[Federal Register Volume 64, Number 86 (Wednesday, May 5, 1999)]
[Rules and Regulations]
[Pages 24025-24028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11250]
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FEDERAL HOUSING FINANCE BOARD
12 CFR Part 960
[No. 99-26]
RIN 3069-AA-82
Amendment of Affordable Housing Program Regulation
AGENCY: Federal Housing Finance Board.
ACTION: Interim final rule.
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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending
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.
DATES: The interim final rule shall be effective on June 4, 1999. The
Finance Board will accept written comments on this interim final rule
on or before July 6, 1999.
ADDRESSES: Mail comments to Elaine L. Baker, Secretary to the Board,
Federal Housing Finance Board, 1777 F Street, NW, Washingon DC 20006.
Comments will be available for inspection at this address.
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, NW,
Washington, DC 20006.
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Background
Section 10(j)(1) of the Federal Home Loan Bank Act (Bank Act)
requires each Federal Home Loan Bank (Bank) to establish a Program to
subsidize the interest rate on advances to members of the Federal Home
Loan Bank System engaged in lending for long-term, low-and moderate-
income, owner-occupied and affordable rental housing at subsidized
interest rates. See 12 U.S.C. 1430(j)(1). The Finance Board is required
to promulgate regulations governing the operation of the Program. See
id.
On August 4, 1997, the Finance Board published a final AHP
regulation adopting comprehensive revisions to the Program, see 12 CFR
part 960, which, among other changes, authorized the 12 Banks, rather
than the Finance Board, to approve applications for AHP subsidies
beginning January 1, 1998. See 62 FR 41812 (Aug. 4, 1997). On May 20,
1998, the Finance Board published an interim final rule amending the
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 was adopted as a final rule,
with several changes, and will become effective June 1, 1999.
In the course of implementing the changes to the Program under the
recent revisions to the AHP regulation, the Banks and Finance Board
staff have identified a number of additional technical issues whose
resolution would clarify Program requirements and improve the
effectiveness of the Program. This interim final rule addresses those
issues. Although the interim final rule will become effective 30 days
after the date of publication in the Federal Register, the Finance
Board requests comment on all aspects of the interim final rule during
a 60-day comment period.
[[Page 24026]]
II. Analysis of the Interim Final Rule
A. Timing of Submission of Amendments to Bank AHP Implementation Plans
to the Finance Board--Sec. 960.3(b)(4)
Section 960.3(b)(1) of the AHP regulation requires each Bank's
board of directors to adopt a written AHP implementation plan setting
forth the requirements specified in the regulation. See 12 CFR
960.3(b)(1). Each Bank is required to provide its Advisory Council an
opportunity to review and make recommendations on the Bank's AHP
implementation plan and any subsequent amendments to the plan prior to
adoption of the plan or amendments. See id. Sec. 960.3(b)(3). Section
960.3(b)(4) of the AHP regulation provides that:
A Bank shall submit its initial AHP implementation plan, and any
amendments, to the Finance Board and the Bank's Advisory Council at
least 60 days prior to distributing requests for applications for
AHP subsidies for the funding period in which the plan, or
amendments, will be effective.
See id. Sec. 960.3(b)(4). The Banks adopted their initial plans under
the revised AHP regulation for the first AHP funding period in 1998,
and have been submitting amendments to such plans to the Finance Board
for subsequent AHP funding periods.
The 60-day requirement in the regulation was intended to give the
Advisory Councils and the Finance Board sufficient time to review the
implementation plans and amendments prior to distribution by the Banks
of AHP application materials to the public. However, the Banks have
indicated that the 60-day requirement is unworkable as a practical
matter because, among other reasons, the Banks' Advisory Councils
generally meet only quarterly. By the time the Advisory Councils have
met and made their recommendations to the Banks' boards, and the Banks'
boards have adopted the amendments, the Banks are approaching their
target dates for sending out AHP application materials to the public.
Requiring the Banks then to send their final plan amendments to the
Finance Board and the Advisory Councils 60 days prior to the
distribution of the AHP application materials to the public would delay
distribution of the AHP application materials, which in turn would
deprive potential applicants of adequate notice of the AHP application
requirements before the applications would be due at the Bank. To avoid
this result, the Finance Board in 1998 issued a number of waivers of
the 60-day requirement so that the Banks could meet their target AHP
application distribution dates.
While the 60-day period was useful for the initial plan review
under the newly revised AHP regulation, Finance Board staff's
experience has been that subsequent amendments to the plans have not
required a 60-day review period. In any case, the administrative
convenience afforded by a 60-day review period is outweighed by the
needs of the users of the Program for timely distribution of AHP
application materials. Therefore, the Finance Board has decided to
amend the AHP regulation to correct this timing problem. Accordingly,
the interim final rule amends Sec. 960.3(b)(4) to require that the
Banks submit any amendments of their AHP implementation plans to the
Finance Board within 30 days after the date the Bank's board of
directors approves the amendments. The interim final rule also deletes
the requirement that the Banks' final plan amendments be sent to the
Advisory Councils 60 days prior to the Banks' distribution of the AHP
application materials, since the Advisory Councils already will have
had an opportunity to review the proposed plan amendments pursuant to
Sec. 960.3(b)(3).
B. Timing of Appraisals for Member Real Estate Owned (REO) Properties
and Properties Upon Which a Member Holds a Mortgage or Lien--
Sec. 960.5(b)(2)(ii)(B)
Section 960.5(b)(2)(ii)(B) of the AHP regulation provides that:
The purchase price of property or services, as reflected in the
project's development budget, sold to the project by a member
providing AHP subsidy to the project, or, in the case of property,
upon which such member holds a mortgage or lien, may not exceed the
market value of such property or services as of the date the
purchase price for the property or services was agreed upon. In the
case of real estate owned property sold to a project by a member
providing AHP subsidy to a project, or property sold to the project
upon which the member holds a mortgage or lien, the market value of
such property is deemed to be the ``as-is'' or ``as-rehabilitated''
value of the property, whichever is appropriate, as reflected in an
independent appraisal of the property performed within six months
prior to the date the purchase price for the property was agreed
upon.
See id. Sec. 960.5(b)(2)(ii)(B) (emphasis added).
Section 960.5(b)(2)(ii)(B) is intended to ensure that the AHP
subsidy is passed on to the ultimate borrower (subsidy pass-through
requirement), as required by the Bank Act, and thus that the project
has a need for the AHP subsidy, by requiring that the purchase price of
the property not exceed its current market value (i.e., that the
subsidy is not recouped by the member to discharge its mortgage or lien
through an excessive purchase price paid for the property by the
project). See 12 U.S.C. 1430(j)(9)(E); 12 CFR 960.5(b)(2)(ii)(B). The
AHP regulation requires this determination to be made based on an
appraisal of the market value of the property performed within six
months prior to the date the purchase price of the property was agreed
upon (i.e., the sales contract). See 12 CFR 960.5(b)(2)(ii)(B). If the
purchase price of the property exceeds the current market value, then
the project sponsor is paying more than necessary for the property, the
member is receiving more than necessary, and the project does not need
the AHP subsidy.
In 1998, several Banks received applications for AHP funding
involving member REO property or property upon which the member held a
mortgage or lien, for which no independent appraisals of the property
had been performed within six months prior to the date the purchase
price for the property was agreed upon, as required by
Sec. 960.5(b)(2)(ii)(B). In some instances, the sponsors had agreed to
a purchase price for the property or had purchased the property two to
three years before the AHP application due date, with no anticipation
that they later would be applying for AHP funds in connection with the
property. Due to the fees of $5,000 or more typically charged for
independent appraisals and the limited predevelopment funds available
to pay for such appraisals, many non-profit sponsors with limited
financial resources conduct in-house analyses or rely upon tax
assessment values to determine the market value of properties. Sponsors
are especially reluctant to obtain an independent appraisal when they
may never exercise the option to purchase the property. In short, given
the way many sponsors acquire property, the requirements of
Sec. 960.5(b)(2)(ii)(B) for obtaining an independent appraisal of the
property within six months prior to the date the purchase price for the
property was agreed upon are not practical or cost effective in the
affordable housing industry.
A reasonable alternative is to require that the sponsor obtain an
independent appraisal of the property within six months prior to the
date the Bank disburses AHP subsidies to the project. This would avoid
the timing problem discussed above but still require a current
appraisal to ensure that the purchase price of the property does not
exceed its current market value.
Accordingly, the interim final rule amends Sec. 960.5(b)(2)(ii)(B)
to require that the independent appraisal of the
[[Page 24027]]
property obtained by the sponsor be performed within six months prior
to the date the Bank disburses AHP subsidy to the project. The interim
final rule also amends this section to require that the independent
appraisal be completed by a State certified or licensed appraiser, as
defined in 12 CFR 564.2(j) and (k), in order to ensure a more accurate
evaluation of the property value.
C. Inclusion of the Creation of Permanent Owner-Occupied Housing Under
the Housing for Homeless Households Scoring Criterion--
Sec. 960.6(b)(4)(iv)(D)
Under Sec. 960.6(b)(4)(iv)(D) of the AHP regulation, an application
may receive scoring points if it involves 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. See id. Sec. 960.6(b)(4)(iv)(D). The regulation
inadvertently omitted the creation of permanent owner-occupied housing,
which was included in the proposed rule amending the AHP regulation.
See 61 FR 57799, 57824 (Nov. 8, 1996). There have been a number of
innovative and successful initiatives to move households directly from
homeless shelters into permanent homeownership through self-help and
other social services programs. Citing such programs, a Bank commenting
on the May 20, 1998 interim final rule urged the Finance Board to
endorse the inclusion of the creation of permanent owner-occupied
housing under the housing for homeless households scoring criterion.
Accordingly, the interim final rule amends Sec. 960.6(b)(4)(iv)(D)
to include the creation of permanent owner-occupied housing reserving
at least 20 percent of the units for homeless households under the
housing for homeless households scoring criterion.
D. Specific Inclusion of the Creation of ``Visitable'' Housing Under
the Special Needs Scoring Criterion--Sec. 960.6(b)(4)(iv)(F)(1)
Under Sec. 960.6(b)(4)(iv)(F)(1) of the AHP regulation, a Bank may
choose as one of its scoring criteria under the First District Priority
scoring category the following:
Special Needs. The creation of housing in which at least 20
percent of the units are reserved for occupancy by households with
special needs, such as the elderly, mentally or physically disabled
persons, persons recovering from physical abuse or alcohol or drug
abuse, or persons with AIDS.
See 12 CFR 960.6(b)(4)(iv)(F)(1) (emphasis added). The use of the words
``such as'' indicates that the specific list of special needs housing
in the regulation is not exclusive, allowing a Bank the option to
select other types of special needs housing not specifically mentioned
but of the general types included in the list.
The creation of housing that is ``visitable'' by persons with
physical disabilities who are not occupants of such housing may be
considered a type of special needs housing that a Bank has the option
of adopting under the special needs scoring criterion. Although
amendment of the AHP regulation to allow a Bank to adopt such a
``visitable'' housing criterion is not necessary, the interim final
rule amends Sec. 960.6(b)(4)(iv)(F)(1) to specifically include
``visitable'' housing because the Finance Board believes it is
important to increase awareness of this significant special needs
housing as an option for the Banks to consider in adopting their
scoring criteria under the First District Priority scoring category.
The interim final rule amends Sec. 960.1 to include a definition of
``visitable,'' based on the definition of ``visitable'' adopted by the
Department of Housing and Urban Development, which is as follows:
In either owner-occupied or rental housing, at least one
entrance is at-grade (no steps) and approached by an accessible
route such as a sidewalk, and the entrance door and all interior
passage doors are at least 2 feet, 10 inches wide, offering 32
inches of clear passage space.
III. Regulatory Flexibility Act
Because no notice of proposed rulemaking is required for this
interim final rule, the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.) do not apply.
IV. Paperwork Reduction Act
This interim 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.
V. Notice and Public Participation
The Finance Board for good cause finds that the notice and public
comment procedure required by the Administrative Procedure Act is
impracticable, unnecessary or contrary to the public interest in this
instance, because the changes made by this interim final rule are
technical in nature and apply only to the Banks. See 5 U.S.C.
553(b)(3)(B).
List of Subjects in 12 CFR Part 960
Credit, Federal home loan banks, Housing, Reporting and
recordkeeping requirements.
Accordingly, the Finance Board hereby amends title 12, chapter IX,
part 960, Code of Federal Regulations, as follows.
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 960.1 is amended by adding in alphabetical order the
following definition to read as follows:
Sec. 960.1 Definitions.
* * * * *
Visitable means, in either owner-occupied or rental housing, at
least one entrance is at-grade (no steps) and approached by an
accessible route such as a sidewalk, and the entrance door and all
interior passage doors are at least 2 feet, 10 inches wide, offering 32
inches of clear passage space.
3. Section 960.3 is amended by revising paragraph (b)(4) to read as
follows:
Sec. 960.3 Operation of Program and adoption of AHP implementation
plan.
* * * * *
(b) * * *
(4) Submission of plan amendments to the Finance Board. A Bank
shall submit any amendments of its AHP implementation plan to the
Finance Board within 30 days after the date the Bank's board of
directors approves such amendments.
* * * * *
4. Section 960.5 is amended by revising the second sentence of
paragraph (b)(2)(ii)(B) to read as follows:
Sec. 960.5 Minimum eligibility standards for AHP projects.
* * * * *
(b) * * *
(2) * * *
(ii) * * *
(B) * * * In the case of real estate owned property sold to a
project by a member providing AHP subsidy to a project, or property
sold to the project upon which the member holds a mortgage or lien, the
market value of such property is deemed to be the ``as-is'' or ``as-
rehabilitated'' value of the property, whichever is appropriate, as
reflected in an independent appraisal of the property performed by a
State certified or licensed appraiser, as defined in 12 CFR 564.2(j)
and (k), within six months prior to the date the
[[Page 24028]]
Bank disburses AHP subsidy to the project.
* * * * *
5. Section 960.6 is amended by revising paragraphs (b)(4)(iv)(D)
and (b)(4)(iv)(F)(1) 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, the creation of transitional housing
for homeless households permitting a minimum of six months occupancy,
or the creation of permanent owner-occupied housing reserving at least
20 percent of the units for homeless households.
* * * * *
(F) * * *
(1) Special needs. The creation of housing in which at least 20
percent of the units are reserved for occupancy by households with
special needs, such as the elderly, mentally or physically disabled
persons, persons recovering from physical abuse or alcohol or drug
abuse, or persons with AIDS; or the creation of housing that is
``visitable'' by persons with physical disabilities who are not
occupants of such housing;
* * * * *
Dated: April 14, 1999.
By the Board of Directors of the Federal Housing Finance Board.
Bruce A. Morrison,
Chairman.
[FR Doc. 99-11250 Filed 5-4-99; 8:45 am]
BILLING CODE 6725-01-P