[Federal Register Volume 70, Number 173 (Thursday, September 8, 2005)]
[Proposed Rules]
[Pages 53480-53486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-17642]



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Part III





Department of Housing and Urban Development





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24 CFR Part 291



Disposition of HUD-Acquired Single Family Property; Good Neighbor Next 
Door Sales Program; Proposed Rule

  Federal Register / Vol. 70 , No. 173 / Thursday, September 8, 2005 / 
Proposed Rules  

[[Page 53480]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 291

[Docket No. FR-4712-P-01; HUD-2005-0016]
RIN 2502-AH72


Disposition of HUD-Acquired Single Family Property; Good Neighbor 
Next Door Sales 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 establish regulations for HUD's new 
Good Neighbor Next Door (GNND) Sales Program. The requirements for the 
new program are closely modeled on those for HUD's Officer Next Door 
(OND) and Teacher Next Door (TND) Sales Programs. The GNND Sales 
Program would replace and build upon the success of these two existing 
sales programs. The purpose of the GNND Sales Program is to improve the 
quality of life in distressed urban communities by encouraging law 
enforcement officers, teachers, and firefighters/emergency responders 
whose daily responsibilities and duties represent a nexus to the needs 
of the community to purchase and live in homes in these communities. 
Although the requirements governing the new GNND Sales Program would be 
similar to the existing requirements for the Officer and Teacher Next 
Door Sales Programs, HUD is also proposing to make several important 
modifications and improvements to the existing requirements.

DATES: Comments Due Date: November 7, 2005.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed 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. Interested persons 
may also submit comments electronically through either:
     The Federal eRulemaking Portal at www.regulations.gov; or
     The HUD electronic Web site at 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 www.epa.gov/feddocket.

FOR FURTHER INFORMATION CONTACT: Joseph McCloskey, Director, Office of 
Single Family Asset Management, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Room 9172, Washington, DC 20410-
8000; telephone (202) 708-1672 (this is not a toll-free number). 
Hearing- or speech-impaired individuals may access this number through 
TTY by calling the toll-free Federal Information Relay Service at (800) 
877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    A vital part of HUD's mission is to promote homeownership and the 
revitalization of cities. In support of these goals, HUD established 
the OND Sales Program. The OND Sales Program enables full-time law 
enforcement officers to purchase HUD-acquired homes located in 
revitalization areas at a 50 percent discount from list prices. HUD's 
regulations for the OND Sales Program are located in subpart F of 24 
CFR part 291 (entitled ``Disposition of HUD-Acquired Single Family 
Properties'').
    In June 2004, HUD completed an evaluation of the success of the OND 
and TND Sales programs, which supported the assumption that an influx 
of police officers as homeowners does result in a substantial decrease 
in serious crime in a target neighborhood. HUD's evaluation of the OND/
TND Sales programs is available for download at www.huduser.org.
    The success of the OND Sales Program led to the development of the 
TND Sales Program. The TND Sales Program, modeled after the OND Sales 
Program, was designed to enable more teachers to help revitalize 
economically distressed neighborhoods by encouraging eligible teachers 
to purchase HUD-acquired homes located in HUD-designated revitalization 
areas at a 50 percent discount from list prices. HUD announced the 
creation of the TND Sales Program through a Federal Register notice 
published on December 7, 1999 (64 FR 68370).

II. This Proposed Rule

    This proposed rule would establish regulations for the GNND Sales 
Program. The requirements for the new program are similar to those for 
the existing OND and TND Sales Programs. The GNND Sales Program would 
replace and build upon the success of these two existing sales 
programs. The regulations for the GNND Sales Program would replace the 
existing OND regulations at 24 CFR part 291, subpart F. The objective 
of the new program is to improve the quality of life in distressed 
urban communities by encouraging law enforcement officers, teachers, 
and firefighters/emergency responders, whose daily responsibilities and 
duties reflect a high level of public service commitment and represent 
a nexus to the needs of the community, to purchase and live in homes in 
these communities.

III. Overview of the GNND Sales Program

    Although the requirements governing the new GNND Sales Program 
would be similar to the existing requirements for the OND and TND 
programs, HUD is also proposing to make several important modifications 
and improvements to the current requirements. This section of the 
preamble provides an overview of the proposed GNND Sales Program and 
highlights the most significant changes that would be made to the 
existing requirements by this rule.
    1. General. The GNND Sales Program will enable a full-time law 
enforcement officer, teacher, or firefighter/emergency responder 
(collectively referred to in this rule as ``participants'') to purchase 
a HUD-acquired home located in a HUD-designated revitalization area at 
a 50 percent discount from the list price. The participant would also 
be eligible to purchase the home with a reduced down payment of $100, 
but only if the participant finances the home through an FHA-insured 
mortgage.
    To be eligible to purchase a home under the GNND Sales Program, the 
participant (or his/her spouse) may not have owned any residential real 
property for one year prior to the date of submitting an offer on the 
home being acquired through the program. Further, the participant (or 
his/her spouse) must not have previously purchased another home under 
the GNND Sales Program (or its predecessor OND/TND sales programs). 
This will help to ensure that the limited inventory of properties 
available for sale under the GNND Sales

[[Page 53481]]

Program are purchased by individuals who do not currently own a home. 
Although both spouses, if otherwise eligible, may submit an offer on a 
single property made available for sale under the program, HUD will 
approve an offer from only one spouse.
    Under the current OND/TND requirements, participants are prohibited 
from owning any residential property (other than the home purchased 
through the OND or TND sales programs) during the owner occupancy term. 
Upon reconsideration, HUD has concluded that this requirement imposes 
an unduly burdensome restriction on business activity. Accordingly, the 
prohibition on the purchase of other residential property during the 
owner occupancy term would no longer apply under the GNND Sales 
Program.
    2. Eligible properties. Under the GNND Sales Program, all 
properties acquired by HUD that are located in HUD-designated 
revitalization areas (both those that are eligible for FHA mortgage 
insurance and those that are not eligible) will be made available to 
interested participants prior to listing the properties for sale to 
other purchasers.
    In the event that several offers are made on a single property, HUD 
will select a winning offer by lottery, as well as a back-up offer in 
the event the winning offeror is unable to close on the purchase of the 
property. If the back-up offeror is also unable to close on the 
purchase of the property, the property will then be made available for 
sale to other purchasers. Unlike the current OND/TND requirement, GNND 
offerors will no longer be required to notify HUD of their geographic 
area of interest and to indicate a preliminary interest in a particular 
property. This current OND/TND requirement has proven to be an 
administratively burdensome and inefficient method for determining 
interest in properties made available for sale under the programs. As a 
matter of practice, HUD lists properties eligible for purchase 
separately from other properties, so that they can be more easily 
identified.
    3. Real Estate Brokers. Participants must submit offers through a 
participating real estate broker. In HUD's experience, the business 
expertise of real estate brokers is beneficial to participants and 
facilitates the home buying process. Any real estate broker who has 
agreed to comply with HUD requirements may participate in the GNND 
Sales Program. Real estate brokers may submit unlimited numbers of 
offers on an individual property provided each offer is from a 
different prospective purchaser.
    4. Cap on Program Sales. HUD proposes to limit the number of HUD-
acquired homes sold under the GNND Sales Program in a fiscal year to no 
greater than five percent of the number of ``Part A'' mortgage 
insurance conveyance claims paid by HUD in the immediately preceding 
fiscal year. (Generally, there are two ``parts'' to the payment of an 
FHA mortgage insurance claim. A Part A claim consists of payment to 
cover the unpaid principal balance of the mortgage loan and certain 
interest expenses. A Part B claim, which is paid subsequent to a Part A 
claim, includes all other expenses covered by the FHA mortgage 
insurance.)
    The cap shall apply on a national basis, but HUD reserves the right 
to geographically apportion the cap to address regional or local 
differences in the number of homes sold through the GNND Sales Program. 
Additionally, HUD retains the flexibility to adjust the percentage of 
this cap for any fiscal year. Any HUD determination to geographically 
distribute the cap, change a current geographic distribution, or adjust 
the percentage of the cap would be announced by HUD through publication 
of a Federal Register notice at least 30 days before the revision takes 
effect. This provision would allow HUD to respond to disparities or 
changing circumstances more quickly than might be possible through 
notice and comment rulemaking procedures, while still ensuring that 
affected members of the public are provided with advance notice of any 
changes to the GNND Program sales cap.
    HUD believes that the proposed cap on sales will help ensure that 
sufficient numbers of HUD-acquired properties are available for other 
departmental property disposition initiatives (such as the programs for 
discounted sales to nonprofit organizations and government agencies). 
Further, the proposed limit on properties sold under the GNND Sales 
Program will better enable HUD to control the program and implement any 
necessary changes.
    5. Eligible law enforcement officers. A law enforcement officer 
would be eligible to purchase a home through the GNND Sales Program if 
employed full-time by a law enforcement agency of the federal 
government, a state, a unit of general local government, or an Indian 
tribal government. Further, in carrying out such full-time employment, 
the law-enforcement officer must be sworn to uphold, and make arrests 
for violations of federal, state, tribal, county, township, or 
municipal law. For purposes of the GNND Sales Program, the term ``unit 
of general local government'' would be defined to mean a county or 
parish, city, town, township, or other political subdivision of a 
state.
    As noted above, the officer must be employed by a law-enforcement 
agency. Officers employed by federal, state, local, or tribal agencies 
that are not law-enforcement agencies (such as, for example, a public 
housing authority) would not be eligible to participate under the GNND 
Sales Program. The employment requirement must be satisfied both at the 
time the law enforcement officer submits a bid to purchase the home, 
and at the time of closing on the purchase of the home.
    Law enforcement officers employed by public or private colleges and 
universities would no longer be eligible to participate under the new 
program. Generally, these law enforcement officers do not have arrest 
authority beyond the campus and therefore have limited deterrent effect 
on crime in the communities where they live. Continuing eligibility to 
include these officers would not achieve the objective of the GNND 
Sales Program, which is to improve the quality of life in distressed 
urban communities by having law enforcement officers live in the 
neighborhoods where they are authorized to make arrests.
    The scope of the definition of law enforcement officer has been 
expanded to include tribal police officers. Tribal police officers are 
sworn to uphold and make arrests for violations of tribal law. Because 
tribal police officers have general arrest authority, the presence of 
tribal police officers would be as beneficial to their communities as 
that of their counterparts employed by federal, state, or local 
governments. HUD, therefore, proposes to revise the current regulations 
to allow tribal police officers to participate in the GNND Sales 
Program.
    6. Eligible teachers. A teacher would be eligible to purchase a 
home through the GNND Sales Program if employed full-time by a state-
accredited public school or private school that provides direct 
services to students in grades pre-kindergarten through 12. The 
employment requirement must be satisfied both at the time the teacher 
submits a bid to purchase the home, and at the time of closing on the 
purchase of the home. The public or private school where the teacher is 
employed must serve students from the area where the home is located in 
the normal course of business.
    7. Eligible firefighters/emergency responders. The GNND Sales 
Program would include firefighters and

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emergency responders as a new class of eligible participants. To 
qualify as a firefighter/emergency responder, an individual would have 
to be employed as a full-time firefighter or emergency medical 
technician by a fire department or emergency medical services responder 
unit of the federal government, a state, a unit of general local 
government, or an Indian tribal government serving the area where the 
home is located. The employment requirement must be satisfied both at 
the time the firefighter/emergency responder submits a bid to purchase 
the home, and at the time of closing on the purchase of the home.
    8. Earnest money deposit. The participant would be required to make 
an earnest money deposit at the time of submitting an offer to purchase 
a home. The amount of the earnest money deposit required for a property 
would be an amount equal to one percent of the list price, but no less 
than $500 and no more than $2,000.
    The earnest money deposit must be in the form of a cash equivalent 
or a certification from the real estate broker that the earnest money 
deposit has been deposited in the broker's escrow account. If an offer 
is accepted, the earnest money deposit would be credited to the 
purchaser at closing. If the offer is rejected, the earnest money 
deposit would be returned. Earnest money deposits are subject to total 
forfeiture upon the participant's failure to close a sale.
    9. Start of owner-occupancy term. Participants must agree to live 
in the home purchased through the GNND Sales Program as their sole 
residence for at least 36 months. This proposed rule would establish 
new requirements governing the commencement of the required owner-
occupancy term. The required start date would be based upon the date of 
closing and would vary depending on the scope of any repairs necessary 
for occupancy of the home. Specifically, the proposed rule provides 
that occupancy of the home must commence within 30 days after the 
closing date if HUD determines that the home requires no more than 
$10,000 in repairs prior to occupancy. If HUD determines that the home 
requires repairs worth more than $10,000 but less than $20,000, 
occupancy must start within 90 days of the closing date. If HUD 
determines that the home requires more than $20,000 in repairs, 
occupancy would be required to commence within 180 days of the closing 
date. The HUD determination regarding the amount of required repairs 
will be made solely for purposes of establishing the commencement of 
the owner-occupancy term, and does not constitute an assurance or 
guarantee for the benefit of purchaser.
    10. Interruptions to the owner-occupancy term. HUD may, at its sole 
discretion, allow interruptions to the 36-month owner-occupancy term if 
it determines that the interruption is necessary to prevent hardship. 
The participant must submit a written and signed request to HUD 
containing: (1) The reasons why the interruption is necessary; (2) the 
dates of the intended interruption; and (3) a certification from the 
participant that he/she is not abandoning the home as his/her permanent 
residence and will resume occupancy of the home upon the conclusion of 
the interruption to complete the remainder of the 36-month owner-
occupancy term.
    The written request for approval of an interruption to the owner-
occupancy term must be submitted to HUD at least 30 calendar days 
before the anticipated interruption. Military service members protected 
by the Servicemembers Civil Relief Act of 2003 need not submit their 
written request to HUD 30 days in advance of an anticipated 
interruption, but should submit their written request as soon as 
practicable upon learning of a potential interruption, in order to 
ensure timely processing and approval of the request.
    11. Financing purchase of the home. If the participant uses 
conventional financing to purchase a home under the GNND Sales Program, 
the amount of the mortgage may not exceed the discounted sales price of 
the home. However, a participant using an FHA-insured mortgage to 
finance purchase of the home may finance reasonable and customary 
closing costs with the FHA-insured mortgage. The amount of the FHA-
insured mortgage may not exceed the discounted sales price of the home 
plus the closing costs. In no event will HUD pay a buyer's closing 
costs on the purchase of a property through the GNND Sales Program.
    12. The second mortgage. A participant must agree to execute a 
second mortgage and note payable to HUD on the home in the amount of 
the difference between the list price and the discounted selling price. 
The term of the second mortgage is equal to the owner-occupancy term 
(36 months) plus 30, 90, or 180 days, as applicable depending on the 
amount of repairs required prior to occupancy (see section III.9. of 
this preamble). The amount of the second mortgage will be reduced by 
\1/36\ on the last day of each month of occupancy following the 
occupancy start date. At the end of the 36th month of occupancy, the 
amount of the second mortgage will be zero. If the participant sells 
the home or stops living in the home as his/her sole residence prior to 
the expiration of the owner-occupancy term, the participant will owe 
HUD the amount due on the second mortgage as of the date the property 
is sold or vacated.
    13. Refinancing. This proposed rule would permit a participant to 
refinance the mortgage used to finance the purchase of his/her home. 
However, the total of the refinanced mortgage and the remaining 
principal balance of the second mortgage may not exceed 95 percent of 
the value of the property, as appraised at the time of the refinancing. 
The second mortgage must hold a superior lien position to the 
refinanced mortgage in the absence of a subordination. HUD may permit 
subordination of the second mortgage, but only if HUD, at its sole 
discretion, determines that at least one of the following three 
conditions is satisfied: (1) The refinancing will result in a lower 
annual percentage rate on the first mortgage; (2) the refinancing is 
undertaken pursuant to HUD's Section 203(k) Rehabilitation Loan 
Insurance Program in order to rehabilitate or repair the home; or (3) 
the refinancing is necessary to prevent the participant from defaulting 
on the first mortgage.
    14. Multi-unit properties. Multi-unit properties would continue to 
be ineligible for purchase under the GNND Sales Program.
    15. Continuing obligations. To remain a participant in the GNND 
Sales Program, the participant must, for the entire duration of the 
owner-occupancy term, continue to own and live in as his/her sole 
residence the home purchased through the GNND Sales Program. 
Additionally, the participant must certify initially, and once annually 
thereafter during and at the conclusion of the owner-occupancy term, 
that he or she owns, has lived in, and continues to live in the home as 
his or her sole residence.
    16. Governmental entities and nonprofit organizations. Under the 
proposed rule, governmental entities and nonprofit organizations would 
no longer be eligible to purchase HUD-acquired homes for sale under the 
GNND Sales Program. Currently, governmental entities and nonprofit 
organizations may purchase OND and TND properties if they resell these 
homes directly to eligible law enforcement officers and teachers under 
the terms and conditions of the OND and TND Sales Programs. HUD 
believes that limiting participation in the GNND Sales Program to the 
ultimate purchasers--law enforcement officers, teachers, and 
firefighters/emergency

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responders--will better focus the program and help to ensure that the 
GNND Sales Program accomplishes its goals.

IV. Findings and Certifications

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (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 economically 
significant, as provided in section 3(f)(1) of the Order). The docket 
file 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).

Information Collection Requirements

    The information collection requirements contained in this proposed 
rule have been submitted to 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:

                                       Reporting and Recordkeeping Burden
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                                                                                   Estimated
                                                 Number of        Number of       average time      Estimated
              Section reference                   parties       responses per   for requirement   annual burden
                                                                  respondent       (in hours)       (in hours)
----------------------------------------------------------------------------------------------------------------
Sec.  Sec.   291.515, 291.520, 291.525,               30,100                1              .12            3,612
 291.530, and 291.540.......................
----------------------------------------------------------------------------------------------------------------

    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 electronic submission of responses).
    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 proposed 
rule, however. Comments must refer to the proposal by name and docket 
number (FR-4712) and must 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.

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 the private sector. This rule does not impose 
any federal mandates on any state, local, or tribal governments or the 
private sector within the meaning of UMRA.

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 Order. This proposed rule does not have federalism 
implications and does not impose substantial direct compliance costs on 
state and local governments or preempt state law within the meaning of 
the Order.

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)). The Finding of No Significant 
Impact 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. 
This proposed rule promotes safe neighborhoods by enabling law 
enforcement officers, teachers, and firefighters/emergency responders 
to purchase HUD-acquired single family homes at a significant discount. 
The proposed rule places restrictions on the use of a home purchased 
through the GNND Sales Program, which affects the individual purchasing 
the home. The proposed rule, however, does not place restrictions on 
any small entities involved in any transactions related to the GNND 
Sales Program. Accordingly, the undersigned certifies that this

[[Page 53484]]

proposed 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 by this preamble.

Catalog of Federal Domestic Assistance Numbers

    The Catalog of Federal Domestic Assistance Number for the Officer 
Next Door Program is 14.198. The Catalog of Federal Domestic Assistance 
Number for the Teacher Next Door Initiative is 14.310.

List of Subjects in 24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 291 as follows:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

    1. The authority citation for 24 CFR part 291 continues to read as 
follows:

    Authority: 12 U.S.C. 1701 et seq.; 42 U.S.C. 1441, 1441a, 1551a, 
and 3535(d).

    2. Subpart F is revised to read as follows:

Subpart F--Good Neighbor Next Door Sales Program

Sec.
291.500 Purpose.
291.505 Definition of ``unit of general local government.''
291.510 Overview of the GNND Sales Program.
291.515 Purchaser qualifications.
291.520 Eligible law enforcement officers.
291.525 Eligible teachers.
291.530 Eligible firefighter/emergency responders.
291.535 Earnest money deposit.
291.540 Owner-occupancy term.
291.545 Financing purchase of the home.
291.550 Second mortgage.
291.555 Refinancing.
291.560 Ineligibility of multiple-unit properties.
291.565 Continuing obligations after purchase.

Subpart F--Good Neighbor Next Door Sales Program


Sec.  291.500  Purpose.

    This subpart describes the policies and procedures governing the 
Good Neighbor Next Door (GNND) Sales program. The purpose of the GNND 
Sales Program is to improve the quality of life in distressed urban 
communities. This is to be accomplished by encouraging law enforcement 
officers, teachers, and firefighters/emergency responders, whose daily 
responsibilities and duties represent a nexus to the needs of the 
community, to purchase and live in homes in these communities.


Sec.  291.505  Definition of ``unit of general local government.''

    For purposes of this subpart, the term ``unit of general local 
government'' means a county or parish, city, town, township, or other 
political subdivision of a state.


Sec.  291.510  Overview of the GNND Sales Program.

    (a) General. The GNND Sales Program enables a full-time law 
enforcement officer, teacher, or firefighter/emergency responder to 
purchase a specifically designated HUD-acquired home located in a HUD-
designated revitalization area:
    (1) At a 50 percent discount from the list price; and
    (2) With a downpayment of $100, but only if the law enforcement 
officer, teacher, or firefighter/emergency responder finances the home 
through a Federal Housing Administration (FHA) insured mortgage.
    (b) Eligible properties. Under the GNND Sales Program, all 
properties acquired by HUD located in HUD-designated revitalization 
areas (both those that are eligible for FHA mortgage insurance and 
those that are not eligible) are made available to interested law 
enforcement officers, teachers, and firefighters/emergency responders 
prior to listing the properties for sale to other purchasers.
    (c) Multiple offers. In the event that several offers are made on a 
single property, HUD will randomly select a winning offer by lottery as 
well as a back-up offer in the event the winning offeror is unable to 
close on purchase of the property. If the back-up offeror is also 
unable to close on the purchase of the property, the property will then 
be made available for sale to other purchasers.
    (d) Real estate brokers. Law enforcement officers, teachers, and 
firefighters/emergency responders must submit offers through a 
participating real estate broker. Any real estate broker who has agreed 
to comply with HUD requirements may participate in the GNND Sales 
Program. Real estate brokers may submit unlimited numbers of offers on 
an individual property provided each offer is from a different 
prospective purchaser.
    (e) Cap on sales. The number of HUD-acquired homes sold under the 
GNND Sales Program in a fiscal year shall not exceed five percent of 
the number of ``Part A'' mortgage insurance conveyance claims paid by 
HUD in the immediately preceding fiscal year. The cap shall apply on a 
national basis, but HUD reserves the right to geographically apportion 
the cap to address regional or local differences in the number of homes 
sold through the GNND Sales Program. Additionally, HUD may adjust the 
percentage of the cap for any fiscal year. Any HUD determination to 
geographically distribute the cap, change a current geographic 
distribution, or adjust the percentage of the cap will be announced by 
HUD through publication of a notice in the Federal Register at least 30 
days before the revision takes effect.


Sec.  291.515  Purchaser qualifications.

    To qualify to purchase a home through the GNND Sales Program:
    (a) The person must be employed as a full-time law enforcement 
officer (as described in Sec.  291.520), teacher (as described in Sec.  
291.525), or firefighter/emergency responder (as described in Sec.  
291.530) at the time he/she submits a bid to purchase a home through 
the program and at the time of closing on the purchase of the home;
    (b) The person must certify to his/her good faith intention to 
continue employment as a law enforcement officer (as described in Sec.  
291.520), teacher (as described in Sec.  291.525), or firefighter/
emergency responder (as described in Sec.  291.530) for at least one 
year following the date of closing;
    (c) The person must make an earnest money deposit at the time of 
signing the contract for purchase of the home as described in Sec.  
291.535;
    (d) The person must agree to own, and live in as his/her sole 
residence, the home for the entire duration of the owner-occupancy 
term, as described in Sec.  291.540 and to certify to that occupancy as 
described in Sec.  292.565;
    (e) The person must agree to execute a second mortgage and note on 
the home as described in Sec.  291.550 for the difference between the 
initial list price and the discounted selling price;
    (f) Neither the person (nor his/her spouse) may have owned any 
residential real property for one year prior to the date of submitting 
a bid on the home

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being acquired through the GNND Sales Program;
    (g) Neither the person (nor his/her spouse) must ever have 
purchased another home under the GNND Sales Program or under the 
predecessor Officer Next Door Sales and Teacher Next Door Sales 
programs; and
    (h) Although both spouses, if otherwise eligible, may submit an 
offer on a single home made available for sale under the GNND Sales 
Program, HUD will only approve an offer from only one spouse.


Sec.  291.520  Eligible law enforcement officers.

    A person qualifies as a law enforcement officer, for the purposes 
of the GNND Sales Program if the person is:
    (a) Employed full-time by a law enforcement agency of the federal 
government, a state, unit of general local government, or an Indian 
tribal government; and
    (b) In carrying out such full-time employment, the person is sworn 
to uphold and make arrests for violations of federal, state, tribal, 
county, township, or municipal laws.


Sec.  291.525  Eligible teachers.

    A person qualifies as a teacher for the purposes of the GNND Sales 
Program, if the person is:
    (a) Employed full-time by a state accredited public school or 
private school that provides direct services to students in grades pre-
kindergarten through 12; and
    (b) The public or private school where the person is employed 
serves students from the area where the home is located in the normal 
course of business.


Sec.  291.530  Eligible firefighter/emergency responders.

    A person qualifies as a firefighter/emergency responder, for the 
purposes of the GNND Sales Program, if the person is employed full-time 
as a firefighter or emergency medical technician by a fire department 
or emergency medical services responder unit of the federal government, 
a state, unit of general local government, or an Indian tribal 
government serving the area where the home is located.


Sec.  291.535  Earnest money deposit.

    (a) General. The earnest money deposit is the sum of money that 
must be paid by the law enforcement officer, teacher, or firefighter/
emergency responder at the time of submitting an offer for purchase of 
a property under the GNND Sales Program. Each bid must be accompanied 
by an earnest money deposit in either the form of a cash equivalent as 
prescribed by HUD, or a certification from the real estate broker that 
the earnest money deposit has been deposited in the broker's escrow 
account.
    (b) Amount of earnest money deposit. The amount of the earnest 
money deposit required is an amount equal to one percent of the list 
price, but no less than $500 and no more than $2,000.
    (c) Acceptance or rejection of offer. If an offer is accepted, the 
earnest money deposit will be credited to the purchaser at closing. If 
the offer is rejected, the earnest money deposit will be returned. 
Earnest money deposits are subject to total forfeiture for failure of 
the participant to close a sale.


Sec.  291.540  Owner-occupancy term.

    (a) General. The owner-occupancy term is the number of months a 
participant in the GNND Sales Program must agree to own, and live in as 
his/her sole residence, a home purchased through the GNND Sales 
Program.
    (b) Start of owner-occupancy term. The owner-occupancy term is 36 
months, commencing either
    (1) Thirty (30) days following closing, if HUD determines that the 
home requires no more than $10,000 in repairs prior to occupancy;
    (2) Ninety (90) days following closing, if HUD determines that the 
home requires more than $10,000, but not more than $20,000 in repairs 
prior to occupancy; or
    (3) One hundred and eighty (180) days following closing if HUD 
determines that the home requires more than $20,000 in repairs prior to 
occupancy.
    (c) Interruptions to owner-occupancy term. (1) General. HUD may, at 
its sole discretion, allow interruptions to the 36-month owner-
occupancy term if it determines that the interruption is necessary to 
prevent hardship, but only if the law enforcement officer, teacher, or 
firefighter/emergency responder submits a written and signed request to 
HUD containing the following information:
    (i) The reasons why the interruption is necessary;
    (ii) The dates of the intended interruption; and
    (iii) A certification from the law enforcement officer, teacher, or 
firefighter/emergency responder that:
    (A) The law enforcement officer, teacher, or firefighter/emergency 
responder is not abandoning the home as his/her permanent residence; 
and
    (B) The law enforcement officer, teacher, or firefighter/emergency 
responder will resume occupancy of the home upon the conclusion of the 
interruption and complete the remainder of the 36-month owner-occupancy 
term.
    (2) Timing of written request to HUD. The written request for 
approval of an interruption to the owner-occupancy term must be 
submitted to HUD at least 30 calendar days before the anticipated 
interruption. Military service members protected by the Servicemembers 
Civil Relief Act of 2003 need not submit their written request to HUD 
30 days in advance of an anticipated interruption, but should submit 
their written request as soon as practicable upon learning of a 
potential interruption, in order to ensure timely processing and 
approval of the request.


Sec.  291.545  Financing purchase of the home.

    (a) Purchase using conventional financing. If the law enforcement 
officer, teacher, or firefighter/emergency responder uses conventional 
financing to purchase a home under the GNND Sales Program, the amount 
of the mortgage may not exceed the discounted sales price of the home.
    (b) Purchase with FHA-insured mortgage. A law enforcement officer, 
teacher, or firefighter/emergency responder using an FHA-insured 
mortgage to finance purchase of the home may finance reasonable and 
customary closing costs with the FHA-insured mortgage. The amount of 
the FHA-insured mortgage may not exceed the discounted sales price of 
the home plus the closing costs.
    (c) No HUD payment of closing costs. In no event will HUD pay a 
buyer's closing costs on the purchase of a property through the GNND 
Sales Program.


Sec.  291.550  Second mortgage.

    (a) General. The second mortgage is a mortgage and note, payable to 
HUD, on the home purchased through the GNND Sales Program in the amount 
of the difference between the list price of the home and the discounted 
selling price.
    (b) Second mortgage term. The term of the second mortgage is equal 
to the owner-occupancy term (36 months) plus 30, 90, or 180 days, as 
applicable depending on the amount of repairs required prior to 
occupancy (see Sec.  291.540(b)). The amount of the second mortgage 
will be reduced by \1/36\th on the last day of each month of occupancy 
following the occupancy start date. At the end of the 36th month of 
occupancy, the amount of the second mortgage will be zero.
    (c) Sale or vacancy of home. If the law enforcement officer, 
teacher, or firefighter/emergency responder sells his/her home or stops 
living in the

[[Page 53486]]

home as his/her sole residence prior to the expiration of the owner-
occupancy term, he/she will owe HUD the amount due on the second 
mortgage either as of the date the property is sold or vacated.


Sec.  291.555  Refinancing.

    (a) General. A law enforcement officer, teacher, or firefighter/
emergency responder may refinance the mortgage and note used to 
purchase the home. However, the total of the refinanced mortgage and 
the remaining principal balance of the second mortgage may not exceed 
95 percent of the value of the property, as appraised at the time of 
the refinancing. Unless HUD permits subordination pursuant to paragraph 
(b) of this section, the second mortgage described in Sec.  291.550 
must hold a superior lien position to the refinanced mortgage.
    (b) Subordination of second mortgage. HUD may permit subordination 
of the second mortgage to the refinanced mortgage, but only if HUD, at 
its sole discretion, determines that the refinancing will satisfy one 
of the following:
    (1) Will result in a lower annual percentage rate (APR) on the 
first mortgage;
    (2) Will be undertaken pursuant to HUD's Section 203(k) 
Rehabilitation Loan Insurance Program in order to rehabilitate or 
repair the home; or
    (3) Is necessary to prevent the law enforcement officer, teacher, 
or firefighter/emergency responder from defaulting on the first 
mortgage.


Sec.  291.560  Ineligibility of multiple-unit properties.

    Only single-unit properties are eligible for the GNND Sales 
Program.


Sec.  291.565  Continuing obligations after purchase.

    To remain a participant in the GNND Sales Program, the law 
enforcement officer, teacher, or firefighter/emergency responder, must, 
for the entire duration of the owner-occupancy term:
    (a) Continue to own, and live in as his/her sole residence, the 
home purchased through the GNND Sales Program; and
    (b) Certify initially and once annually thereafter during and at 
the conclusion of the owner-occupancy term that paragraph (a) of this 
section continues to be true.

    Dated: July 8, 2005.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 05-17642 Filed 9-7-05; 8:45 am]
BILLING CODE 4210-27-P