[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