[Federal Register Volume 68, Number 26 (Friday, February 7, 2003)]
[Rules and Regulations]
[Pages 6596-6597]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2972]



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Part IV





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; 
Final Rule

  Federal Register / Vol. 68, No. 26 / Friday, February 7, 2003 / Rules 
and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 234

[Docket No. FR-4713-F-02]
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: Final rule.

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SUMMARY: This final rule amends 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 change will improve homeownership opportunities 
through increased FHA activity under the section 234(c) program. This 
final rule follows publication of a proposed rule on August 21, 2002. 
One comment was received on the rule, and it supported the rule. 
Accordingly, the Department is adopting the proposed rule without 
change.

DATES: Effective Date: March 10, 2003.

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--The August 21, 2002, Proposed Rule

    The Department published a proposed rule on August 21, 2002 (67 FR 
54316), announcing its intention to amend its regulation that 
implements section 234(c) of the National Housing Act (12 U.S.C. 
1715y(c)) (the Act). Section 234 (c) 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. 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 regulation at 24 CFR 234.3 defines 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. When the condominium 
documents are presented, a condominium regime is established. 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.
    The Department proposed revising the definition of ``conversion'' 
in 24 CFR 234.3 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 to approve 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.

II. This Final Rule

    This final rule follows publication of the August 21, 2002, rule, 
which invited public comment on the proposed revision. HUD received one 
comment on the rule. The commenter supported the proposed revision. The 
commenter wrote that the rule will relieve Puerto Rican lenders from 
the heavy burden of holding section 234(c) loans without insurance, 
while waiting for documents to be recorded to meet the current 
definition of ``conversion.'' Thus, the change will expedite placement 
of mortgage loans in the secondary mortgage market. The commenter also 
noted that the risks to HUD are minimal by adopting this rule. Under 
the condominium regime, legal documents undergo close scrutiny from 
lawyers who are experts in condominium law and hired by developers and 
bankers to protect their individual interests. The commenter added that 
the rule would expedite the conversion to condominiums of many section 
8 rental projects in Puerto Rico. According to the commenter, the rule 
also will stimulate developers and lenders to build more condominium 
units in areas with high land prices, thus allowing many families the 
dream of homeownership.
    Accordingly, HUD has decided to adopt the August 21, 2002, proposed 
rule without change.

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 final 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 discriminatory aspects of the rule with

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regard to small entities, and there are no unusual procedures that 
would need to be complied with by small entities.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications and does 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 amends 
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: January 27, 2003.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 03-2972 Filed 2-6-03; 8:45 am]
BILLING CODE 4210-27-P