[Federal Register Volume 70, Number 150 (Friday, August 5, 2005)]
[Proposed Rules]
[Pages 45492-45495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-15472]



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Part II





Department of Housing and Urban Development





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24 CFR Parts 200 and 290



Disposition of Multifamily Housing Projects by HUD; Purchaser's 
Compliance With State and Local Housing Laws and Requirements; Proposed 
Rule

  Federal Register / Vol. 70, No. 150 / Friday, August 5, 2005 / 
Proposed Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 200 and 290

[Doc. No. FR-4941-P-01; 2005-0015]
RIN 2502-AI24


Disposition of Multifamily Housing Projects by HUD; Purchaser's 
Compliance With State and Local Housing Laws and Requirements

AGENCY: Office of the Secretary, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise HUD's regulations governing 
the disposition of multifamily projects that are HUD-owned or secured 
by a HUD-held mortgage which are being foreclosed to implement 
statutory amendments made by the Consolidated Appropriations Act, 2004. 
The proposed rule would require a potential purchaser of such a project 
to certify that all other properties owned by the purchaser, and 
located in the same city or town as the project being purchased, are in 
substantial compliance with applicable state or local government 
housing statutes, regulations, ordinances, and codes. A potential 
purchaser of a multifamily project, from a state or local government 
that previously had acquired the property from HUD would also be 
required to submit evidence of substantial compliance with applicable 
state or local housing requirements. The proposed rule would also 
expand the scope of the participation and compliance requirements for 
HUD's Federal Housing Administration programs to include purchasers of 
multifamily housing projects from state or local governments, in cases 
where the property had previously been acquired by the state or local 
government from HUD.

DATES: Comment Due Date: October 4, 2005.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Room 10276, Washington, DC 20410-0500. Electronic comments may be 
submitted through either:
     The Federal eRulemaking Portal: at http://www.regulations.gov; or
     The HUD electronic Web site at: http://www.epa.gov/feddocket. Follow the link entitled ``View Open HUD Dockets.'' 
Commenters should follow the instructions provided on that site to 
submit comments electronically.
    Facsimile (FAX) comments are not acceptable. In all cases, 
communications must refer to the docket number and title. All comments 
and communications submitted will be available, without charge, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, please schedule an appointment to review the public comments 
by calling the Regulations Division at (202) 708-3055 (this is not a 
toll-free number). Copies of the public comments are also available for 
inspection and downloading at http://www.epa.gov/feddocket.

FOR FURTHER INFORMATION CONTACT: Beverly J. Miller, Director, Office of 
Multifamily Asset Management, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Room 6160, Washington, DC 20410-
8000; telephone (202) 708-3730 (this is not a toll-free number). 
Hearing or speech impaired individuals may access this number via TTY 
by calling the toll-free Federal Information Relay Service at (800) 
877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 203 of the Housing and Community Development Amendments Act 
of 1978 (12 U.S.C. 1701z-11) (1978 HCD Act) authorizes the Secretary of 
HUD to manage or dispose of multifamily housing projects that are owned 
by the Secretary or that are subject to a mortgage held by the 
Secretary. Pursuant to section 203(i) of the 1978 HCD Act, state and 
local governments have a right of first refusal to purchase a HUD-owned 
multifamily project. The purpose of the multifamily housing project 
disposition program is to dispose of properties in a way that preserves 
the availability of affordable housing, strengthens neighborhoods and 
communities, supports fair housing strategies, and protects the 
financial interests of the federal government.
    HUD's regulations for the multifamily housing project disposition 
program are located at 24 CFR part 290, subpart A. These regulations 
supplement the requirements of section 203 of the 1978 HCD Act for the 
management and disposition of multifamily housing projects. In 
addition, a potential purchaser of a multifamily project that is HUD-
owned or secured by a HUD-held mortgage is subject to the participation 
and compliance requirements contained in subpart H of 24 CFR part 200. 
These regulations establish uniform standards for the approval, 
disapproval, or withholding of action on principals in projects based 
upon their past performance as well as other aspects of their records. 
Among other requirements, a potential purchaser of such a multifamily 
project must submit a previous participation certification attesting to 
its past performance and other relevant facts (for example, that the 
potential purchaser is not a HUD employee or a Member of Congress).
    Section 219 of the Consolidated Appropriations Act, 2004 (Pub. L. 
108-199, approved January 23, 2004) (FY 2004 Appropriations Act), 
mandated several changes to the requirements applicable to purchasers 
of HUD-owned multifamily housing projects. In enacting section 219, the 
Congress required HUD to institute a policy ``to prevent the sale of 
HUD properties, from HUD, or from state and local governments, to 
people with demonstrated patterns of severe housing code violations'' 
(see S. Rep. 108-143, at 62 (2004)). Specifically, section 219 requires 
the Secretary of HUD to issue a proposed rule to ensure that a 
potential purchaser of a multifamily project that is HUD-owned or 
secured by a HUD-held mortgage is in substantial compliance with 
applicable state or local government housing statutes, regulations, 
ordinances, and codes with regard to other properties owned by the 
purchaser. Further, under the proposed rule any state or local 
government that exercises its right of first refusal to acquire the 
project must ensure that any person or entity that subsequently 
acquires the project from the state or local government is subject to 
the same standards that would otherwise apply if the person or entity 
had purchased the project directly from HUD.

II. This Proposed Rule

    This proposed rule would amend HUD's regulations to implement 
section 219 of the Consolidated Appropriations Act, 2004. The specific 
regulatory amendments that would be made by the proposed rule are as 
follows:

A. Proposed Changes to FHA Participation and Compliance Requirements 
(24 CFR Part 200, Subpart H)

    The proposed rule would expand the scope of the regulations in 24 
CFR part 200, subpart H to include a potential purchaser of a 
multifamily project from a state or local government that previously 
had acquired the project by exercising its right of first refusal under 
section 203(i) of the 1978 HCD Act. As noted above, potential 
purchasers of

[[Page 45493]]

multifamily projects directly from HUD are already subject to these 
requirements. Currently, however, the regulations do not apply to 
purchasers of multifamily projects from state and local governments 
declining to exercise their right of first refusal. The proposed 
regulatory change would comply with section 219 of the Consolidated 
Appropriations Act, 2004 by ensuring that any person or entity that 
subsequently acquires multifamily projects from the state or local 
government is subject to the same standards that would otherwise apply 
if the person or entity had purchased the project directly from HUD.
    The proposed rule would amend Sec.  200.213, which lists the 
activities subject to the participation and compliance requirements, to 
include purchases of multifamily housing projects from state or local 
governments that previously had acquired the property from HUD. The 
proposed rule would also revise Sec.  200.217, which establishes the 
timing of submission of the previous participation certification. 
Proposed purchasers of a project from a state, city, or municipality 
that previously had acquired the project, and which declined to 
exercise its right of first refusal under section 203 of the 1978 HCD 
Act, would be required to submit the required certification prior to 
the proposed acquisition.

B. Proposed Changes to Requirements Regarding the Disposition of HUD-
Owned Multifamily Projects (24 CFR Part 290, Subpart A)

    As noted above, section 219 of the Consolidated Appropriations Act, 
2004 requires that potential purchasers of a multifamily project from 
HUD be in substantial compliance with applicable state or local 
government housing statutes, regulations, ordinances, and codes with 
regard to other properties owned by the purchaser. The proposed rule 
would amend the regulations at 24 CFR part 290, subpart A to implement 
this requirement.
    HUD proposes to add a new Sec.  290.16, which would require that a 
potential purchaser of a multifamily project must certify, on a form 
prescribed by HUD, that all other properties owned by the potential 
purchaser, and located in the same city or town as the project being 
purchased, are in substantial compliance with applicable state or local 
government housing statutes, regulations, ordinances, and codes. For 
purposes of new Sec.  290.16, the term ``potential purchaser'' would be 
defined to mean any purchaser of a multifamily project that is HUD-
owned or secured by a HUD-held mortgage that is being foreclosed, with 
the exception of a state agency or unit of local government (including 
public housing agencies) in the locality in which the project is 
located. This certification must be submitted concurrently with the 
previous participation certificate required under 24 CFR part 200, 
subpart H.
    The certification must identify by name and location all properties 
owned by the potential purchaser that are located in the same city or 
town as the project being purchased. The certification must also state 
whether to the best of the potential purchaser's knowledge and belief, 
each such property is currently and materially in violation of any 
applicable state or local requirements. If there are material 
violations, the certification must specify the nature of each material 
violation and state whether, notwithstanding the material violations, 
the properties are in substantial compliance with applicable state or 
local government housing statutes, regulations, ordinances, and codes. 
HUD may verify the accuracy of the certification by requiring 
supporting documentation from the potential purchaser.
    As noted above, the certification would only apply to other 
properties owned by the potential purchaser that are in the same city 
or town as the project being purchased. It would be overly burdensome 
to require a potential purchaser to identify all properties on a 
nationwide basis, and excessive HUD staff time would be required to 
review and verify compliance with such a broad certification 
requirement. Most purchasers of HUD multifamily projects (competitive 
or noncompetitive) are local purchasers. In those cases where the 
potential purchaser is a nationwide developer, most of these purchasers 
have conducted, or are currently conducting, business with HUD and 
submission of the required previous participation certification would 
provide HUD with the opportunity to assess the developer's 
qualifications to purchase the project.
    HUD will notify a potential purchaser of any preliminary 
determination that the potential purchaser is not in substantial 
compliance. Within 10 business days after receipt of notice of the date 
of such a preliminary determination, the potential purchaser may appeal 
the preliminary determination to the Deputy Assistant Secretary for 
Multifamily Housing or the Deputy Assistant Secretary's designee, and 
request an informal HUD conference. If the potential purchaser does not 
appeal HUD's preliminary determination within 10 business days, the 
preliminary determination shall become final. If HUD makes a final 
determination that the potential purchaser is not in substantial 
compliance, HUD may elect not to sell the project to the potential 
purchaser, such as by terminating any sales contract.
    As noted above in this preamble, the Senate Report accompanying 
enactment of section 219 of the Consolidated Appropriations Act, 2004 
specifies that the focus of the statutory certification requirement is 
on the sale of properties ``to people with demonstrated patterns of 
severe housing code violations,'' and not on governmental or other 
entities (emphasis added). Accordingly, under the proposed rule, state 
and local governments purchasing a multifamily project would not be 
subject to the certification requirement. HUD agrees with the Senate 
Report language and does not believe it would be appropriate, or 
consistent with prior HUD practice, to evaluate the experience or 
worthiness of another governmental agency's ability to purchase and 
operate a HUD-owned project. State and local governmental entities that 
purchase HUD-owned projects are presumed to operate and maintain the 
projects in a responsible and conscientious manner.
    HUD will require, as a condition of the sale, that a person or 
entity that seeks to purchase the project from the state or local 
government to certify, or otherwise verify, prior to the sale that all 
other properties owned by the potential purchaser, and located in the 
same city or town as the project being purchased, are in substantial 
compliance with applicable state or local government housing statutes, 
regulations, ordinances, and codes.

III. Findings and Certifications

Information Collection Requirements

    The information collection requirements contained in this proposed 
rule have been submitted to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, an agency may not conduct 
or sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a currently valid OMB 
control number.
    The burden of the information collections in this proposed rule is 
estimated as follows:

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                                       Reporting and Recordkeeping Burden
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                                                                                        Estimated
                                                                          Number of   average time    Estimated
                    Section reference                       Number of     responses        for         annual
                                                             parties         per       requirement   burden  (in
                                                                         respondent    (in hours)      hours)
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Sec.   290.16...........................................          800             1           .10            80
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    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;
    (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 responses to be submitted electronically.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Under the provisions 
of 5 CFR part 1320, OMB is required to make a decision concerning this 
collection of information between 30 and 60 days after today's 
publication date. Therefore, a comment on the information collection 
requirements is best assured of having its full effect if OMB receives 
the comment within 30 days of today's publication. This time frame does 
not affect the deadline for comments to the agency on the interim rule, 
however. Comments must refer to the proposal by name and docket number 
(FR-4941) and be sent to both:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax number: (202) 395-6947, and
Kathleen McDermott, Reports Liaison Officer, Office of Housing-Federal 
Housing Commissioner, Department of Housing and Urban Development, 451 
Seventh Street, SW., Room 9116, Washington, DC 20410-8000.

Regulatory Planning and Review

    OMB reviewed this rule under Executive Order 12866 (entitled 
``Regulatory Planning and Review''). OMB determined that this rule is a 
``significant regulatory action'' as defined in section 3(f) of the 
Order (although not an economically significant regulatory action, as 
provided under section 3(f)(1) of the Order). Any changes made to the 
rule subsequent to its submission to OMB are identified in the docket 
file, which is available for public inspection in the Regulations 
Division, Office of General Counsel, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-
0500. Due to security measures at the HUD Headquarters building, please 
schedule an appointment to review the docket file by calling the 
Regulations Division at (202) 708-3055 (this is not a toll-free 
number).

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. 4332(2)(C)). That finding is available for 
public inspection between the hours of 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Room 10276, 
Washington, DC 20410-0500.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The proposed rule would revise HUD's regulations governing the 
disposition of multifamily projects by HUD to implement statutory 
amendments made by the Consolidated Appropriations Act, 2004. As 
discussed above in this preamble, these changes concern compliance by 
purchasers of multifamily housing projects from HUD with applicable 
state and local housing requirements, and the applicability of HUD 
requirements to persons or entities seeking to purchase multifamily 
projects from state or local governments that previously had acquired 
the property from HUD. To the extent that the rule would impose any 
burdens on small entities participating in HUD's multifamily project 
disposition program, it would be as a result of statutory mandate. 
Accordingly, the undersigned certifies that this rule will 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 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 rule will not have federalism 
implications and would not impose substantial direct compliance costs 
on state and local governments or preempt state law within the meaning 
of the Executive Order.

Unfunded Mandates Reform Act

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

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance Numbers for HUD's 
Multifamily Property Disposition program is 14.199.

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List of Subjects

24 CFR Part 200

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

24 CFR Part 290

    Low and moderate income housing, Mortgage insurance.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR parts 200 and 290 as follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

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

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

    2. Add Sec.  200.213(e) to read as follows:


Sec.  200.213  Applicability of procedure.

* * * * *
    (e) Projects purchased from a state, city, or municipality that had 
previously acquired the project by exercising its right of first 
refusal for the purchase of a multifamily housing project under section 
203 of the Housing and Community Amendments Act of 1978 (12 U.S.C. 
1701z-11).
    3. Add Sec.  200.217(a)(15) to read as follows:


Sec.  200.217  Filing of previous participation certificate on 
prescribed form.

    (a) * * *
    (15) Purchase of a project acquired from a state, city, or 
municipality that had previously acquired the project by exercising its 
right of first refusal for the purchase of a multifamily housing 
project under section 203 of the Housing and Community Amendments Act 
of 1978 (12 U.S.C. 1701z-11)--Prior to the proposed acquisition.
* * * * *

PART 290--DISPOSITION OF MULTIFAMILY PROJECTS AND SALE OF HUD-HELD 
MULTIFAMILY MORTGAGES

    4. The authority citation for 24 CFR part 290 continues to read as 
follows:

    Authority: 12 U.S.C. 1701z-11, 1701z-12, 1713, 1715b, 1715z-1b, 
1715z-11a; 42 U.S.C. 3535(d), 3535(i).

    5. Add Sec.  290.16 to read as follows:


Sec.  290.16  Purchaser compliance with state and local housing laws 
and requirements.

    (a) Definition of ``potential purchaser''. For purposes of this 
section, the term ``potential purchaser'' means any purchaser of a 
multifamily project that is HUD-owned or secured by a HUD-held mortgage 
that is being foreclosed pursuant to this part and 24 CFR part 27, with 
the exception of a state agency or unit of local government (including 
public housing agencies) in the locality in which the project is 
located.
    (b) Certification of substantial compliance with state and local 
laws and requirements. (1) A potential purchaser of a multifamily 
project pursuant to this part shall certify, on a form prescribed by 
HUD, that all other properties owned by the potential purchaser, and 
located in the same city or town as the project being purchased, are in 
substantial compliance with any applicable state or local government 
housing statutes, regulations, ordinances, and codes.
    (2) The certification must identify by name and location all 
properties owned by the potential purchaser and located in the same 
city or town as the project being purchased. The certification must 
also state whether, to the best of the potential purchaser's knowledge 
and belief, each such property is currently and materially in violation 
of any applicable state or local government requirement. If there are 
material violations, the certification must specify the nature of each 
material violation and state whether, notwithstanding the material 
violations, the properties are in substantial compliance with 
applicable state or local government statutes, regulations, ordinances, 
and codes.
    (3) This certification shall be submitted concurrently with the 
previous participation certificate required under Sec.  200.217 of this 
chapter.
    (4) HUD may verify the accuracy of the certification by requiring 
supporting documentation from the potential purchaser.
    (c) HUD determinations. (1) HUD will notify the potential purchaser 
of its preliminary determination that the potential purchaser is not in 
substantial compliance.
    (2) Within 10 business days after receipt of notice of the date of 
HUD's preliminary determination, the potential purchaser may appeal the 
preliminary determination to the Deputy Assistant Secretary for 
Multifamily Housing or the Deputy Assistant Secretary's designee, and 
request an informal HUD conference. If the potential purchaser does not 
appeal HUD's preliminary determination within 10 business days, the 
preliminary determination shall become final.
    (3) If HUD determines that the potential purchaser is not in 
substantial compliance, HUD may elect not to sell the project to the 
potential purchaser, such as by terminating any sales contract.
    (d) State and local government purchasers. State and local 
governments purchasing a multifamily project pursuant to this part are 
not subject to the certification requirements described in paragraph 
(b) of this section. However, HUD will require, as a condition of the 
sale, that a person or entity subsequently seeking to purchase the 
project from the state or local government certify, or otherwise 
verify, prior to the sale that all other properties owned by the 
potential purchaser, and located in the same city or town as the 
project being purchased, are in substantial compliance with applicable 
state or local government housing statutes, regulations, ordinances, 
and codes.

    Dated: July 8, 2005.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 05-15472 Filed 8-4-05; 8:45 am]
BILLING CODE 4210-27-P