[Federal Register Volume 80, Number 191 (Friday, October 2, 2015)]
[Proposed Rules]
[Pages 59690-59695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-24837]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT`

24 CFR Part 291

[Docket No. FR-5776-P-01]
RIN 2502-AJ32


Disposition of HUD-Acquired Single Family Properties; Updating 
HUD's Single Family Property Disposition Regulations

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 that address 
property disposition. This rule proposes to consolidate and reorganize 
HUD's property disposition regulations so that they better reflect 
industry standards and allow HUD to conduct its Single Family Property 
Disposition Program more efficiently and more effectively so that HUD 
can obtain the greatest value for its real estate-owned (REO) 
properties in different market conditions.

DATES: Comment Due Date: December 1, 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: Thomas Kumi, Director, Single Family 
Asset Management and Disposition Division, Office of Single Family 
Housing, Department of Housing and Urban Development, 451 7th Street 
SW., Room 9172, Washington, DC 20410-8000, telephone number 202-708-
1672. Persons with hearing or speech impairments may access this number 
through TTY by calling the toll-free Federal Relay Service at 800-877-
8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 204(g) of the National Housing Act (12 U.S.C. 1710g) 
addresses the management and disposition of HUD-acquired single family 
property, which includes HUD-acquired real and personal property 
assets. HUD's implementing regulations are codified in 24 CFR part 291 
(currently entitled, ``Disposition of HUD-Acquired Single Family 
Property''). Under these statutory and regulatory authorities, HUD is 
charged with carrying out a program of sales of HUD-acquired and owned 
properties along with appropriate credit terms and standards to be used 
in carrying out the program. Property owned by HUD as a result of 
acquisition includes REO. The goals of HUD's Single Family Property 
Disposition program are to reduce the inventory of single family 
properties in a manner that minimizes losses to the Mutual Mortgage 
Insurance Fund, promote the expansion of homeownership opportunities 
for American families by, among other things, selling such properties 
at a discount to state and local governments and HUD-approved nonprofit 
entities, and help stabilize distressed communities.
    As a result of recent changes in the housing market, specifically 
the economic and housing crisis that commenced in 2008, HUD acquired an 
unprecedented number of REO properties--98,342, 90,943, 103,215 and 
111,416 in FY 2010, FY 2011, FY 2012, and FY 2013 respectively. This 
increase caused FHA to reexamine its disposition strategy for HUD-
acquired single family properties and determine that it needed to 
revise, consolidate and reorganize its property disposition regulations 
to facilitate the expeditious sale of REO properties acquired and 
provide greater efficiency in the administration of HUD's property 
disposition program. While part 291 addresses both HUD-acquired real 
and personal property assets, the focus of this proposed rule is on 
HUD's disposition of REO properties. FHA's intent is to bring its 
practices into

[[Page 59691]]

conformance with industry standards and allow HUD to conduct its Single 
Family Property Disposition Program more efficiently and more 
effectively so that it can obtain the greatest value for REO properties 
in different market conditions.

II. This Proposed Rule

    The proposed amendments to part 291 would make several changes to 
the administration of HUD's single-family property disposition program 
with respect to the disposition of REO properties. These changes seek 
to provide greater efficiency in the administration of HUD's property 
disposition program for REO properties, align FHA's regulatory 
authority with its business practices, and provide flexibility in 
anticipation of future changes to the property disposition program for 
REO properties. The following section of this preamble describes the 
changes to the property disposition process proposed by this rule.
    1. Ownership and Disposition Authority. HUD proposes to revise the 
heading of part 291 from ``Disposition of HUD-Acquired Single Family 
Property'' to ``Disposition of HUD-Acquired and Owned Single Family 
Property'' to better reflect the fact that HUD not only receives REO 
properties, but also holds and maintains them throughout the 
disposition process. For similar reasons, the heading of Sec.  291.100, 
which states HUD's general policy on disposition, would be changed from 
``General policy'' to ``General policy on HUD acquisition, ownership, 
and disposition of real estate assets''. Under section 204(g) of the 
National Housing Act (12 U.S.C. 1710(g)), HUD is authorized to carry on 
activity necessary for receiving, owning, holding and maintaining 
property before selling it. Section 291.1(a), which states the purpose 
of part 291, would be amended to reference HUD's authority to acquire 
and possess properties. This authority would also be cited in Sec.  
291.90 governing sales methods to reiterate HUD's authority to 
prescribe methods of sale and dispose of properties.
    2. Appraisal of HUD REO Properties. Section 291.100(b) of the 
proposed rule would be revised to clarify that the list price for HUD 
REO properties may be established utilizing one or more evaluation 
tools. When an appraisal is ordered as part of the process of 
establishing list price, the value must be established by an appraiser 
who meets the requirements in 24 CFR part 200, subpart G (Appraiser 
Roster), and who is in good standing on the appraiser roster 
established under that section. All methods used by appraisers must be 
consistent with FHA appraisal requirements at the time the appraisal is 
made. This change will align requirements for REO appraisers with 
requirements for appraisers found in part 200, subpart G, to ensure 
consistency. The proposed rule would expand the valuation methods 
available to include alternative methods commonly used in the real 
estate industry, such as Broker Price Opinions \1\ and Automated 
Valuation Models.\2\
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    \1\ A Broker's Price Opinion (BPO) is the process a hired sales 
agent utilizes to determine the selling price of a real estate 
property. BPOs are popularly used in situations where lenders and 
mortgage companies believe the expense and delay of an appraisal to 
determine the value of properties is unnecessary. See https://www.brokerpriceopinion.com.
    \2\ Automated valuation model (AVM) is the name given to a 
service that can provide real estate property valuations using 
mathematical modeling combined with a database. Most AVMs calculate 
a property's value at a specific point in time by analyzing values 
of comparable properties. Some also take into account previous 
surveyor valuations, historical house price movements and user 
inputs (e.g. number of bedrooms, property improvements). Appraisers, 
investment professionals and lending institutions use AVM technology 
in their analysis of residential property. It is a technology-driven 
report. The product of an automated valuation technology comes from 
analysis of public record data and computer decision logic combined 
to provide a calculated estimate of a probable selling price of a 
residential property.
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    3. Escrow Amount Required for Properties Needing Repairs. 
Currently, buyers of HUD-acquired properties can qualify for FHA 
mortgage insurance even if the property does not meet FHA's minimum 
property standards, provided that they put money into escrow to make 
necessary repairs to bring the property up to standard. As currently 
codified in Sec.  291.100(c)(2), a property that requires no more than 
$5,000 for repairs may be offered for sale in an ``as-is'' condition if 
the purchaser establishes a cash escrow in the amount of $5,000. This 
amount has not been increased since 1994. Based on present value 
calculations with an escalation of 3.5 percent, HUD estimates that 
repairs costing $5,000 in 1994 would cost $10,000 in 2015. Therefore, 
the proposed rule would increase the maximum repair amount that would 
allow a purchaser to acquire property under Sec.  291.100(d)(1)(ii) to 
$10,000. In addition, in order to ensure that HUD can keep this amount 
updated, this rule proposes to add a provision at Sec.  
291.100(d)(1)(ii)(B) that would allow HUD to increase or decrease this 
amount based on changes to the Consumer Price Index \3\ by issuing a 
Federal Register notice for comment. After consideration of public 
comments received on the notice, HUD would then publish the revised 
escrow amounts in a Federal Register notice. Finally, the rule would 
revise Sec. Sec.  291.100(c) and (d) to better reflect the distinction 
between FHA's role in the property disposition process and FHA's role 
as an insurer of qualified properties when they are sold.
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    \3\ The Consumer Price Index (CPI) is prepared by the Department 
of Labor's Bureau of Labor Statistics and is a measure of the 
average change over time in the prices paid by urban consumers for a 
market basket of consumer goods and services. For more information, 
see http://stats.bls.gov/cpi/home.htm.
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    4. Listings. The proposed rule would clarify that HUD has the 
statutory authority to allow for a number of listings options in Sec.  
291.100(h) that real estate brokers may use to list REO properties. In 
addition to asset management and listing contracts, this rule would 
provide that HUD may use other methods deemed to be appropriate. This 
will provide HUD with additional flexibility to expedite the sales 
process, thereby ensuring that properties are disposed of efficiently 
and at minimum cost to HUD. In addition, the proposed rule would revise 
Sec.  291.100(h)(2)(ii) to require the purchaser's broker to submit 
bids through HUD's designated electronic bid system rather than through 
the exclusive broker.
    5. Settlement Cost Assistance Available to Owner-Occupant 
Purchasers. Section 291.205(b) currently provides that, in the case of 
competitive sales, HUD, upon request by the purchaser, may elect to pay 
all or a portion of the financing and loan closing costs as well as the 
broker's sales commission, not to exceed the percentage of the purchase 
price determined appropriate by the Secretary for the area. The 
proposed rule would remove HUD's obligation to pay the broker's sales 
commission and specify that settlement cost assistance is only 
available to owner-occupant purchasers and not available to investor 
purchasers. Both ``owner-occupant purchaser'' and ``investor 
purchaser'' are defined in Sec.  291.5.
    6. Bidding Process for Competitive Sales: The proposed rule would 
update the bidding process established under the competitive sales 
procedures in Sec.  291.205. Section 291.205(k) would be revised to 
provide for winning bids to be made available publicly rather than 
making them available for inspection at a time and place designated by 
the HUD local office. Losing bids would no longer be made available 
either through electronic posting or through the HUD local office. In 
addition, the rule would specify that winning bidders may be notified 
by their brokers using

[[Page 59692]]

electronic mail and that an executed sales contract will be deemed 
final when, after being signed by both parties, the executed contract 
is sent by email rather than via postal service delivery to the 
successful bidder.
    7. Good Neighbor Next Door (GNND). The objective of the GNND 
program is to improve the quality of life in distressed urban 
communities by encouraging law enforcement officers, teachers, and 
firefighters/emergency medical technicians, whose daily 
responsibilities reflect a high level of public service commitment and 
represent a nexus to the needs of the community, to purchase and live 
in homes in these communities, as the preamble to that final rule made 
clear. (See 71 FR 64422, November 1, 2006.) As to law enforcement 
officers specifically, one of the purposes of the GNND Sales Program is 
to revitalize distressed communities by deterring the commission of 
crimes with the presence of law enforcement officers in these areas. 
(See 71 FR 64424.) However, the currently codified rule, while it 
requires teachers and firefighters in the GNND program to live in the 
areas they serve, does not do so with respect to police officers. 
Therefore, this rule would add this requirement for police officers in 
accordance with the purpose of the rule.
    This proposed rule further clarifies that similar requirements 
apply to all of the GNND participants by making a parallel change to 
Sec. Sec.  291.500, 291.525 and 291.530, which are the sections on 
purpose and purchaser qualifications, in general. This rule also adds a 
definition of ``locality'' to Sec.  291.505, and uses that term in this 
proposed rule rather than ``area,'' which is the current terminology, 
to avoid repetitive language and confusion with the concept of a 
``revitalization area'' used in codified Sec.  291.510.

Technical Changes

    This proposed rule would revise the structure of Sec.  291.5 to 
consolidate the definition for ``Secretary'' with the other definitions 
in this section.

III. Findings and Certifications

Executive Order 12866 and Executive Order 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. The 
majority of the proposed changes to part 291 described above would 
streamline HUD's property disposition program by bringing its practices 
into conformance with industry standards and allowing HUD to administer 
its Single Family Property Disposition Program more efficiently and 
more effectively. These changes would not create additional significant 
burdens for the public. As a result, this rule was determined to not be 
a significant regulatory action under section 3(f) of Executive Order 
12866, Regulatory Planning and Review, and therefore was not reviewed 
by the Office of Management and Budget.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
HUD defines ``small supervised lenders'' as those depository 
institutions that are regulated by the Federal Reserve, the Office of 
the Comptroller of the Currency, the Federal Deposit Insurance 
Corporation, or the National Credit Union Administration, and which 
have a depository asset base of less than $500 million.\4\ This rule 
proposes to make changes to the administration of HUD's property 
disposition and acquisition activities carried out as part of the FHA 
insurance program for one-to-four family homes. These changes include 
limiting the provision of settlement cost assistance to owner-
occupants, providing HUD flexibility to run the bidding process for REO 
properties, changes to the direct sales process, the additional 
flexibility to list properties electronically, changes to the required 
escrow amount for purchasers obtaining property not meeting HUD's 
property standards, and clarifications in the rule governing HUD's 
appraisal process. These changes would streamline HUD's administration 
of its Single Family Property Disposition Program and adopt measures 
that reflect industry practice. For these reasons, HUD has determined 
that this rule would not have a significant economic impact on a 
substantial number of small entities.
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    \4\ Of HUD's 1,459 supervised lenders, 598 are considered, by 
HUD, to be ``small supervised lenders.''
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    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.

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 Proposed Process
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                                             Number of     Frequency of    Total annual    Burden hours    Total annual                    Total annual
         Information collection             respondents      response        responses     per response    burden hours     Hourly cost        cost
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2502-0306--Acquisition/Disposition of             65,000               1          65,000             .08            5200          $63.67        $331,084
 Mortgaged Single Family Properties
 (Sec.   291.100).......................
2502-0189--Repair Completion Escrow               35,000               1          35,000             .02             700           63.67          44,569
 Requirement (Sec.   291.100)...........

[[Page 59693]]

 
2502-0570--HUD-Owned Real Estate--Good            65,000               1          65,000             .02            1300           63.67          82,771
 Neighbor Next Door Program (Sec.
 291.500)...............................
                                         ---------------------------------------------------------------------------------------------------------------
    Totals..............................         165,000               3         165,000             1.2            7200  ..............         458,424
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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 the 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 the publication date. 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-5776-
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.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of National Environmental 
Policy Act (42 U.S.C. 4332(2)(C)). The Finding of No Significant Impact 
is available for public inspection between the hours of 8 a.m. and 5 
p.m. weekdays in the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410. Due to security measures at the HUD 
Headquarters building, please schedule an appointment to review the 
FONSI 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 toll-free Federal Relay 
Service at 800-877-8339.

Executive Order 13132, Federalism

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

Unfunded Mandates Reform Act

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

List of Subjects in 24 CFR Part 291

    Community facilities, Conflict of interests, Homeless, Lead 
poisoning, Low and moderate income housing, Mortgages, Reporting and 
recordkeeping requirements, Surplus government property.

    Accordingly, for the reasons stated in the preamble above, HUD 
proposes to amend 24 CFR part 291 as follows:

PART 291--DISPOSITION OF HUD-ACQUIRED AND OWNED SINGLE FAMILY 
PROPERTY

0
1. The authority citation for part 291 continues to read as follows:

    Authority:  12 U.S.C. 1701 et seq., 42 U.S.C. 1441, 1441a, 1551a 
and 3535(d).

0
2. Revise the heading of part 291 to read as set forth above.
0
3. Revise Sec.  291.1(a)(1) to read as follows:


Sec.  291.1  Purpose and general requirements.

    (a) * * *
    (1) This part governs the acquisition, possession and disposition 
of one-to-four family properties acquired by the Federal Housing 
Administration (FHA) through foreclosure of an insured or Secretary-
held mortgage or loan under the National Housing Act, or acquired by 
HUD under section 204(g) of the National Housing Act (12 U.S.C. 
1710(g)). HUD will issue detailed policies and procedures that must be 
followed in specific areas.
* * * * *
0
4. Amend Sec.  291.5 by removing paragraphs (a) and (b), adding

[[Page 59694]]

introductory text, and revising the definition of ``Secretary.''
    The addition and revision to read as follows:


Sec.  291.5  Definitions.

    Terms used in this part are defined as follows:
* * * * *
    Secretary is defined in 24 CFR 5.100.
* * * * *
0
5. Amend Sec.  291.90 by revising the introductory paragraph to read as 
follows:


Sec.  291.90  Sales methods.

    In accordance with section 204(g) of the National Housing Act (12 
U.S.C. 1710(g)), HUD will prescribe the terms and conditions for all 
methods of sale. HUD may dispose of assets using any method that the 
Secretary deems appropriate, including, but not limited to the 
following:
* * * * *
0
6. Amend Sec.  291.100 by revising the section heading and paragraphs 
(b), (c), (d), and (h) to read as follows:


Sec.  291.100  General policy on HUD acquisition, ownership and 
disposition of real estate assets.

    (a) * * *
    (b) List price. The list price, or ``asking price,'' assigned to 
the property is based upon one or more evaluation tools (e.g. 
appraisal, Broker Price Opinion, Automated Valuation Model). An 
appraisal, when used, must be conducted by an independent real estate 
appraiser who meets all of the requirements of 24 CFR part 200, subpart 
G, and is in good standing on the appraiser roster established under 
that section. The appraiser must provide an opinion of the ``as-is'' 
market value using a valuation method that is commonly employed in the 
industry and that is consistent with FHA appraisal requirements.
    (c) Insurance. When listing properties, HUD may elect to only 
identify property not eligible for mortgage insurance under section 
203(b) of the National Housing Act (12 U.S.C. 1709(b)).
    (d) Financing. (1) Subject to underwriting requirements, REO 
properties that have not been identified as uninsurable in accordance 
with paragraph (c) of this section can be purchased and financed with a 
mortgage insured under section 203(b) or 203(k) of the National Housing 
Act (12 U.S.C. 1709(b), 1709(k)), if supported by an FHA appraisal, in 
one of the following ways:
    (i) Insured. A property that meets the Minimum Property Standards 
(MPS) as defined in HUD Handbook 4905.1 or any successor handbook, as 
determined by the Secretary, for existing dwellings will be offered for 
sale in ``as-is'' condition with FHA mortgage insurance available as 
provided in part 203 of this chapter.
    (ii) Insured with repair escrow. (A) A property that requires no 
more than $10,000 for repairs to meet the MPS as defined in HUD 
Handbook 4905.1 or any successor handbook or, as determined by the 
Secretary, will be offered for sale in ``as-is'' condition with FHA 
mortgage insurance available, as provided in part 203 of this chapter, 
provided the mortgagor establishes a cash escrow to ensure the 
completion of the required repairs.
    (B) Changes in repair escrow. HUD may adjust the escrow balance 
required under this paragraph based on changes to the Consumer Price 
Index by publishing a Federal Register notice that provides for a 
public comment period of 30 calendar days for the purpose of accepting 
comments on the amount of the change. After comments have been 
considered, HUD will publish a final notice announcing the revised 
escrow amounts.
    (iii) Insured with rehabilitation loan in accordance with 203(k) of 
the National Housing Act and pursuant to Sec.  203.50 of this chapter.
    (2) REO properties that have been identified as uninsurable in 
accordance with paragraph (c) of this section can be purchased and 
financed with a mortgage insured under section 203(k) of the National 
Housing Act (12 U.S.C. 1709(k)), subject to underwriting requirements 
supported by an FHA-specified appraisal and in accordance with 24 CFR 
203.50.
    (3) HUD, in its sole discretion, may take back purchase money 
mortgages (PMMs) on property purchased by governmental entities or 
private nonprofit organizations who buy property for ultimate resale to 
owner-occupant purchasers with incomes at or below 115 percent of the 
area median income. When offered by HUD, a PMM will be available in an 
amount determined by the Secretary to be appropriate, at market rate 
interest, for a period not to exceed 5 years. Mortgagors must meet FHA 
mortgage credit standards.
    (i) For purposes of this section, the term ``purchase money 
mortgage,'' or PMM means a note secured by a mortgage or trust deed 
given by a buyer, as mortgagor, to the seller, as mortgagee, as part of 
the purchase price of the real estate.
    (ii) Except as provided in paragraph (d)(3) of this section, the 
purchaser is entirely responsible for obtaining financing for 
purchasing a property.
    (e) * * *
    (h) Any real estate broker who has agreed to comply with HUD 
requirements may be eligible to participate in the sales program. 
Purchasers participating in the competitive sales program, except 
government entities and nonprofit organizations, must submit bids 
through a participating broker. In accordance with section 204(g) of 
the National Housing Act (12 U.S.C. 1710(g)), HUD will prescribe the 
terms and conditions for all methods of listing properties. HUD may 
dispose of properties using any method that the Secretary deems 
appropriate, including, but not limited to the following:
    (1) Open listings. Properties may be sold on an open listing basis 
with participating real estate brokers.
    (2) Asset management and listing contracts. (i) HUD may invite 
firms experienced in property management to compete for contracts that 
provide for an exclusive right to manage and list specified properties 
in a given area.
    (ii) In areas where a broker has an exclusive right to list 
properties, a purchaser may use a broker of his or her choice. The 
purchaser's broker must submit the bid through HUD's designated 
electronic bid system.
* * * * *
0
7. Amend Sec.  291.205 by revising the introductory text and paragraphs 
(b), (k)(1), (k)(2), and (l) to read as follows:


Sec.  291.205  Competitive sales of individual properties.

    When HUD conducts competitive sales of individual properties to 
individual buyers, it will generally sell the properties on an ``as-
is'' basis, without repairs or warranties, and it will follow the sales 
procedures provided in this section.
* * * * *
    (b) * * *
    (1) The net offer is calculated by subtracting from the bid price 
the dollar amounts for the financing and loan closing costs and the 
broker's sales commission, as described in paragraph (b)(2) of this 
section.
    (2) If an owner-occupant purchaser of the property requests in the 
bid, HUD may pay all or a portion of the financing and loan closing 
costs, not to exceed the percentage of the purchase price determined 
appropriate by the Secretary for the area. In no event will the total 
amount for broker's sales commission exceed 6 percent of the purchase 
price, except for cash bonuses offered to brokers by HUD for the sale 
of hard-to-sell properties. No assistance for

[[Page 59695]]

financing and loan closing costs or for the broker's sales commission 
will be provided to investor purchasers.
* * * * *
    (k) * * *
    (1) The Secretary will make all winning bids available publicly.
    (2) Successful bidders will be notified through their real estate 
brokers by electronic mail, mail, telephone, or other means. Acceptance 
of a bid is final and effective only upon HUD's execution of the sales 
contract, signed by both the submitting real estate broker and the 
prospective purchaser, and sending a copy of the executed contract by 
electronic mail to the successful bidder or the bidder's agent.
    (l) Counteroffers. HUD may present counteroffers during competitive 
bid periods as it deems appropriate to minimize losses to its insurance 
fund. ``Best and Final'' offers requested by HUD are considered 
counteroffers.

Subpart F--Good Neighbor Next Door Sales Program

0
8. Revise Sec.  291.500 to read as follows:


Sec.  291.500  Purpose.

    This subpart describes the policies and procedures governing the 
Good Neighbor Next Door (GNND) Sales Program. The purpose of the GNND 
Sales Program is to improve the quality of life in distressed urban 
communities. This is to be accomplished by encouraging law enforcement 
officers, teachers, and firefighters/emergency medical technicians to 
purchase and live in homes that are located in the same communities 
where they perform their daily responsibilities and duties.

0
9. Revise Sec.  291.505 to read as follows:


Sec.  291.505  Definitions.

    For purposes of this subpart:
    Locality means the community, neighborhood, or jurisdiction of the 
unit of general local government, or Indian tribal government;
    Unit of general local government means a county or parish, city, 
town, township, or other political subdivision of a state.
0
10. In Sec.  291.520, remove ``and'' from the end of paragraph (a), add 
the word ``and'' at the end of paragraph (b), and add paragraph (c).
    The addition reads as follows:


Sec.  291.520  Eligible law enforcement officers.

* * * * *
    (c) The full time employment in paragraph (a) of this section must, 
in the normal course of business, directly serve the locality in which 
the home is located.
0
11. Revise Sec.  291.525(b) to read as follows:


Sec.  291.525  Eligible teachers.

* * * * *
    (b) The full time employment in paragraph (a) of this section must, 
in the normal course of business, serve students from the locality 
where the home is located.
0
12. Revise Sec.  291.530 to read as follows:


Sec.  291.530  Eligible firefighter/emergency medical technicians.

    A person qualifies as a firefighter/emergency medical technician 
for the purposes of the GNND Sales Program if the person is:
    (a) Employed full-time as a firefighter or emergency medical 
technician by a fire department or emergency medical services responder 
unit of the federal government, a state, unit of general local 
government, or an Indian tribal government; and
    (b) The full time employment in paragraph (a) of this section must, 
in the normal course of business, directly serve the locality where the 
home is located.

    Dated: August 13, 2015.
Edward L. Golding,
Principal Deputy Assistant Secretary for Housing.
[FR Doc. 2015-24837 Filed 10-1-15; 8:45 am]
 BILLING CODE 4210-67-P