[Federal Register Volume 79, Number 179 (Tuesday, September 16, 2014)]
[Rules and Regulations]
[Pages 55360-55362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22069]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5 and 232

[Docket No. FR--5794-I-01]
RIN 2502-AJ25


Federal Housing Administration (FHA): Section 232 Healthcare 
Facility Insurance Program--Aligning Operator Financial Reports With 
HUD's Uniform Financial Reporting Standards

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

ACTION: Interim rule.

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SUMMARY: Through a final rule published on September 7, 2012, HUD 
revised the regulations for FHA's program for insurance of health care 
facilities under section 232 of the National Housing Act (Section 232 
program). In the September 7, 2012, final rule, HUD retained the 
longstanding requirement that owners and borrowers participating in the 
Section 232 program submit audited financial statements to HUD, and 
added the requirement that operators of Section 232 facilities also 
submit financial statements to HUD on a quarterly and annual basis. 
However, the September 7, 2012, rule placed operators on a different 
submission deadline than that required of owners. This interim rule 
revises the financial reporting deadlines for operators to bring them 
in-line with the reporting periods prescribed in HUD's Uniform 
Financial Reporting Standards, to which owners and borrowers are 
subject.

DATES: Effective date: October 16, 2014.
    Comment due date: November 17, 2014.

ADDRESSES: Interested persons are invited to submit comments on this 
interim rule to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    Submission of Comments by Mail. Comments may be submitted by mail 
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 Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule.

    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.
    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available 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, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at 202-402-3055 (this is 
not a toll-free number). Individuals with speech or hearing impairments 
may access this number via TTY by calling the Federal Relay Service, 
toll-free, at 800-877-8339. Copies of all comments submitted are 
available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Office of Residential 
Care Facilities, Office of Healthcare Programs, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
6264, Washington, DC 20410-8000; telephone number 202-708-0599 (this is 
not a toll-free number). Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal Relay 
Service at 1-800-877-8339.

I. Supplementary Information

A. Background

    Section 232 of the National Housing Act (12 U.S.C. 1715w) (Section 
232) authorizes FHA to insure mortgages made by private lenders to 
finance the development of nursing homes, intermediate care facilities, 
board and care homes, and assisted living facilities (collectively, 
residential healthcare facilities). The Section 232 program allows for 
long-term, fixed-rate financing for new and rehabilitated properties 
for up to 40 years. Existing properties without rehabilitation can be 
financed with or without Ginnie Mae[supreg] \1\ Mortgage Backed 
Securities for up to 35 years. Eligible borrowers under the Section 232 
program include investors, builders, developers, public entities, and 
private nonprofit corporations and associations. The documents executed 
at loan closing provide that the borrower may not engage in any other 
business or activity.
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    \1\ Ginnie Mae is a registered service mark of the Government 
National Mortgage Association; see http://www.ginniemae.gov/.
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    As the need for residential care facilities increased, requests to 
FHA to make mortgage insurance available for such facilities also 
increased. Updates to the Section 232 program regulations, codified at 
24 CFR part 232, were needed to ensure that program requirements are 
sufficient to meet increased demand, and prevent mortgage defaults that 
not only impose a risk to the FHA insurance fund but can jeopardize the 
safety and stability of Section 232 facilities and their residents.

B. September 7, 2012 Regulatory Revisions

    In 2012, HUD commenced the rulemaking process to make the updates 
needed to the Section 232 program regulations, regulations that had not 
been revised since 1996. By final rule published on September 7, 2012, 
at 77 FR 55120, HUD revised the Section 232

[[Page 55361]]

program regulations to reflect current policy and practices, and 
improve accountability and strengthen risk management in the Section 
232 program. The September 7, 2012, final rule was preceded by a 
proposed rule published on May 3, 2012, at 77 FR 26304.
    Included in the updates made by the 2012 rulemaking were revisions 
to 24 CFR 5.801 (Uniform Financial Reporting Standards) and 24 CFR 
232.1009 (Financial Reports), both of which contained reporting 
requirements applicable to the Section 232 program. HUD revised these 
regulatory sections to include operators of projects insured or held by 
HUD as entities that must submit financial statements to HUD. Owners 
and borrowers have long been required to submit financial reports
    Sections 5.801(c)(4) and 232.1009 provide that operators must 
submit financial statements to HUD quarterly within 30 calendar days of 
the date of the end of each fiscal quarter, and 60 calendar days from 
the end of the fiscal-year-end quarter to submit final fiscal year end 
quarter and fiscal year-to-date reports to HUD. The other entities 
required to submit reports were provided slightly longer periods to 
prepare and submit the reports than that provided to operators. In the 
September 7, 2012, final rule, commenters asked that HUD extend the 30-
day filing deadline for end-of-each quarterly report to 60 days. HUD 
declined to provide the extension and stated that receipt of unaudited 
quarterly and year-to-date operator financial statements promptly at 
the end of each quarter is needed for effective monitoring of a 
property's financial operations and the trend of those operations. HUD 
further stated that in recognition of the intricacies involved in 
developing year-end financial statements, HUD extended the submission 
of the final quarter and year-to-date operator certified statements 
submitted for the 4th fiscal quarter to 60 calendar days (originally 
proposed to be 30 calendar days) following the end of the fiscal year. 
(See 77 FR 55122 and 55132.)

C. This Interim Rule

    This interim rule increases the amount of time operators have to 
comply with the reporting requirements provided in Sec. Sec.  
5.801(c)(4) and 232.1009. With almost two years of administering the 
Section 232 program under the revised regulations, HUD has determined 
that it can provide operators additional time to submit financial 
reports and maintain the effective monitoring of a property's financial 
operations and the trend of those operations, which was of concern to 
HUD in the September 7, 2012, rule.
    This interim rule provides that operators will have an additional 
30 calendar days to comply with the financial statement reporting 
requirements. Operators will now have 60 calendar days following the 
end of a fiscal quarter and 90 calendar days following the end of the 
fiscal-year-end quarter to comply with HUD's financial statement 
reporting requirements.
    In addition to the changes to 24 CFR 5.801(c)(4) and 24 CFR 
232.1009, HUD further revises Sec.  232.1009, to include language that 
HUD included in Sec.  5.801(c)(4), and that is that HUD may direct the 
submission of reports (referred to as forms in the regulatory text) to 
the lender or another third party in addition to or in lieu of 
submission to HUD.

II. Justification for Interim Rulemaking

    HUD generally publishes rules for advance public comment in 
accordance with its rules on rulemaking at 24 CFR part 10. However, 
under 24 CFR 10.1, HUD may omit prior public notice and comment if it 
is ``impracticable, unnecessary, or contrary to the public interest.'' 
This interim rule relaxes a reporting requirement for operators by 
allowing operators more time to comply with HUD's financial statement 
reporting requirements. Allowing operators the additional time to 
submit financial statements responds positively to prior public comment 
from operators received in response to the 2012 rulemaking. HUD 
believes it is not necessary to delay implementation of this change to 
first take public comment, given the prior public comment already 
submitted on this issue. As stated in the preamble, allowing operators 
additional time to submit their financial reporting requirements does 
not adversely affect the monitoring contemplated by HUD in the 2012 
rulemaking.
    Although HUD has determined that good cause exists to publish this 
rule for effect without prior solicitation of public comment, HUD 
recognizes the value and importance of public input in the rulemaking 
process. Accordingly, HUD is issuing these regulatory amendments on an 
interim basis and providing a 60-day public comment period. All 
comments will be considered in the development of the final rule.

III. Findings and Certifications

Executive Order 13563, Regulatory Review

    The President's Executive Order (EO) 13563, entitled ``Improving 
Regulation and Regulatory Review,'' was signed by the President on 
January 18, 2011, and published on January 21, 2011, at 76 FR 3821. 
This EO requires executive agencies to analyze regulations that are 
``outmoded, ineffective, insufficient, or excessively burdensome, and 
to modify, streamline, expand, or repeal them in accordance with what 
has been learned.'' Section 4 of the EO, entitled ``Flexible 
Approaches,'' provides, in relevant part, that where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, each agency shall identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public. HUD submits that the changes made by this rule 
to the Section 232 regulations are consistent with the EO's directions 
as the rule reduces the burden on regulated parties by allowing for 
less restrictive reporting periods.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    The changes required by this rule do not impose significant 
economic impacts on these small entities or otherwise adversely 
disproportionately burden such small entities. In fact, such small 
entities should benefit from the less restrictive reporting period. 
Accordingly, the undersigned certifies that this rule will not have a 
significant economic impact on a substantial number of small entities.

Environmental Impact

    This interim rule does not direct, provide for assistance or loan 
and mortgage insurance for, 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. This interim rule is limited to changing 
submission deadlines for required reports. Accordingly, under 24 CFR 
50.19(c)(1), this rule is categorically excluded from environmental 
review under the

[[Page 55362]]

National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either: (1) Imposes substantial direct compliance costs on State and 
local governments and is not required by statute, or (2) preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This rule will not have federalism 
implications and would not impose substantial direct compliance costs 
on State and local governments or preempt State law within the meaning 
of the Executive Order.

Unfunded Mandates Reform Act

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

Information Collection Requirements

    The information collection requirements contained in this rule were 
reviewed 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 2502-0605. 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.

Catalogue of Federal Domestic Assistance

    The Catalogue of Federal Domestic Assistance Number for the 
Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board 
and Care Homes and Assisted Living Facilities mortgage insurance 
programs is 14.129.

List of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Grant 
programs-housing and community development, Individuals with 
disabilities, Intergovernmental relations, Loan programs-housing and 
community development, Low and moderate income housing, Mortgage 
insurance, Penalties, Pets, Public housing, Rent subsidies, Reporting 
and recordkeeping requirements, Social security, Unemployment 
compensation, Wages.

24 CFR Part 232

    Fire prevention, Health facilities, Loan programs-health, Loan 
programs-housing and community development, Mortgage insurance, Nursing 
homes, Reporting and recordkeeping requirements.

    Accordingly, parts 5 and 232 of title 24 of the Code of Federal 
Regulations are amended as follows:

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

0
1. The authority citation for 24 CFR part 5 continues to read as 
follows:

    Authority:  42 U.S.C. 1437a, 1437c, 1437d, 1437f, 1437n, 
3535(d), and Sec. 327, Pub. L. 109-115, 119 Stat. 2936.


0
2. In Sec.  5.801, revise paragraph (c)(4) introductory text to read as 
follows:


Sec.  5.801  Uniform financial reporting standards.

* * * * *
    (c) * * *
    (4) For entities listed in paragraph (a)(6) of this section, the 
financial information to be submitted to HUD in accordance with 
paragraph (b) of this section must be submitted to HUD on a quarterly 
and fiscal-year-to-date basis, within 60 calendar days of the end of 
each quarterly reporting period deadline, except that the final fiscal-
year-end quarter and fiscal-year-to-date reports must be submitted to 
HUD within 90 calendar days of the end of the fiscal-year-end quarter, 
or within such additional time as may be provided by the Commissioner 
for good cause shown. HUD may direct that such forms be submitted to 
the lender or another third party in addition to or in lieu of 
submission to HUD.
* * * * *

PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE 
FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES

0
3. The authority citation for 24 CFR part 232 continues to read as 
follows:

    Authority:  12 U.S.C. 1715b, 1715w; 42 U.S.C. 3535(d).


0
4. Revise Sec.  232.1009 to read as follows:


Sec.  232.1009  Financial reports.

    (a) The borrower must provide HUD and lender an audited annual 
financial report based on an examination of its books and records, in 
such form and substance required by HUD in accordance with 24 CFR 5.801 
and 24 CFR 200.36.
    (b) Operators must submit financial statements quarterly within 60 
calendar days of the date of the end of each fiscal quarter, setting 
forth both quarterly and fiscal year-to-date information, except that 
the final fiscal year end quarter must be submitted to HUD within 90 
calendar days of the end of the quarter, in accordance with 24 CFR 
5.801(c)(4), or within such additional time as may be provided by the 
Commissioner for good cause shown. HUD may direct that such forms be 
submitted to the lender or another third party in addition to or in 
lieu of submission to HUD.

    Dated: September 10, 2014.
Carol J. Galante,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2014-22069 Filed 9-15-14; 8:45 am]
BILLING CODE 4210-67-P