[Federal Register Volume 67, Number 162 (Wednesday, August 21, 2002)]
[Proposed Rules]
[Pages 54316-54317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21225]



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Part V





Department of Housing and Urban Development





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24 CFR Part 234



FHA Approval of Condominium Developments Located in the Commonwealth of 
Puerto Rico for Mortgage Insurance Under the Section 234(c) Program; 
Proposed Rule

  Federal Register / Vol. 67, No. 162 / Wednesday, August 21, 2002 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 234

[Docket No. FR-4713-P-01]
RIN 2502-AH80


FHA Approval of Condominium Developments Located in the 
Commonwealth of Puerto Rico for Mortgage Insurance Under the Section 
234(c) Program

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend the Department's regulations 
with respect to condominium ownership mortgage insurance to provide 
that the date of recordation for purposes of obtaining Federal Housing 
Administration (FHA) approval of a condominium development in the 
Commonwealth of Puerto Rico for mortgage insurance under the Section 
234(c) program is the date the condominium legal documents are 
presented to the Commonwealth Registry of the Property. The Department 
believes that the proposed change will improve homeownership 
opportunities through increased FHA activity under the Section 234(c) 
program.

DATES: Comment Due Date: October 21, 2002.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Rules Docket Clerk, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410. Communications should refer to the above 
docket number and title. Facsimile (FAX) comments are not acceptable. 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.

FOR FURTHER INFORMATION CONTACT: Vance Morris, Office of the Deputy 
Assistant Secretary for Single Family Housing, Room 9278, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Washington, DC 
20410. Telephone (202) 708-2121 ext. 2204 (this is not a toll-free 
number). Hearing- or speech-impaired persons may access this number by 
calling the Federal Information Relay Service at 1-800-877-8339 (this 
is a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    Section 234(c) of the National Housing Act (12 U.S.C. 1715y(c)) 
(Act) authorizes the Secretary to insure an individual mortgage on a 
one-family unit in a multifamily project and an undivided interest in 
the common areas and facilities that serve the project, provided 
certain conditions are met. The regulations at 24 CFR 234.26(b) provide 
that the project in which a unit is located shall be committed to a 
plan of condominium ownership by a deed or other recorded instrument 
that is acceptable to the FHA Commissioner. As it relates to 
condominiums, recordation especially commits the developer to following 
through with the establishment of a viable condominium. Recordation 
marks a specific point in time when various fees must be paid and when 
rights and obligations vest in a non-profit condominium association 
that has been created by the articles of condominium association.
    Section 234(k) of the Act provides that, before FHA mortgage 
insurance can be placed on a unit in a condominium project converted 
from rental property, at least one year must elapse between the date of 
conversion and the date application for insurance is made. Conversion 
is not defined in the Act. HUD's regulations at 24 CFR 234.3 define 
conversion as the date on which all documents necessary to create a 
condominium under State law (and under local law) have been recorded.
    Under the Commonwealth of Puerto Rico's inscription law, the legal 
documents to create a condominium regime are ``presented'' to the 
Commonwealth Office of the Property Registry, which closely reviews the 
documents for sufficiency and accuracy. If the documents are found to 
be in compliance, or can be corrected to be brought into compliance, 
the documents then are inscribed or recorded. (Because of a current 
backlog, the review process now takes several years.) When the 
condominium documents are presented, a condominium regime is 
established. During the review period, the purchaser acquires a fee 
interest in a unit together with a common, undivided interest in the 
common areas as do purchasers in those jurisdictions with more standard 
recordation procedures. Only in extraordinary circumstances would 
recordation of the condominium documents not ultimately occur once the 
legal documents are presented to the Commonwealth Office of the 
Property Registry.
    From the time the condominium legal documents are presented for 
inscription, the developer/proponent is responsible for paying 
assessments and costs associated with operating and maintaining the 
project as a condominium. This can result in substantial cost to a 
developer prior to the project's eligibility for FHA mortgage 
insurance.

II. This Rule

    This proposed rule would revise the definition of ``conversion'' in 
24 CFR 234.26(b) to provide that, in the case of Puerto Rico, 
conversion is defined as the date on which a condominium development's 
legal documents (which must be in compliance with applicable law) are 
``presented'' for inscription (i.e., recordation) to the Commonwealth 
Registry under Puerto Rico's inscription process. This revision would 
allow the Department's approval of condominium developments in Puerto 
Rico for FHA mortgage insurance on individual units within the project 
on the basis of evidence of presentment of legal documents and the 
parties obtaining title insurance on each unit.

III. Findings and Certifications

Environmental Review

    A Finding of No Significant Impact with respect to the environment 
for this rule 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. The Finding of No Significant Impact 
is available for public inspection between 7:30 a.m. and 5:30 p.m. 
weekdays in the office of the Rules Docket Clerk, Office of General 
Counsel, Department of Housing and Urban Development, Room 10276, 451 
Seventh Street, SW., Washington, DC 20410.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This proposed rule does not impose a Federal 
mandate that will result in expenditure by State, local, or tribal 
governments, within the meaning of the Unfunded Mandates Reform Act of 
1995.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule would not have a significant 
economic impact on a substantial number of small entities. There are no 
anti-competitive

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discriminatory aspects of the rule with regard to small entities, and 
there are no unusual procedures that would need to be complied with by 
small entities. Although HUD has determined that this proposed rule 
would not have a significant economic impact on a substantial number of 
small entities, HUD welcomes comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This proposed rule would not have 
federalism implications and would not impose substantial direct 
compliance costs on State and local governments nor preempt State law 
within the meaning of the Executive Order.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance Numbers for 24 CFR part 
234 are 14.117 and 14.133.

List of Subjects in 24 CFR Part 234

    Condominiums, Mortgage insurance, Reporting and recordkeeping 
requirements.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 234 to read as follows:

PART 234--CONDOMINIUM OWNERSHIP MORTGAGE INSURANCE

    1. The authority citation for 24 CFR part 234 continues to read as 
follows:

    Authority: 12 U.S.C. 1715b and 1715y; 42 U.S.C. 3535(d).

    2. The definition of ``conversion'' in Sec. 234.3 is revised to 
read as follows:


Sec. 234.3  Definitions

* * * * *
    Conversion means the date on which all documents necessary to 
create a condominium under State law (and under local law, where 
applicable) have been recorded, except that in the case of the 
Commonwealth of Puerto Rico, conversion is defined as the date on which 
the legal documents (which must be in compliance with applicable law) 
to create a condominium are presented for inscription (i.e., 
recordation) to the Commonwealth Office of the Property Registry.
* * * * *

    Dated: July 8, 2002.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 02-21225 Filed 8-20-02; 8:45 am]
BILLING CODE 4210-27-P