[Federal Register Volume 80, Number 153 (Monday, August 10, 2015)]
[Proposed Rules]
[Pages 47874-47880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-19529]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-5850-P-01]
RIN 2502-AJ28


Retrospective Review--Improving the Previous Participation 
Reviews of Prospective Multifamily Housing and Healthcare Programs 
Participants

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise HUD's regulations for 
reviewing the previous participation in federal programs of certain 
participants seeking to take part in multifamily housing and healthcare 
programs administered by HUD's Office of Housing. Specifically, the 
proposed rule would clarify and simplify the process by which HUD 
reviews the previous participation of participants that have decision-
making authority over their projects as one component of HUD's 
responsibility to assess financial and operational risk to the projects 
in these programs. The proposed rule would clarify which individuals 
and entities will be reviewed, HUD's purpose in conducting such review, 
and describe the review to be undertaken. By targeting more closely the 
individuals and actions that would be subject to prior participation 
review, HUD not only brings greater certainty and clarity to the 
process but provides HUD with flexibility as to the necessary previous 
participation review for entities and individuals that is not possible 
in a one-size fits all approach. Through this rule, HUD proposes to 
replace the current previous participation regulations in their 
entirety.

DATES: Comment Due Date: October 9, 2015.

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 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.
    1. 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 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. 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 appointment to review the public comments must be 
scheduled in advance 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 via TTY by calling the 
Federal Relay Service at 800-877-8339. Copies of all comments submitted 
are available for inspection and downloading at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Aaron Hutchinson, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
6178, Washington, DC 20410; telephone number 202-708-3994 (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 Relay 
Service at 800-877-8339 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    Currently, applicants seeking to participate in HUD's multifamily 
housing and healthcare programs must certify that all principals 
involved in a proposed project have acted responsibly and have honored 
their legal, financial, and contractual obligations in their previous 
participation in HUD programs, in certain programs administered by the 
U.S. Department of Agriculture, and in projects assisted or insured by 
state and local government housing finance agencies. HUD's regulations 
governing the assessment of previous participation are codified in 24 
CFR part 200, subpart H (Subpart H), and require applicants to complete 
a very detailed and lengthy certification form (HUD Form 2530).\1\
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    \1\ See http://portal.hud.gov/hudportal/documents/huddoc?id=2530.pdf.
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    The 2530 form currently requires disclosure of all principals to be 
involved in the proposed project, a list of projects in which those 
principals have previously participated or currently participate in, a 
detailed account of the principals' involvement in the listed 
project(s), and assurances that the principals have upheld their

[[Page 47875]]

responsibilities while participating in those programs. The regulations 
in Subpart H govern not only the content of the certification submitted 
by applicants, but the types of parties that must certify, the process 
for submitting the certification, the standards by which submissions 
are evaluated, and the delegations and duties of HUD officials involved 
in the evaluation of the certifications. The regulations in Subpart H 
also contain procedures by which applicants can appeal adverse 
determinations.
    Since the regulations were last revised, with the changing deal 
structures and transaction practices, it has become apparent that the 
current regulations are both over-inclusive and under-inclusive, 
creating unnecessary burdens for participants and HUD alike. For 
example, the current review and certification process requires 
submittal of information about the entities' organizational structures 
and detailed information about each entity in the organizational 
structure. This information is often duplicative of information that 
HUD collects elsewhere in program application procedures. The previous 
participation review process set forth in the current regulations can 
obfuscate what entities and individuals exercise true control over a 
project. Applicants are often highly complex entities. Current 
procedures have not kept step with contemporary organizational 
structures or transactional practices. For example, the current 
regulations' definitions pre-date the development of limited liability 
companies as an organizational entity.
    Participants in HUD's multifamily housing and healthcare programs 
have long complained about the delays with HUD's previous participation 
process because of the overly detailed information required to be 
submitted. Complaints focused on the difficulties associated with 
obtaining information from all the limited partner investors in 
individual projects and in duplicating information for multiple levels 
of affiliates. Current regulations require that HUD field offices send 
certain requests for determination to HUD headquarters instead of 
resolving them at the field office level, which contributes to further 
delays. The process set forth in the current regulations for appealing 
adverse determinations is cumbersome and yet fails to specify that 
participants can participate in the appeal or submit information they 
deem relevant to the appeal. Participants in HUD's multifamily housing 
and healthcare programs also stated that the previous participation 
process requires participants to complete a Form 2530 for each project, 
regardless of the number of Forms 2530 each participant completed in 
the recent past, regardless of how many projects the participant is 
involved in each year, and regardless of whether the participant is a 
well-established, experienced institutional entity already familiar to 
HUD. Moreover, the Form 2530 is not tailored to any particular program 
or set of circumstances. Yet, the current regulations require its use 
for all programs requiring previous participation review.
    Over the years, HUD has made efforts to improve the process and 
minimize the time and collection burden it takes to undergo the 
previous participation review process. In 1998, a housing re-
engineering task force met with members of the multifamily housing 
industry to discuss suggestions for improving HUD's previous 
participation process.\2\ In 2004, HUD convened a working group 
consisting of multifamily housing industry partners to improve the 
process.\3\ In 2004 through 2005, HUD undertook rulemaking to replace 
the Form 2530 paper submission requirement with an electronic review 
system, which HUD named the Active Partner Performance System (APPS). 
HUD published its final rule on April 13, 2005, at 70 FR 19660, which 
became effective on May 13, 2005, and provided for transition to the 
new system, six months following publication of the final rule.\4\ 
Unfortunately, electronic processing did not work as HUD envisioned due 
to bugs in the now outdated, 2006 version of the electronic system, and 
the Preservation Approval Process Act of 2007 (Public Law 110-35, 
approved June 25, 2007) directed HUD to suspend the mandatory 
electronic filing of previous participations certificates in order to 
permit paper filings of Form 2530 at the participant's option.\5\
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    \2\ See http://www.hud-consultant.com/2530.html.
    \3\ See http://www.ncsha.org/node/923.
    \4\ See http://www.gpo.gov/fdsys/pkg/FR-2005-04-13/pdf/05-7351.pdf.
    \5\ See http://www.gpo.gov/fdsys/pkg/PLAW-110publ35/pdf/PLAW-110publ35.pdf.
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    Since 2007, HUD has not undertaken further rulemaking to improve 
the previous participation process, but has taken incremental steps 
designed to minimize burden. On January 22, 2010, HUD issued Housing 
Notice H2010-04, which revised the previous participation process with 
respect to placing ``flags'' for certain conditions pertaining to the 
multifamily housing and healthcare programs process. A flag generally 
will necessitate additional review by HUD. The 2010-04 notice issued by 
HUD limited the appropriateness of flags related to failing scores 
under the Real Estate Assessment Center (REAC) physical inspection 
process to those situations in which a property has a REAC score below 
60 but above 30. Under the notice, such properties are no longer 
required to be flagged in APPS, but instead the owner of the property 
is provided the opportunity to meet with the applicable HUB or Program 
Center to discuss the identified physical deficiencies, and work out a 
plan to correct the deficiency or deficiencies.\6\ HUD maintained this 
process through Housing notices 2011-24 \7\ and 2012-16.\8\ On March 6, 
2013, HUD posted a fillable portable document form (pdf) version of 
Form 2530.\9\ In issuing this new form, HUD did make some changes to 
reduce burden. Schedule A of the form requires a listing of previous 
projects for only the past 10 years. The form no longer requires 
alphabetizing the list of the organization's principals, and the 
organization may attach a significant authority document for principals 
who have authority to sign on behalf of the organization.
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    \6\ See http://www.hud.gov/offices/adm/hudclips/notices/hsg/10hsgnotices.cfm.
    \7\ See http://portal.hud.gov/hudportal/documents/huddoc?id=11-24hsgn.pdf.
    \8\ See http://portal.hud.gov/hudportal/documents/huddoc?id=12-16hsgn.pdf.
    \9\ See http://portal.hud.gov/hudportal/documents/huddoc?id=2530.pdf.
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    While the guidance provided in the Housing notices and the new Form 
2530 PDF with fillable sections have provided some improvement to the 
previous participation review process, significant improvement is not 
achieved by solely changing the form by which information is submitted. 
HUD recognizes that to achieve the improvement that HUD and HUD's 
multifamily housing and healthcare programs industry partners seek, HUD 
must change the process. In this regard, HUD is continuing to review 
its previous participation review practices for potential improvements. 
These revised regulations are one piece of those continuing efforts.
    In soliciting public comment on regulations on which HUD should 
focus on streamlining and reducing burden, through notice published on 
March 2, 2011, at 76 FR 11395,\10\ commenters raised the regulations 
governing the previous participation process as regulations that HUD 
should address as

[[Page 47876]]

part of the retrospective review process.\11\
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    \10\ See http://www.gpo.gov/fdsys/pkg/FR-2011-03-02/pdf/2011-4563.pdf.
    \11\ See http://www.regulations.gov/#!docketBrowser;rpp=25;po=0;s=2530%252Bprocess;dct=PS;D=HUD-2011-
0037.
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    Changes to the regulations governing the previous participation 
process would benefit both HUD's multifamily housing and healthcare 
participants and HUD. The detailed prescriptive procedure in the 
current regulations is at once overly inclusive and under-inclusive, in 
some instances making it difficult for HUD to review the previous 
participation of certain controlling entities and individuals with 
control, while at other times requiring HUD to review the previous 
participation of entities and individuals that will not exercise 
control over a proposed project.

II. This Proposed Rule

    The proposed rule would revise the Subpart H regulations in their 
entirety, replacing the current prior participation review process. 
While the current regulations mandate that Form HUD 2530 be used, the 
proposed rule would shift the emphasis of the regulations from this 
specific form to the substance of what is being asked from whom. This 
would provide HUD with flexibility to develop form(s) specifically 
tailored to certain programs, which seek information relevant to those 
programs, and expand electronic data practices for gathering 
information. This approach would further decrease the burden of 
information collection imposed on applicants. The proposed revised 
process would also clarify when past participation review is triggered. 
Furthermore, the proposed rule streamlines the appeals process for 
applicants who receive adverse determinations and specifies that they 
have a right to participate in the appeal and submit information they 
may feel is helpful in their circumstances.
    Because the instructions of the 2530 form mirror the requirements 
of the existing regulations, it is assumed that the instructions will 
need to be revised once the regulations are finalized, following 
consideration of public comments received in response to this proposed 
rule. Although the proposed regulations envision greatly reducing the 
burden of completing the 2530 form, because information will be 
collected from substantially fewer entities, the substance of the 
information collected is anticipated to remain largely the same. The 
information sought by the 2530 form is directed to obtaining core 
performance information that is needed of an entity that has control 
over the project. The APPs system will continue to be available for 
use.

A. Consolidation of Key Concepts

    The proposed rule would consolidate the central concepts currently 
codified in Subpart H into four regulatory sections. These proposed 
sections are: Sec.  200.214 (Covered Projects), Sec.  200.216 
(Controlling Participants), Sec.  200.218 (Triggering Events), and 
Sec.  200.220 (Previous Participation).
    First, proposed Sec.  200.214 establishes the new term ``Covered 
Project'' to refer to the types of proposed projects that subject 
certain entities and individuals to previous participation review. The 
definition of Covered Project would include many of the categories of 
projects currently listed in Sec.  200.217, which describes the types 
of projects that require principals to submit their previous 
participation certification. It also includes a category for projects 
insured under sections 542(b) and 542(c) of the Housing and Community 
Development Act of 1992 (12 U.S.C. 17107 note), which sections provide 
HUD with insurance authority independent of the National Housing Act 
and authorizes certain risk-sharing arrangements with certain entities.
    Proposed Sec.  200.216 would identify the individuals and entities 
that are subject to previous participation review. This concept is 
currently captured in HUD's existing codified regulations in the 
definition for ``Principal'' in Sec.  200.215(e) as well as in Sec.  
200.218, which sets out who must certify and sign Form 2530. Proposed 
Sec.  200.216 would establish the new term ``Controlling Participant,'' 
in order to clarify that HUD will only seek information pertaining to 
the previous participation of those individuals or entities who will 
exercise control over the proposed project. The definition for 
Controlling Participant would be narrower than the specific types of 
individuals and entities included in the existing definition for 
``principal''; instead of including any individuals or entities who 
have any interest in the project other than an arms-length fee 
arrangement for professional services. Instead of including long lists 
of enumerated individuals and affiliate entities, the definition for 
Controlling Participant would include the persons or entities 
determined by HUD to have control over the finances or operation of a 
proposed project. As required by the Preservation Approval Process Act 
of 2007, investor entities with limited liability in Covered Projects 
benefiting from low-income housing tax credits, that do not have 
operational or policy control or influence over a Controlling 
Participant are all specifically excluded from previous participation 
review. The proposed regulation would expand this exemption to 
investors in other kinds of tax credits who also do not exercise 
control of the project.
    Proposed Sec.  200.218 would establish the concept of a 
``Triggering Event,'' which specifically identifies which actions taken 
by a Controlling Participant would require the submission of materials 
for the purpose of undergoing previous participant review.
    Proposed Sec.  200.220 would describe what is involved in a 
previous participation review. The purpose of the review is to focus on 
the prior performance of Covered Projects in which the Controlling 
Partner exercised actual or constructive control and to determine 
whether any serious findings reflect adversely on the Controlling 
Participants' integrity, competency, or ability to exercise control of 
a Covered Project responsibly.
    In addition, the proposed rule would add the term ``Commissioner'' 
to the definitions for Subpart H. The subpart H regulations would be 
revised to clarify that HUD's decision making authority in the review 
process resides with the Assistant Secretary for Housing--Federal 
Housing Commissioner (Commissioner), and the Commissioner's designees.

B. Determining Risk

    Under the current regulations, HUD is required to evaluate 
applicants' prior performance using specific criteria set out in the 
definition for ``risk'' in Sec.  200.215 and using the standards for 
disapproval outlined in Sec.  200.230. HUD has found these criteria and 
standards to be constraining and, at times, have presented an 
unnecessarily high bar to participation by qualified applicants. In 
other instances, HUD has found these criteria and standards to 
insufficiently cover a circumstance that HUD determines should 
constitute an impermissible risk to the Department. Nor is previous 
participation review the primary avenue for the Department to assess 
the risk of a project; various application and underwriting procedures 
assess different components of risk. Previous participation review is 
merely one component of assessing risk, and the proposed rule more 
accurately reflects its purpose.
    Controlling Participants who are debarred, suspended, subject to 
restrictions under 2 CFR part 2424, or prohibited from doing business 
with any other federal department or federal agency are automatically 
precluded from participation in federal programs,

[[Page 47877]]

and the proposed rule would deny the participation of such Controlling 
Participants from the current Triggering Event for which they are 
applying. The proposed rule would also allow the Commissioner to 
require that other unacceptable risks be mitigated before the 
Controlling Participant could participate in the current Triggering 
Event. Proposed Sec.  200.220(c) would provide the Commissioner this 
discretion to disapprove an applicant, conditionally accept an 
applicant, temporarily withhold approval of an applicant until more 
information can be gathered, or require the Controlling Participant to 
remedy or mitigate certain conditions to the Commissioner's 
satisfaction. Examples of unacceptable risk would typically include 
those deficiencies currently codified at Sec.  200.230, such as but not 
limited to: (1) Mortgage defaults, assignments or foreclosures; (2) 
suspension or termination of payments under any HUD assistance 
contract; (3) significant work stoppages; and (4) instances of 
noncompliance with the regulations, programmatic or contractual 
requirements of HUD or State or local government's Housing Finance 
Agency in connection with an insured or assisted project.
    Collectively, these changes would significantly reduce the initial 
paperwork burden for applicants and would allow the Department to 
undertake a targeted review to those who control the finances and/or 
operation of a project.

C. Other Proposed Changes

    In addition to the proposed regulatory changes discussed above, the 
proposed rule would make several other streamlining and clarifying 
changes. For example, Sec.  200.230 of the currently codified 
regulations requires HUD to consider particular kinds of events or 
flags in its evaluation of applicants, even when these may not be 
relevant or indicative of real risk. Any flag is enough to delay a 
project and can stand as an obstacle to the applicant's participation. 
The proposed rule refocuses the purpose of this previous participation 
review. If a violation rises to the level of indicating unacceptable 
risk, in accordance with contemporary transactional practices, the 
violation must be mitigated. If not, HUD and the participant have more 
flexibility in how and when to mitigate the violation. In addition, 
Sec. Sec.  200.241-200.245 in the currently codified regulations 
establish a detailed appeals process for applicants who receive an 
adverse determination. The proposed rule would streamline these 
regulations addressing the appeals process by consolidating them into a 
single section. Proposed Sec.  200.222 would substitute the opportunity 
for a hearing before the standing Multifamily Participation Review 
Committee with the opportunity for reconsideration before a review 
committee or a reviewing officer, as established by the Commissioner. 
Further, the proposed rule explicitly provides that the applicant have 
an opportunity to participate in this reconsideration process and 
submit information on their behalf; the current regulations lack these 
provisions.
    HUD believes these proposed changes significantly reduce the burden 
of the previous participation process, which has long been subject to 
complaints of being too burdensome a process. HUD welcomes comments on 
how this process may be further streamlined but preserves HUD's right 
and need to determine the suitability of applicants to participate in 
HUD's multifamily housing and healthcare programs.

III. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. 
Executive Order 13563 (Improving Regulations and Regulatory Review) 
directs 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.'' Executive Order 13563 also directs that, where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, agencies are to identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public.
    This rule was determined not to be a ``significant regulatory 
action'' as defined in section 3(f) of Executive Order 12866, nor was 
it found to be an economically significant regulatory action, as 
provided under section 3(f)(1) of the Executive Order.
    This rule responds to the direction of Executive Order 13563 to 
reduce burden. As discussed in this preamble, HUD stakeholders have 
long complained about the previous participation process, and HUD has 
offered measures over the past to improve this process. However these 
measures were not successful in providing a significant overhaul of the 
previous participation review process sufficient to remedy the common 
complaints. HUD believes that this proposal to streamline the previous 
participation review process strikes the appropriate balance between 
allowing HUD to effectively assess the suitability of applicants to 
participate in HUD's multifamily housing and healthcare programs, while 
interjecting sufficient flexibility into the process in order to remove 
a one-size-fits-all review process. Such a balance best allows HUD to 
make determinations of suitability in order to accurately access risk.

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 would not have 
a significant economic impact on a substantial number of small 
entities.
    As has been discussed in this preamble, this rule proposes to 
greatly streamline HUD's previous participation review process. As 
noted earlier in this preamble, and discussed in more detail in the 
preceding section, this process has long been the subject of complaint 
by HUD participants as an overly burdensome process. HUD believes that 
the changes proposed by this rule would allow HUD to better consider 
the differences of any applicant and tailor requested information to 
that applicant, including whether the applicant is a small entity. For 
these reasons, HUD has determined that this 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 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 
in this preamble.

Environmental Impact

    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

[[Page 47878]]

environmental review under the National Environmental Policy Act of 
1969 (42 U.S.C. 4321).

Federalism Impact

    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 preempts state law, 
unless the agency meets the consultation and funding requirements of 
section 6 of the Order. This rule does not have federalism implications 
and would not impose substantial direct compliance costs on state and 
local governments nor preempts state law within the meaning of the 
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.

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule have been submitted to the Office of Management and Budget (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 information collection in this proposed 
rule is estimated as follows:

                                                Information Collection Under Current 2530 Review Process
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                                        Number of      Approximate number of                     Total annual
       Information collection          forms filed     respondents  needed to    Burden hours    burden hours     Hourly cost     Total annual cost per
                                        annually         complete the form      per respondent    per filing    per respondent           filing
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HUD-2530 (paper), Electronic.......          10,000  8 per filing.............               1               8             $20  $160.00.
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
    Total Annual Burden per All              10,000  80,000...................  ..............          80,000  ..............  $1.6 Million.
     Filings.
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                                           Information Collection Under Proposed Participation Review Process
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                                        Number of      Approximate number of                     Total annual
       Information collection         reviews done       respondents to be       Burden hours    burden hours     Hourly cost     Total annual cost per
                                        annually              reviewed          per respondent    per filing    per respondent           filing
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Previous Participation Review......          10,000  3 per filing.............               1               3             $20  $60.00
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
    Total Annual Burden per All              10,000  30,000...................  ..............          30,000  ..............  600,000
     Filings.
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    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning the 
information collection requirements in the proposed rule regarding:
    (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) Whether the proposed collection of information enhances the 
quality, utility, and clarity of the information to be collected; and
    (4) Whether the proposed information collection minimizes 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-5850-P-01) and must be sent to: HUD Desk Officer, Office of 
Management and Budget, New Executive Office Building, Washington, DC 
20503, Fax number: (202) 395-6947 and Colette Pollard, HUD Reports 
Liaison Officer, Department of Housing and Urban Development, 451 7th 
Street, SW., Room 2204, Washington, DC 20410.
    Interested persons may submit comments regarding the information 
collection requirements electronically through the Federal eRulemaking 
Portal at http://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 http://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.

List of Subjects in 24 CFR Part 200

    Administrative practice and procedure, Claims, Equal employment 
opportunity, Fair housing, Housing standards, Lead poisoning, Loan 
programs--housing and community development, Mortgage insurance, 
Organization and functions (Government agencies), Penalties, Reporting 
and recordkeeping

[[Page 47879]]

requirements, Social security, Unemployment compensation, Wages.

    Accordingly, for the reasons stated in the preamble above, and in 
accordance with HUD's authority under 42 U.S.C. 3535(d), HUD proposes 
to amend 24 CFR part 200 as follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

0
1. The authority citation for 24 CFR part 200 continues to read as 
follows:

    Authority:  12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).

0
2. Revise subpart H to read as follows:
Subpart H--Participation and Compliance Requirements
Sec.
200.210 Policy.
200.212 Definitions.
200.214 Covered Projects.
200.216 Controlling Participant.
200.218 Triggering Events.
200.220 Previous Participation review.
200.222 Request for reconsideration.

Subpart H--Participation and Compliance Requirements


Sec.  200.210  Policy.

    It is HUD's policy that, in accordance with the intent of the 
National Housing Act (12 U.S.C. 1701 et seq.) and with other applicable 
federal statutes, participants in HUD's housing and healthcare programs 
be responsible individuals and organizations who will honor their 
legal, financial and contractual obligations. Accordingly, as provided 
in this subpart, HUD will review the prior participation of Controlling 
Participants, as defined in Sec.  200.212 and Sec.  200.216, as a 
prerequisite to participation in HUD's multifamily housing and 
healthcare programs listed in Sec.  200.214.


Sec.  200.212  Definitions.

    As used in this subpart:
    Commissioner means the Assistant Secretary for Housing-Federal 
Housing Commissioner, or the Commissioner's delegates and designees.
    Controlling Participant means an individual or entity serving in a 
capacity for a Covered Project that makes the individual or entity 
subject to previous participation review under this subpart, as further 
described in Sec.  200.216.
    Covered Project means a HUD-held, FHA-insured, or HUD-assisted 
project on which the participation of a Controlling Participant is 
conditioned on previous participation review under this subpart, as 
further described in Sec.  200.214.
    Previous Participation means a Controlling Participant's previous 
participation in federal programs, as further described in Sec.  
200.220.
    Triggering Event means an occurrence in connection with a Covered 
Project that subjects a Controlling Participant to Previous 
Participation review under this subpart, as further described in Sec.  
200.218.


Sec.  200.214  Covered Projects.

    The following types of multifamily and healthcare projects are 
Covered Projects subject to the requirements of this subpart, provided 
however that single family projects are excluded from the definition of 
Covered Projects:
    (a) FHA insured projects. A project financed or which is proposed 
to be financed with a mortgage insured under the National Housing Act, 
a project subject to a mortgage held by the Secretary under the 
National Housing Act, or a project acquired by the Secretary under the 
National Housing Act.
    (b) Housing for the elderly or persons with disabilities. Housing 
for the elderly financed or to be financed with direct loans or capital 
advances under section 202 of the Housing Act of 1959, as amended; and 
housing for persons with disabilities under section 811 of the 
Cranston-Gonzalez National Affordable Housing Act.
    (c) Risk Share projects. A project that is insured under section 
542(b) or 542(c) of the Housing and Community Development Act of 1992 
(12 U.S.C. 17107 note).
    (d) Projects subject to continuing HUD requirements. A project that 
is subject to a Use Agreement or any other continuing HUD requirements 
or affordability restrictions.
    (e) Subsidized projects. Any project in which 20 percent or more of 
the units now receive or will receive a subsidy in the form of:
    (1) Interest reduction payments under section 236 of the National 
Housing Act (12 U.S.C. 1715z-1);
    (2) Rent Supplement payments under section 101 of the Housing and 
Urban Development Act of 1965 (12 U.S.C. 1701s); or
    (3) Project-based housing assistance payment contracts under 
section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f), 
excluding those issued pursuant to section 8(o)(13) of the United 
States Housing Act of 1937 (42 U.S.C. 1437f(o)(13).


Sec.  200.216  Controlling Participant.

    (a) Definition. An individual or entity serving in any of the 
following capacities for a Covered Project is a Controlling Participant 
subject to the requirements of this subpart:
    (1) An owner of a Covered Project;
    (2) A borrower of a loan financing a Covered Project;
    (3) A management agent;
    (4) An operator (in connection with healthcare projects insured 
under the following section of the National Housing Act: section 232 
(12 U.S.C. 1715w) and section 242 (12 U.S.C. 1715z-7));
    (5) A master tenant (in connection with any multifamily housing 
project insured under the National Housing Act (12 U.S.C. 1701 et 
seq.), and in connection with certain healthcare projects insured under 
sections 232 and 242 of the National Housing Act);
    (6) A general contractor;
    (7) In connection with a hospital project insured under section 242 
of the National Housing Act (12 U.S.C. 1715z-7), members of a hospital 
Board of Directors (or similar body) and executive management (such as 
the Chief Executive Officer and Chief Financial Officer) that HUD 
determines to have control over the finances or operation of a Covered 
Project; and
    (8) Any other person or entity determined by HUD to have control 
over the finances or operation of a Covered Project.
    (b) Control of entities. To the extent any Controlling Participant 
listed in paragraph (a) of this section is an entity, any individual(s) 
determined by HUD to control the financial or operational decisions of 
such Controlling Participant shall also be considered Controlling 
Participants. For purposes of this section, ``control'' shall mean 
ownership of at least 25 percent of such entity or the ability to bind 
such entity in the Triggering Event that necessitates review of 
Previous Participation.
    (c) Exclusions from definition. The following individuals or 
entities are not Controlling Participants for purposes of this subpart:
    (1) Investor entities with limited liability in Covered Projects 
benefiting from tax credits, including but not limited to low-income 
housing tax credits pursuant to section 42 of title 26 of the United 
States Code, whether such investors are syndicators, direct investors 
or investors in such syndicators and/or investors;
    (2) Individuals or entities that do not have operational or policy 
control or influence over an entity that is a Controlling Participant;
    (3) Mortgagees acting in their capacity as such; and
    (4) Public housing agencies (PHAs), where the PHA is acting in its 
capacity as a PHA owning or operating public housing.

[[Page 47880]]

Sec.  200.218  Triggering Events.

    Each of the following is a Triggering Event that may subject a 
Controlling Participant to Previous Participation review under Sec.  
200.220:
    (a) An application for FHA mortgage insurance, excluding 
applications already approved by HUD;
    (b) An application for funds provided by HUD, such as but not 
limited to supplemental loans or flexible subsidy loans;
    (c) A request to change any Controlling Participant with respect to 
a Covered Project;
    (d) A request for consent to an assignment of a housing assistance 
payment contract under section 8 of the United States Housing Act of 
1937 or of another contract pursuant to which a Controlling Participant 
will receive funds in connection with a Covered Project;
    (e) A bid to purchase a Covered Project or mortgage note held by 
the Commissioner; or
    (f) A sale of a HUD-held mortgage affecting a Covered Project, or a 
sale of any HUD-held Covered Project that is now or will be subject to 
a Use Agreement or any other continuing HUD requirements or 
affordability restrictions. Notwithstanding the foregoing, HUD may 
elect to refrain from conducting Previous Participation review under 
this subsection where a bidder's Previous Participation has already 
been reviewed under paragraph (e) of this section, in order to avoid a 
duplicative review.


Sec.  200.220  Previous Participation review.

    (a) Scope of review. (1) Upon the occurrence of a Triggering Event, 
as provided in Sec.  200.218, the Commissioner shall review the 
Previous Participation of the relevant Controlling Participants in 
considering whether to approve the participation of the Controlling 
Participants in connection with the Triggering Event. The 
Commissioner's review of a Controlling Participant's previous 
participation shall include previous financial and operational 
performance in federal programs that may indicate a financial or 
operating risk in approving the Controlling Participant's participation 
in the subject Triggering Event. The Commissioner's review shall 
consider financial stability; previous performance in accordance with 
HUD statutes, regulations and program requirements; general business 
practices and other factors that indicate that the Controlling 
Participant could not be expected to operate the project in a manner 
consistent with furthering the Department's purpose of supporting and 
providing decent, safe and affordable housing for the public. At the 
Commissioner's discretion, as necessary to determine financial or 
operating risk, this review may include the Controlling Participant's 
participation and performance in any federal program and may exclude 
previous participation in which the Controlling Participant did not 
exercise, actually or constructively, control.
    (2) The Commissioner will not review Previous Participation for 
interests acquired by inheritance or by court decree.
    (3) In connection with the submittal of an application for any 
Triggering Event, applicants shall identify the Controlling 
Participants and, to the extent requested by HUD, make available to HUD 
the Controlling Participant's Previous Participation in Covered 
Projects.
    (b) Results of review. (1) Based upon the review under paragraph 
(a) of this section, the Commissioner will approve, disapprove, limit, 
or otherwise condition the continued participation of the Controlling 
Participant in the Triggering Event, in accordance with paragraphs (c) 
and (d) of this section.
    (2) The Commissioner shall provide notice of the determination to 
the Controlling Participant including the reasons for disapproval or 
limitation. The Commissioner may provide notice of the determination to 
other parties, as well, such the FHA-approved lender in the 
transaction.
    (c) Basis for disapproval. (1) The Commissioner must disapprove a 
Controlling Participant if the Commissioner determines that the 
Controlling Participant is suspended, debarred or subject to other 
restriction under 2 CFR part 2424;
    (2) The Commissioner may disapprove a Controlling Participant if 
the Commissioner determines:
    (i) The Controlling Participant is restricted from doing business 
with any other department or agency of the federal government; or
    (ii) The Controlling Participant's record of Previous Participation 
reveals significant risk to proceeding with the Triggering Event.
    (d) Alternatives to disapproval. In lieu of disapproval, the 
Commissioner may:
    (1) Condition or limit the Controlling Participant's participation;
    (2) Temporarily withhold issuing a determination in order to gather 
more necessary information; or
    (3) Require the Controlling Participant to remedy or mitigate 
outstanding violations of HUD requirements to the Commissioner's 
satisfaction in order to participate in the Triggering Event.


Sec.  200.222  Request for reconsideration.

    (a) Where participation in a Triggering Event has been disapproved, 
otherwise limited or conditioned because of Previous Participation 
review, the Controlling Participant may request reconsideration of such 
determination by a review committee or reviewing officer as established 
by the Commissioner.
    (b) The Controlling Participant shall submit requests for such 
reconsideration in writing within 30 days of receipt of the 
Commissioner's notice of the determination under Sec.  200.220.
    (c) The review committee or reviewing officer shall schedule a 
review of such requests for reconsideration. The Controlling 
Participant shall be provided advance written notification of such a 
review. The Controlling Participant shall be provided the opportunity 
to submit such supporting materials as the Controlling Participant 
desires or as the review committee or reviewing officer requests.
    (d) Before making its decision, the review committee or reviewing 
officer will analyze the reasons for the decision(s) for which 
reconsideration is being requested, as well as the documents and 
arguments presented by the Controlling Participant. The review 
committee or reviewing officer may affirm, modify, or reverse the 
initial decision. Upon making its decision, the review committee or 
reviewing officer will provide written notice of its determination to 
the Controlling Participant setting forth the reasons for the 
determination(s).

    Dated: August 3, 2015.
Edward L. Golding,
Principal Deputy Assistant Secretary for Housing.
[FR Doc. 2015-19529 Filed 8-7-15; 8:45 am]
 BILLING CODE 4210-67-P