[Federal Register Volume 67, Number 114 (Thursday, June 13, 2002)]
[Rules and Regulations]
[Pages 40774-40788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14721]



[[Page 40773]]

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

Part II





Department of Housing and Urban Development





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



24 CFR Parts 1006 and 1007



Housing Assistance for Native Hawaiians: Native Hawaiian Housing Block 
Grant Program and Loan Guarantees for Native Hawaiian Housing; Interim 
Rule

  Federal Register / Vol. 67, No. 114 / Thursday, June 13, 2002 / Rules 
and Regulations  

[[Page 40774]]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 1006 and 1007

[Docket No. FR-4668-I-01]
RIN 2577-AC27


Housing Assistance for Native Hawaiians: Native Hawaiian Housing 
Block Grant Program and Loan Guarantees for Native Hawaiian Housing; 
Interim Rule

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Interim rule.

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

SUMMARY: The purpose of this interim rule is to implement HUD's Office 
of Public and Indian Housing (PIH) procedures and requirements for two 
new programs to address the housing needs of Native Hawaiians. The 
Native Hawaiian Housing Block Grant Program will provide housing block 
grants to fund affordable housing activities. The Section 184A Loan 
Guarantees for Native Hawaiian Housing Program will provide Native 
Hawaiian families with greater access to private mortgage resources by 
guaranteeing loans for one- to four-family housing located on Hawaiian 
Home Lands.

DATES: Effective Date: July 15, 2002.
    Comments Due Date: August 12, 2002.

ADDRESSES: Interested persons are invited to submit comments regarding 
this interim rule to the Rules Docket Clerk, Office of General Counsel, 
Room 10278, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 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. FAXED comments will not be 
accepted.

FOR FURTHER INFORMATION CONTACT: Sherone Ivey, Office of Native 
American Programs, Office of Public and Indian Housing, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 
20410, telephone (202) 401-7914. Persons with hearing or speech 
impairments may access this number via TTY by calling the toll-free 
Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: The Hawaiian Homelands Homeownership Act of 
2000 (HHH Act) was enacted as both Title II of the Omnibus Indian 
Advancement Act (Public Law 106-568, 114 Stat. 2868, approved December 
27, 2000) and Subtitle B of Title V of the American Homeownership and 
Economic Opportunity Act of 2000 (Public Law 106-569, 114 Stat. 2944, 
approved December 27, 2000). Because the Office of the Law Revision 
Counsel of the U.S. House of Representatives, which prepares and 
publishes the United States Code (U.S.C.), bases its codification of 
the HHH Act on Public Law 106-569, and for convenience of reference, 
the discussion of the HHH Act in this preamble will refer only to 
sections of Public Law 106-569.
    The HHH Act consists of four sections. The first two sections, 511 
and 512, provide the short title and the Congressional findings for the 
legislation, respectively. Section 513 of the HHH Act establishes a 
block grant program to provide housing assistance for Native Hawaiians 
(25 U.S.C. 4221 et seq.). Section 514 establishes a program of loan 
guarantees for Native Hawaiian Housing (12 U.S.C. 1715z-13b). This rule 
will implement these two new programs that address the housing needs of 
Native Hawaiians.
    Section 513 of the HHH Act amends the Native American Housing 
Assistance and Self-Determination Act of 1996 (25 U.S.C. 4101 et seq.) 
(NAHASDA) by adding to it a new ``Title VIII--Housing Assistance for 
Native Hawaiians''. Title VIII establishes a program of block grant 
assistance to provide affordable housing for Native Hawaiians that is 
closely modelled on the Indian Housing Block Grant (IHBG) Program under 
NAHASDA, which is implemented at 24 CFR part 1000. This rule will 
implement Title VIII of NAHASDA at 24 CFR part 1006 as the Native 
Hawaiian Housing Block Grant (NHHBG) Program.
    Readers of this rule will encounter references to NAHASDA in the 
rule text, even though this program is exclusively for Native Hawaiians 
rather than Native Americans. That is because the single section 513 of 
the HHH Act adds sections 801 through 824, which authorize this NHHBG 
Program, as Title VIII of NAHASDA. To avoid possible confusion arising 
from references to NAHASDA, this rule uses the term ``the Act'' when 
referring to Title VIII of NAHASDA. Therefore, when it is necessary to 
cite an authorizing statutory section in section 1006 of this rule, the 
reference will be to a section of ``the Act'' rather than to Title VIII 
of NAHASDA. For example, the environmental requirements in 
Sec. 1006.350 of this rule cite section 806 of the Act as their 
authority. Also because the NHHBG Program is authorized under the same 
statute as the IHBG Program, there are overlapping requirements that 
apply to both programs, such as the definitions that appear in section 
4 of NAHASDA. The Definitions section of this NHHBG rule, at 
Sec. 1006.10, includes relevant definitions from section 4 of NAHASDA, 
although section 4 is not specifically identified as their source. The 
definitions provided by the Act are also listed in Sec. 1006.10. The 
Act definitions have section 801 of NAHASDA, which lists the specific 
definitions applicable to the Native Hawaiian program, as their source.
    As noted above, the NHHBG Program is modelled after the IHBG 
Program. In broad outline, the Department of Hawaiian Home Lands (DHHL) 
is required to submit annually to HUD a housing plan with a one-year 
and a five-year component in order to qualify for an annual grant, just 
as each Tribe or its tribally designated housing entity (TDHE) is 
required to submit an annual Indian Housing Plan. Grant funds are then 
made available to the DHHL by HUD to be used in accordance with the 
housing plan. In the IHBG Program, the total amount of funding made 
available annually is divided among Tribes according to an allocation 
formula under section 302 of NAHASDA. Section 817 of NAHASDA similarly 
provides for an allocation formula for Native Hawaiian funding. 
However, since the DHHL is the sole recipient of funds under this NHHBG 
Program, a formula to allocate funds is not necessary, and this rule 
does not include an allocation formula.
    In other respects, 24 CFR part 1006 as implemented by this interim 
rule closely follows Title VIII of NAHASDA with some clarifications 
added, such as specific references to cross-cutting requirements that 
are generally applicable to Federal assistance (see, for example, 
Sec. 1006.370, Federal administrative requirements, and Sec. 1006.375, 
Other Federal requirements), or an explicit statement of how a 
requirement applies in a particular situation (for example, the 
clarification in Sec. 1006.345(a)(2) of how Davis-Bacon wage rates 
apply when NHHBG funds are used to assist homebuyers to acquire single 
family housing).
    Not every section of Title VIII of NAHASDA or every requirement 
necessary for the full implementation of the NHHBG Program is addressed 
in this rule. Some provisions of the statute, such as the formula 
discussed above, do not require implementation. Another statutory 
provision not addressed in this rule is section 811(b)(1) of the Act. 
Section 811(b)(1) states: ``The Director shall, using amounts of any 
grants

[[Page 40775]]

received under this title, reserve and use for operating under 810 such 
amounts as may be necessary to provide for the continued maintenance 
and efficient operation of such housing.'' (Emphasis added.) HUD 
believes that this provision does not impose a requirement on the DHHL 
to provide operating assistance for housing assisted with NHHBG funds 
for several reasons. First, the language of section 811(b)(1) does not 
contain any reference to housing to which ``such'' housing refers. 
Second, unlike the Indian Housing Block Grant statute (at section 
202(1) of NAHASDA), section 810--the eligible affordable housing 
activities section--does not expressly list operating assistance as an 
eligible activity. In addition, the statutory language for the Indian 
Housing Block Grant program upon which section 811(b)(1) is based 
(section 203(b) of NAHASDA), expressly imposes the requirement for 
continued maintenance and efficient operation of ``such'' housing on 
``housing developed or operated pursuant to a contract between the 
Secretary and an Indian housing authority pursuant to the United States 
Housing Act of 1937'' in order to assure continued operating assistance 
for this housing after termination (pursuant to title V of NAHASDA) of 
operating assistance for low-rent Indian housing under the United 
States Housing Act of 1937. However, project-based rental assistance 
for rental housing assisted with NHHBG funds is eligible under section 
810(5) as a model activity.
    In addition, there are certain statutory provisions (such as 
section 802(d)(1), which requires HUD, by regulation, to authorize the 
DHHL to use a percentage of grant amounts for reasonable administrative 
and planning expenses) and additional non-statutory, discretionary 
requirements (such as additional program administration requirements) 
that must be implemented by proposed rulemaking to give interested 
parties an opportunity for public comment before they become effective. 
HUD intends to issue a proposed rule to address such additional 
requirements. This interim rule implements the NHHBG program to a 
sufficient extent to permit HUD to make available to the DHHL the funds 
already appropriated for this significant program in an expeditious 
manner.
    Because the statutes authorizing the IHBG Program and the NHHBG 
Program are nearly identical, the requirements in the proposed rule HUD 
will issue for the NHHBG Program will closely follow the requirements 
of the IHBG rule at 24 CFR part 1000. During the interim period before 
the requirements of the NHHBG proposed rule are implemented in a final 
rule, HUD will allow the DHHL to undertake activities authorized by the 
Act and awaiting implementation through the proposed rule upon the 
DHHL's written agreement to follow the relevant requirements in part 
1000. For example, the DHHL would be permitted to invest NHHBG funds, 
as authorized by section 812(b) of the Act, before the effective date 
of the rule implementing section 812(b), upon agreeing in writing to 
follow the requirements of 24 CFR 1000.58, which governs the investment 
of IHBG funds. If the DHHL chooses to exercise this option, HUD will 
advise the public through notice published in the Federal Register.
    Section 514 of the HHH Act adds a new section 184A to the Housing 
and Community Development Act of 1992 to authorize a new program of 
housing loan guarantees for Native Hawaiians. Just as the NHHBG Program 
under section 513 of the HHH Act is closely modelled on the IHBG 
Program under NAHASDA, the Section 184A Loan Guarantee for Native 
Hawaiian Housing Program is based upon the Section 184 Loan Guarantee 
for Indian Housing Program, which is implemented at 24 CFR part 1005. 
This rule proposes to implement the Native Hawaiian Housing Loan 
Guarantee Program at 24 CFR part 1007 in accordance with the basic 
statutory requirements provided for Section 184A with the discretionary 
aspects, such as identifying eligible collateral, following the 
requirements adopted in the Indian Housing Loan Guarantee Program.

Findings and Certifications

Justification for Interim Rule

    In general, the Department 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, however, does 
provide in Sec. 10.1 for exceptions from that general rule where the 
Department finds good cause to omit advance notice and public 
participation. The good cause requirement is satisfied when the prior 
public procedure is ``impracticable, unnecessary, or contrary to the 
public interest''. The Department finds that good cause exists to 
publish this interim rule for effect without first soliciting public 
comment. Prior public procedure is contrary to the public interest in 
that it will unduly delay the availability of funding already 
appropriated to address the pressing housing needs of Native Hawaiians. 
In addition, prior public procedure is unnecessary because the interim 
rule closely follows the statutory requirements for the programs to be 
implemented, and any subsequent adjustments and additions to the rule, 
including provisions resulting from the public comment that is here 
requested, can be timely implemented through proposed rulemaking, if 
necessary, without disrupting program implementation.

Paperwork Reduction Act Statement

    The information collection requirements contained in this rule have 
been submitted to the Office of Management and Budget (OMB) for review 
under section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35).
    Estimate of the total reporting and recordkeeping burden that will 
result from the collection of information:
    Reporting and Recordkeeping Burden:

----------------------------------------------------------------------------------------------------------------
                                                                  Annual time for     Est. avg.      Est. annual
                Section reference                    Number of        freq. of       requirement       burden
                                                    respondents     requirement         (hrs.)         (hrs.)
----------------------------------------------------------------------------------------------------------------
1007.50.........................................             250               1             0.18             46
1007.75.........................................               3               1             1.00              3
                                                                                                   -------------
  Total Reporting and Recordkeeping Burden        ..............  ...............  ...............            49
   (Hours)......................................
----------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;

[[Page 40776]]

    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond; including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this proposal. Comments must be 
received within sixty (60) days from the date of this proposal. 
Comments must refer to the proposal by name and docket number (FR-4668) 
and must be sent to: Lauren Wittenberg, HUD Desk Officer, Office of 
Management and Budget, New Executive Office Building, Washington, DC 
20503; and Mildred Hamman, Reports Liaison Officer, Office of the 
Assistant Secretary for Public and Indian Housing, Department of 
Housing & Urban Development, 451--7th Street, SW., Room 4244, 
Washington, DC 20410.
    Additional information on these information collection requirements 
may be obtained from the Reports Liaison Officer.

Environmental Impact

    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 (42 U.S.C. 4223). The Finding of No Significant Impact is 
available for public inspection between the hours of 7:30 a.m. and 5:30 
p.m. weekdays in the Office of General Counsel, Rules Docket Clerk, 
Room 10276, U.S. Department of Housing and Urban Development, 451 
Seventh Street, SW., Washington, DC 20410-0500.

Regulatory Planning and Review

    The Office of Management and Budget has reviewed this interim rule 
under Executive Order 12866 (captioned ``Regulatory Planning and 
Review'') and 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 during regular 
business hours (7:30 a.m. to 5:30 p.m.) at the Office of the General 
Counsel, Rules Docket Clerk, Room 10276, U.S. Department of Housing and 
Urban Development, 451 Seventh Street, SW., Washington, DC 20410-0500.

Regulatory Flexibility Act

    The Secretary has reviewed this interim rule before publication and 
by approving it certifies, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that this interim rule would not 
have a significant economic impact on a substantial number of small 
entities. Notwithstanding HUD's determination that this rule will not 
have a significant economic effect on a substantial number of small 
entities, HUD specifically invites comments regarding any less 
burdensome alternatives to this rule that will meet HUD's objectives as 
described in this preamble.

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, within the 
meaning of the UMRA, any Federal mandates on any State, local, or 
tribal governments or on the private sector.

List of Subjects

24 CFR Part 1006

    Community development block grants, Grant programs--housing and 
community development, Grant programs--Native Hawaiians, Low and 
moderate income housing, Native Hawaiians, Reporting and recordkeeping 
requirements.

24 CFR Part 1007

    Loan programs--Native Hawaiians, Native Hawaiians, Reporting and 
recordkeeping requirements.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number is 14.873 for the 
Native Hawaiian Housing Block Grant Program, and 14.874 for the Loan 
Guarantees for Native Hawaiian Housing Program.
    Accordingly, chapter IX of title 24 of the Code of Federal 
Regulations is amended by adding new parts 1006 and 1007 as follows:

PART 1006--NATIVE HAWAIIAN HOUSING BLOCK GRANT PROGRAM

Subpart A--General
Sec.
1006.1   Applicability.
1006.10   Definitions.
1006.20   Grants for affordable housing activities.
1006.30   Waivers.
Subpart B--Housing Plan
1006.101   Housing plan requirements.
1006.110   Review of plans.
Subpart C--Eligible Activities
1006.201   Eligible affordable housing activities.
1006.205   Development.
1006.210   Housing services.
1006.215   Housing management services.
1006.220   Crime prevention and safety activities.
1006.225   Model activities.
1006.230   Administrative and planning costs.
1006.235   Types of investments.
Subpart D--Program Requirements
1006.301   Eligible families.
1006.305   Low-income requirement and income targeting.
1006.310   Rent and lease--purchase limitations.
1006.315   Lease requirements.
1006.320   Tenant or homebuyer selection.
1006.325   Maintenance, management and efficient operation.
1006.330   Insurance coverage.
1006.335   Use of nonprofit organizations and public-private 
partnerships.
1006.340   Treatment of program income.
1006.345   Labor standards.
1006.350   Environmental review.
1006.355   Nondiscrimination requirements.
1006.360   Conflict of interest.
1006.365   Program administration responsibilities.
1006.370   Federal administrative requirements.
1006.375   Other Federal requirements.
Subpart E--Monitoring and Accountability
1006.401  Monitoring of compliance.
1006.410  Performance reports.
1006.420  Review of DHHL's performance.
1006.430  Corrective and remedial action.
1006.440  Remedies for noncompliance.

    Authority: 25 U.S.C. 4221 et seq.; 42 U.S.C. 3535(d).

Subpart A--General


Sec. 1006.1  Applicability.

    The requirements and procedure of this part apply to grants under 
the Native Hawaiian Housing Block Grant (NHHBG) Program, authorized by 
the Hawaiian Homelands Homeownership Act of 2000 (HHH Act), which adds 
Title VIII--Housing Assistance For Native Hawaiians (25 U.S.C. 4221 et 
seq.), to the Native American Housing Assistance and Self-Determination 
Act of 1996 (NAHASDA) (25 U.S.C. 4101 et seq.).


Sec. 1006.10  Definitions.

    The following definitions apply in this part:

[[Page 40777]]

    Act means title VIII of NAHASDA, as amended.
    Adjusted income means the annual income that remains after 
excluding the following amounts:
    (1) Youths, students, and persons with disabilities. $480 for each 
member of the family residing in the household (other than the head of 
the household or the spouse of the head of the household):
    (i) Who is under 18 years of age; or
    (ii) Who is:
    (A) 18 years of age or older; and
    (B) A person with disabilities or a full-time student.
    (2) Elderly and disabled families. $400 for an elderly or disabled 
family.
    (3) Medical and attendant expenses. The amount by which 3 percent 
of the annual income of the family is exceeded by the aggregate of:
    (i) Medical expenses, in the case of an elderly or disabled family; 
and
    (ii) Reasonable attendant care and auxiliary apparatus expenses for 
each family member who is a person with disabilities, to the extent 
necessary to enable any member of the family (including a member who is 
a person with disabilities) to be employed.
    (4) Child care expenses. Child care expenses, to the extent 
necessary to enable another member of the family to be employed or to 
further his or her education.
    (5) Earned income of minors. The amount of any earned income of any 
member of the family who is less than 18 years of age.
    (6) Travel expenses. Excessive travel expenses, not to exceed $25 
per family per week, for employment--or education-related travel.
    (7) Other amounts. Such other amounts as may be provided in the 
housing plan for Native Hawaiians.
    Affordable Housing means housing that complies with the 
requirements of the Act and this part. The term includes permanent 
housing for homeless persons who are persons with disabilities, 
transitional housing, and single room occupancy housing.
    Assistant Secretary means HUD's Assistant Secretary for Public and 
Indian Housing.
    Department of Hawaiian Home Lands (DHHL) means the agency or 
department of the government of the State of Hawaii that is responsible 
for the administration of the Hawaiian Homes Commission Act, 1920 (HHCA 
1920) (42 Stat. 108 et seq.).
    Director means the Director of the Department of Hawaiian Home 
Lands.
    Drug-Related Criminal Activity means the illegal manufacture, sale, 
distribution, use, or possession with intent to manufacture, sell, 
distribute, or use a controlled substance (as such term is defined in 
section 102 of the Controlled Substances Act).
    Elderly families; near-elderly families means:
    (1) In general. The term ``elderly family'' or ``near-elderly 
family'' means a family whose head (or his or her spouse), or whose 
sole member, is:
    (i) For an elderly family, an elderly person; or
    (ii) For a near-elderly family, a near-elderly person.
    (2) Certain families included. The term ``elderly family'' or 
``near-elderly family'' includes:
    (i) Two or more elderly persons or near-elderly persons, as the 
case may be, living together; and
    (ii) One or more persons described in paragraph (2)(i) of this 
definition living with one or more persons determined under the housing 
plan to be essential to their care or well-being.
    Elderly person means an individual who is at least 62 years of age.
    Family includes, but is not limited to, a family with or without 
children, an elderly family, a near-elderly family, a disabled family, 
a single person, as determined by the DHHL.
    Hawaiian Home Lands means lands that:
    (1) Have the status as Hawaiian home lands under section 204 of the 
HHCA 1920 (42 Stat. 110); or
    (2) Are acquired pursuant to the HHCA 1920.
    Homebuyer payment means the payment of a family purchasing a home 
pursuant to a long-term lease purchase agreement.
    Housing area means an area of Hawaiian Home Lands with respect to 
which the DHHL is authorized to provide assistance for affordable 
housing under the Act and this part.
    Housing plan means a plan developed by the DHHL pursuant to the Act 
and this part, particularly Sec. 1006.101.
    HUD means the Department of Housing and Urban Development.
    Low-income family means a family whose income does not exceed 80 
percent of the median income for the area, as determined by HUD with 
adjustments for smaller and larger families, except that HUD may, for 
purposes of this paragraph, establish income ceilings higher or lower 
than 80 percent of the median for the area on the basis of the findings 
of HUD or the agency that such variations are necessary because of 
prevailing levels of construction costs or unusually high or low family 
incomes.
    Median income means, with respect to an area that is a housing 
area, the greater of:
    (1) The median income for the housing area, which shall be 
determined by HUD; or
    (2) The median income for the State of Hawaii.
    Native Hawaiian means any individual who is:
    (1) A citizen of the United States; and
    (2) A descendant of the aboriginal people, who, prior to 1778, 
occupied and exercised sovereignty in the area that currently 
constitutes the State of Hawaii, as evidenced by:
    (i) Genealogical records;
    (ii) Verification by kupuna (elders) or kama'aina (long-term 
community residents); or
    (iii) Birth records of the State of Hawaii.
    Native Hawaiian Housing Block Grant (NHHBG) Funds means funds made 
available under the Act, plus program income.
    Near-elderly person means an individual who is at least 55 years of 
age and less than 62 years of age.
    Nonprofit means, with respect to an organization, association, 
corporation, or other entity, that no part of the net earnings of the 
entity inures to the benefit of any member, founder, contributor, or 
individual.
    Secretary means the Secretary of Housing and Urban Development.
    Tenant-based rental assistance means a form of rental assistance in 
which the assisted tenant may move from a dwelling unit with a right to 
continued assistance. Tenant-based rental assistance under this part 
also includes security deposits for rental of dwelling units.
    Transitional housing means housing that:
    (1) Is designed to provide housing and appropriate supportive 
services to persons, including (but not limited to) deinstitutionalized 
individuals with disabilities, homeless individuals with disabilities, 
and homeless families with children; and
    (2) Has as its purpose facilitating the movement of individuals and 
families to independent living within a time period that is set by the 
DHHL or project owner before occupancy.


Sec. 1006.20  Grants for affordable housing activities.

    (a) Annual grant. Each fiscal year, HUD will make a grant (to the 
extent that amounts are made available) under the Act to the DHHL to 
carry out affordable housing activities for Native Hawaiian families 
who are eligible to reside on the Hawaiian Home Lands, if:
    (1) The Director has submitted to HUD a housing plan for that 
fiscal year; and

[[Page 40778]]

    (2) HUD has determined that the housing plan complies with the 
requirements of Sec. 1006.101.
    (b) Waiver. HUD may waive housing plan requirements if HUD finds 
that the DHHL has not complied or cannot comply with those requirements 
due to circumstances beyond the control of the DHHL.


Sec. 1006.30  Waivers.

    Upon determination of good cause, the Secretary may, subject to 
statutory limitations, waive any provision of this part and delegate 
this authority in accordance with section 106 of the Department of 
Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3535(q)).

Subpart B--Housing Plan


Sec. 1006.101  Housing plan requirements.

    The DHHL must submit a housing plan for each Federal Fiscal Year 
grant. The housing plan has two components, a five-year plan and a one-
year plan, as follows:
    (a) Five-year plan. Each housing plan must contain, for the 5-year 
period beginning with the fiscal year for which the plan is first 
submitted, the following information:
    (1) Mission statement. A general statement of the mission of the 
DHHL to serve the needs of the low-income Native Hawaiian families 
eligible to live on the Hawaiian Home Lands to be served by the DHHL;
    (2) Goals and objectives. A statement of the goals and objectives 
of the DHHL to enable the DHHL to serve the needs identified in 
paragraph (a)(1), of this section during the 5-year period; and
    (3) Activities plans. An overview of the activities planned during 
the 5-year period including an analysis of the manner in which the 
activities will enable the DHHL to meet its mission, goals, and 
objectives.
    (b) One-year plan. The housing plan must contain the following 
information for the fiscal year for which the assistance under the Act 
is to be made available:
    (1) Goals and objectives. A statement of the goals and objectives 
to be accomplished by the DHHL with its annual grant allocation that 
are measurable in a quantitative way.
    (2) Statement of needs. A statement of the housing needs of the 
low-income families served by the DHHL and the means by which those 
needs will be addressed during the period covered by the plan, 
including:
    (i) A description of the estimated housing needs and the need for 
assistance for the low-income families to be served by the DHHL, 
including a description of the manner in which the geographical 
distribution of assistance is consistent with:
    (A) The geographical needs of those families; and
    (B) Needs for various categories of housing assistance; and
    (ii) A description of the estimated housing needs for all families 
to be served by the DHHL.
    (3) Financial resources. An operating budget for the DHHL that 
includes an identification and a description of:
    (i) The NHHBG funds and other financial resources reasonably 
available to the DHHL to carry out eligible activities, including an 
explanation of the manner in which NHHBG funds will be used to leverage 
additional resources; and
    (ii) Eligible activities to be undertaken and their projected cost, 
including administrative expenses.
    (4) Affordable housing resources. A statement of the affordable 
housing resources currently available at the time of the submittal of 
the plan and to be made available during the period covered by the 
plan, including:
    (i) A description of the significant characteristics of the housing 
market in the State of Hawaii, including the availability of housing 
from other public sources and private market housing;
    (ii) The effect of the characteristics identified under paragraph 
(b)(4)(i) of this section, on the DHHL's decision to use the NHHBG for:
    (A) Rental assistance;
    (B) The production of new units;
    (C) The acquisition of existing units; or
    (D) The rehabilitation of units;
    (iii) A description of the structure, coordination, and means of 
cooperation between the DHHL and any other governmental entities in the 
development, submission, or implementation of the housing plan, 
including a description of:
    (A) The involvement of private, public, and nonprofit organizations 
and institutions;
    (B) The use of loan guarantees under section 184A of the Housing 
and Community Development Act of 1992; and
    (C) Other housing assistance provided by the United States, 
including loans, grants, and mortgage insurance;
    (iv) A description of the manner in which the plan will address the 
needs identified pursuant to paragraph (b)(2) of this section;
    (v) A description of:
    (A) Any existing or anticipated homeownership programs and rental 
programs to be carried out during the period covered by the plan; and
    (B) The requirements and assistance available under the programs 
referred to in paragraph (b)(4)(v)(A) of this section;
    (vi) A description of:
    (A) Any existing or anticipated housing rehabilitation programs 
necessary to ensure the long-term viability of housing to be carried 
out during the period covered by the plan; and
    (B) The requirements and assistance available under the programs 
referred to in paragraph (b)(4)(vi)(A) of this section;
    (vii) A description of:
    (A) All other existing or anticipated housing assistance provided 
by the DHHL during the period covered by the plan, including 
transitional housing; homeless housing; college housing; and supportive 
services housing; and
    (B) The requirements and assistance available under such programs; 
(viii) A description of:
    (A) Any housing to be demolished or disposed of;
    (B) A timetable for that demolition or disposition;
    (C) A financial analysis of the proposed demolition/disposition; 
and
    (D) Any additional information HUD may request with respect to that 
demolition or disposition.
    (ix) A description of the manner in which the DHHL will coordinate 
with welfare agencies in the State of Hawaii to ensure that residents 
of the affordable housing will be provided with access to resources to 
assist in obtaining employment and achieving self-sufficiency;
    (x) A description of the requirements established by the DHHL to:
    (A) Promote the safety of residents of the affordable housing;
    (B) Facilitate the undertaking of crime prevention measures;
    (C) Allow resident input and involvement, including the 
establishment of resident organizations; and
    (D) Allow for the coordination of crime prevention activities 
between the DHHL and local law enforcement officials; and
    (xi) A description of the entities that will carry out the 
activities under the plan, including the organizational capacity and 
key personnel of the entities.
    (5) Certifications of compliance. The DHHL must certify that it:
    (i) Will comply with:
    (A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.) and with the Fair Housing Act (42 U.S.C. 3601 et seq.), to the 
extent applicable as described in Sec. 1006.355, in carrying out the 
Native Hawaiian Housing Block Grant Program; and

[[Page 40779]]

    (B) Other applicable Federal statutes;
    (ii) Will require adequate insurance coverage for housing units 
that are owned and operated or assisted with NHHBG funds, in compliance 
with the requirements of Sec. 1006.330;
    (iii) Has policies in effect and available for review by HUD and 
the public governing the eligibility, admission, and occupancy of 
families for housing assisted with NHHBG funds and governing the 
selection of families receiving other assistance under the Act and this 
part;
    (iv) Has policies in effect and available for review by HUD and the 
public governing rents charged, including the methods by which such 
rents or homebuyer payments are determined, for housing assisted with 
NHHBG funds; and
    (v) Has policies in effect and available for review by HUD and the 
public governing the management and maintenance of rental and lease-
purchase housing assisted with NHHBG funds.
    (c) Updates to plan. (1) In general. Subject to paragraph (c)(2) of 
this section, after the housing plan has been submitted for a fiscal 
year, the DHHL may comply with the provisions of this section for any 
succeeding fiscal year with respect to information included for the 5-
year period under paragraph (a) of this section by submitting only such 
information regarding such changes as may be necessary to update the 
plan previously submitted and by submitting information for the 1-year 
period under paragraph (b) of this section.
    (2) Complete plans. The DHHL shall submit a complete plan under 
this section not later than 4 years after submitting an initial plan, 
and not less frequently than every 4 years thereafter.
    (d) Amendments to plan. The DHHL must submit any amendment to the 
one-year housing plan for HUD review before undertaking any new 
activities that are not addressed in the current plan. The amendment 
must include a description of the new activity and a revised budget 
reflecting the changes. HUD will review the revised plan and will 
notify DHHL within 30 days whether the amendment complies with 
applicable requirements.


Sec. 1006.110  Review of plans.

    (a) Review. (1) In general. Within 60 days of receipt of the 
housing plan, HUD will conduct a limited review to ensure that the 
contents of the plan comply with the requirements of Sec. 1006.101, are 
consistent with information and data available to HUD, and are not 
prohibited by or inconsistent with any provision of the Act and this 
part or any other applicable law.
    (2) Limitation. HUD will review the housing plan only to the extent 
that HUD considers that the review is necessary.
    (3) Incomplete plans. If HUD determines that any of the required 
certifications are not included in the housing plan, the plan shall be 
considered to be incomplete. HUD may also consider a housing plan to be 
incomplete if it does not address all of the requirements of 
Sec. 1006.101, and the DHHL has not requested a waiver of the missing 
requirement.
    (b) Notice. (1) In general. Not later than 60 days after receiving 
the housing plan, HUD will notify the DHHL whether or not the plan 
complies with applicable requirements.
    (2) Notice of reasons for determination of noncompliance. If HUD 
determines that the contents of the housing plan do not comply with the 
requirements of Sec. 1006.101, or are not consistent with information 
and data available to HUD, or are prohibited by or inconsistent with 
any provision of the Act and this part or any other applicable law, HUD 
will specify in the notice under paragraph (b)(1) of this section:
    (i) The reasons for noncompliance; and
    (ii) Any modifications necessary for the plan to be in compliance.
    (3) Effect of HUD's failure to take action. If HUD does not notify 
the DHHL, upon the expiration of the 60-day period described in 
paragraph (a)(1) of this section, the plan shall be considered to have 
been determined to comply with the requirements under Sec. 1006.101 and 
the DHHL shall be considered to have been notified of compliance.

Subpart C--Eligible Activities


Sec. 1006.201  Eligible affordable housing activities.

    Eligible affordable housing activities are development, housing 
services, housing management services, crime prevention and safety 
activities and model activities. NHHBG funds may only be used for 
eligible activities that are consistent with the DHHL's housing plan.


Sec. 1006.205  Development.

    (a) NHHBG funds may be used for the acquisition, new construction, 
reconstruction, or moderate or substantial rehabilitation of affordable 
housing for homeownership or rental, which may include:
    (1) Real property acquisition;
    (2) Acquisition of affordable housing;
    (3) Financing acquisition of affordable housing by homebuyers 
through:
    (i) Down payment assistance;
    (ii) Closing costs assistance;
    (iii) Direct lending; and
    (iv) Interest subsidies or other financial assistance
    (4) New construction of affordable housing;
    (5) Reconstruction of affordable housing;
    (6) Moderate rehabilitation of affordable housing, including but 
not limited to:
    (i) Lead-based paint hazards elimination or reduction;
    (ii) Improvements to provide physical accessibility for disabled 
persons; and
    (iii) Energy-related improvements;
    (7) Substantial rehabilitation of affordable housing, including but 
not limited to:
    (i) Lead-based paint hazards elimination or reduction;
    (ii) Improvements to provide physical accessibility for disabled 
persons; and
    (iii) Energy-related improvements;
    (8) Site improvement, including recreational areas and playgrounds 
for use by residents of affordable housing and on-site streets and 
sidewalks;
    (9) The development of utilities and utility services;
    (10) Conversion;
    (11) Demolition;
    (12) Administration and planning; and
    (13) Other related activities, such as environmental review and 
architectural and engineering plans for the affordable housing project.
    (b) Multi-unit projects. NHHBG funds may be used to assist one or 
more housing units in a multi-unit project. Only the actual NHHBG 
eligible development costs of the assisted units may be charged to the 
NHHBG Program. If the assisted and unassisted units are not comparable, 
the actual costs may be determined based upon a method of cost 
allocation. If the assisted and unassisted units are comparable in 
terms of size, features, and number of bedrooms, the actual cost of the 
NHHBG-assisted units can be determined by pro-rating the total NHHBG 
eligible development costs of the project so that the proportion of the 
total development costs charged to the NHHBG Program does not exceed 
the proportion of the NHHBG-assisted units in the project.


Sec. 1006.210  Housing services.

    NHHBG funds may be used for the provision of housing-related 
services for affordable housing, including:
    (a) Housing counseling in connection with rental or homeownership 
assistance;

[[Page 40780]]

    (b) The establishment and support of resident organizations and 
resident management corporations;
    (c) Energy auditing;
    (d) Activities related to the provisions of self-sufficiency and 
other services;
    (e) Homelessness prevention activities, which may include short 
term subsidies to defray rent and utility bills of an eligible family;
    (f) Payments to prevent foreclosure on a home;
    (g) Tenant-based rental assistance, which may include security 
deposits and/or first month's rent; and
    (h) Other services related to assisting owners, tenants, 
contractors, and other entities participating or seeking to participate 
in other housing activities assisted pursuant to the Act and this part.


Sec. 1006.215  Housing management services.

    NHHBG funds may be used for the provision of management services 
for affordable housing, including:
    (a) The preparation of work specifications;
    (b) Loan processing;
    (c) Inspections;
    (d) Tenant selection;
    (e) Management of tenant-based rental assistance; and
    (f) Management of affordable housing projects.


Sec. 1006.220  Crime prevention and safety activities.

    NHHBG funds may be used for the provision of safety, security, and 
law enforcement measures and activities appropriate to protect 
residents of affordable housing from crime, including the costs of:
    (a) Physical improvements for affordable housing to enhance 
security, such as, fences, monitors, locks, and additional lighting;
    (b) Security personnel for affordable housing; and
    (c) Equipment for patrols.


Sec. 1006.225  Model activities.

    NHHBG funds may be used for housing activities under model programs 
that are:
    (a) Designed to carry out the purposes of the Act and this part; 
and
    (b) Specifically approved by HUD as appropriate for those purposes.


Sec. 1006.230  Administrative and planning costs.

    Up to such amount as HUD may authorize, or such other limit as may 
be specified by statute, of each grant received under the Act may be 
used for any reasonable administrative and planning expenses of the 
DHHL relating to carrying out the Act and this part and activities 
assisted with NHHBG funds, including:
    (a) General management, oversight and coordination. Reasonable 
costs of overall program management, coordination, monitoring, and 
evaluation. Such costs include, but are not limited to, necessary 
expenditures for the following:
    (1) Salaries, wages, and related costs of the DHHL's staff. In 
charging costs to this category the DHHL may either include the entire 
salary, wages, and related costs allocable to the NHHBG Program of each 
person whose primary responsibilities with regard to the program 
involves program administration assignments, or the prorated share of 
the salary, wages, and related costs of each person whose job includes 
any program administration assignments. The DHHL may use only one of 
these methods. Program administration includes the following types of 
assignments:
    (i) Developing systems and schedules for ensuring compliance with 
program requirements;
    (ii) Developing interagency agreements and agreements with entities 
receiving NHHBG funds;
    (iii) Monitoring NHHBG-assisted housing for progress and compliance 
with program requirements;
    (iv) Preparing reports and other documents related to the program 
for submission to HUD;
    (v) Coordinating the resolution of audit and monitoring findings;
    (vi) Evaluating program results against stated objectives; and
    (vii) Managing or supervising persons whose primary 
responsibilities with regard to the program include such assignments as 
those described in paragraphs (a)(1)(i) through (vi) of this section;
    (2) Travel costs incurred for official business in carrying out the 
program;
    (3) Administrative services performed under third party contracts 
or agreements, including such services as general legal services, 
accounting services, and audit services; and
    (4) Other costs for goods and services required for administration 
of the program, including such goods and services as rental or purchase 
of equipment, insurance, utilities, office supplies, and rental and 
maintenance (but not purchase) of office space.
    (b) Staff and overhead. Staff and overhead costs directly related 
to carrying out a project or service, such as work specifications 
preparation, loan processing, inspections, and other services related 
to assisting potential owners, tenants, and homebuyers (e.g., housing 
counseling); and staff and overhead costs directly related to providing 
advisory and other relocation services to persons displaced by the a 
project, including timely written notices to occupants, referrals to 
comparable and suitable replacement property, property inspections, 
counseling, and other assistance necessary to minimize hardship. These 
costs may be charged as administrative costs or as project costs under 
Sec. 1006.205 or service costs under Secs. 1006.210 or 1006.215, at the 
discretion of the DHHL.
    (c) Public information. The provision of information and other 
resources to residents and citizen organizations participating in the 
planning, implementation, or assessment of projects being assisted with 
NHHBG funds.
    (d) Indirect costs. Indirect costs may be charged to the NHHBG 
Program under a cost allocation plan prepared in accordance with OMB 
Circulars A-87 or A-122 as applicable.
    (e) Preparation of the housing plan and reports. Preparation of the 
housing plan under Sec. 1006.101 and performance reports under 
Sec. 1006.410. Preparation includes the costs of public hearings, 
consultations, and publication.
    (f) Other Federal requirements. Costs of complying with the Federal 
requirements in Secs. 1006.370 and 1006.375 of this part. Project-
specific environmental review costs may be charged as administrative 
costs or as project costs, at the discretion of the DHHL.


Sec. 1006.235  Types of investments.

    Subject to the requirements of this part and to the DHHL's housing 
plan, the DHHL has the discretion to use NHHBG funds for affordable 
housing activities in the form of equity investments, interest-bearing 
loans or advances, noninterest-bearing loans or advances, interest 
subsidies, the leveraging of private investments, and other forms of 
assistance that HUD determines to be consistent with the purposes of 
the Act. The DHHL has the right to establish the terms of assistance 
provided with NHHBG funds.

Subpart D--Program Requirements


Sec. 1006.301  Eligible families.

    (a) Assistance for eligible housing activities under the Act and 
this part is limited to low-income Native Hawaiian families who are 
eligible to reside on the Hawaiian Home Lands, except as provided under 
paragraphs (b) and (c), of this section.
    (b) Exception to low-income requirement. (1) Other Native Hawaiian 
families. The DHHL may provide

[[Page 40781]]

assistance for homeownership activities and through loan guarantee 
activities to Native Hawaiian families who are not low-income families, 
as approved by HUD, to address a need for housing for those families 
that cannot be reasonably met without that assistance.
    (2) Limitations. HUD approval is required if the DHHL plans to use 
its annual grant amount for assistance in accordance with paragraph 
(b)(1), of this section.
    (c) Other families. The DHHL may provide housing or NHHBG 
assistance to a family that is not low-income and is not composed of 
Native Hawaiians if the DHHL documents that:
    (1) The presence of the family in the housing involved is essential 
to the well-being of Native Hawaiian families; and
    (2) The need for housing for the family cannot be reasonably met 
without the assistance.
    (d) Written policies. The DHHL must develop, follow, and have 
available for review by HUD written policies governing the eligibility, 
admission, and occupancy of families for housing assisted with NHHBG 
funds and governing the selection of families receiving other 
assistance under the Act and this part.


Sec. 1006.305  Low-income requirement and income targeting.

    (a) In general. Housing qualifies as affordable housing for 
purposes of the Act and this part only if each dwelling unit in the 
housing:
    (1) In the case of rental housing, is made available for occupancy 
only by a family that is a low-income family at the time of the initial 
occupancy of that family of that unit; and
    (2) In the case of housing for homeownership, is made available for 
purchase only by a family that is a low-income family at the time of 
purchase, or is an owner-occupied unit in which the family is low-
income at the time it receives NHHBG assistance.
    (b) NHHBG-assisted rental units must meet the affordability 
requirements for the remaining useful life of the property, as 
determined by HUD, or such other period as HUD determines in accordance 
with section 813(a)(2)(B) of the Act.
    (c) Enforceable agreements. (1) The DHHL, through binding 
contractual agreements with owners or other authorized entities, shall 
ensure long-term compliance with the provisions of this part.
    (2) The agreements referred to in paragraph (c)(1) of this section 
shall provide for:
    (i) To the extent allowable by Federal and State law, the 
enforcement of the provisions of the Act and this part by the DHHL and 
HUD; and
    (ii) Remedies for breach of the provisions of the Act and this 
part.
    (d) Exception. Notwithstanding the requirements of this section, 
housing assisted with NHHBG funds pursuant to Sec. 1006.301(b) shall be 
considered affordable housing for purposes of the Act and this part.


Sec. 1006.310  Rent and lease-purchase limitations.

    (a) Rents. The DHHL must develop and follow written policies 
governing rents for rental housing units assisted with NHHBG funds, 
including methods by which rents are determined. The maximum monthly 
rent for a low-income family may not exceed 30 percent of the family's 
monthly adjusted income.
    (b) Lease-purchase. If DHHL assists low-income families to become 
homeowners of rental housing through a long-term lease (i.e. 10 or more 
years) with an option to purchase the housing, DHHL must develop and 
follow written policies governing lease-purchase payments for rental 
housing units assisted with NHHBG funds, including methods by which 
payments are determined. The maximum monthly payment for a low-income 
family may not exceed 30 percent of the family's monthly adjusted 
income.
    (c) Exception for certain homeownership payments. Homeownership 
payments for families who are not low-income, as permitted under 
Sec. 1006.301(b), are not subject to the requirement that homebuyer 
payments may not exceed 30 percent of the monthly adjusted income of 
that family.
    (d) Low-income families who receive homeownership assistance other 
than lease-purchase assistance are not subject to the limitations in 
paragraphs (a) and (b) of this section.


Sec. 1006.315  Lease requirements.

    Except to the extent otherwise provided by or inconsistent with the 
laws of the State of Hawaii, in renting dwelling units in affordable 
housing assisted with NHHBG funds, the DHHL, owner, or manager must use 
leases that:
    (a) Do not contain unreasonable terms and conditions;
    (b) Require the DHHL, owner, or manager to maintain the housing in 
compliance with applicable local housing codes and quality standards;
    (c) Require the DHHL, owner, or manager to give adequate written 
notice of termination of the lease, which shall be the period of time 
required under applicable State or local law;
    (d) Specify that, with respect to any notice of eviction or 
termination, notwithstanding any State or local law, a resident shall 
be informed of the opportunity, before any hearing or trial, to examine 
any relevant documents, record, or regulations directly related to the 
eviction or termination;
    (e) Require that the DHHL, owner, or manager may not terminate the 
tenancy, during the term of the lease, except for serious or repeated 
violation of the terms and conditions of the lease, violation of 
applicable Federal, State, or local law, or for other good cause; and
    (f) Provide that the DHHL, owner, or manager may terminate the 
tenancy of a resident for any activity, engaged in by the resident, any 
member of the household of the resident, or any guest or other person 
under the control of the resident, that:
    (1) Threatens the health or safety of, or right to peaceful 
enjoyment of the premises by, other residents or employees of the DHHL, 
owner, or manager;
    (2) Threatens the health or safety of, or right to peaceful 
enjoyment of their premises by, persons residing in the immediate 
vicinity of the premises; or
    (3) Involves criminal activity (including drug-related criminal 
activity) on or off the premises.


Sec. 1006.320  Tenant or homebuyer selection.

    As a condition to receiving grant amounts under the Act, the DHHL 
must adopt and use written tenant and homebuyer selection policies and 
criteria that:
    (a) Are consistent with the purpose of providing housing for low-
income families;
    (b) Are reasonably related to program eligibility and the ability 
of the tenant or homebuyer assistance applicant to perform the 
obligations of the lease; and
    (c) Provide for:
    (1) The selection of tenants and homebuyers from a written waiting 
list in accordance with the policies and goals set forth in the housing 
plan; and
    (2) The prompt notification in writing of any rejected applicant of 
the grounds for that rejection.


Sec. 1006.325  Maintenance, management and efficient operation.

    (a) Written policies. The DHHL must develop and enforce policies 
governing the management and maintenance of rental housing assisted 
with NHHBG funds.
    (b) Disposal of housing. This section may not be construed to 
prevent the DHHL, or any entity funded by the DHHL, from demolishing or 
disposing of housing, pursuant to regulations established by HUD.

[[Page 40782]]

Sec. 1006.330  Insurance coverage.

    (a) In general. As a condition to receiving NHHBG funds, the DHHL 
must require adequate insurance coverage for housing units that are 
owned or operated or assisted with more than $5,000 of NHHBG funds, 
including a loan of more than $5,000 that includes payback provisions.
    (b) Adequate insurance. Insurance is adequate if it is a purchased 
insurance policy from an insurance provider or a plan of self-insurance 
in an amount to cover replacement cost.
    (c) Loss covered. The DHHL must provide for or require insurance in 
adequate amounts to indemnify against loss from fire, weather, and 
liability claims for all housing units owned, operated or assisted by 
the DHHL. NHHBG funds may only be used to purchase insurance for low-
income homeowners and only in amounts sufficient to protect against the 
loss of the NHHBG funds at risk in the property. The cost of such 
insurance may not include coverage for a resident's personal property.
    (d) Exception. The DHHL shall not require insurance if the 
assistance is in an amount less than $5000.
    (e) Contractor's coverage. The DHHL shall require contractors and 
subcontractors to either provide insurance covering their activities or 
negotiate adequate indemnification coverage to be provided by the DHHL 
in the contract.


Sec. 1006.335  Use of nonprofit organizations and public-private 
partnerships.

    (a) Nonprofit organizations. The DHHL must, to the extent 
practicable, provide for private nonprofit organizations experienced in 
the planning and development of affordable housing for Native Hawaiians 
to carry out affordable housing activities with NHHBG funds.
    (b) Public-private partnerships. The DHHL must make all reasonable 
efforts to maximize participation by the private sector, including 
nonprofit organizations and for-profit entities, in implementing its 
housing plan.


Sec. 1006.340  Treatment of program income.

    (a) Defined. Program income is income realized from the use of 
NHHBG funds. If gross income is used to pay costs incurred that are 
essential or incidental to generating the income, these costs may be 
deducted from gross income to determine program income. Program income 
includes income from fees for services performed; from the use or 
rental of real or personal property acquired or assisted with NHHBG 
funds; from the sale of property acquired or assisted with NHHBG funds; 
from payments of principal and interest on loans made with NHHBG funds; 
and from payments of interest earned on investment of NHHBG funds 
pursuant to Sec. 1006.235.
    (b) Authority to retain. The DHHL may retain any program income 
that is realized from any NHHBG funds if:
    (1) That income was realized after the initial disbursement of the 
NHHBG funds received by the DHHL; and
    (2) The DHHL agrees to use the program income for affordable 
housing activities in accordance with the provisions of the Act and 
this part; and
    (3) The DHHL disburses program income before disbursing additional 
NHHBG funds in accordance with 24 CFR part 85.
    (c) Exclusion of amounts. If the amount of income received in a 
single fiscal year by the DHHL, which would otherwise be considered 
program income, does not exceed $25,000, such funds may be retained but 
will not be considered program income.


Sec. 1006.345  Labor standards.

    (a) Davis-Bacon wage rates. (1) As described in section 805(b) of 
the Act, contracts and agreements for assistance, sale or lease under 
this part must require prevailing wage rates determined by the 
Secretary of Labor under the Davis-Bacon Act (40 U.S.C. 276a-276a-5) to 
be paid to laborers and mechanics employed in the development of 
affordable housing.
    (2) When NHHBG assistance is only used to assist homebuyers to 
acquire single family housing, the Davis-Bacon wage rates apply to the 
construction of the housing if there is a written agreement with the 
owner or developer of the housing that NHHBG assistance will be used to 
assist homebuyers to buy the housing.
    (3) Prime contracts not in excess of $2000 are exempt from Davis-
Bacon wage rates.
    (b) HUD-determined wage rates. Section 805(b) of the Act also 
mandates that contracts and agreements for assistance, sale or lease 
under the Act require that prevailing wages determined or adopted 
(subsequent to a determination under applicable State or local law) by 
HUD shall be paid to maintenance laborers and mechanics employed in the 
operation, and to architects, technical engineers, draftsmen and 
technicians employed in the development, of affordable housing.
    (c) Contract Work Hours and Safety Standards Act. Contracts in 
excess of $100,000 to which Davis-Bacon or HUD-determined wage rates 
apply are subject by law to the overtime provisions of the Contract 
Work Hours and Safety Standards Act (40 U.S.C. 327).
    (d) Volunteers. The requirements in 24 CFR part 70 concerning 
exemptions for the use of volunteers on projects subject to Davis-Bacon 
and HUD-determined wage rates are applicable.
    (e) Other laws and issuances. The DHHL, contractors, 
subcontractors, and other participants must comply with regulations 
issued under the labor standards provisions cited in this section, and 
other applicable Federal laws and regulations pertaining to labor 
standards.


Sec. 1006.350  Environmental review.

    (a) In order to ensure that the policies of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) (NEPA) and 
other provisions of Federal law which further the purposes of that act 
(as specified in 24 CFR 58.5) are most effectively implemented in 
connection with the expenditure of NHHBG funds, HUD will provide for 
the release of funds for specific projects to the DHHL if the Director 
of the DHHL assumes all of the responsibilities for environmental 
review, decisionmaking, and action under NEPA and other provisions of 
Federal law which further the purposes of that act (as specified in 24 
CFR 58.5) that would apply to HUD were HUD to undertake those projects 
as Federal projects.
    (b) An environmental review does not have to be completed before a 
HUD finding of compliance for the housing plan or amendments to the 
housing plan submitted by the DHHL.
    (c) No funds may be committed to a grant activity or project before 
the completion of the environmental review and approval of the request 
for release of funds and related certification required by sections 
806(b) and 806(c) of the Act, except as authorized by 24 CFR part 58.
    (d) As set forth in section 806(a)(2)(B) of the Act and 24 CFR 
58.77, HUD will:
    (1) Provide for the monitoring of environmental reviews performed 
by the DHHL under this section;
    (2) At its discretion, facilitate training for the performance of 
such reviews by the DHHL; and,
    (3) At its discretion, provide for the suspension or termination of 
the assumption of responsibilities under this section based upon a 
finding of substantial failure of the DHHL to execute responsibilities 
under this section.


Sec. 1006.355  Nondiscrimination requirements.

    Program eligibility under the Act and this part may be restricted 
to Native

[[Page 40783]]

Hawaiians. Subject to the preceding sentence, no person may be 
discriminated against on the basis of race, color, national origin, 
religion, sex, familial status, or disability. The following 
nondiscrimination requirements are applicable to the use of NHHBG 
funds:
    (a) The requirements of the Age Discrimination Act of 1975 (42 
U.S.C. 6101-6107) and HUD's implementing regulations in 24 CFR part 
146;
    (b) Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) 
and HUD's regulations at 24 CFR part 8; and
    (c) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et 
seq.) and the Fair Housing Act (42 U.S.C. 3601 et seq.), to the extent 
that nothing in their requirements concerning discrimination on the 
basis of race shall be construed to prevent the provision of NHHBG 
assistance:
    (1) To the DHHL on the basis that the DHHL served Native Hawaiians; 
or
    (2) To an eligible family on the basis that the family is a Native 
Hawaiian family.


Sec. 1006.360  Conflict of interest.

    In the procurement of property and services by the DHHL and 
contractors, the conflict of interest provisions in 24 CFR 85.36 or 24 
CFR 84.42 apply.


Sec. 1006.365  Program administration responsibilities.

    (a) Responsibilities. The DHHL is responsible for managing the day-
to-day operations of the NHHBG Program, ensuring that NHHBG funds are 
used in accordance with all program requirements and written 
agreements, and taking appropriate action when performance problems 
arise. The use of contractors does not relieve the DHHL of this 
responsibility.
    (b) Agreements with contractors. The DHHL may enter into agreements 
with private contractors selected under the provisions of 24 CFR 85.36 
for purposes of administering all or part of the NHHBG program for the 
DHHL.


Sec. 1006.370  Federal administrative requirements.

    (a) Governmental entities. The DHHL and any governmental contractor 
receiving NHHBG funds shall comply with the requirements and standards 
of OMB Circular No. A-87, ``Cost Principles for State, Local and Indian 
Tribal Governments,'' and with 24 CFR part 85 ``Uniform Administrative 
Requirements for Grants and Cooperative Agreements to State, Local and 
Federally Recognized Indian Tribal Governments.''
    (b) Non-profit organizations. The requirements of OMB Circular No. 
A-122, ``Cost Principles for Non-profit Organizations,'' and the 
requirements of 24 CFR part 84, ``Uniform Administrative Requirements 
for Grants and Agreements with Institutions of Higher Education, 
Hospitals, and Other Non-profit Organizations,'' apply to contractors 
receiving NHHBG funds that are non-profit organizations that are not 
governmental contractors.
    (c)(1) With respect to the applicability of cost principles, all 
items of cost listed in Attachment B of OMB Circular A-87 which require 
prior Federal agency approval are allowable without the prior approval 
of HUD to the extent that they comply with the general policies and 
principles stated in Attachment A of this circular and are otherwise 
eligible under this part, except for the following:
    (i) Depreciation methods for fixed assets shall not be changed 
without specific approval of HUD or, if charged through a cost 
allocation plan, the Federal cognizant agency.
    (ii) Fines and penalties are unallowable costs to the NHHBG 
program.
    (2) In addition, no person providing consultant services in an 
employer-employee type of relationship shall receive more than a 
reasonable rate of compensation for personal services paid with NHHBG 
funds. In no event, however, shall such compensation exceed the 
equivalent of the daily rate paid for Level IV of the Executive 
Schedule.
    (d) OMB Circulars referenced in this part may be obtained from 
www.whitehouse.gov/omb/circulars/index.html; telephone; (202) 395-3080.


Sec. 1006.375  Other Federal requirements.

    (a) Lead-based paint. The following subparts of HUD's lead-based 
paint regulations at part 35, which implement the Lead-Based Paint 
Poisoning Prevention Act (42 U.S.C. 4822-4846) and the Residential 
Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), 
apply to the use of assistance under this part:
    (1) Subpart A, ``Disclosure of Known Lead-Based Paint Hazards Upon 
Sale or Lease of Residential Property'';
    (2) Subpart B, ``General Lead-Based Paint Requirements and 
Definitions for All Programs'';
    (3) Subpart H, ``Project-Based Rental Assistance'';
    (4) Subpart J, ``Rehabilitation'';
    (5) Subpart K, ``Acquisition, Leasing, Support Services, or 
Operation'';
    (6) Subpart M, ``Tenant-Based Rental Assistance''; and
    (7) Subpart R, ``Methods and Standards for Lead-Based Paint Hazard 
Evaluation and Hazard Reduction Activities''.
    (b) Drug-free workplace. The Drug-Free Workplace Act of 1988 (41 
U.S.C. 701 et seq.) and HUD's implementing regulations in 24 CFR part 
24 apply to the use of assistance under this part.
    (c) Displacement and relocation. The following relocation and real 
property acquisition policies are applicable to programs developed or 
operated under the Act and this part:
    (1) Real property acquisition requirements. The acquisition of real 
property for an assisted activity is subject to 49 CFR part 24, subpart 
B.
    (2) Minimize displacement. Consistent with the other goals and 
objectives of the Act and this part, the DHHL shall assure that it has 
taken all reasonable steps to minimize the displacement of persons 
(households, businesses, nonprofit organizations, and farms) as a 
result of a project assisted under the Act and this part.
    (3) Relocation assistance for displaced persons. A displaced person 
(defined in paragraph (d)(7) of this section) must be provided 
relocation assistance at the levels described in, and in accordance 
with the requirements of, the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, as amended (URA) (42 U.S.C. 
4601-4655) and implementing regulations at 49 CFR part 24.
    (4) Appeals to the DHHL. A person who disagrees with the DHHL's 
determination concerning whether the person qualifies as a ``displaced 
person,'' or the amount of relocation assistance for which the person 
is eligible, may file a written appeal of that determination with the 
DHHL.
    (5) Responsibility of DHHL. (i) The DHHL shall certify that it will 
comply with the URA, the regulations at 49 CFR part 24, and the 
requirements of this section. The DHHL shall ensure such compliance 
notwithstanding any third party's contractual obligation to the DHHL to 
comply with the provisions in this section.
    (ii) The cost of required relocation assistance is an eligible 
project cost in the same manner and to the same extent as other project 
costs. However, such assistance may also be paid for with funds 
available to the DHHL from any other source.
    (iii) The DHHL shall maintain records in sufficient detail to 
demonstrate compliance with this section.
    (6) Definition of displaced person. (i) For purposes of this 
section, the term ``displaced person'' means any person (household, 
business, nonprofit organization, or farm) that moves from real 
property, or moves his or her personal property from real property, 
permanently, as a direct result of

[[Page 40784]]

rehabilitation, demolition, or acquisition for a project assisted under 
the Act. The term ``displaced person'' includes, but is not limited to:
    (A) A tenant-occupant of a dwelling unit who moves from the 
building/complex permanently after the submission to HUD of a housing 
plan that is later approved;
    (B) Any person, including a person who moves before the date 
described in paragraph (d)(7)(i)(A) of this section, that the DHHL 
determines was displaced as a direct result of acquisition, 
rehabilitation, or demolition for the assisted project;
    (C) A tenant-occupant of a dwelling unit who moves from the 
building/complex permanently after execution of the agreement between 
the DHHL and HUD, if the move occurs before the tenant is provided 
written notice offering him or her the opportunity to lease and occupy 
a suitable, decent, safe and sanitary dwelling in the same building/
complex, under reasonable terms and conditions, upon completion of the 
project. Such reasonable terms and conditions include a monthly rent 
and estimated average monthly utility costs that do not exceed the 
greater of:
    (1) The tenant-occupant's monthly rent and estimated average 
monthly utility costs before the agreement; or
    (2) 30 percent of gross household income.
    (D) A tenant-occupant of a dwelling who is required to relocate 
temporarily, but does not return to the building/complex, if either:
    (1) The tenant-occupant is not offered payment for all reasonable 
out-of-pocket expenses incurred in connection with the temporary 
relocation, including the cost of moving to and from the temporarily 
occupied unit, any increased housing costs and incidental expenses; or
    (2) Other conditions of the temporary relocation are not 
reasonable.
    (E) A tenant-occupant of a dwelling who moves from the building/
complex after he or she has been required to move to another dwelling 
unit in the same building/complex in order to carry out the project, if 
either:
    (1) The tenant-occupant is not offered reimbursement for all 
reasonable out-of-pocket expenses incurred in connection with the move; 
or
    (2) Other conditions of the move are not reasonable.
    (ii) Notwithstanding the provisions of paragraph (c)(6)(i) of this 
section, a person does not qualify as a ``displaced person'' (and is 
not eligible for relocation assistance under the URA or this section), 
if:
    (A) The person moved into the property after the submission of the 
housing plan to HUD, but before signing a lease or commencing 
occupancy, was provided written notice of the project, its possible 
impact on the person (e.g., the person may be displaced, temporarily 
relocated or suffer a rent increase) and the fact that the person would 
not qualify as a ``displaced person'' or for any assistance provided 
under this section as a result of the project;
    (B) The person is ineligible under 49 CFR 24.2(g)(2); or
    (C) The DHHL determines the person is not displaced as a direct 
result of acquisition, rehabilitation, or demolition for an assisted 
project. To exclude a person on this basis, HUD must concur in that 
determination.
    (iii) The DHHL may at any time ask HUD to determine whether a 
specific displacement is or would be covered under this section.
    (7) Definition of initiation of negotiations. For purposes of 
determining the formula for computing the replacement housing 
assistance to be provided to a person displaced as a direct result of 
rehabilitation or demolition of the real property, the term 
``initiation of negotiations'' means the execution of the agreement 
covering the rehabilitation or demolition (See 49 CFR part 24).
    (d) Audits. The DHHL must comply with the requirements of the 
Single Audit Act and OMB Circular A-133, with the audit report 
providing a schedule of expenditures for each grant. A copy of each 
audit must be submitted to HUD concurrent with submittal to the Audit 
Clearinghouse.

Subpart E--Monitoring and Accountability


Sec. 1006.401  Monitoring of compliance.

    (a) Periodic reviews and monitoring. At least annually, the DHHL 
must review the activities conducted and housing assisted with NHHBG 
funds to assess compliance with the requirements of the Act and this 
part. This review must encompass and incorporate the results of the 
monitoring by the DHHL of all contractors involved in the 
administration of NHHBG activities.
    (b) Review. Each review under paragraph (a) of this section must 
include on-site inspection of housing to determine compliance with 
applicable requirements.
    (c) Results. The results of each review under paragraph (a) of this 
section must be:
    (1) Included in a performance report of the DHHL submitted to HUD 
under Sec. 1006.410; and
    (2) Made available to the public.


Sec. 1006.410  Performance reports.

    (a) Requirement. For each fiscal year, the DHHL must:
    (1) Review the progress the DHHL has made during that fiscal year 
in achieving goals stated in its housing plan; and
    (2) Submit a report in a form acceptable to HUD, within 60 days of 
the end of the DHHL's fiscal year, to HUD describing the conclusions of 
the review.
    (b) Content. Each report submitted under this section for a fiscal 
year shall:
    (1) Describe the use of grant amounts provided to the DHHL for that 
fiscal year;
    (2) Assess the relationship of the use referred to in paragraph 
(b)(1), of this section, to the goals identified in its housing plan;
    (3) Indicate the programmatic accomplishments of the DHHL; and
    (4) Describe the manner in which the DHHL would change its housing 
plan as a result of its experiences administering the grant under the 
Act.
    (c) Public availability. (1) Comments by Native Hawaiians. In 
preparing a report under this section, the DHHL shall make the report 
publicly available to Native Hawaiians who are eligible to reside on 
the Hawaiian Home Lands and give a sufficient amount of time to permit 
them to comment on that report, in such manner and at such time as the 
DHHL may determine, before it is submitted to HUD .
    (2) Summary of comments. The report under this section must include 
a summary of any comments received by the DHHL from beneficiaries under 
paragraph (c)(1) of this section, regarding the program to carry out 
the housing plan.
    (d) HUD review. HUD will:
    (1) Review each report submitted under the Act and this part; and
    (2) With respect to each such report, make recommendations as HUD 
considers appropriate to carry out the purposes of the Act.


Sec. 1006.420  Review of DHHL's performance.

    (a) Objective. HUD will, at least annually, review DHHL's 
performance to determine whether the DHHL has:
    (1) Carried out eligible activities in a timely manner;
    (2) Carried out and made certifications in accordance with the 
requirements and the primary objectives of the Act and this part and 
with other applicable laws;

[[Page 40785]]

    (3) A continuing capacity to carry out the eligible activities in a 
timely manner;
    (4) Complied with its housing plan; and
    (5) Submitted accurate performance reports.
    (b) Basis for review. In reviewing DHHL's performance, HUD will 
consider all available evidence, which may include, but not be limited 
to, the following:
    (1) The DHHL's housing plan and any amendments thereto;
    (2) Reports prepared by the DHHL;
    (3) Records maintained by the DHHL;
    (4) Results of HUD's monitoring of the DHHL's performance, 
including field evaluation of the quality of the work performed;
    (5) Audit reports;
    (6) Records of drawdowns on the line of credit;
    (7) Records of comments and complaints by citizens and 
organizations; and
    (8) Litigation.
    (c) The DHHL's failure to maintain records may result in a finding 
that the DHHL failed to meet the applicable requirement to which the 
record pertains.


Sec. 1006.430  Corrective and remedial action.

    (a) General. One or more corrective or remedial actions will be 
taken by HUD when, on the basis of a performance review, HUD determines 
that the DHHL has not:
    (1) Complied with the requirements of the Act and this part and 
other applicable laws and regulations, including the environmental 
responsibilities assumed under Sec. 1006.350;
    (2) Carried out its activities substantially as described in its 
housing plan;
    (3) Made substantial progress in carrying out its program and 
achieving its quantifiable goals as described in its housing plan; or
    (4) Shown the continuing capacity to carry out its approved 
activities in a timely manner.
    (b) Action. The action taken by HUD will be designed, first, to 
prevent the continuance of the deficiency; second, to mitigate any 
adverse effects or consequences of the deficiency; and third, to 
prevent a recurrence of the same or similar deficiencies. The following 
actions may be taken singly or in combination, as appropriate for the 
circumstances:
    (1) Issue a letter of warning advising the DHHL of the performance 
problem(s), describing the corrective actions that HUD believes should 
be taken, establishing a completion date for corrective actions, and 
notifying the DHHL that more serious actions may be taken if the 
performance problem(s) is not corrected or is repeated;
    (2) Request the DHHL to submit progress schedules for completing 
activities or complying with the requirements of the Act and this part;
    (3) Recommend that the DHHL suspend, discontinue, or not incur 
costs for the affected activity;
    (4) Recommend that the DHHL redirect funds from affected activities 
to other eligible activities;
    (5) Recommend that the DHHL reimburse its program account or line 
of credit under the Act in the amount improperly expended and reprogram 
the use of the funds; and
    (6) Recommend that the DHHL obtain appropriate technical assistance 
using existing grant funds or other available resources to overcome the 
performance problem(s).


Sec. 1006.440  Remedies for noncompliance.

    (a) Remedies. If HUD finds that the DHHL has failed to comply 
substantially with any provision of the Act or this part, the following 
actions may be taken by HUD:
    (1) Terminate payments to the DHHL;
    (2) Reduce payments to the DHHL by an amount equal to the amount 
not expended in accordance with the Act or this part;
    (3) Limit the availability of payments to programs, projects, or 
activities not affected by such failure to comply; or
    (4) Adjust, reduce or withdraw grant amounts or take other action 
as appropriate in accordance with reviews and audits.
    (b) Exception. Grant amounts already expended on affordable housing 
activities may not be recaptured or deducted from future assistance 
provided to the DHHL.
    (c) HUD may, upon due notice, suspend payments at any time after 
the issuance of the opportunity for hearing pending such hearing and 
final decision, to the extent HUD determines such action necessary to 
preclude the further expenditure of funds for activities affected by 
such failure to comply.
    (d) Hearing requirement. Before imposing remedies under this 
section, HUD will:
    (1) Take at least one of the corrective or remedial actions 
specified under Sec. 1006.430 and permit the DHHL to make an 
appropriate and timely response;
    (2) Provide the DHHL with the opportunity for an informal 
consultation with HUD regarding the proposed action; and
    (3) Provide DHHL with reasonable notice and opportunity for a 
hearing.
    (e) Continuance of actions. If HUD takes an action under paragraph 
(a) of this section, the action will continue until HUD determines that 
the failure of the DHHL to comply with the provision has been remedied 
and the DHHL is in compliance with the provision.
    (f) Referral to the Attorney General. In lieu of, or in addition 
to, any action HUD may take under paragraph (a) of this section, if HUD 
has reason to believe that the DHHL has failed to comply substantially 
with any provision of the Act or this part, HUD may refer the matter to 
the Attorney General of the United States with a recommendation that an 
appropriate civil action be instituted. Upon receiving a referral, the 
Attorney General may bring a civil action in any United States district 
court of appropriate jurisdiction for such relief as may be 
appropriate, including an action to recover the amount of the 
assistance furnished under the Act that was not expended in accordance 
with the Act or this part or for mandatory or injunctive relief.

PART 1007--SECTION 184A LOAN GUARANTEES FOR NATIVE HAWAIIAN HOUSING

Sec.
1007.1   Purpose.
1007.5   Definitions.
1007.10   Eligible Borrowers.
1007.15   Eligible uses.
1007.20   Eligible housing.
1007.25   Eligible lenders.
1007.30   Security for loan.
1007.35   Loan terms.
1007.40   Environmental requirements.
1007.45   Applicability of civil rights statutes.
1007.50   Certificate of guarantee.
1007.55   Guarantee fee.
1007.60   Liability under guarantee.
1007.65   Transfer and assumption.
1007.70   Disqualification of lenders and civil money penalties.
1007.75   Payment under guarantee.

    Authority: 12 U.S.C. 1715z-13b; 42 U.S.C. 3535(d).


Sec. 1007.1  Purpose.

    This part provides the requirements and procedures that apply to 
loan guarantees for Native Hawaiian Housing under section 184A of the 
Housing and Community Development Act of 1992. Section 184A permits HUD 
to guarantee an amount not to exceed 100 percent of the unpaid 
principal and interest that is due on an eligible loan. The purpose of 
section 184A and this part is to provide access to sources of private 
financing to Native Hawaiian families who otherwise could not acquire 
housing financing because of the unique legal status of the

[[Page 40786]]

Hawaiian Home Lands or as a result of a lack of access to private 
financial markets.


Sec. 1007.5  Definitions.

    The following definitions apply in this part:
    Department of Hawaiian Home Lands (DHHL) means the agency or 
department of the government of the State of Hawaii that is responsible 
for the administration of the Hawaiian Homes Commission Act, 1920 (42 
Stat. 108 et seq.).
    Eligible entity means a Native Hawaiian family, the Department of 
Hawaiian Home Lands, the Office of Hawaiian Affairs, and private 
nonprofit or private for-profit organizations experienced in the 
planning and development of affordable housing for Native Hawaiians.
    Family means one or more persons maintaining a household, and 
includes, but is not limited to, a family with or without children, an 
elderly family, a near-elderly family, a disabled family, or a single 
person.
    Guarantee Fund means the Native Hawaiian Housing Loan Guarantee 
Fund under this part.
    Hawaiian Home Lands means lands that:
    (1) Have the status of Hawaiian Home Lands under section 204 of the 
Hawaiian Homes Commission Act (42 Stat. 110); or
    (2) Are acquired pursuant to that Act.
    HUD means the Department of Housing and Urban Development.
    Native Hawaiian means any individual who is:
    (1) A citizen of the United States; and
    (2) A descendant of the aboriginal people, who, prior to 1778, 
occupied and exercised sovereignty in the area that currently 
constitutes the State of Hawaii, as evidenced by:
    (i) Genealogical records;
    (ii) Verification by kupuna (elders) or kama'aina (long-term 
community residents); or
    (iii) Birth records of the State of Hawaii.
    Native Hawaiian family means a family with at least one member who 
is a Native Hawaiian.
    Office of Hawaiian Affairs means the entity of that name 
established under the constitution of the State of Hawaii.


Sec. 1007.10  Eligible borrowers.

    A loan guaranteed under this part may only be made to the following 
borrowers:
    (a) A Native Hawaiian family;
    (b) The Department of Hawaiian Home Lands;
    (c) The Office of Hawaiian Affairs; or
    (d) A private, nonprofit organization experienced in the planning 
and development of affordable housing for Native Hawaiians.


Sec. 1007.15  Eligible uses.

    (a) In general. A loan guaranteed under this part may only be used 
to construct, acquire, or rehabilitate eligible housing.
    (b) Construction advances. Advances made by the lender during 
construction are eligible if:
    (1) The mortgagor and the mortgagee execute a building loan 
agreement, approved by HUD, setting forth the terms and conditions 
under which advances will be made;
    (2) The advances are made only as provided in the building loan 
agreement;
    (3) The principal amount of the mortgage is held by the mortgagee 
in an interest bearing account, trust, or escrow for the benefit of the 
mortgagor, pending advancement to the mortgagor or to his or her 
creditors as provided in the loan agreement; and
    (4) The mortgage bears interest on the amount advanced to the 
mortgagor or to his or her creditors and on the amount held in an 
account or trust for the benefit of the mortgagor.


Sec. 1007.20  Eligible housing.

    (a) A loan guaranteed under this part may only be made for one to 
four-family dwellings that are standard housing, in accordance with 
paragraph (b), of this section. The housing must be located on Hawaiian 
Home Lands for which a housing plan that provides for the use of loan 
guarantees under this part has been submitted and approved under part 
1006 of this chapter.
    (b) Standard housing must meet housing safety and quality standards 
that:
    (1) Provide sufficient flexibility to permit the use of various 
designs and materials; and
    (2) Require each dwelling unit to:
    (i) Be decent, safe, sanitary, and modest in size and design;
    (ii) Conform with applicable general construction standards for the 
region in which the housing is located;
    (iii) Contain a plumbing system that:
    (A) Uses a properly installed system of piping;
    (B) Includes a kitchen sink and a partitional bathroom with 
lavatory, toilet, and bath or shower; and
    (C) Uses water supply, plumbing, and sewage disposal systems that 
conform to any minimum standards established by the applicable county 
or State;
    (iv) Contain an electrical system using wiring and equipment 
properly installed to safely supply electrical energy for adequate 
lighting and for operation of appliances that conforms to any 
appropriate county, State, or national code;
    (v) Be not less than the size provided under the applicable locally 
adopted standards for size of dwelling units, except that HUD, upon 
request of the DHHL may waive the size requirements under this 
paragraph; and
    (vi) Conform with the energy performance requirements for new 
construction established by HUD under section 526(a) of the National 
Housing Act (12 U.S.C.A. 1735f-4), unless HUD determines that the 
requirements are not applicable.
    (c) The relevant requirements of the Lead-Based Paint Poisoning 
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint 
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing 
regulations at part 35, subparts A, B, and R of this title and 
Secs. 200.805 and 200.810 of this title apply to housing eligible for a 
loan guaranteed under this part.


Sec. 1007.25  Eligible lenders.

    (a) In general. To qualify for a guarantee under this part, a loan 
shall be made only by a lender meeting qualifications established in 
this part and approved by HUD, including any lender described in 
paragraph (b), of this section, except that a loan otherwise insured or 
guaranteed by an agency of the Federal Government or made by the DHHL 
from amounts borrowed from the United States shall not be eligible for 
a guarantee under this part.
    (b) Approval. The following lenders shall be considered to be 
lenders that have been approved by HUD:
    (1) Any mortgagee approved by HUD for participation in the single 
family mortgage insurance program under title II of the National 
Housing Act (12 U.S.C.A. 1707 et seq.);
    (2) Any lender that makes housing loans under chapter 37 of title 
38, United States Code, that are automatically guaranteed under section 
3702(d) of title 38, United States Code;
    (3) Any lender approved by the Secretary of Agriculture to make 
guaranteed loans for single family housing under the Housing Act of 
1949 (42 U.S.C.A. 1441 et seq.);
    (4) Any other lender that is supervised, approved, regulated, or 
insured by any agency of the Federal Government; and
    (5) Any other lender approved by HUD under this part.

[[Page 40787]]

Sec. 1007.30  Security for loan.

    (a) In general. A loan guaranteed under section 184A of the Housing 
and Community Development Act of 1992 and this part may be secured by 
any collateral authorized under and not prohibited by Federal or State 
law and determined by the lender and approved by HUD to be sufficient 
to cover the amount of the loan. Eligible collateral may include, but 
is not limited to, the following:
    (1) The property and/or improvements to be acquired, constructed, 
or rehabilitated, to the extent that an interest in such property is 
not subject to any restrictions against alienation applicable to 
Hawaiian Home Lands;
    (2) A security interest in non-Hawaiian Home Lands property;
    (3) Personal property; or
    (4) Cash, notes, an interest in securities, royalties, annuities, 
or any other property that is transferable and whose present value may 
be determined.
    (b) Hawaiian Home Lands property interest as collateral. If a 
property interest in Hawaiian Home Lands is used as collateral or 
security for the loan, the following additional provisions apply:
    (1) Approved Lease. Any land lease for a unit financed under 
section 184A of the Housing and Community Development Act of 1992 must 
be on a form approved by both the DHHL and HUD.
    (2) Assumption or sale of leasehold. The lease form must contain a 
provision requiring the DHHL's consent before any assumption of an 
existing lease, except where title to the leasehold interest is 
obtained by HUD through foreclosure of the guaranteed mortgage or a 
deed in lieu of foreclosure. A mortgagee other than HUD must obtain the 
DHHL's consent before obtaining title through a foreclosure sale. The 
DHHL's consent must be obtained on any subsequent transfer from the 
purchaser, including HUD, at foreclosure sale. The lease may not be 
terminated by the lessor without HUD's approval while the mortgage is 
guaranteed or held by HUD.
    (3) Liquidation. The lender or HUD shall only pursue liquidation 
after offering to transfer the account to another eligible Native 
Hawaiian family or the DHHL. The lender or HUD shall not sell, 
transfer, or otherwise dispose of or alienate the property except to 
another eligible Native Hawaiian family or the DHHL.
    (4) Eviction procedures. Before HUD will guarantee a loan secured 
by a Hawaiian Home Lands property, the DHHL must notify HUD that it has 
adopted and will enforce procedures for eviction of defaulted 
mortgagors where the guaranteed loan has been foreclosed.
    (i) Enforcement. If HUD determines that the DHHL has failed to 
enforce adequately its eviction procedures, HUD will cease issuing 
guarantees for loans under this part except pursuant to existing 
commitments. Adequate enforcement is demonstrated where prior evictions 
have been completed within 60 days after the date of the notice by HUD 
that foreclosure was completed.
    (ii) Review. If HUD ceases issuing guarantees for the DHHL's 
failure to enforce its eviction procedures, HUD shall notify the DHHL 
of such action and that the DHHL may, within 30 days after notification 
of HUD's action, file a written appeal with the Field Office of Native 
American Programs (FONAP) Administrator. Within 30 days after 
notification of an adverse decision of the appeal by the FONAP 
Administrator, the DHHL may file a written request for review with the 
Deputy Assistant Secretary, Office of Native American Programs (ONAP).
    Upon notification of an adverse decision by the Deputy Assistant 
Secretary, the DHHL has 30 additional days to file an appeal with the 
Assistant Secretary for Public and Indian Housing. The determination of 
the Assistant Secretary shall be final, but the DHHL may resubmit the 
issue to the Assistant Secretary for review at any subsequent time if 
new evidence or changed circumstances warrant reconsideration.


Sec. 1007.35  Loan terms.

    To be eligible for guarantee under this part, the loan shall:
    (a) Be made for a term not exceeding 30 years;
    (b) Bear interest (exclusive of the guarantee fee under 
Sec. 1007.55 and service charges, if any) at a rate agreed upon by the 
borrower and the lender and determined by HUD to be reasonable, but not 
to exceed the rate generally charged in the area (as determined by HUD) 
for home mortgage loans not guaranteed or insured by any agency or 
instrumentality of the Federal Government;
    (c) Involve a principal obligation not exceeding:
    (1) 97.75 percent of the appraised value of the property as of the 
date the loan is accepted for guarantee (or 98.75 percent if the value 
of the property is $50,000 or less); or
    (2) The amount approved by HUD under this section; and
    (d) Involve a payment on account of the property:
    (1) In cash or its equivalent; or
    (2) Through the value of any improvements, appraised in accordance 
with generally accepted practices and procedures.


Sec. 1007.40  Environmental requirements.

    Before HUD issues a commitment to guarantee any loan or (if no 
commitment is issued) before guarantee of any loan, there must be 
compliance with environmental review procedures to the extent 
applicable under part 50 of this title. If the loan involves proposed 
or new construction, HUD will require compliance with procedures 
similar to those required by Sec. 203.12(b)(2) of this title for FHA 
mortgage insurance.


Sec. 1007.45  Applicability of civil rights statutes.

    To the extent that the requirements of title VI of the Civil Rights 
Act of 1964 (42 U.S.C. 2000d et seq.) or of the Fair Housing Act (42 
U.S.C.A. 3601 et seq.) apply to a guarantee provided under this part, 
nothing in the requirements concerning discrimination on the basis of 
race shall be construed to prevent the provision of the guarantee to an 
eligible entity on the basis that the entity serves Native Hawaiian 
families or is a Native Hawaiian family.


Sec. 1007.50  Certificate of guarantee.

    (a) Approval process. (1) In general. Before HUD approves any loan 
for guarantee under this section, the lender shall submit the 
application for the loan to HUD for examination.
    (2) Approval. If HUD approves the application submitted under 
paragraph (a)(1) of this section, HUD will issue a certificate as 
evidence of the loan guarantee approved.
    (b) Standard for approval. HUD may approve a loan for guarantee 
under this part and issue a certificate under this section only if HUD 
determines that there is a reasonable prospect of repayment of the 
loan.
    (c) Effect. (1) As evidence. A certificate of guarantee issued 
under this part by HUD shall be conclusive and incontestable evidence 
in the hands of the bearer of the eligibility of the loan for guarantee 
under this part and the amount of that guarantee.
    (2) Full faith and credit. The full faith and credit of the United 
States is pledged to the payment of all amounts agreed to be paid by 
HUD as security for the obligations made by HUD under this section.
    (d) Fraud and misrepresentation. This section may not be construed:
    (1) To preclude HUD from establishing defenses against the

[[Page 40788]]

original lender based on fraud or material misrepresentation; or
    (2) To bar HUD from establishing regulations that are (on the date 
of issuance or disbursement, whichever is earlier) partial defenses to 
the amount payable on the guarantee.


Sec. 1007.55  Guarantee fee.

    The lender shall pay to HUD, at the time of issuance of the 
guarantee, a fee for the guarantee of loans under this part, in an 
amount equal to 1 percent of the principal obligation of the loan. This 
amount is payable by the borrower at closing.


Sec. 1007.60  Liability under guarantee.

    The liability under a guarantee provided under this section shall 
decrease or increase on a pro rata basis according to any decrease or 
increase in the amount of the unpaid obligation under the provisions of 
the loan agreement involved.


Sec. 1007.65  Transfer and assumption.

    Notwithstanding any other provision of law, any loan guaranteed 
under this section, including the security given for the loan, may be 
sold or assigned by the lender to any financial institution subject to 
examination and supervision by an agency of the Federal Government or 
of any State or the District of Columbia.


Sec. 1007.70  Disqualification of lenders and civil money penalties.

    (a) In general. (1) Grounds for action. HUD may take action under 
paragraph (a)(2) of this section if HUD determines that any lender or 
holder of a guarantee certificate:
    (i) Has failed:
    (A) To maintain adequate accounting records;
    (B) To service adequately loans guaranteed under this section; or
    (C) To exercise proper credit or underwriting judgment; or
    (ii) Has engaged in practices otherwise detrimental to the interest 
of a borrower or the United States.
    (2) Actions. Upon a determination by HUD that any of the grounds 
for action in paragraph (a)(1)(i), of this section apply to the holder 
of a guarantee certificate, HUD may:
    (i) Refuse, either temporarily or permanently, to guarantee any 
further loans made by such lender or holder;
    (ii) Bar such lender or holder from acquiring additional loans 
guaranteed under this part; and
    (iii) Require that such lender or holder assume not less than 10 
percent of any loss on further loans made or held by the lender or 
holder that are guaranteed under this part.
    (b) Civil money penalties for intentional violations. (1) In 
general. HUD may impose a civil monetary penalty on a lender or holder 
of a guarantee certificate if HUD determines that the holder or lender 
has intentionally failed:
    (i) To maintain adequate accounting records;
    (ii) To adequately service loans guaranteed under this section; or
    (iii) To exercise proper credit or underwriting judgment.
    (2) Penalties. A civil monetary penalty imposed under this section 
shall be imposed in the manner and be in an amount provided under 
section 536 of the National Housing Act (12 U.S.C.A. 1735f-1) with 
respect to mortgagees and lenders under that Act.
    (c) Payment on loans made in good faith. Notwithstanding paragraphs 
(a) and (b) of this section, if a loan was made in good faith, HUD may 
not refuse to pay a lender or holder of a valid guarantee on that loan, 
without regard to whether the lender or holder is barred under this 
section.


Sec. 1007.75  Payment under guarantee.

    (a) Lender options. (1) Notification. If a borrower on a loan 
guaranteed under this part defaults on the loan, the holder of the 
guarantee certificate shall provide written notice of the default to 
HUD.
    (2) Payment. Upon providing the notice required under paragraph 
(a)(1), of this section, the holder of the guarantee certificate shall 
be entitled to payment under the guarantee (subject to the provisions 
of this section) and may proceed to obtain payment in one of the 
following manners:
    (i) Foreclosure. The holder of the certificate may initiate 
foreclosure proceedings (after providing written notice of that action 
to HUD). Upon a final order by the court authorizing foreclosure and 
submission to HUD of a claim for payment under the guarantee, HUD will 
pay to the holder of the certificate the pro rata portion of the amount 
guaranteed (as determined under Sec. 1007.60) plus reasonable fees and 
expenses as approved by HUD. HUD's rights will be subrogated to the 
rights of the holder of the guarantee, who shall assign the obligation 
and security to HUD.
    (ii) No foreclosure. Without seeking foreclosure (or in any case in 
which a foreclosure proceeding initiated under paragraph (a)(2)(i) of 
this section continues for a period in excess of 1 year), the holder of 
the guarantee may submit to HUD a request to assign the obligation and 
security interest to HUD in return for payment of the claim under the 
guarantee. HUD may accept assignment of the loan if HUD determines that 
the assignment is in the best interest of the United States. Upon 
assignment, HUD will pay to the holder of the guarantee the pro rata 
portion of the amount guaranteed (as determined under Sec. 1007.60). 
HUD's rights will be subrogated to the rights of the holder of the 
guarantee, who shall assign the obligation and security to HUD.
    (b) Requirements. Before any payment under a guarantee is made 
under paragraph (a) of this section, the holder of the guarantee shall 
exhaust all reasonable possibilities of collection. Upon payment, in 
whole or in part, to the holder, the note or judgment evidencing the 
debt shall be assigned to the United States and the holder shall have 
no further claim against the borrower or the United States. HUD will 
then take such action to collect as HUD determines to be appropriate.

    Dated: May 28, 2002.
Michael Liu,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 02-14721 Filed 6-12-02; 8:45 am]
BILLING CODE 4210-01-P