[Federal Register Volume 67, Number 109 (Thursday, June 6, 2002)]
[Rules and Regulations]
[Pages 39238-39240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14090]



[[Page 39237]]

-----------------------------------------------------------------------

Part V





Department of Housing and Urban Development





-----------------------------------------------------------------------



24 CFR Part 200



Nonprofit Organization Participation in Certain FHA Single Family 
Activities; Placement and Removal Procedures; Final Rule

  Federal Register / Vol. 67 , No. 109 / Thursday, June 6, 2002 / Rules 
and Regulations  

[[Page 39238]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-4585-F-02]
RIN 2502-AH49


Nonprofit Organization Participation in Certain FHA Single Family 
Activities; Placement and Removal Procedures

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule establishes regulatory placement and removal 
procedures for HUD's Nonprofit Organization Roster. The Roster lists 
nonprofit organizations that HUD has determined are qualified to 
participate in certain specified Federal Housing Administration (FHA) 
single family activities. These activities may include acting as a 
mortgagor; purchasing HUD's Real Estate Owned (REO) Properties (HUD 
Homes) at a discount; providing secondary financing; and imposing legal 
restrictions on conveyance as part of affordable housing programs. The 
establishment of these placement and removal procedures will better 
protect participants in the FHA single family programs and safeguard 
FHA insurance funds. This final rule follows publication of a September 
17, 2001, proposed rule and takes into consideration the two public 
comments received on the proposed rule. After careful consideration of 
the comments, HUD has decided to adopt the proposed rule without 
change.

DATES: Effective Date: July 8, 2002.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Office of 
Single Family Program Development, Department of Housing and Urban 
Development, 451 Seventh Street SW, Room 9266, Washington, DC 20410-
8000; phone (202) 708-2700 (this is not a toll-free number). For 
hearing- and speech-impaired persons, this number may be accessed via 
TTY (text telephone) by calling the Federal Information Relay Service 
at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background--HUD's September 17, 2001, Proposed Rule

    On September 17, 2001 (66 FR 48080), HUD published a proposed rule 
to establish regulatory placement and removal procedures for the 
Federal Housing Administration (FHA) Nonprofit Organization Roster. The 
Roster lists nonprofit organizations that HUD has determined are 
qualified to participate in certain specified FHA single family 
activities. FHA maintains the Roster to provide a means for mortgagees 
and the general public to verify if nonprofit organizations are 
qualified to participate in specified FHA activities. This Roster is an 
important part of the FHA Single Family Mortgage Insurance program 
because nonprofit organizations that are placed on the Roster are 
considered to be assets to FHA in increasing homeownership 
opportunities and protecting FHA insurance funds.
    Nonprofit organizations are important participants in HUD's efforts 
to further affordable housing opportunities for low- and moderate-
income persons through the FHA single family programs. FHA's single 
family regulations recognize a special role for nonprofit organizations 
in conjunction with the origination of new mortgages, disposition of 
homes by HUD, imposition of legal restrictions on conveyance as part of 
affordable housing programs, and provision of secondary financing.
    The special role provided for nonprofit organizations in the FHA 
regulations is intended only for those organizations that are 
financially viable and actively involved in the furthering of 
affordable housing in their communities. However, currently there are 
no regulatory procedures for placing a nonprofit organization on, or 
for removing a poorly performing nonprofit organization from, the 
Roster. Accordingly, HUD issued the September 17, 2001, proposed rule 
to establish such policies, and to solicit public comment on the 
proposed regulatory changes. The establishment of these placement and 
removal procedures will better protect participants in the FHA single 
family programs and safeguard FHA insurance funds. The preamble to the 
September 17, 2001, proposed rule provides additional details regarding 
the proposed placement and removal procedures.

II. This Final Rule

    This final rule follows publication of the September 17, 2001, 
proposed rule, and takes into consideration the two public comments 
received on the proposed rule. The public comment period on the rule 
closed on November 16, 2001. Comments were received from a State 
housing authority and a nonprofit housing corporation. After careful 
consideration of the public comments, HUD has decided to adopt the 
September 17, 2001, proposed rule without change.

III. Discussion of Public Comments Received on the September 17, 2001, 
Proposed Rule

    Comment: Support for proposed rule. The State housing authority 
supported the proposed rule. The commenter agreed that the placement 
and removal procedures would better protect participants in the FHA 
single family programs and safeguard FHA insurance funds. The commenter 
wrote that the proposed rule would assist housing finance agencies in 
identifying qualified and financially viable nonprofit organizations 
for various collaborative ventures. The commenter also wrote that the 
proposed recertification process would help keep the Roster current, 
and would not impose an undue administrative burden on nonprofit 
organizations.
    HUD Response. HUD appreciates the commenter's support. HUD agrees 
that the regulatory procedures will help ensure that only those 
nonprofit organizations that are financially viable and actively 
involved in furthering affordable housing are eligible to participate 
in FHA programs. As noted, HUD has adopted the September 17, 2001, 
proposed rule without change.
    Comment: Reapplication process would be unduly burdensome. The 
nonprofit housing corporation wrote that the proposed two-year 
reapplication process for placement on the Roster would be unduly 
burdensome to nonprofit organizations. Under HUD's proposal, the 
placement of the nonprofit organization on the Roster would expire in 
two years. The nonprofit organization would be required to reapply for 
placement on the Roster before the expiration of the two-year period. 
The commenter wrote that nonprofit organizations typically have limited 
administrative funds, and may not have the resources to handle a 
reapplication process every two years.
    The public commenter recommended that the reapplication process 
should be structured to only require the submission of any information 
that has changed since the submission of the nonprofit organization's 
original application. The commenter suggested that HUD notify nonprofit 
organizations 45 to 60 days in advance of the two-year expiration date, 
and provide the nonprofit with a reapplication form. Nonprofit 
organizations would be required to return the form within a time period 
specified by HUD. The reapplication form would only require that 
nonprofit organizations detail any significant changes to the nature 
and scope of their work, or to the relevant homeownership programs they 
operate

[[Page 39239]]

(or to indicate that no such changes have occurred).
    HUD Response. HUD has not revised the proposed rule in response to 
the commenter's suggestion. The recertification process helps to ensure 
that participating nonprofit organizations remain in compliance with 
FHA requirements and are actually conducting the activities described 
in their affordable housing plans. As part of the recertification 
process, nonprofit organizations must submit a detailed description of 
the activities they have performed (see Attachment 5 to HUD Mortgagee 
Letter 00-8, ``Nonprofit Agency Participation in Single Family FHA 
Activities'').\1\ This property listing format allows FHA to conduct a 
comprehensive review of nonprofit performance, and to evaluate such 
important factors as net development cost and the sales price of resold 
properties. Relying on the nonprofit agency to advise FHA of any 
significant changes, as the public commenter suggests, would not permit 
FHA to conduct these detailed reviews. Accordingly, HUD believes that 
the commenter's recommendation would be an insufficient method for 
identifying deficiencies in the nonprofit's program. Further, HUD notes 
that nonprofit organizations that are recipients of HUD grants, or 
participate in other HUD activities, are required to submit regular 
performance reports. The recertification requirement, therefore, is a 
familiar process for these nonprofit organizations, and does not impose 
a new administrative requirement.
---------------------------------------------------------------------------

    \1\ A copy of Mortgage Letter 00-8 may be obtained via the HUD 
Web site at http://www.hud.gov.
---------------------------------------------------------------------------

IV. Findings and Certifications

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, Regulatory Planning and Review. OMB determined 
that this rule is a ``significant regulatory action'' as defined in 
section 3(f) of the Order (although not an economically significant 
regulatory action under the Order). Any changes made to this rule as a 
result of that review are identified in the docket file, which is 
available for public inspection in the Department's Office of the Rules 
Docket Clerk, Room 10276, 451 Seventh Street, SW, Washington, DC 20410-
0500.

Paperwork Reduction Act

    The information collection requirements described in Sec. 200.194 
have been approved by OMB in connection with Mortgagee Letter 00-8, and 
assigned OMB Control Number 2502-0540. In accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3520), an agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a valid control number.

Environmental Impact

    This final rule establishes placement and removal procedures for 
HUD's Nonprofit Organization Roster. The final rule does not direct, 
provide for assistance or loan and mortgage insurance for, or otherwise 
govern or regulate, real property acquisition, disposition, leasing, 
rehabilitation, alteration, demolition, or new construction, or 
establish, revise, or provide for standards for construction or 
construction materials, manufactured housing, or occupancy. Therefore, 
in accordance with 24 CFR 50.19(c)(1), this final rule is categorically 
excluded from environmental review under the National Environmental 
Policy Act (42 U.S.C. 4321 et seq.).

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. Although 
many nonprofit organizations affected by this rule are small entities, 
compliance with the rule is not expected to have a substantive economic 
impact. The rule does not discriminate against small entities or 
disadvantage them competitively.
    The final rule establishes the procedure by which a nonprofit 
organization, who has violated FHA single family mortgage insurance 
program requirements, may be removed from HUD's Nonprofit Organization 
Roster. Accordingly, to the extent that the final rule has an impact on 
small entities, it will be as a result of actions taken by small 
entities themselves--that is, violation of single family program 
regulations and requirements. Further, the final rule provides several 
procedural safeguards designed to minimize any potential impact on 
small entities. For example, the rule grants a nonprofit organization, 
selected for removal from the Roster, the opportunity to provide a 
written response and to request a conference regarding a proposed 
removal. The rule also specifies that the official designated by HUD to 
review an appeal may not be the same HUD official involved in the 
initial removal decision.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications and would not impose substantial direct 
compliance costs on State and local governments or preempt State law 
within the meaning of the Executive Order.

Unfunded Mandates Reform Act

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

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance numbers for the 
principal FHA single family programs are 14.117 and 14.133.

List of Subjects in 24 CFR Part 200

    Administrative practice and procedure, Claims, Equal employment 
opportunity, Fair housing, Home improvement, Housing standards, Lead 
poisoning, Loan programs--housing and community development, Minimum 
property standards, Mortgage insurance, Organization and functions 
(Government agencies), Penalties, Reporting and recordkeeping 
requirements, Social security, Unemployment compensation, Wages.

    Accordingly, for the reasons described in the preamble, HUD amends 
24 CFR part 200 as follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

    1. The authority citation for 24 CFR part 200 continues to read as 
follows:

    Authority: 12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).


    2. Add subpart F to read as follows:

[[Page 39240]]

Subpart F--Placement and Removal Procedures for Participation in FHA 
Programs

Nonprofit Organizations

Sec.
200.194   Placement of nonprofit organization on Nonprofit 
Organization Roster.
200.195   Removal of nonprofit organization from Nonprofit 
Organization Roster.

Subpart F--Placement and Removal Procedures for Participation in 
FHA Programs

Nonprofit Organization


Sec. 200.194  Placement of nonprofit organization on Nonprofit 
Organization Roster.

    (a) Nonprofit Organization Roster. HUD maintains a roster of 
nonprofit organizations that are qualified to participate in certain 
specified FHA activities. In order to be recognized as a nonprofit 
organization for purposes of single family regulations in this chapter, 
an organization must:
    (1) Be included in the Roster; and
    (2) Comply with any requirements stated in a specific applicable 
provision of the single family regulations in this chapter.
    (b) Application. To be included in the Roster, a nonprofit 
organization must apply to HUD using an application (or materials) in a 
form prescribed by HUD (which may require an affordable housing program 
narrative for the activities the nonprofit organization proposes to 
carry out). The nonprofit organization must specify in its application 
the FHA activities it proposes to carry out.
    (c) HUD response to application. HUD's review of the application 
will result in one of the following:
    (1) Approval of the nonprofit organization to participate in all, 
or some, of the FHA activities specified in its application and the 
addition of the nonprofit organization to the Roster.
    (2) Rejection due to deficiencies in the application. HUD will 
provide the nonprofit organization with a period to correct these 
deficiencies.
    (3) Rejection due to the nonprofit organization's failure to submit 
a program that complies with applicable single family regulations in 
this chapter, Mortgagee Letters, or other standards or instructions 
issued by HUD.
    (d) Reapplication after two years. The placement of a nonprofit 
organization on the Roster expires after two years. The nonprofit 
organization must reapply for placement on the Roster, in accordance 
with paragraph (b) of this section, before expiration of the two-year 
period.


Sec. 200.195  Removal of nonprofit organization from Nonprofit 
Organization Roster.

    (a) Cause for removal. HUD may remove a nonprofit organization from 
the FHA Nonprofit Organization Roster established under Sec. 200.194. 
Removal may be for any cause that HUD determines to be detrimental to 
FHA or any of its programs, including but not limited to:
    (1) Failure to comply with applicable single family regulations in 
this chapter, Mortgagee Letters or other written instructions or 
standards issued by HUD;
    (2) Failure to comply with applicable Civil Rights requirements;
    (3) Holding a significant number of FHA-insured mortgages that are 
in default, foreclosure, or claim status (in determining the number 
considered ``significant,'' HUD may compare the number of insured 
mortgages held by the nonprofit organization against the similar 
holdings of other nonprofit organizations);
    (4) Being debarred or suspended, subject to a limited denial of 
participation, or otherwise sanctioned by HUD;
    (5) Failure to further all objectives described in the affordable 
housing program narrative;
    (6) Misrepresentation or fraudulent statements; or
    (7) Failure to respond within a reasonable time to HUD inquiries, 
including recertification requests or other requests for further 
documentation.
    (b) Procedure for removal. A nonprofit organization that is 
debarred or suspended or subject to a limited denial of participation 
will be automatically removed from the FHA Nonprofit Organization 
Roster. In all other cases, the following procedure for removal 
applies:
    (1) HUD will give the nonprofit organization written notice of the 
proposed removal. The notice will include the reasons for the proposed 
removal and the duration of the proposed removal.
    (2) The nonprofit organization will have 20 days from the date of 
the notice (or longer, if provided in the notice) to submit a written 
response appealing the proposed removal and to request a conference. A 
request for a conference must be in writing and must be submitted along 
with the written response.
    (3) A HUD official will review the appeal and provide an informal 
conference if requested. The HUD official will send a response either 
affirming, modifying, or canceling the removal. The HUD official will 
not be someone who was involved in HUD's initial removal decision. HUD 
will respond with a decision within 30 days of receiving the response, 
or, if the nonprofit organization has requested a conference, within 30 
days after the completion of the conference. HUD may extend the 30-day 
period by providing written notice to the nonprofit organization.
    (4) If the nonprofit organization does not submit a timely written 
response, the removal will be effective 20 days after the date of HUD's 
initial removal notice (or after a longer period provided in the 
notice). If a written response is submitted, and the initial removal 
decision is affirmed or modified, the removal will be effective on the 
date of HUD's notice affirming or modifying the initial removal 
decision.
    (c) Placement on the Roster after removal. A nonprofit organization 
that has been removed from the FHA Nonprofit Organization Roster may 
apply for placement on the Roster (in accordance with Sec. 200.194) 
after the nonprofit organization's removal from the Roster has expired. 
An application will be rejected if the period for the nonprofit 
organization's removal from the Roster has not expired.
    (d) Other action. Nothing in this section prohibits HUD from taking 
such other action against a nonprofit organization, as provided in 24 
CFR part 24, or from seeking any other remedy against a nonprofit 
organization available to HUD by statute or otherwise.

    Dated: May 22, 2002.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 02-14090 Filed 6-5-02; 8:45 am]
BILLING CODE 4120-27-P