[Federal Register Volume 64, Number 127 (Friday, July 2, 1999)]
[Rules and Regulations]
[Pages 36210-36213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16847]



[[Page 36209]]

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Part V





Department of Housing and Urban Development





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24 CFR Part 291



Disposition of HUD-Acquired Single Family Property; Officer Next Door 
Sales Program; Final Rule

  Federal Register / Vol. 64, No. 127 / Friday, July 2, 1999 / Rules 
and Regulations  

[[Page 36210]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 291

[Docket No. FR-4277-I-02]
RIN 2502-AH37


Disposition of HUD-Acquired Single Family Property; Officer Next 
Door Sales Program

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Interim rule.

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SUMMARY: This interim rule amends HUD's regulations that address the 
disposition of HUD-acquired single family properties to codify the 
policies and procedures concerning the Officer Next Door Sales Program 
(OND Sales Program). The OND Sales Program has been operating since 
August 11, 1997 as a temporary program. This interim rule establishes 
the OND Sales Program as a permanent part of HUD's single family 
property disposition program. Through the OND Sales Program, HUD makes 
HUD-acquired single family homes available to law enforcement officers 
for purchase at a discount from the list price. A home purchased 
through the OND Sales Program must be located in a HUD-designated 
Revitalization Area or HUD-approved exception area, and the law 
enforcement officer must agree to own and live in the home as his or 
her sole residence for a specified period of time. Governmental 
entities and private nonprofit organizations may also purchase homes 
through the OND Sales Program, if they intend to resell these homes 
directly to law enforcement officers under the terms and conditions of 
the OND Sales Program.

DATES: Effective Date: August 2, 1999.
    Comments Due Date: August 31, 1999.

ADDRESSES: Interested persons are invited to submit comments regarding 
this interim rule to the Rules Docket Clerk, Office of the General 
Counsel, Room 10276, U.S. Department of Housing and Urban Development, 
451 Seventh Street, SW, Washington, DC 20410-0500. Comments should 
refer to the above docket number and title. A copy of each comment 
submitted will be available for public inspection and copying between 
7:30 am and 5:30 pm weekdays at the above address. Facsimile (FAX) 
comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: Joe McCloskey, Director, Single Family 
Asset Management Division, Office of Insured Single Family Housing, 
Room 9286, U.S. Department of Housing and Urban Development, 451 
Seventh Street, SW, Washington, DC 20410-8000; telephone (202) 708-1672 
(this is not a toll-free number). Hearing-or speech-impaired 
individuals may access this number via TTY by calling the toll-free 
Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    One of HUD's major goals is to use its resources in a manner that 
enhances the general well-being of American communities. A critical 
component of the Nation's housing policy is promoting safe 
neighborhoods. One means of furthering this policy is to create 
homeownership opportunities for law enforcement officers, charged with 
the responsibility of ensuring the safety and well-being of residents, 
in the communities they serve. A second means is to help promote safe 
neighborhoods by furthering the community policing efforts being made 
by numerous cities. In order to support these efforts, HUD developed 
the Officer Next Door Sales Program (OND Sales Program).
    HUD initiated the OND Sales Program on August 11, 1997, through the 
issuance of HUD Notice H-97-51. On December 31, 1997, HUD issued Notice 
H-97-73, which expanded the definition of law enforcement officer in 
order to increase the number of law enforcement officers eligible to 
participate in the OND Sales Program. On January 12, 1998 (63 FR 1886) 
a notice was published in the Federal Register that described the OND 
Sales Program policies and procedures contained in HUD Notices H-97-51 
and H-97-53.
    Since 1997, the OND Sales Program has been operated as a temporary 
program under HUD's authority to make single family properties 
available under 24 CFR part 291 (entitled ``Disposition of HUD-Acquired 
Single Family Property'') and through a series of regulatory waivers 
authorized by the Assistant Secretary for Housing-Federal Housing 
Commissioner. Section 7(q) of the Department of Housing and Urban 
Development Act, as amended by section 106 of the Department of Housing 
and Urban Development Reform Act (42 U.S.C. 3535(q)), requires that HUD 
publish quarterly Federal Register notices of all regulatory waivers it 
has approved. The latest regulatory waiver issued by HUD regarding the 
OND Sales program was published on March 12, 1999 (64 FR 12676, 12678).

II. The OND Sales Program

    Through the OND Sales Program, HUD makes HUD-acquired single family 
homes, located in HUD-designated Revitalization Areas or HUD-approved 
exception areas, available to law enforcement officers for purchase at 
a substantial discount from the list price. Currently the discount rate 
for the OND Sales Program is 50% off the list price.
    In addition, by allowing selected homes to be purchased with 
mortgages insured by the Federal Housing Administration (FHA), HUD 
makes it possible for a law enforcement officer to purchase a home with 
a very low down payment. In order to qualify for this low down payment, 
a selected home must be eligible for FHA financing. Currently, law 
enforcement officers may purchase an FHA eligible home with an FHA-
insured mortgage, through the OND Sales Program, with a downpayment of 
$100.
    A law enforcement officer is defined, under the OND Sales Program, 
as (1) an individual who is employed full-time by a Federal, state, 
county, or municipal government and in carrying out such full-time 
employment is (2) sworn to uphold, and make arrests for violations of, 
Federal, state, county, or municipal law. A law enforcement officer, 
participating in the OND Sales program, must agree to own and live in 
the home as his or her sole residence for a set period of time. This 
period of time is called the owner-occupancy term. Currently, the 
owner-occupancy term is 3 years. The law enforcement officer must also 
agree to certify initially and once annually, for each year of the 
owner-occupancy term, that (1) he or she owns and lives in the home as 
his or her sole residence and that (2) he or she does not own any other 
residential real property other than the home purchased through the OND 
Sales Program.
    In addition, law enforcement officers will have to agree to execute 
a second mortgage and note on the home. Under the second mortgage, the 
law enforcement officer will not be required to make any monthly 
payments, nor will any interest accrue. This second mortgage will have 
the same term as the owner-occupancy term. The amount of the second 
mortgage will be the difference between the list price of the home and 
the discounted selling price. The amount owed on the second mortgage 
will be reduced, according to a schedule established by HUD, 
periodically over the owner-occupancy term. At the end of the owner-
occupancy term, the amount of the second mortgage will be zero. If a 
law

[[Page 36211]]

enforcement officer fails to meet any of the continuing obligations of 
the OND Sales Program, he or she will owe HUD the amount due on the 
second mortgage. In addition, HUD may take one or more actions, 
including but not limited to: (1) issuance of a limited denial of 
participation for FHA programs, (2) referral to the HUD Inspector 
General for investigation, and (3) reporting to the law enforcement 
officer's employing agency.
    Governmental entities and private nonprofit organizations may also 
purchase homes through the OND Sales Program, if they intend to resell 
these homes directly to law enforcement officers under the terms and 
conditions of the OND Sales Program. Governmental entities and private 
nonprofit organizations may participate in the OND Sales Program by 
either (1) assigning the sales contract to a qualified law enforcement 
officer before or at the time of closing or (2) participating in a 
three party closing with the qualified law enforcement officer.

III. For More Information About the OND Sales Program

    Law enforcement officers, governmental entities, private nonprofit 
organizations, and other interested persons can receive more 
information about the OND Sales Program by calling (800) 217-6970 or by 
visiting HUD's Web site at http://www.hud.gov.

IV. Changes From the January 12, 1998 Federal Register Notice

    This interim rule reflects the following changes to the OND Sales 
Program as it was described in the January 12, 1998 Federal Register 
notice:

A. Second Mortgage

    To qualify to purchase a home through the OND Sales Program, a law 
enforcement officer must agree to execute a second mortgage and note. 
Previously, the OND Sales Program only required the inclusion of a 
covenant in the deed. If a law enforcement officer fails to meet the 
continuing obligations of the OND Sales Program, the amount of the 
second mortgage will be due and payable. The amount of the second 
mortgage will be reduced, according to a schedule established by HUD, 
periodically over the owner-occupancy term.

B. Initial and Annual Certification

    In order to continue to be eligible for the OND Sales Program, a 
law enforcement officer must certify initially and once annually, for 
each year of the owner-occupancy term, that he or she continues to own 
and live in the home as his or her sole residence, and that the law 
enforcement officer does not own any other residential real property.

C. Multiple Homes

    During the entire duration of the owner-occupation term, a law 
enforcement officer may not own any other residential real property 
other than the home purchased through the OND Sales Program.

D. Single-Unit Homes

    Only single-unit homes are eligible for purchase through the OND 
Sales Program.

V. This Interim Rule

    This interim rule establishes the OND Sales Program as a permanent 
part of HUD's single family property disposition program. Specifically, 
the interim rule creates a new subpart F in 24 CFR part 291 that 
codifies the policies and procedures concerning the OND Sales Program.

VI. Justification for Interim Rulemaking

    HUD generally publishes a rule for public comment before issuing a 
rule for effect, in accordance with its own regulations on rulemaking 
at 24 CFR part 10. Part 10 provides for exceptions to the general rule 
if the agency finds good cause to omit advance notice and public 
participation. The good cause requirement is satisfied when prior 
public procedure is ``impracticable, unnecessary, or contrary to the 
public interest'' (24 CFR 10.1). For the following reasons, HUD finds 
that good cause exists to publish this rule for effect without first 
soliciting public comment.
    The OND Sales Program has been operating as a temporary program 
since August 11, 1997, using HUD's existing authority under the single 
family property disposition program regulations at 24 CFR part 291 and 
through the issuance of a series of waivers. In addition, HUD published 
the January 12, 1998 Federal Register notice publicizing the details of 
the OND Sales Program.
    While this interim rule makes certain revisions to the OND Sales 
Program, the basic structure of the program remains principally 
unchanged from that published in the January 12, 1998 Federal Register 
notice. The primary purpose of this interim rule is to change the 
status of the OND Sales Program from a temporary program to a permanent 
part of HUD's single family property disposition program. The interim 
rule codifies the current policies and procedures concerning the OND 
Sales Program in a new subpart F in 24 CFR part 291. Accordingly, HUD 
has determined that it is unnecessary to solicit prior notice and 
comment before issuing this rule for effect.
    Although HUD is issuing this rule for effect, it welcomes public 
comment on the amendments made by the rule. HUD has, therefore, issued 
these regulations on an interim basis and has provided the public with 
a 60-day comment period. All public comments will be addressed in the 
final rule.

VII. Findings and Certifications

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538)(UMRA) requires Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and on 
the private sector. This interim rule does not impose any Federal 
mandates on any State, local, or, tribal governments, or on the private 
sector, within the meaning of UMRA.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with the HUD regulations at 24 CFR part 50 
that implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (Pub. L. 91-190, 83 Stat. 852, 853, codified as amended at 
42 U.S.C. 4332). The Finding of No Significant Impact is available for 
public inspection and copying during regular business hours (7:30 a.m. 
to 5:30 p.m.) in the Office of the Rules Docket Clerk, Room 10276, U.S. 
Department of Housing and Urban Development, 451 Seventh Street, SW, 
Washington, DC 20410-0500.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this interim rule and in so 
doing certifies that this interim rule would not have a significant 
economic impact on a substantial number of small entities.
    This interim rule promotes safe neighborhoods by enabling law 
enforcement officers to purchase HUD-acquired single family homes at a 
significant discount. The interim rule places restrictions on the use 
of a home purchased through the Officer Next Door Sales Program, which 
affects the individual purchasing the home. The interim rule, however, 
does not place restrictions on any small entities involved in any 
transactions related to the Officer Next Door Sales Program.
    While we have determined that this rule would not have a 
significant

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economic impact on a substantial number of small entities, we welcome 
any comments regarding alternatives to this rule that would meet our 
objectives, as described in this preamble, and would be less burdensome 
to small entities.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612 (entitled ``Federalism'') has determined that 
the policies contained in this interim rule do not have substantial 
direct effects on States or their political subdivisions, on the 
relationship between the Federal government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. This interim rule codifies the procedures governing the OND 
Sales Program in a new subpart in HUD's single family property 
disposition program regulations. Through the OND Sales Program, HUD 
makes HUD-acquired single family homes available to law enforcement 
officers for purchase at a significant discount. As a result, this 
interim rule is not subject to review under the Order.

List of Subjects in 24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    Accordingly, for the reasons stated in the preamble, 24 CFR part 
291 is amended as follows:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

    1. The authority citation for 24 CFR part 291 continues to read as 
follows:

    Authority: 12 U.S.C. 1701 et seq.; 42 U.S.C. 1441, 1441a, 1551a, 
and 3535(d).

    2. Subpart F is added to read as follows:

Subpart F--Officer Next Door Sales Program

Sec.
291.500  What is the purpose of the Officer Next Door Sales Program?
291.510  How does the Officer Next Door Sales Program work?
291.520  How do I qualify to purchase a home through the Officer 
Next Door Sales Program?
291.530  Who qualifies as a law enforcement officer?
291.540  What is the owner-occupancy term?
291.550  What is the second mortgage?
291.560  May I purchase a multi-unit property through the Officer 
Next Door Sales Program if I plan to live in one of the units as my 
sole residence?
291.570  What continuing obligations apply to me if I purchase a 
home through the Officer Next Door Sales Program?
291.580  May governmental entities and private nonprofit 
organizations purchase homes through the Officer Next Door Sales 
Program?
291.590  How are the terms governmental entities and private 
nonprofit organization defined?

Subpart F--Officer Next Door Sales Program


Sec. 291.500  What is the purpose of the Officer Next Door Sales 
Program?

    The purpose of the Officer Next Door Sales Program is to promote 
safe neighborhoods by encouraging law enforcement officers to purchase, 
and live in as their sole residence, homes located in economically 
distressed neighborhoods.


Sec. 291.510  How does the Officer Next Door Sales Program work?

    (a) The Officer Next Door Sales Program enables a full-time law 
enforcement officer to purchase a HUD-acquired home located in a HUD-
designated Revitalization Area or HUD-approved exception area:
    (1) At a discount from the list price; and
    (2) With a reduced downpayment, if:
    (i) The home is eligible for an FHA-insured mortgage; and
    (ii) The law enforcement officer chooses to finance the home 
through an FHA-insured mortgage, and is qualified to obtain such a 
mortgage.
    (b) Under the Officer Next Door sales Program, all properties 
acquired by HUD (both those that are eligible for FHA mortgage 
insurance and those that are not eligible) located in HUD-designated 
Revitalization Areas are made available to interested law enforcement 
officers, government entities, and nonprofit organizations prior to 
listing the properties for sale to the general public. Purchasers must 
notify HUD of their geographic area of interest and will be given five 
(5) days to indicate their preliminary interest in a specific property 
as more fully explained in Sec. 291.210(a).


Sec. 291.520  How do I qualify to purchase a home through the Officer 
Next Door Sales Program?

    To qualify to purchase a home through the Officer Next Door Sales 
Program you must:
    (a) Be a full-time law enforcement officer as described in 
Sec. 291.530;
    (b) Agree to own, and live in as your sole residence, the home for 
the entire duration of the owner-occupancy term;
    (c) Agree to execute a second mortgage and note on the home as 
described in Sec. 291.550 for the difference between the list price and 
the discounted selling price;
    (d) Agree that you will not own any residential real property, 
other than the home you purchase through the Officer Next Door Sales 
Program, during the owner-occupancy period.


Sec. 291.530  Who qualifies as a law enforcement officer?

    You qualify as a law enforcement officer, for the purposes of the 
Officer Next Door Sales Program, if you are:
    (a) Employed full-time by a Federal, state, county, or municipal 
government; and
    (b) In carrying out such full-time employment, you are sworn to 
uphold, and make arrests for violations of, Federal, state, county, or 
municipal law.


Sec. 291.540  What is the owner-occupancy term?

    The owner-occupancy term is the number of years a participant in 
the Officer Next Door Sales Program must agree to own, and live in as 
their sole residence, a home purchased through the Officer Next Door 
Sales Program. The owner-occupancy term is determined by HUD.


Sec. 291.550  What is the second mortgage?

    The second mortgage is a mortgage and note on the home you purchase 
through the Officer Next Door Sales Program. The amount of the second 
mortgage is the difference between the list price of the home and the 
discounted selling price. The second mortgage will have the same term 
as the owner-occupancy term. The amount of the second mortgage will be 
reduced, according to a schedule established by HUD, periodically over 
the owner-occupancy term. If you fail to meet any of the continuing 
obligations of the OND Sales Program, you will owe HUD the amount due 
on the second mortgage. At the end of the owner-occupancy term, the 
amount of the second mortgage will be zero.


Sec. 291.560  May I purchase a multi-unit property through the Officer 
Next Door Sales Program if I plan to live in one of the units as my 
sole residence?

    No, only single-unit properties are eligible for the Officer Next 
Door Sales Program.

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Sec. 291.570  What continuing obligations apply to me if I purchase a 
home through the Officer Next Door Sales Program?

    To remain a participant in the Officer Next Door Sales Program you 
must, for the entire duration of the owner-occupancy term:
    (a) Continue to own, and live in as your sole residence, the home 
you purchased through the Officer Next Door Sales Program;
    (b) Not own any other residential real property other than the home 
you purchased through the Officer Next Door Sales Program; and
    (c) Certify initially and once annually that paragraphs (a) and (b) 
of this section continue to be true.


Sec. 291.580  May governmental entities and private nonprofit 
organizations purchase homes through the Officer Next Door Sales 
Program?

    Yes, governmental entities and private nonprofit organizations may 
purchase homes through the Officer Next Door Sales Program, if they 
intend to resell these homes directly to law enforcement officers under 
the terms and conditions of the Officer Next Door Sales Program. In 
order to participate, governmental entities and private nonprofit 
organizations must either:
    (a) Assign the sales contract to a qualified law enforcement 
officer before, or at the time of, closing; or
    (b) Participate in a three party closing with the qualified law 
enforcement officer.


Sec. 291.590  How are the terms governmental entities and private 
nonprofit organization defined?

    The terms Governmental entities and Private nonprofit organization 
are defined in Sec. 291.5 of this part.

    Dated: June 8, 1999.
William C. Apgar,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 99-16847 Filed 7-1-99; 8:45 am]
BILLING CODE 4210-27-P