[Federal Register Volume 71, Number 99 (Tuesday, May 23, 2006)]
[Proposed Rules]
[Pages 29754-29755]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-4746]



[[Page 29753]]

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Part III





Department of Housing and Urban Development





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24 CFR Part 234



Approval of Condominiums in Puerto Rico on Evidence of Presentment of 
Legal Documents; Proposed Rule

  Federal Register / Vol. 71, No. 99 / Tuesday, May 23, 2006 / Proposed 
Rules  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 234

[Docket No. FR-5009-P-01; HUD-2006-0005]
RIN 2502-AI36


Approval of Condominiums in Puerto Rico on Evidence of 
Presentment of Legal Documents

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule amends the Department's regulations 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 Office of the Property Registry. This 
proposed rule would enable parties to obtain mortgage insurance upon 
presentment of legal documents, whether the condominium regime is under 
construction, proposed for construction, or was established by 
conversion. Instituting a single standard for approval of mortgage 
insurance will result in a reduction in risk, time and cost for 
developers and help to increase FHA activity and homeownership 
opportunities in Puerto Rico.

DATES: Comment Due Date: July 24, 2006.

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 Rulemaking 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 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). Individuals with speech or hearing impairments may access this 
number through TTY by calling the toll-free Federal Information Relay 
Service at (800) 877-8339. Copies of the public comments are also 
available for inspection and downloading at http://www.epa.gov/feddocket.

FOR FURTHER INFORMATION CONTACT: Margaret Burns, Director, Office of 
Single Family Program Development, Office of Housing, Department of 
Housing and Urban Development, 451 Seventh Street, SW, Room 9278, 
Washington, DC 20410-7000, telephone (202) 708-2121 (this is not a 
toll-free number). Individuals with speech or hearing impairments may 
access this number through TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background--Amending the Definition of Conversion: February 7, 2003, 
Final Rule

    The Department published a final rule on February 7, 2003 (68 FR 
6596), which amended 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. Section 234(k) of 
the Act provides that, before Federal Housing Administration (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.
    In response to a severe backlog at the Puerto Rico Commonwealth 
Office of the Property Registry, which resulted in developers and 
proponents being responsible for paying assessments and costs 
associated with operating and maintaining the multifamily project as a 
condominium before mortgage insurance could be obtained, HUD amended 
the definition of conversion in the February 7, 2003, final rule. Prior 
to the effective date of that final rule, the date of conversion in 
Puerto Rico was deemed to commence upon the recording of the required 
documentation. The final rule changed the definition of conversion with 
respect to Puerto Rico, to allow the running of the one-year waiting 
period to begin upon presentment for inscription (i.e., recording) of 
the required documentation.
    This revision allowed the Department to approve condominium 
developments in Puerto Rico for FHA mortgage insurance on individual 
units within the multifamily project on the basis of evidence of 
presentment of legal documents and the parties' obtaining title 
insurance on each unit. The final rule thereby relieved 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 then-
existing definition of conversion.

II. This Proposed Rule

    The Department proposes to revise the provisions found in 24 CFR 
234.26 to provide that, in the case of Puerto Rico, the date of 
presentment should serve as the date of recordation for all condominium 
regimes. The proposed rule expands the scope of recordation while 
better reflecting the realities of the inscription process in Puerto 
Rico. At present, given the close scrutiny of legal documents by 
lawyers who are experts in condominium law, once legal documents are 
presented to the Commonwealth Office of the Property Registry they 
almost always result in the recordation of the property interest. Under 
the proposed rule, condominium plans would still have to comply with 
the legal requirements of the local jurisdiction. In addition, the 
proposed rule would not alter property rights, which are conferred by 
the legal documents themselves and not their recordation.
    The process for inscription is currently the same for both new 
condominium regimes and condominium conversions. This results in the 
same kinds of difficulties, delays, and costs that developers and 
proponents of new condominium regimes experienced with conversion 
condominiums prior to the February 7, 2003, final rule. Under the 
current regulatory scheme, new condominiums and converted condominiums 
must comply with the same requirements, yet they are treated 
differently. Both types of condominiums must meet the recordation 
requirement of 24 CFR 234(f)(1); however, while a developer of a new 
condominium must wait for the entire inscription process to be 
completed before approval of mortgage insurance can be obtained, a 
developer of a converted condominium can seek approval upon presentment 
of the legal

[[Page 29755]]

documents to the Commonwealth Office of the Property Registry.
    The new proposed rule would broaden the definition of recordation 
to include presentment of condominium documents in the case of all 
condominium regimes in Puerto Rico. This would establish a uniform 
approach to the FHA mortgage insurance approval process by allowing FHA 
mortgage insurance to be placed on condominiums, including those under 
construction or planned for construction, following presentment of the 
condominium's legal documents to the Commonwealth Office of the 
Property Registry. This proposed rule would not only resolve the 
disparate treatment among condominium regimes but also reduce risk, 
time and expenses to developers, but also substantially increase FHA's 
market share and homeownership opportunities in the Commonwealth.

III. Findings and Certifications

Information Collection Requirements

    The information collection requirements contained in the Section 
234(c) program have been approved by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520) and assigned OMB Control Number 2502-0059. In accordance with the 
Paperwork Reduction Act, HUD 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.

Environmental Review

    This proposed rule does not direct, provide for assistance, or loan 
and mortgage insurance for, or otherwise govern or regulate, real 
property acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from the requirements of the 
National Environmental Policy Act (42 U.S.C. 4321 et seq.).

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 proposed rule does not 
impose any Federal mandates on any state, local, or tribal government 
or the private sector within the meaning of UMRA.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) generally 
requires an agency to conduct 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 rule will not 
have a significant economic impact on a substantial number of small 
entities for the following reasons. There are no anti-competitive 
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.
    Notwithstanding HUD's determination that this rule will not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the executive order are met. This 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 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. Revise Sec.  234.26(b) and (d)(1) to read as follows:


Sec.  234.26  Project requirements.

* * * * *
    (b) Plan of condominium ownership. The project in which the unit is 
located shall have been committed to a plan of condominium ownership by 
a deed, or other recorded instrument, that is acceptable to the 
Commissioner. In the case of condominium documents in the Commonwealth 
of Puerto Rico, the Department will accept documents presented for 
inscription (recordation) to the Commonwealth Office of the Property 
Registry so long as the mortgagor obtains a title insurance policy that 
reflects the condominium regime.
* * * * *
    (d) * * *
    (1) The deed of the family unit and the deed or other recorded 
instrument committing the project to a plan of condominium ownership 
must comply with legal requirements of the jurisdiction. In the case of 
condominium documents in the Commonwealth of Puerto Rico, the 
Department will accept documents presented for inscription 
(recordation) to the Commonwealth Office of Property Registry for 
certification purposes so long as the mortgagor obtains a title 
insurance policy that reflects the condominium regime.
* * * * *

    Dated: April 27, 2006.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 06-4746 Filed 5-22-06; 8:45 am]
BILLING CODE 4210-67-P