that
``[a]ny limit on the amount of AHP subsidy available per member must
result in equal amounts of AHP subsidy available to all members.'' This
requirement is intended to ensure that such limits are not structured
or applied in a discriminatory manner. A commenter pointed out that,
under a technical reading of this language, a Bank would have to make
an equal amount of AHP subsidy available to all members, regardless of
whether the member meets the minimum threshold requirement for credit
product usage. This was not the intent of the amended language in
Sec. 960.5(b)(10)(ii). Accordingly, the language has been clarified in
the final rule to provide that any limit on the amount of AHP subsidy
available per member must result in equal amounts of AHP subsidy
available to all members receiving subsidy pursuant to such limit.
B. Procedure for Approval of Applications for Funding--Sec. 960.6
1. Scoring Criterion for Use of Donated Government-Owned or Other
Properties--Sec. 960.6(b)(4)(iv)(A)
Under Sec. 960.6(b)(4)(iv)(A) of the Interim Final Rule, an
application may
[[Page 23015]]
receive scoring points if it involves the creation of housing using a
significant proportion of units or land donated or conveyed for a
nominal price by the federal government or any agency or
instrumentality thereof, or by any other party. The Interim Final Rule
added language to Sec. 960.6(b)(4)(iv)(A) clarifying that a ``nominal
price'' is a small, negligible amount, most often one dollar, and may
be accompanied by modest expenses related to the conveyance of the
property.
A commenter objected to the definition of ``nominal price,''
stating that it should be defined as up to 10 percent of the fair
market value of the units or land. By defining ``nominal price'' as
``most often one dollar,'' the Interim Final Rule left some discretion
to the Banks to determine, on a case-by-case basis, whether a price
higher than one dollar may qualify as nominal. The Finance Board
continues to believe that this case-specific approach is preferable to
establishing a general standard in the regulation that would apply to
all transactions anywhere in the country, regardless of possible
variances in what may be considered nominal from region to region and
transaction to transaction. Accordingly, the comment is not adopted in
the final rule.
Another commenter stated that the term ``modest expenses'' should
be defined. Again, the Finance Board believes that a case-specific
approach is more appropriate than establishing a national standard for
the definition of ``modest expenses.'' Accordingly, the final rule does
not define the term, leaving it to the discretion of each Bank to
determine what are modest conveyance expenses for particular
transactions in its District.
2. Scoring Criterion for Housing for Homeless Households--
Sec. 960.6(b)(4)(iv)(D)
Under Sec. 960.6(b)(4)(iv)(D) of the Interim Final Rule, an
application may receive scoring points if it involves ``[t]he creation
of rental housing reserving at least 20 percent of the units for
homeless households, or the creation of transitional housing for
homeless households permitting a minimum of six months occupancy.'' See
12 CFR 960.6(b)(4)(iv)(D). The Interim Final Rule omitted the express
exclusion of overnight shelters contained in the 1997 AHP Regulation,
because it is clear that overnight shelters do not come within the
category of housing permitting a minimum of six months occupancy. The
Interim Final Rule also clarified that ``rental projects,'' as defined
in Sec. 960.1, include overnight shelters. The intention was to make
clear that while overnight shelters are eligible for AHP funding, they
may not receive scoring points under Sec. 960.6(b)(4)(iv)(D). However,
by defining ``rental projects'' to include overnight shelters, the
Interim Final Rule unintentionally made overnight shelters eligible for
such scoring points under the first clause dealing with rental
projects. Accordingly, the final rule revises the first clause in
Sec. 960.6(b)(4)(iv)(D) to expressly exclude overnight shelters for
homeless households.
3. Scoring Criterion for Economic Diversity--Sec. 960.6(b)(4)(iv)(F)(8)
The Interim Final Rule revised the second alternative requirement
in Sec. 960.6(b)(4)(iv)(F)(8) to provide that applications may receive
scoring points for ``Economic Diversity'' if they involve the creation
of housing that provides very low- or low- or moderate-income
households with housing opportunities in neighborhoods or cities where
the median income exceeds the median income for the larger surrounding
area--such as the city, county, or Primary Metropolitan Statistical
Area--in which the neighborhood or city is located. The general intent
of this requirement is to promote housing opportunities for very low-
and low- or moderate-income households in areas that are wealthier
relative to the surrounding areas to avoid isolation of such
households.
A commenter suggested allowing scoring points to be awarded under
this criterion for housing in areas where the median income equals or
exceeds the median income for the larger surrounding area. The Finance
Board believes that this change would meet the general intent of the
requirement and, therefore, has revised the language in the final rule
accordingly.
C. Modifications of Applications After Project Completion--Sec. 960.9
The Interim Final Rule amended Sec. 960.9 of the AHP regulation to
clarify the types of changes to an approved AHP project after project
completion that would justify a modification to the terms of the
approved AHP application. See id. Sec. 960.9. The amendment
inadvertently omitted the language limiting such modifications to
changes ``other than an increase in the amount of subsidy approved for
the project.'' This limiting language has been restored in the final
rule.
III. Regulatory Flexibility Act
Because no notice of proposed rulemaking is required for this final
rule, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.) do not apply. Moreover, the final rule applies only to the Banks,
which do not come within the meaning of ``small entities,'' as defined
in the Regulatory Flexibility Act. See id. section 601(6).
IV. Paperwork Reduction Act
This final rule does not contain any collections of information
pursuant to the Paperwork Reduction Act of 1995. See 44 U.S.C. 3501 et
seq. Therefore, the Finance Board has not submitted any information to
the Office of Management and Budget for review.
List of Subjects in 12 CFR Part 960
Credit, Federal home loan banks, Housing, Reporting and
recordkeeping requirements. Accordingly, the Interim Final Rule
amending 12 CFR part 960, published at 63 FR 27668 (May 20, 1998), is
adopted as final with the following changes:
PART 960--AFFORDABLE HOUSING PROGRAM
1. The authority citation for part 960 continues to read as
follows:
Authority: 12 U.S.C. 1430(j).
2. Section 960.5 is amended by revising paragraph (b)(10)(ii) to
read as follows:
Sec. 960.5 Minimum eligibility standards for AHP projects.
* * * * *
(b) * * *
(10) District eligibility requirements.
(ii) Any limit on the amount of AHP subsidy available per member
must result in equal amounts of AHP subsidy available to all members
receiving subsidy pursuant to such limit.
3. Section 960.6 is amended by revising paragraphs (b)(4)(iv)(D)
and (b)(4)(iv)(F)(8) to read as follows:
Sec. 960.6 Procedure for approval of applications for funding.
* * * * *
(b) * * *
(4) * * *
(iv) * * *
(D) Housing for homeless households. The creation of rental
housing, excluding overnight shelters, reserving at least 20 percent of
the units for homeless households, or the creation of transitional
housing for homeless households permitting a minimum of six months
occupancy.
* * * * *
(F) * * *
(8) Economic diversity. The creation of housing that is part of a
strategy to end isolation of very low-income households by providing
economic diversity through mixed-income housing in low- or moderate-
income
[[Page 23016]]
neighborhoods, or providing very low- or low- or moderate-income
households with housing opportunities in neighborhoods or cities where
the median income equals or exceeds the median income for the larger
surrounding area--such as the city, county, or Primary Metropolitan
Statistical Area--in which the neighborhood or city is located;
* * * * *
4. Section 960.9 is amended by revising the introductory text to
read as follows:
Sec. 960.9 Modifications of applications after project completion.
Modification procedure. If, after final disbursement of funds to a
project from all funding sources, there is or will be a change in the
project that would change the score that the project application
received in the funding period in which it was originally scored and
approved, had the changed facts been operative at that time, a Bank, in
its discretion, may approve in writing a modification to the terms of
the approved application, other than an increase in the amount of
subsidy approved for the project, provided that:
* * * * *
By the Board of Directors of the Federal Housing Finance Board.
Dated: April 13, 1999.
Bruce A. Morrison,
Chairman.
[FR Doc. 99-10160 Filed 4-28-99; 8:45 am]
BILLING CODE 6725-01-P