[Federal Register Volume 72, Number 64 (Wednesday, April 4, 2007)]
[Rules and Regulations]
[Pages 16688-16689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-6088]



[[Page 16687]]

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Part VI





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; Final Rule

  Federal Register / Vol. 72, No. 64 / Wednesday, April 4, 2007 / Rules 
and Regulations  

[[Page 16688]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 234

[Docket No. FR-5009-F-02]
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: Final rule.

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SUMMARY: This final 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 
final rule enables 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. This final rule follows publication of a 
May 23, 2006, proposed rule on which HUD did not receive any public 
comments. Accordingly, HUD is adopting the May 23, 2006, proposed rule 
without change.

DATES: Effective Date: May 4, 2007.

FOR FURTHER INFORMATION CONTACT: Maynard T. Curry, Housing Program and 
Policy Specialist, Office of Single Family Program Development, Office 
of Housing, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 9266, 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

    On May 23, 2006, HUD published a proposed rule (71 FR 29754) for 
public comment to amend the Department's regulations governing Federal 
Housing Administration (FHA) approval of condominium developments in 
the Commonwealth of Puerto Rico for mortgage insurance under section 
234 of the National Housing Act (12 U.S.C 1715y(c)) (the Act). Section 
234(c) of the Act authorizes the Secretary of HUD 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 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. HUD's 
regulations implementing section 234 of the Act are codified at 24 CFR 
part 234.
    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 issued a 
February 7, 2003, final rule that amended the definition of conversion. 
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.
    The May 23, 2006, proposed rule would revise the part 234 
regulations to provide that, in the case of Puerto Rico, the date of 
presentment should serve as the date of recordation for all condominium 
regimes, which includes existing rental units that have been converted, 
units under construction, or units that are planned for construction. 
The proposed regulatory changes were designed to expand the scope of 
recordation while better reflecting the realities of the inscription 
process in Puerto Rico. 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 proposed 
rule would allow all condominium regimes in Puerto Rico to obtain FHA 
approval for mortgage insurance at the time of presentment of 
condominium documents. This would establish a uniform approach to the 
FHA mortgage insurance approval process by allowing FHA mortgage 
insurance to be placed on condominiums, whether they be conversions of 
existing rental units, units under construction, or units planned for 
construction, following presentment of the condominium's legal 
documents to the Commonwealth Office of the Property Registry.
    For more detailed information regarding the proposed regulatory 
changes, please refer to the preamble of the May 23, 2006, proposed 
rule.

II. This Final Rule

    This final rule follows the publication of a May 23, 2006, proposed 
rule. The public comment period on the proposed rule closed on July 24, 
2006. HUD did not receive any public comments on the proposed rule. 
HUD, therefore, is issuing this final rule without change from the 
proposed rule.

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 amendment is categorically excluded from environmental review 
under the National Environmental Policy Act (42 U.S.C. 4321). In 
keeping with the exclusion provided for in 24 CFR 50.19(c)(1), this 
amendment 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, this amendment is categorically 
excluded because it amends an existing

[[Page 16689]]

document where the existing document as a whole would not fall within 
the exclusion in 24 CFR 50.19(c)(1).

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 final 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: (1) there are no anti-competitive 
discriminatory aspects of the rule with regard to small entities, and 
(2) 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, 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.

0
Accordingly, for the reasons described in the preamble, HUD amends 24 
CFR part 234 to read as follows:

PART 234--CONDOMINIUM OWNERSHIP MORTGAGE INSURANCE

0
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).


0
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 Commissioner 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: March 20, 2007.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. E7-6088 Filed 4-3-07; 8:45 am]
BILLING CODE 4210-67-P