[Federal Register Volume 79, Number 62 (Tuesday, April 1, 2014)]
[Notices]
[Pages 18305-18307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-07271]



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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5752-N-35]


30-Day Notice of Proposed Information Collection: HUD Multifamily 
Rental Project Closing Documents Renewal of Currently Approved 
Collection

AGENCY: Office of the Chief Information Officer, HUD.

ACTION: Notice.

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SUMMARY: HUD has submitted the proposed information collection 
requirement described below to the Office of Management and Budget 
(OMB) for review, in accordance with the Paperwork Reduction Act. The 
purpose of this notice is to allow for an additional 30 days of public 
comment.

DATES: Comments Due Date: May 1, 2014.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposal. Comments should refer to the proposal by name and/or OMB 
Control Number and should be sent to: HUD Desk Officer, Office of 
Management and Budget, New Executive Office Building, Washington, DC 
20503; fax: 202-395-5806. Email: [email protected].

FOR FURTHER INFORMATION CONTACT: Colette Pollard, Reports Management 
Officer, QDAM, Department of Housing and Urban Development, 451 7th 
Street SW., Washington, DC 20410; email Colette Pollard at 
[email protected] or telephone 202-402-3400. Persons with hearing 
or speech impairments may access this number through TTY by calling the 
toll-free Federal Relay Service at (800) 877-8339. This is not a toll-
free number. Copies of available documents submitted to OMB may be 
obtained from Ms. Pollard.

SUPPLEMENTARY INFORMATION: This notice informs the public that HUD has 
submitted to OMB a request for approval of the information collection 
described in Section A. The Federal Register notice that solicited 
public comment on the information collection for a period of 60 days 
was published on October 29, 2013.

I. Overview of Information Collection

    Title of Information Collection: Multifamily Rental Project Closing 
Documents Renewal of Currently Approved Collection.
    OMB Approval Number: 2502-0598.
    Type of Request: Revision of currently approved collection.
    Form Number: Please see below.
    Description of the need for the information and proposed use: These 
are closing documents (Closing Documents) used in FHA-insured 
multifamily rental project transactions. The documents included in the 
proposed collection of information, including where applicable redline/
strikeout versions showing both the changes that were proposed with the 
60-day notice and the cumulative proposed changes to documents 
currently in use, have been posted on HUD's Web site at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhclosingdocuments.
    While complying with the Paperwork Reduction Act of 1995, this 30-
day notice provides information beyond that normally provided in such 
notices. This notice identifies substantive changes that HUD has made 
to the Closing Documents in response to public comment submitted in 
response to the October 29, 2013 notice, and responds to significant 
issues raised by commenters on the Closing Documents.

Security Instrument

    One comment suggested expanding the definition of ``Loan 
Documents'' to be consistent with the definition used in the Section 
232 healthcare program and to incorporate more of the documents in this 
collection. HUD has made this revision. Another comment suggested 
clarifications to the definition of Mortgaged Property. HUD has made 
these clarifications in both the Security Instrument and the Regulatory 
Agreement.
    Another comment suggested requiring payment of Imposition Deposits 
a minimum of thirty (30) days prior to the date they are due without 
penalty or interest, rather than by the date they are due without 
penalty or interest. HUD has determined that this change is not 
necessary since it has not previously encountered objections to the 
current language, and such a change would place an increased burden on 
borrowers to submit imposition deposit payments a full month before 
they are due.

Note

    HUD revised the language in section 9(h) to make clear that, with 
respect to a project insured under Section 223(f), a prepayment 
resulting in a project's conversion to a use other than rental housing 
is permissible within the five-year post-closing time frame if HUD is 
able to make the requisite statutory findings.
    HUD has taken the opportunity to clarify that Rider 1, attached to 
the Note for projects being financed with GNMA or Other Bond 
Obligations, is only to include the prepayment lockout and premium 
schedule. Since the provisions typically included in Rider have been 
incorporated into the body of the Note it is no longer necessary to 
insert them in the Rider.

Regulatory Agreement

    One comment suggested removing limitations on distributions in 
section 14. HUD has declined to make this change. Distributions remain 
subject to surplus cash requirements and limited to twice-annual 
Surplus Cash calculation, as set forth in section 13(a).
    HUD accepted comments inserting language in section 18 so it is 
clear that submission of final reports by partial-year owners is 
required. In section 21(g), which limits the ability of management 
agents to seek indemnification, HUD accepted comments inserting a 
standard of gross negligence or willful misconduct.

Lender's Certificate

    In section 15, HUD accepted one commenter's suggestion to calculate 
the ten (10) year anniversary date for the PCNA reporting requirement 
based on the commencement of amortization date for new construction/
substantial rehabilitation projects. We agree that using the 
commencement of amortization date is preferable since it closely tracks 
when construction is completed, is easily identified, and rarely 
changes. With the addition of this language, HUD has determined that 
the PCNA Rider is no longer necessary and will make the appropriate 
revision in the MAP Guide.
    A commenter pointed out that for purposes of consistency with the 
Lean program and previous guidance, section 24(b) should be revised to 
change the date of delinquency for a missed payment from the tenth 
(10th) to the fifteenth (15th) day of the month in which it is due. HUD 
has considered this comment, but has decided not to make the change at 
this time. For the Multifamily program, the tenth (10th) of the month 
is correct.
    A commenter suggested clarifications to section 30 and suggested 
that the section be limited ``to the best of Lender's knowledge.'' HUD 
has made several of the clarifications requested but has declined to 
add the limitation to the best of lender's knowledge. HUD has kept the 
language, ``. . . based upon Lender's due diligence.''
    Another commenter suggested that because UCC Financing Statements 
do not always establish first liens that section 38 be revised to only 
state that a perfected security interest has been established in favor 
of Lender that is only subject to matters approved by HUD. HUD has 
determined that this

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change is not warranted in Lender's Certificate since this document 
covers new construction/substantial rehabilitation. It is unlikely that 
there will be prior financing statements in this context, and if there 
are, revisions to this section would be better addressed on a project 
basis.

Request for Endorsement

    In a comment similar to the comments regarding section 30 of the 
Lender's Certificate described above, a comment suggested 
clarifications to the certification regarding permits and approvals. In 
considering this comment, HUD determined that because the Lender's 
Certificate is used for new construction and substantial rehabilitation 
transactions but this document is not, differences between the two 
documents are warranted with regard to this certification. Due to the 
limited nature of the permits and approvals necessary for the 
transactions for which this document is used, HUD limited the 
certifications accordingly and determined that no exhibit to list the 
required approvals is necessary.

Request for Final Endorsement

    A comment suggested adding to this document a certification 
regarding permits and approvals similar to the certification in the 
Lender's Certificate. HUD agrees with this comment.

Opinion of Borrower's Counsel and Instructions

    HUD received a very general yet significant comment about the 
Opinion of Borrower's Counsel. The commenter objected to HUD's refusal 
to allow the Opinion to be negotiable, and observed that this 
inflexibility does not conform to customary opinion practice. HUD 
rejects this comment and continues to make the Opinion of Borrower's 
Counsel a uniform, standardized document that cannot be modified on a 
deal-by-deal basis unless the change is required to comply with state 
or local law. HUD does not have the staffing capacity that would be 
needed to permit deal-by-deal negotiations of the Opinion, and it would 
be difficult to ensure that such negotiations were accomplished 
uniformly across the nation. The use of a uniform, non-negotiable form 
will also reduce transaction costs.
    The commenter also asked HUD to narrow the list of documents 
reviewed in connection with the issuance of the Opinion and the list of 
documents upon which the various opinions within the form Opinion are 
based. HUD declined to adopt these changes. HUD determined that its 
interests and due diligence needs with respect to ensuring that 
borrowers are able to fulfill their legal obligations in connection 
with the loan closing and project ownership are not limited to the 
provisions in the Note, Security Instrument, Regulatory Agreement, and 
Building Loan Agreement. HUD's practice in this regard is consistent 
with that of Fannie Mae and Freddie Mac. Further, HUD has also, for 
now, decided not to adopt a request that it move the ``closing'' 
instructions contained in the Instructions to the Opinion of Borrower's 
Counsel to another location.
    Regarding the suggestion that HUD remove any negative assurances in 
keeping with private practice, HUD declines. HUD's due diligence needs 
are distinguishable from that of the conventional loans and securities 
offering and HUD's practice is consistent with that of Fannie Mae and 
Freddie Mac.
    The commenter also requested that opinions that the borrower has 
the power and authority to comply with statutes, the that loan 
documents will not violate local law, that the borrower has authority 
to enter into the loan, that the loan documents are enforceable, that 
the project is properly zoned, that the loan documents will not 
contravene the borrower's other agreements, and that the loan documents 
are sufficient to create a lien in the mortgaged property be removed. 
Commenter also requested removal of factual confirmations, as well as 
disclosure of the attorney's financial interest and borrower's pending 
litigation. Commenter further requested that deviations from the form 
opinion not be disclosed. Commenter asked to remove language permitting 
HUD to rely on the opinion letter, and delete the False Claims Act 
warning language. HUD declines each of these requests. The requested 
changes would be adverse to FHA's mandate.
    Commenter requested that the opinion on Public Entity Agreements 
(PEA) be removed, but this comment stems from commenter's confusion 
between PEAs and secondary financing documents, thus HUD declines.

Subordination Agreement

    HUD received a comment that subordinate lender entities should not 
be subject to qualification under HUD's Program Obligations. HUD has 
determined that the reference to qualifying under Program Obligations 
should be deleted. While only public bodies providing secured, 
secondary financing to FHA-insured multifamily projects use this 
Subordination Agreement, HUD believes that its approval of the use and 
execution of the Subordination Agreement on a given transaction 
constitutes the necessary approval of the subordinate lender.
    HUD received a comment that the deliverables required under section 
4 are not necessary for refinance transactions under Section 223(a)(7) 
and 223(f) of the National Housing Act. HUD disagrees with the comment 
with respect to transactions refinanced under Section 223(f) as it is 
very important for the Department to receive the necessary assurances. 
HUD, however, agrees that it is not necessary to obtain a copy of the 
subordinate loan documents for currently insured projects undergoing a 
223(a)(7) refinancing after the refinancing takes place.
    HUD received a comment about the provision in the document 
concerning bankruptcy. The comment related to events after a borrower's 
bankruptcy filing, whereas the provision in the Subordination Agreement 
concerns the timeframe prior to a bankruptcy filing. Consequently, HUD 
has rejected the comment.
    HUD received a request to eliminate section 6(b), which precludes 
subordinate lenders from commencing a foreclosure in the event of a 
default under the subordinate loan documents without senior lender's 
consent. HUD disagreed with this comment. Foreclosures of a subordinate 
loan are still subject to the senior FHA-insured mortgage. Therefore, 
foreclosure's benefits to the subordinate lender are limited but 
foreclosure by the subordinate lender without senior lender consent 
risks disrupting project operations, ownership and senior lender's 
ability to effect a work out. Further, as is provided for in section 
6(b), subordinate lenders may seek recovery against non-project sources 
such as personal guaranties, as well as specific enforcement remedies 
relating to project use and occupancy requirements.
    HUD agreed with the comment that any future modification of the 
senior loan documents should not negatively impact subordinate lenders. 
Consequently, HUD has placed limitations on the ability to modify the 
senior loan without subordinate lender consent, and has further decided 
to include limitations on the ability to refinance the senior loan.
    Estimated Burden: Please see following table.

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                                             Number of     Frequency of    Responses per   Burden hours    Annual burden                   Total annual
         Information collection             respondents      response          annum       per response        hours        Hourly cost        cost
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HUD-91710M..............................             600               1             600            0.5           300                $26         $700
HUD-91712M..............................             600               1             600            0.5           300                 26        7,800
HUD-92023M..............................            1250               1            1250            1            1250                 26       32,500
HUD-92070M..............................              60               1              60            0.5            30                 26          780
HUD-92223M..............................             600               1             600            0.5           300                 26        7,800
HUD-92412M..............................             175               1             175            0.5            87.50              26        2,275
HUD-92414M..............................            1250               1            1250            0.5           625                 26       16,250
HUD-92450M..............................             175               1             175            0.5            87.50              26        2,275
HUD-92452A-M............................             175               1             175            0.5            87.50              26        2,275
HUD-92452M..............................             175               1             175            0.5            87.50              26        2,275
HUD-92455M..............................            1075               1            1075            1            1075                 26       27,950
HUD-92456M..............................             175               1             175            0.5            87.50              26        2,275
HUD-91073M..............................            1250               1            1250            0.5           625                 26       16,250
HUD-92464M..............................            1250               1            1250            1            1250                 46       57,500
HUD-92476.1M............................            1075               1            1075            0.5           537.50              26       13,975
HUD-92476a-M............................             175               1             175            0.5            87.50              26        2,275
HUD-92477M..............................             175               1             175            0.5            87.50              26        2,275
HUD-92478M..............................            1250               1            1250            0.5           625                 26       16,250
HUD-92479M..............................             175               1             175            0.5            87.50              26        2,275
HUD-91725M..............................            1250               1            1250            1            1250                125      156,250
HUD-91725M-CERT.........................            1250               1            1250            1            1250                 46       57,500
HUD-91725M-INST.........................               0               0               0            0               0                  0            0
HUD-92434M..............................             175               1             175            1             175                 26        4,550
HUD-92441M-SUPP.........................             175               1             175             .75          131.25              26        3,412.50
HUD-92441M..............................             175               1             175             .75          131.25              26        3,412.50
HUD-92442M..............................             175               1             175            1             175                 58       10,150
HUD-92466M..............................            1250               1            1250            1            1250                 58       72,500
HUD-92554M..............................             175               1             175            0.5            87.50              26        2,275
HUD-94000M..............................            1250               1            1250            0.75          937.5               26       24,375
HUD-94001M..............................            1250               1            1250            1            1250                 26       32,500
HUD-93305M..............................            1250               1            1250            0.5           625                 26       16,200
HUD-92476M..............................              20               1              20            0.5            10                 26          200
HUD-92420M..............................             600               1             600            0.5           300                 26        7,800
HUD-92408M..............................            1250               1             600            2            2500                103      257,500
HUD-91070M..............................            1250               1            1250            0.5           625                 36       22,500
HUD-91071M..............................              20               1              20            0.5            10                 26          260
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    Totals..............................  ..............  ..............          23,175  ..............       18,325     ..............      894,550.00
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    The hourly rate is an estimate based on an average annual salary of 
$62,000 for developers and mortgagees.

III. Solicitation of Public Comment

A. Burden of Information Collection

    This notice is soliciting comments from members of the public and 
affected parties concerning the collection of information described in 
this notice on the following:
    (1) 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) The accuracy of the agency's estimate of the burden of the 
proposed collection of information.
    (3) Ways to enhance the quality, utility, and clarity of the 
information to be collected or any content of the Closing Documents.
    (4) Ways to 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.
    Comments must be received by May 1, 2014. Comments should refer to 
the proposal by name and/or OMB Control Number and should be sent to:

Colette Pollard, Reports Management Officer, QDAM, Department of 
Housing and Urban Development, 451 7th Street SW., Room 4176, 
Washington, DC 20410-5000

and

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, Fax number: (202) 395-6947.

     Authority:  Section 3507 of the Paperwork Reduction Act of 
1995, 44 U.S.C. Chapter 35.

    Date: March 26, 2014.
Collette Pollard,
Reports Management Officer, Office of the Chief Information Officer.
[FR Doc. 2014-07271 Filed 3-31-14; 8:45 am]
BILLING CODE 4210-67-P