[Federal Register Volume 73, Number 246 (Monday, December 22, 2008)]
[Proposed Rules]
[Pages 78554-78567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30291]
[[Page 78553]]
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Part VI
Department of Housing and Urban Development
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24 CFR Part 291
Disposition of HUD-Owned Single Family Assets in Revitalization Areas;
Proposed Rule
Federal Register / Vol. 73, No. 246 / Monday, December 22, 2008 /
Proposed Rules
[[Page 78554]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 291
[Docket No. FR-4988-P-01]
RIN 2502-AH40
Disposition of HUD-Owned Single Family Assets in Revitalization
Areas
AGENCY: Office of Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would implement a statutorily established
program to make HUD-held single family homes and mortgage assets
available for sale to units of general local government, states, Indian
tribes, nonprofit organizations, and for-profit entities (collectively,
purchasers) to provide homeownership opportunities and to promote
neighborhood revitalization. Revitalization areas would be identified
through application of specified economic and housing criteria. The
purchasers would then make available the assets in accordance with a
HUD-approved plan to encourage homeownership and revitalize the area.
DATES: Comment Due Date: February 20, 2008.
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 Seventh
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 Seventh 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 Information 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: Vance T. Morris, Director, Office of
Single Family Asset Management, Office of Housing, Department of
Housing and Urban Development, 451 Seventh Street, SW., Room 9172,
Washington, DC 20410-8000, at 202-708-1672 (this is not a toll-free
number). Persons with hearing or speech impairments may access these
numbers through TTY by calling the Federal Information Relay Service at
800-877-8339 (this is a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
A. Section 204(h) of the National Housing Act--Disposition of Assets in
Revitalization Areas
Section 602 of the Department of Veterans Affairs and Housing and
Urban Development and Independent Agencies Appropriations Act, 1999
(Pub. L. 105-276, approved October 21, 1998) amended section 204 of the
National Housing Act (12 U.S.C. 1710) (NHA or the statute), by adding a
new subsection (h), which provides the statutory framework for a new
program for the disposition of HUD-owned single family assets in
revitalization areas (see 12 U.S.C. 1710(h)). In 2004, section 204(h)
was further amended by the Consolidated Appropriations Act, 2005 (Pub.
L. 108-447, approved December 8, 2004).
Under section 204(h) of the NHA, HUD makes HUD-held single family
homes and formerly insured mortgages on single family properties,
referred to as ``eligible assets,'' ``available for sale in a manner
that promotes the revitalization, through expanded homeownership
opportunities, of revitalization areas'' (12 U.S.C. 1710(h)(1).) All
properties involved are HUD-held properties; that is, they are
properties that were subject to a mortgage insured by HUD and are now
owned by HUD pursuant to the payment of insurance benefits under the
NHA and the implementing regulations for the NHA programs that are
codified in Chapter II of Title 24 of the Code of Federal Regulations
(CFR). HUD-held mortgages may also be sold.
Key to the statutory scheme for this program is the concept of a
``revitalization area,'' (Revitalization Area). In accordance with
section 204(h)(3) of the NHA (12 U.S.C. 1710(h)(3)), HUD is required to
designate Revitalization Areas, which must meet one of the statutory
criteria for designation (i.e., having very low median household
income, a high concentration of eligible assets, or a low homeownership
rate).
B. Eligible Purchasers
Under the statute, an eligible purchaser is a unit of general local
government, state, Indian tribe, or a nonprofit organization, as stated
in section 204(h)(4)(A) of the NHA (12 U.S.C. 1710(h)(4)(A)), or a for-
profit entity, as stated in section 204(h)(5)(B) of the NHA (12 U.S.C.
1710(h)(5)(B)). The statute contemplates two categories of eligible
purchasers--preferred purchasers and non-preferred purchasers.
Preferred purchasers are units of general local government, states,
and Indian tribes having jurisdiction of the area where the assets are
to be sold, as well as nonprofit organizations that make a commitment
to purchase categories of single family assets in a specific area,
known as an asset control area (ACA), where there is a need for
increased homeownership opportunities. The statute requires that such
purchasers be provided a preference in the sale of eligible assets. All
other eligible purchasers are non-preferred purchasers under the
statute. For-profit entities may not be preferred purchasers.
In accordance with section 204(h)(4) of the NHA (12 U.S.C.
1710(h)(4)), preferred purchasers must establish ACAs within
Revitalization Areas.
[[Page 78555]]
During a period of time to be established by agreement, preferred
purchasers must purchase all of the assets HUD owns in particular
identified categories at the time the sale agreement is entered into
and those that become available during the time period (see section
204(h)(4)(B)(ii) of the NHA (12 U.S.C. 1710(h)(4)(B)(ii)). Section
204(h)(4)(C) of the NHA (12 U.S.C. 1710(h)(4)(C)) directs that the
preferred purchasers, in order to be eligible, must have the capacity
to make the purchases.
In order to encourage the purchase of assets to use for HUD housing
and revitalization purposes, section 204(h)(6)(B) of the NHA (12 U.S.C.
1701(h)(6)(B)) provides for discounts from the appraised value for
preferred purchasers. Appraised value must be based on the market value
of the property in ``as-is'' physical condition, taking into account:
(1) The age and condition of major mechanical and structural systems,
and (2) the value of the property appraised for homeownership. Section
204(h)(6) of the NHA also provides, in subsection (C), that ``the
Secretary of HUD, in the sole discretion of the Secretary, shall
establish the discount * * * for an eligible asset'' (see 12 U.S.C.
1701(h)(6)(C)). In establishing the discount, the Secretary may
consider any factor deemed appropriate, including the condition of the
property, the extent of the preferred purchaser's resources, the
homeownership plan undertaken by the purchaser (see section I.C.
below), and the financial safety and soundness of the Mutual Mortgage
Insurance Fund. Non-preferred purchasers cannot receive discounts.
Preferred purchasers are recipients of federal financial assistance
subject to section 504 of the Rehabilitation Act of 1973 (29 U.S.C.
794) (section 504) and Title VI of the Civil Rights Act of 1964 (42
U.S.C. 2000d et seq.), because they obtain HUD properties at a
discount. Preferred purchasers are, therefore, required to comply with
the section 504 regulations in 24 CFR part 8, including accessibility
requirements. Since non-preferred purchasers do not receive discounts
and provide their own financing, they are not recipients of federal
financial assistance.
C. Sale Agreement
Section 204(h)(7) of the NHA provides that sales of eligible assets
may only be made pursuant to a sale agreement (Sale Agreement). The
requirement for a Sale Agreement applies to both preferred purchasers
and non-preferred purchasers. The Sale Agreement must: (1) Identify the
category or categories of assets to be purchased; (2) identify the
boundaries of the Revitalization Area and, for a Preferred Purchaser,
also the boundaries of the ACA; and (3) identify the source of
financing that the purchaser will be using. For preferred purchasers,
the Sale Agreement must also include a homeownership plan.
Section 204(h)(5)(A) of the NHA (12 U.S.C. 1710(h)(5)(A)) provides
that the homeownership plan must have as its primary purpose the
expansion of homeownership in, and the revitalization of, the ACA.
Section 204(h)(5)(A) also provides that the homeownership plan must
contain specific performance goals for increasing the rate of
homeownership, and must also establish rehabilitation standards for
real property that meet or exceed minimum standards for housing
quality. For non-preferred purchasers, section 204(h)(5)(B) of the NHA
(12 U.S.C. 1710(h)(5)(B)) requires that the Sale Agreement include a
binding agreement that the purchaser meet certain performance goals for
homeownership. However, by agreement, HUD may permit a lower rate of
homeownership in ``exceptional circumstances.'' Both preferred and non-
preferred purchasers must certify compliance with the performance goals
contained in the Sale Agreement (section 204(h)(7)(G) of the NHA; 12
U.S.C. 1710(h)(7)(G)).
II. This Proposed Rule
This proposed rule would create a new subpart G in 24 CFR part 291
to establish the regulations governing the sale of single family assets
in Revitalization Areas. Part 291 contains HUD's regulations that
address the disposition of HUD-held single family properties. This
proposed rule would contain the administrative requirements to
implement the program found in section 204(h) of the NHA (12 U.S.C.
1710(h)).
The proposed regulatory language tracks, as much as possible, the
language of section 204(h) of the NHA where the statutory language is
specific on how the program is to be implemented. This section of the
preamble describes the most significant provisions of the proposed rule
that build upon the statutory requirements described in Section I of
this preamble.
1. Definition of Eligible Buyer. Under the proposed rule, an
``eligible buyer,'' which refers to a family (which can consist of a
single person) that ultimately buys the property from the preferred or
non-preferred purchaser, would have to meet eligibility requirements.
Buyers must either: (1) Have income of no more than 115 percent of the
area median income and promise to reside in the property as owners for
3 years; or (2) have a member who is a ``teacher,'' ``police officer,''
or ``firefighter/emergency medical technician,'' as those terms are
defined under HUD's regulations codifying the Good Neighbor Next Door
(GNND) Sales Program at 24 CFR part 291, subpart F.
As noted above in this preamble, the objective of the statute is to
promote neighborhood revitalization, with an emphasis on increasing
affordable housing opportunities. HUD believes that the income
limitation on subsequent buyers helps to ensure both statutory
objectives of revitalization and increased homeownership. The threshold
of 115 percent of area median income reflects the cross section of
income levels that HUD believes is a critical element of neighborhood
revitalization. For example, the proposed income limitation is greater
than the 80 percent of area median income that HUD uses to define a
``low-income family'' under its public and assisted housing programs
authorized under the United States Housing Act of 1937 (42 U.S.C. 1437
et seq.) (see 24 CFR 5.603). At the same time, the income limitation
focuses on increasing homeownership opportunities for those families
for whom good quality homeownership opportunities have been more
limited than for higher-income families.
The inclusion of police officers, teachers, and firefighters/
emergency medical technicians is consistent with the goals of section
204(h) of the NHA and the GNND Sales Program, which seek to improve the
quality of life in distressed communities by encouraging professionals,
whose daily responsibilities represent a nexus to the needs of the
community, to purchase and live in homes in these communities.
2. Nonprofit Preferred Purchasers. The definition of ``preferred
purchaser'' at proposed Sec. 291.605 would track the language in
section 204(h)(4) of the NHA (12 U.S.C. 1710(h)(4)), which refers to a
nonprofit organization, state, Indian tribe, or unit of general local
government. The proposed rule further provides that preferred
purchasers that are nonprofit organizations would also have to be on
the Federal Housing Administration (FHA) Nonprofit Organization Roster
under 24 CFR 200.194, and also will be required to have status as a
tax-exempt organization under section 501(c) of the Internal Revenue
Code, 26 U.S.C. 501(c). These requirements will help to ensure that
participating nonprofit organizations are qualified to participate in
FHA activities and meet the eligibility criteria
[[Page 78556]]
established by the Internal Revenue Service for qualification as a
nonprofit entity.
3. Partnerships of Preferred Purchasers. Preferred purchasers, such
as a local government and a nonprofit organization, can form
partnerships as defined in the rule. Each member of a partnership is
separately responsible for meeting all program requirements, including
application requirements and obligations under the Sale Agreement and
Homeownership Plan.
4. Revitalization Areas. Section 291.610 of the proposed rule would
address the meaning of Revitalization Areas and provide the details of
the criteria for determining Revitalization Areas. This section would
track the statutory requirements for a Revitalization Area stated in
section 204(h)(3) of the NHA (12 U.S.C. 1710(h)(3)).
The proposed rule defines a Revitalization Area as an area
designated by HUD as such and that meets the following criteria: (1)
The area is a very low-income area, with a median income of less than
60 percent of the median income for the metropolitan area, or, if the
area is not within a metropolitan area, a median income of less than 60
percent of the state median income; (2) there is a disproportionately
high concentration of eligible HUD-held assets in the area resulting
from a high rate of foreclosure of FHA-insured mortgages in the area,
or the area is detrimentally impacted by eligible assets in the
vicinity; or (3) the rate for homeownership is substantially below the
rate for homeownership in the metropolitan area or, if the area is not
within a metropolitan area, below that of the state in which the area
is located.
Proposed Sec. 291.610 further provides that HUD will review
Revitalization Areas annually, and remove the designation of
``Revitalization Area'' from any geographical area that no longer meets
the definition. This removal will occur at the earliest opportunity,
such as upon the expiration of the term of the then-current Sale
Agreement. However, the proposed rule specifies that such removal of
designation shall not modify the terms of a Sale Agreement in effect at
the time such designation is removed. A geographic area designated as a
Revitalization Area shall continue to be considered as such for
purposes of the agreement until its expiration.
5. Application Requirements. Section 291.620 of the proposed rule
would establish application submission requirements for entities
wishing to participate as purchasers under the program. The proposed
rule would establish submission requirements that apply solely to each
category of preferred purchasers (units of general local government and
nonprofit organizations) and non-preferred purchasers, as well as
submission requirements applicable to all categories of purchasers. For
example, the proposed rule provides that entities that seek to be
preferred purchasers would be required to submit an application and
that the application reflect no conflicts of interest, as provided in
proposed Sec. 291.670. Other documentation that would be required
under the proposed rule includes organizational and financial
information about the purchaser; an operating plan, including the
acquisition schedule; and valid delegations of necessary authority to
execute the required contracts and documents.
Section 291.625 of the proposed rule would establish the criteria
for review and approval of applications. This section provides that
application consideration would be based on the time and date of
receipt of a complete application that meets the threshold
requirements. The decision on whether or not an application is complete
would be solely within HUD's discretion, and if HUD determines that an
application is incomplete, HUD would notify the applicant in writing.
In such a case, the application will be considered complete once HUD
receives the additional materials and determines that they are
adequate.
6. Preference for Preferred Purchasers. As noted, section 204(h)(4)
(12 U.S.C. 1701(h)(4)) of the NHA requires that preferred purchasers be
provided a preference in the sale of eligible assets. The proposed rule
would implement the statutory preference in two ways. First, proposed
Sec. 291.625 provides that if an application from a preferred and a
non-preferred purchaser for the same geographic area arrive on the same
date, the application from the preferred purchaser will be deemed to
have arrived first. Further, under Sec. 291.655 of the proposed rule,
HUD would offer financing assistance to preferred purchasers.
7. Minimum Standards for Housing Quality. Section 204(h)(5)(B)(iii)
of the NHA (12 U.S.C. 1710(h)(5)(B)(iii)) provides that all purchasers
are responsible for rehabilitating each asset property purchased to
comply with HUD-established minimum standards for housing quality. The
proposed rule, at Sec. 291.635, would implement this statutory
requirement by providing that all properties purchased under the rule
must meet, or be rehabilitated to meet, local building code standards.
Any required rehabilitation would be at the purchaser's expense.
8. Discounts for Preferred Purchasers. As noted, section
204(h)(6)(B) of the NHA (12 U.S.C. 1701(h)(6)(B)) provides for
discounts for preferred purchasers based on the appraised value of the
asset as HUD, in its discretion, may determine. There are no discounts
for non-preferred purchasers. Section 291.640 would implement three
discount classes: (1) A 50 percent discount of the appraised value for
assets with a value equal to or greater than $50,000; (2) a discount of
$24,900 for properties with an appraised value greater than $25,000 but
less than $50,000; and (3) properties with an appraised value of
$25,000 or less would have a purchase price of $100.
The proposed discount structure reflects HUD's experience in
administering Sale Agreements entered into on a case-by-case basis
under the statutory authority of section 204(h) of the NHA. Under those
agreements, preferred purchasers receive a discount of: (1) A 50
percent discount for properties with an appraised value equal to or
greater than $50,000; (2) a $25,000 discount for properties with an
appraised value greater than $25,000 but less than $50,000; and (3) a
purchase price of one dollar for properties with an appraised value of
$25,000 or less. Table One and Table Two, below, compare the average
appraised values, the average discounts, and the average costs of
rehabilitating properties purchased in Fiscal Year (FY) 2006 and FY2007
under current Sale Agreements. The final column, which is captioned
``Return to Community,'' provides the percentage by which the average
cost of repairs exceeds the average dollar amount of the discount.
[[Page 78557]]
Table One--FY2007 Discount and Cost Comparisons
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Average
appraisal
value of Return to
properties Average HUD Average repair community
Appraisal category acquired by discount cost (repair over
preferred discount)
purchasers in (percent)
FY 2007
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Equal to or Greater than $50,000................ $85,390.07 $42,695.04 $60,594.12 142
Greater than $25,000 but less than $50,000...... 36,155.80 25,000.00 67,416.06 270
$25,000 or less................................. 19,028.26 19,027.26 57,537.41 302
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Table Two--FY2006 Discount and Cost Comparisons
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Average
appraisal
value of Return to
properties Average HUD Average repair community
Appraisal category acquired by discount cost (repair over
preferred discount)
purchasers in (percent)
FY 2006
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Equal to or Greater than $50,000................ $95,249.15 $47,624.58 $56,180.97 118
Greater than $25,000 but less than $50,000...... 35,738.28 25,000.00 62,525.17 250
$25,000 or less................................. 15,308.04 15,307.04 55,919.25 365
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The discount structure being proposed by HUD for regulatory
codification largely conforms to the discounts already being provided
under current Sale Agreements entered into on a case-by-case basis. As
Table One and Table Two demonstrate, the current discount structure
reflects the economic realities faced by preferred purchasers. The data
indicate that the ``Return to Community'' (the average cost of
rehabilitation as a percentage of the dollar discount value) increases
as average appraised value decreases. Accordingly, as an offset to
these higher rehabilitation costs, a greater percentage discount is
provided for the purchase of properties with lower appraised values.
For example, in FY2007, the average discount for properties with
appraised values of greater than $50,000 was 50 percent of the average
appraised value. The ``Return to Community'' of these properties was
142 percent. That same fiscal year, the ``Return to Community'' for
properties with an appraised value of $25,000 or less was 302 percent.
The average discount for these properties was 99.99 percent of the
average appraised value.
The proposed discount structure differs in some minor respects from
that currently used. Most importantly, the proposed rule would increase
from one to one hundred dollars the purchase price of properties with
appraised values of less than $25,000. This increase differentiates the
ACA program from the ``Dollar Home'' program authorized under the NHA
(see 12 U.S.C. 1715z-11a(b)), and which HUD anticipates to implement
through regulation in the near future.
The proposed discount structure, therefore, reflects current
discounts that: (1) Are familiar to preferred purchasers, (2) have
proven successful as an incentive to participation in the program, and
(3) have succeeded in promoting the statutory goals of revitalization
with an emphasis on homeownership.
9. Appraisals of Asset Properties. As noted, section 204(h)(6)(B)
of the NHA (12 U.S.C. 1701(h)(6)(B)) provides that discounts for
preferred purchasers be based on the appraised value of the property in
``as is'' physical condition. Section 291.645 of the proposed rule
would implement this requirement. Under the proposed rule, HUD will
order an appraisal by an appraiser on the FHA appraiser roster under 24
CFR part 200, subpart G, for each property in the ACA to be sold.
However, an appraisal would not be required if the property was
appraised by an appraiser from the FHA appraiser roster within the
previous calendar year.
The purchaser may request an individual new appraisal if the
request is made prior to sale and the purchaser demonstrates, in HUD's
sole discretion, a reasonable likelihood that a second appraisal would
indicate a value that differs by 20 percent or more, higher or lower,
from the original appraisal. Additional costs for any new appraisals
would be borne by the purchaser, unless the new appraisal indicates a
value that differs by 20 percent or more, higher or lower, from the
original appraisal.
10. Conveyance of Eligible Assets. Section 291.650 of the proposed
rule would provide for conveyance of eligible assets. Under this
proposed rule, HUD would identify the categories of eligible assets
along with the eligible assets available in those categories. The
purchaser would respond by presenting an acquisition schedule for HUD
review. HUD would consider the schedule along with the purchaser's
capacity, and either approve it or suggest modifications. HUD would
provide notification of additional assets, as they become available
according to a time schedule stated in the regulation.
To ensure compliance with the Sale Agreement, HUD will secure the
sale of asset properties with a subordinate mortgage in the amount of
the difference between the appraised value of the property and the
sales price. HUD shall release the subordination upon compliance of the
provisions of the Sale Agreement and sale of the asset property to an
eligible buyer.
11. Sales Price to Eligible Buyers. The purchaser may elect to
establish the sales price of asset properties to eligible buyers using
either an individual transaction method or a portfolio-wide method.
Under the transaction method, the sales price of an asset property
to an eligible buyer may not exceed the lesser of: (1) The as-
rehabilitated appraised value of the asset property; or (2) the HUD-
established percentage of the ``net development cost'' (the sum of the
acquisition costs of the asset property to the purchaser plus any
closing costs, holding costs, or rehabilitation costs
[[Page 78558]]
required under Sec. 291.635). The proposed rule provides that HUD
initially establishes this percentage at 115 percent. Table Three below
illustrates the transaction method in operation:
Table Three--Sales by Purchaser--Transaction Method
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As-rehabilitated
Property 115 percent of net appraised Maximum resale
development cost property value price allowed
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A................................................... 95,000.00 120,000.00 95,000.00
B................................................... 150,000.00 135,000.00 135,000.00
C................................................... 75,000.00 100,000.00 75,000.00
D................................................... 85,000.00 100,000.00 85,000.00
E................................................... 95,000.00 85,000.00 85,000.00
500,000.00 540,000.00 475,000.00
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Estimated Gross Profit/Loss: {1-[$475,000/((100%/115%) * $500,000]{time} = 9%.
In order to address possible concerns regarding the recovery of
losses where the total net development costs exceed the fair market
value of the asset properties in the purchaser's inventory, the
proposed rule would permit purchasers to calculate allowable sales
price on a portfolio-wide basis. Under this portfolio method, the
cumulative sales prices of asset properties sold to eligible buyers
during the purchaser's portfolio reporting period may not exceed the
lesser of: (1) The total as-rehabilitated appraised value of the asset
properties; or (2) the HUD-established allowable of total net
development cost for those properties (which, as discussed above, HUD
initially proposes to establish at 115 percent). The portfolio
reporting period is a 12-month period covered by the Sale Agreement,
generally commencing on the date of the Sale Agreement's execution or
the anniversary thereof. The portfolio option would permit purchasers
to more readily recoup net development costs by selling asset
properties at fair market value.
Use of the portfolio method is optional. During each portfolio
reporting period, a purchaser may elect either the portfolio method or
the transaction method; however, the purchaser may not use both methods
concurrently and may not change methods during a portfolio reporting
period.
A purchaser electing the portfolio option must deposit into an
escrow account the difference between the actual sales price and 115
percent of the net development cost for each transaction. The purchaser
must remit principal on each mortgage used to finance purchase of a
property when cumulative actual sales are more than 115 percent of the
total net development costs of the properties sold during the portfolio
reporting period. The amount of principal remittance would be
calculated by subtracting 115 percent of total net development costs
from actual cumulative sales for the portfolio reporting period, and
prorating the result as a percentage of actual sales. The purchaser
must remit a payment to the homebuyer's mortgage account for credit to
the unpaid principal balance of the loan for the property. If the
prorated reduction is less than $500, the purchaser may elect to make a
cash payment directly to the eligible buyer. The balance in the escrow
account after principal reductions on mortgages, if any, would be
allocable to the purchaser. Distributions from the escrow account must
be made by the purchaser no later than 90 days after its fiscal year
end.
Table Four below illustrates the portfolio method in operation:
Table Four--Sales by Purchaser--Portfolio Method
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total as-
115 percent of rehabilitated Maximum resale Escrow account Principal
Property total net appraised value of price allowed * deposit required reduction required
development cost properties ** by purchaser
--------------------------------------------------------------------------------------------------------------------------------------------------------
A................................................... 95,000.00 120,000.00 120,000.00 25,000.00 8,888.89
B................................................... 150,000.00 135,000.00 135,000.00 0.00 10,000.00
C................................................... 75,000.00 100,000.00 100,000.00 25,000.00 7,407.41
D................................................... 85,000.00 100,000.00 100,000.00 15,000.00 7,407.41
E................................................... 95,000.00 85,000.00 85,000.00 0.00 6,296.30
500,000.00 540,000.00 540,000.00 65,000.00 40,000.00
--------------------------------------------------------------------------------------------------------------------------------------------------------
Escrow Account Balance Distributed to Purchasers of Rehabilitated Properties: $540,000-$500,000 = $40,000.
Escrow Account Balance Distributed to Purchaser: $65,000-$40,000 = $25,000.
Estimated Gross Profit/Loss: {1-[$500,000/(100%/115%) * $500,000]{time} = 15%.
* Actual resale price may be less than maximum resale price.
** The difference between actual sales price and 115% of net development cost for each transaction must be deposited in an escrow account. A principal
reduction on applicable mortgages is required when cumulative actual sales are more than 115% of total net development costs of property sales for the
program during the purchaser's fiscal year. The balance in the escrow account after required principal reductions on mortgages is allocable to the
purchaser.
To better reflect market conditions, HUD may periodically propose
to adjust the allowable percentage of net development cost and/or the
portfolio reporting period. Such proposed adjustments shall be
announced through publication of a notice in the Federal Register that
will provide the public with the opportunity to comment for a period of
at least 30 days. After the comments have been considered, HUD will
publish a final notice announcing the adjustment and its effective
date.
12. Owner-Occupancy Term for Eligible Buyers. An eligible buyer who
purchases an asset property at below its appraised value would be
required to own, and live in as his/her sole residence, the asset
property for 36 months commencing upon the date of
[[Page 78559]]
closing on the purchase of the home. The owner-occupancy requirement is
consistent with the statutory goal of promoting homeownership, and is
being required in consideration of the discounted sales price to the
eligible buyer. An eligible buyer who pays the full appraised market
value for an asset property would therefore not be subject to the
owner-occupancy requirements.
HUD may, at its sole discretion, allow interruptions to the 36-
month owner-occupancy term if it determines that the interruption is
necessary to prevent hardship, but only if the eligible buyer submits a
written and signed request to HUD containing the reasons why the
interruption is necessary, the date of the intended interruption, and a
certification from the eligible buyer affirming that the buyer will
resume occupancy of the home upon the conclusion of the interruption
and complete the remainder of the 36-month owner-occupancy term.
The written request for approval of an interruption to the owner-
occupancy term must be submitted to HUD at least 30 calendar days
before the anticipated interruption. Military service members protected
by the Servicemembers Civil Relief Act need not submit their written
request to HUD 30 days in advance of an anticipated interruption, but
should submit their written request as soon as practicable upon
learning of a potential interruption, in order to ensure timely
processing and approval of the request.
To ensure compliance with owner occupancy requirements, the sale of
asset properties to eligible buyers shall be secured with a subordinate
mortgage in the amount of the difference between the appraised value of
the Asset Property and the sales price. The term of the subordinate
mortgage is equal to the owner-occupancy term (36 months). The amount
of the subordinate mortgage will be reduced by \1/36\th on the last day
of each month of occupancy following the occupancy start date. At the
end of the 36th month of occupancy, the amount of the subordinate
mortgage will be zero. If the eligible buyer sells the asset property
or stops living in the home as his/her sole residence prior to the
expiration of the owner-occupancy term, he/she will owe HUD the amount
due on the second mortgage as of the date the property is either sold
or vacated.
13. Reporting Requirements and Compliance Reviews. Section 291.665
of the proposed rule contains reporting requirements that purchasers
under the program must fulfill. In addition to financial reports,
purchasers that sell asset properties to eligible buyers must obtain
and retain a certification that the buyer, in fact, meets the
requirements of this regulation for eligible buyers. Proposed Sec.
291.683 would provide for annual HUD compliance reviews. The section
would require all purchasers and their partners and agents to cooperate
with HUD's requests for information.
14. Sanctions for Failure To Comply. Section 291.675 of the
proposed rule contains sanctions that HUD may take against purchasers
or eligible buyers that commit an act of default as defined in the
section, along with administrative appeal procedures. In addition to
the listed sanctions, HUD has the right to take any other enforcement
action permitted by law, including, but not limited to, suspension,
debarment, and actions under the Program Fraud Civil Remedies Act.
III. Findings and Certifications
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 the information collections in this proposed rule is
estimated as follows:
Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
Response
Information collection Number of frequency Total annual Burden hours Total annual
respondents (average) responses per response hours
----------------------------------------------------------------------------------------------------------------
Agreement Process:
Initial Application......... 3 1 3 80 240
Modification of Sale 6 1 6 10 60
Agreement..................
Reporting:
Monthly Report.............. 15 12 180 3 540
Repair Report............... 15 25 375 3 1,125
Financial Statements........ 15 1 15 3 45
Performance Assessment:
AUP Compliance Review....... 15 1 15 3 45
Maintenance Reports......... 3 12 36 1 36
-------------------------------------------------------------------------------
Total................... 72 .............. .............. .............. 2,091
----------------------------------------------------------------------------------------------------------------
Total estimated burden hours: 2,091.
In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning this
collection of information to:
(1) Evaluate 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) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the burden of the collection of information on those
who are to respond, including through the use of appropriate automated
collection techniques or other forms of information technology, e.g.,
permitting electronic submission of responses.
Interested persons are invited to submit comments regarding the
information collection requirements in this rule. Comments must refer
to the proposal by name and docket number (FR-4988) and must be sent
to:
HUD Desk Officer, Office of Management and Budget, New Executive Office
Building,
[[Page 78560]]
Washington, DC 20503, Fax: (202) 395-6947; and
Reports Liaison Officer, Office of the Assistant Secretary for
Housing--Federal Housing Commissioner, Department of Housing and Urban
Development, 451 Seventh Street, SW., Room 9116, Washington, DC 20410.
Executive Order 12866, Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this proposed
rule under Executive Order 12866 (entitled ``Regulatory Planning and
Review''). OMB determined that this proposed rule is a ``significant
regulatory action,'' as defined in section 3(f) of the Order (although
not economically significant, as provided in section 3(f)(1) of the
Order). The docket file is available for public inspection in the
Regulations Division, Office of General Counsel, Department of Housing
and Urban Development, 451 Seventh Street, SW., Room 10276, Washington,
DC 20410-0500. Due to security measures at the HUD Headquarters
building, please schedule an appointment to review the docket file by
calling the Regulations Division at (202) 402-3055 (this is not a toll-
free number). Individuals with speech or hearing impairments may access
this number via TTY by calling the Federal Information Relay Service at
(800) 877-8339.
Regulatory Flexibility Act
The Regulatory Flexibility Act (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. As noted above in
this preamble, the proposed rule would codify a statutorily established
program to make HUD-held single family homes and mortgage assets
available for sale to units of general local government and nonprofit
entities. The goal of the program is to help revitalize certain
distressed areas, with primary focus on the expansion of homeownership
opportunities. Participation in the program is voluntary and,
therefore, the proposed regulatory amendments would not impose any
mandatory burdens on units of general local governments and nonprofit
organizations. Rather, to the extent that the rule would impose any
burden, it would be as a result of the jurisdiction or nonprofit
organization making a determination that its participation in the
program makes administrative and economic sense and aligns with its
operational goals.
HUD has taken several steps to minimize burdens associated with
voluntary participation in the program. For example, the proposed rule
provides for financing assistance to homebuyers through the provision
of FHA mortgage insurance, which will facilitate the sale of homes
acquired under the program. Further, to the extent possible, the
language of the proposed rule closely tracks the statutory program
requirements. Where HUD has been compelled by statute or deemed it
advisable to elaborate upon the statutory language, it has built upon
the best practices observed in administration of the dozen ACA
agreements that are successfully being implemented throughout the
country.
These agreements have been entered into on a case-by-case basis
under statutory authority. The participants reflect a broad geographic
diversity (participants are located in the Northeast, Midwest,
Southwest, and West) and size distribution (including large and small
units of general local government and nonprofit community
organizations). Accordingly, the best practices that would be codified
by the proposed rule are reflective of market realities throughout the
country and address the potential administrative issues that might be
faced by a cross section of participants. For example, in response to
situations where a preferred purchaser may be unable to recoup losses
as a result of the acquisition and rehabilitation costs exceeding the
fair market value of properties, the proposed rule permits program
participants to calculate allowable sales prices on a portfolio-wide
basis. Allowing differing calculations of sales price accommodates
operational differences between program participants, including
differences based on the size of the entities participating in the
program. (For a more detailed discussion of sales price calculation
under the proposed rule, please see Section II.11 of this preamble.)
Another example of the regulatory amendments conforming to best
practices is the proposed discount structure for preferred purchasers.
The proposed rule provides for discounts to preferred purchasers based
on the appraised value of the asset. As discussed in detail in Section
II.8 of this preamble, the discount structure HUD proposes to codify is
largely based on the discounts currently being provided to program
participants. The discounts are therefore based on data accumulated in
administration of the current sale agreements, are familiar to program
participants, and reflect the economic realities faced by preferred
purchasers. Further, as noted, the discounts are based on the appraised
value of properties in the locality, regardless of size, and therefore
accommodate both large and small jurisdictions proportionate to local
conditions.
For the above reasons, the undersigned has determined that the
proposed rule would not have a significant economic impact on a
substantial number of small entities. Notwithstanding HUD's
determination that this rule does not have a significant economic
impact on a substantial number of small entities, HUD specifically
invites comment regarding any less burdensome alternatives to this rule
that will meet HUD's objectives as described in the preamble.
Environmental Impact
A Finding of No Significant Impact (FONSI) with respect to the
environment has been made in accordance with HUD regulations at 24 CFR
part 50, which implement section 102(2)(C) of the National
Environmental Policy Act of 1969 (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, Room 10276, Department of Housing and Urban
Development, 451 Seventh Street, SW., 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
Federal Information 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 imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This proposed rule does not have
federalism implications and does not impose substantial direct
compliance costs on state and local governments nor preempt state law
within the meaning of the Executive Order.
[[Page 78561]]
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 does
not impose any federal mandates on any State, local, or tribal
governments, or on the private sector, within the meaning of UMRA.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number applicable to the
program affected by this rule is 14.311.
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.
For the reasons stated in the preamble, HUD proposes to amend 24
CFR part 291 as follows:
PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY
1. The authority citation for part 291 is revised to read as
follows:
Authority: 12 U.S.C. 1701 et seq., 1710(h); Pub. L. 106-554; 42
U.S.C. 1441, 1441a, and 3535(d).
2. Add a new subpart G to read as follows:
Subpart G--Sale of Single Family Assets in Revitalization Areas
Sec.
291.600 Purpose.
291.605 Definitions.
291.610 Revitalization Areas.
291.615 Purchaser categories.
291.620 Application requirements.
291.625 HUD review and approval of application.
291.630 Sale Agreement requirements for Purchasers.
291.635 Asset Property condition requirements.
291.640 Discount classes for Preferred Purchasers.
291.645 Appraisal and pricing of Asset Properties that are real
properties.
291.650 Conveyance of Eligible Assets.
291.655 HUD financing and assistance to Preferred Purchasers and
their Partnerships.
291.660 Resale of assets to Eligible Buyers.
291.665 Reporting and disclosures.
291.670 Conflicts of interest.
291.675 Sanctions for failure to comply.
291.681 Termination for convenience of the government.
291.683 Audits and reviews.
Sec. 291.600 Purpose.
This subpart provides the regulations that govern a program under
which sales of categories of eligible single family assets are carried
out in a manner that promotes revitalization through the expansion of
homeownership opportunities.
Sec. 291.605 Definitions.
Asset Control Area (ACA) means an area established by a Preferred
Purchaser pursuant to Sec. 291.615(b)(2).
Asset Property means:
(1) With respect to an eligible asset that is real property, such
real property; and
(2) With respect to an eligible asset that is a mortgage, the
property that is subject to the mortgage.
Eligible Asset means:
(1) In the case of real property, any property that:
(i) Is designed as a dwelling for occupancy by 1-to-4 families;
(ii) Is located in a Revitalization Area;
(iii) Was previously subject to a mortgage insured under the
provisions of the National Housing Act (12 U.S.C. 1701 et seq.); and
(iv) Is owned by HUD pursuant to the payment of insurance benefits
under the National Housing Act.
(2) In the case of mortgages, any mortgage that:
(i) Is an interest in a property that meets the requirements of
paragraphs (1)(i) and (1)(ii) of this definition;
(ii) Was previously insured under Title II of the National Housing
Act (12 U.S.C. 1707 et seq.) except for mortgages insured under or made
pursuant to sections 235, 247, or 255 of the National Housing Act (12
U.S.C. 1715z, 1715z-12, or 1715z-20, respectively); and
(iii) Is held by HUD pursuant to the payment of insurance benefits.
(3) Notwithstanding paragraphs (1) and (2) of this definition, the
term ``Eligible Asset'' does not include any real property (including
real property securing a mortgage under paragraph (2) of this
definition) where HUD has determined that it is economically or
otherwise infeasible to rehabilitate the property or that the best use
of the property is as open space, including as park land.
Eligible Buyer means a family (which can include a single person)
that meets the following eligibility requirements to purchase
properties made available under this subpart by the Preferred Purchaser
or Non-Preferred Purchaser:
(1) Has an annual income of no more than 115 percent of area median
income and agrees to reside in the property as the owner for three
years from the date of closing of the sale; or
(2) Is or has a resident member who is a ``teacher,'' ``police
officer,'' or ``firefighter/emergency medical technician,'' as defined
under the Good Neighbor Next Door Sales Program codified in subpart F
of this part.
Homeownership Plan means a plan, incorporated into the Sale
Agreement, to which a Preferred Purchaser must agree under this
subpart. A Homeownership Plan has as its primary purpose the expansion
of homeownership in, and the revitalization of, the ACA in which the
eligible asset is located, and must meet the requirements of this
subpart and section 204 of the National Housing Act (12 U.S.C.
1710(h)).
Indian tribe means any Indian or Alaska Native tribe, band, nation,
or other organized group or community of Indians or Alaska Natives
recognized as eligible for the services provided to Indians or Alaska
Natives by the Secretary of the Interior because of its status as such
an entity, or that was an eligible recipient under chapter 67 of title
31, United States Code, prior to the repeal of such chapter.
Net Development Cost means the sum of the acquisition costs of an
Asset Property to the Purchaser, plus any rehabilitation costs required
under Sec. 291.635, closing, or holding costs.
Non-Preferred Purchaser means any Purchaser that is not a Preferred
Purchaser, but which meets the requirements of Sec. 291.615(c).
Partnership means, for the purpose of this subpart, joint
participation under this subpart by two or more Preferred Purchasers;
for example, by a nonprofit organization and a Unit of General Local
Government.
Preferred Purchaser means a Unit of General Local Government,
state, or Indian tribe having jurisdiction with respect to the area in
which are located the Eligible Assets to be sold, or a nonprofit
organization which:
(1) In the case of a nonprofit organization, is currently included
on the nonprofit organization roster under 24 CFR 200.194 and has tax-
exempt status as an organization under section 501(c) of the Internal
Revenue Code, 26 U.S.C. 501(c);
(2) Establishes an ACA; and
(3) Has the capacity to perform the duties required in Sec.
291.615(b).
Purchaser means either a Preferred or Non-Preferred Purchaser, as
defined in this section, but does not include Eligible Buyer(s), as
defined in this section.
Revitalization Area means a geographic area designated by HUD under
Sec. 291.610.
Sale Agreement means a contract between HUD and a Preferred or Non-
[[Page 78562]]
Preferred Purchaser that contains the information required under Sec.
291.630.
State means any state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the
Virgin Islands, the Northern Mariana Islands, or any agency or
instrumentality thereof that is established pursuant to legislation and
designated by the chief executive officer to act on behalf of the state
with regard to the provisions of this subpart.
Unit of General Local Government means any city, town, township,
county, parish, village, or other general purpose political subdivision
of a state, and any agency or instrumentality thereof that is
established pursuant to legislation and designated by the chief
executive officer to act on behalf of the jurisdiction with regard to
the provisions of this subpart.
Sec. 291.610 Revitalization Areas.
(a) HUD shall designate areas as Revitalization Areas within which
an ACA may be defined, in accordance with the terms and conditions
provided in this subpart. Prior to designating an area as a
Revitalization Area, HUD shall consult with affected Units of General
Local Government, states, Indian tribes, and interested nonprofit
organizations.
(b) The chief executive officer of a county or the government of
appropriate jurisdiction may request that HUD designate as a
Revitalization Area any or all portions within a jurisdiction that meet
the criteria under paragraph (c) of this section. Such requests shall
be submitted in a manner and form prescribed by HUD. Within 60 calendar
days of receiving such a request, HUD will notify the requestor of its
decision.
(c) HUD shall, in its discretion, designate as a Revitalization
Area an area that meets at least one of the following requirements:
(1) Very low-income area. The median household income for the area
is less than 60 percent of the median household income for:
(i) The metropolitan area in which the proposed Revitalization Area
is located; or
(ii) The state in which the proposed area is located (if the
proposed Revitalization Area is not located within a metropolitan
area);
(2) Disproportionately high concentration of Eligible Assets. A
high rate of default or foreclosure for single family mortgages insured
under the National Housing Act has resulted, or may result in the area:
(i) Having a disproportionately high concentration of Eligible
Assets, in comparison with the concentration in surrounding areas; or
(ii) Being detrimentally impacted by Eligible Assets in the
vicinity of the area.
(3) Low homeownership rate. The rate for homeownership of single
family homes in the proposed Revitalization Area, as measured by the
proportion of owner-occupied housing units to occupied housing units,
is substantially below the rate for homeownership in:
(i) The metropolitan area in which the Proposed Revitalization Area
is located; or
(ii) The state in which the proposed area is located (if the
Proposed Revitalization Area is not located within a metropolitan
area);
(d)(1) HUD will review Revitalization Areas annually, and remove
the designation of ``Revitalization Area'' from any geographical area
that no longer meets the definition of a Revitalization Area. This
removal will occur at the earliest opportunity, such as upon the
expiration of the term of the then-current Sale Agreement.
(2) The removal of the designation of a Revitalization Area shall
not modify the terms of a Sale Agreement in effect at the time such
designation is removed. A geographic area designated as a
Revitalization Area shall continue to be considered as such for
purposes of the agreement until the expiration of the Sale Agreement.
Sec. 291.615 Purchaser categories.
(a) Eligibility. HUD may sell assets to Purchasers in accordance
with the procedures provided in this subpart, so long as the Purchasers
and any officers, directors, or principals participating with them are
not debarred, suspended, subject to a limited denial of participation,
or otherwise disqualified from participating in HUD programs.
(b) Preferred Purchasers. HUD shall sell Eligible Assets at a
discount to Preferred Purchasers (including Partnerships thereof). A
Preferred Purchaser must:
(1) Have the capacity to carry out the purchase of the category or
categories of Eligible Assets stated in the Sale Agreement;
(2) Establish an ACA consisting of all or part of a Revitalization
Area;
(3) Purchase all Eligible Assets in the category or categories
identified in the Sale Agreement, up to the maximum number specified in
the Sale Agreement or until the term of the Sale Agreement expires,
whichever occurs first;
(4) Agree to specific performance goals as stated in the Sale
Agreement under Sec. 291.
(c) Non-Preferred Purchasers. Non-Preferred Purchasers are not
eligible for discounts. Non-Preferred Purchasers must:
(1) Enter into a binding agreement in which the Purchaser agrees to
meet specific performance goals established by HUD for homeownership of
the asset properties for the Eligible Assets purchased by the
Purchaser, except that HUD may, by including a provision in the Sale
Agreement, provide for a lower rate of homeownership in sales involving
exceptional circumstances. The Purchaser must also agree to
rehabilitate each Asset Property purchased to comply with local
building code standards; and
(2) Have the capacity to carry out the purchase of Eligible Assets
under this subpart, as stated in the binding agreement under paragraph
(c)(1) of this section.
(d) Partnerships. Preferred Purchasers, such as a Unit of General
Local Government and a nonprofit organization, may form a Partnership
to purchase Eligible Assets under this subpart. In such cases, each
Preferred Purchaser must comply with all application requirements in
Sec. 291.620 and each shall be fully obligated under the Sale
Agreement and Homeownership Plan.
Sec. 291.620 Application requirements.
(a) Units of General Local Government. Every Unit of General Local
Government or Tribal Government that applies to participate under this
subpart must submit to the appropriate Home Ownership Center (HOC)
having jurisdiction over the assets to be sold:
(1) An official resolution of the Unit of General Local or Tribal
Government, signed and dated by persons with actual authority as
required by state, tribal, or local law, adopting the completed Sale
Agreement and agreeing to perform all duties and obligations under the
Sale Agreement and to not take actions that would interfere with its
implementation; and
(2) The Name and Address Identifier (NAID) issued by HUD, if
available, and Federal Employer Identification Number (EIN) for the
applicant and any participating entities.
(b) Nonprofit organizations. Every nonprofit Purchaser that applies
to participate under this subpart must be on the nonprofit roster under
24 CFR 200.194 and must submit:
(1) The Federal Employer Identification Number (EIN) for the
applicant and any participating entities that will be involved in the
applicant's program under this subpart and the Social Security Numbers
(SSNs) of the principal staff of the applicant and its participating
entities;
[[Page 78563]]
(2) A letter of endorsement from a Unit of General Local Government
with jurisdiction over the entire proposed ACA signed by an authorizing
official stating that the official has reviewed the Sale Agreement of
the nonprofit organization and supports the nonprofit organization's
role in carrying out the activities described in the Sale Agreement;
(3) An official resolution of the nonprofit organization, signed
and dated by persons with actual authority as required by state,
tribal, or local law and the organization's governing documents,
adopting the completed Sale Agreement and agreeing to perform all
duties and obligations under the Sale Agreement; and
(4) Evidence of tax-exempt status granted by the Internal Revenue
Service under the tax-exempt organization provisions of section 501 of
the Internal Revenue Code (26 U.S.C. 501 et seq.).
(c) Application requirements applicable to both Units of General
Local Government and nonprofit organizations. In addition to the
applicable application requirements identified in paragraphs (a) and
(b) of this section, a Unit of General Local Government and nonprofit
organization must also submit as part of its application:
(1) The Homeownership Plan to be incorporated into the Sale
Agreement. The Homeownership Plan must contain, at a minimum, a map and
description of the geographical boundaries of the ACA, a statement of
the categories of assets to be sold, and a statement of the
homeownership and neighborhood revitalization goals to be achieved by
the plan.
(2) A certification that neither the Preferred Purchaser nor its
officers, directors, or principals are suspended, debarred, subject to
a limited denial of participation, or otherwise prohibited from
participating in a federal program, subject to applicable penalties for
false statements and perjury.
(d) Non-Preferred Purchasers. Every Non-Preferred Purchaser that
applies under this subpart must submit required information to the
appropriate HOC having jurisdiction over the assets to be sold. The
information to be submitted is as follows:
(1) The Non-Preferred Purchaser's taxpayer identification number,
which may be an SSN or an EIN;
(2) A statement indicating how the Non-Preferred Purchaser is
organized (e.g., as a corporation, sole proprietorship, limited
partnership, etc.);
(3) The Non-Preferred Purchaser's Data Universal Numbering System
(DUNS) number;
(4) Articles of incorporation, by-laws, partnership agreements, or
such other organizational and governing documents;
(5) A certificate of good standing from the jurisdiction in which
the Non-Preferred Purchaser is incorporated or organized;
(6) A copy of the Non-Preferred Purchaser's valid business license
and any professional licenses issued to the entity;
(7) A letter of endorsement from the Unit of General Local
Government stating that it has reviewed the Non-Preferred Purchaser's
proposed binding agreement under Sec. 291.615(c) and supports the Non-
Preferred Purchaser's role in carrying out the activities described in
these documents, along with an organizational resolution from the
entity evidencing: Authority to enter into the binding agreement, and
that the entity has taken whatever steps are necessary to officially
adopt, execute, and endorse these items;
(8) A listing of the names and addresses of members of the Board of
Directors, chief officers (or other governing body), and principal
staff of the Non-Preferred Purchaser;
(9) A certification that neither the Preferred Purchaser nor its
officers, directors, or principals are suspended, debarred, subject to
a limited denial of participation, or otherwise prohibited from
participating in a federal program. Such certification is subject to
applicable penalties for false statements and perjury; and
(10) A certification of the completeness and accuracy of all
information contained in all documents under this section. Such
certification is subject to applicable penalties for false claims,
false statements, and perjury.
(e) Preferred and Non-Preferred Purchasers. In addition to the
applicable application submission requirements described in paragraphs
(a) through (d) of this section, all Purchasers must include the
following information in their application submissions to the
appropriate HOC:
(1) A description of the Purchaser's staff and organization,
including:
(i) A list of all principal staff of the Purchaser, its officers,
directors, and principals, including their position titles, and the
resumes or biographies documenting each staff person's relevant housing
development experience;
(ii) A description of contracts and partnership agreements into
which the Purchaser has entered or plans to enter for the purpose of
conducting activities under this subpart;
(iii) A statement identifying any participating entities that will
assist with or be involved in a Purchaser's program under this subpart,
including, but not limited to, down payment assistance providers,
housing counseling agencies, contracting firms, marketing or sales
agents, and entities offering special financing arrangements for
buyers; and
(iv) A certification that the Purchaser's relationship with
partners, contractors, and participating entities does not create any
conflict-of-interest issues as provided in Sec. 291.670;
(2) A statement of financial condition demonstrating the capacity
of the Purchaser to carry out the proposed program under this subpart,
including:
(i) A capitalization plan showing the amount of capitalization and
the sources of available funds;
(ii) Liabilities, including all debts, liens, and judgments;
(iii) The Purchaser's current and last two year-end audited
financial statements, if available; and
(iv) The Purchaser's current and last two year-end profit and loss
statements and balance sheets, if available.
(3) Valid resolutions delegating signature authority as necessary
to provide for the execution of any sales contracts or other documents
on behalf of the Purchaser. These resolutions must be signed and dated
by the appropriate persons under applicable state, tribal, or local
law; and
(4) A certification, on official letterhead of the Purchaser, of
the completeness and accuracy of all information contained in the
application, subject to applicable penalties for false claims, false
statements, and perjury.
Sec. 291.625 HUD review and approval of application.
(a) Initial stage processing. Each application will be reviewed by
HUD. If the application is complete, the application will be reviewed
under the procedures established by this subpart. If the application is
incomplete, HUD will inform the applicant in writing and provide an
opportunity to submit any missing material within 30 days of the date
of the written communication informing the applicant of the
incompleteness.
(b) Review of application. (1) Each application will be reviewed on
a first-come, first-served basis by the date and time of HUD's receipt
of the application, if the application complies with the requirements
of this subpart, except that if HUD receives an application from a
[[Page 78564]]
Preferred Purchaser and from a Non-Preferred Purchaser for the same
geographic area on the same date, HUD will consider the application
from the Preferred Purchaser to be the prior received application. The
decision regarding when an application was received is solely within
HUD's discretion.
(2) HUD's threshold criteria will include, at a minimum, the
following:
(i) If the application submitted is incomplete and HUD notifies the
applicant in writing as provided in paragraph (a) of this section, the
application will be considered submitted on the date and time that HUD
receives the materials necessary to complete the application. All
members of a Partnership must each submit all required application
materials. HUD's decision as to whether or not an application is
complete is solely within HUD's discretion;
(ii) Status as a Preferred Purchaser or Partnership if the
applicant or applicants is seeking the preference and discounts
available to Preferred Purchasers;
(iii) No employee, officer, or agent of the applicant has engaged
in activities that involve a real or apparent conflict of interest
under Sec. 291.670;
(iv) Eligibility of the personnel to participate in HUD programs;
(v) A methodology to provide homeownership opportunities to
underserved populations, including persons with disabilities; and
(vi) Demonstrated legal, administrative, and financial capacity to
successfully fulfill the requirements of the Sale Agreement and, in the
case of a Preferred Purchaser, the requirements of the Homeownership
Plan.
(c) Application approval. (1) HUD will enter into a Sale Agreement
(which, for a Preferred Purchaser, must incorporate the Homeownership
Plan) with each applicant or with each member of a Partnership as
provided in Sec. 291.630, once HUD approves, in its discretion, the
first complete application it receives that meets the threshold
requirements under paragraph (b) of this section. If no applications
meet the threshold requirements or HUD approves no application, HUD
will not enter into a Sale Agreement.
(2) If an approved ACA includes less than the total Revitalization
Area, or if the category of Eligible Assets to be sold includes less
than all HUD-held assets in an ACA or Revitalization Area, or if an
approved application from a Non-Preferred Purchaser includes fewer than
all the assets in a Revitalization Area, the remaining assets (i.e.,
those not covered in the application) in a Revitalization Area may be
sold as provided elsewhere in this part.
Sec. 291.630 Sale Agreement requirements for Purchasers.
Every Purchaser, and each member of a Partnership that applies to
participate under this subpart, as a condition of participation, enters
into a Sale Agreement, which must contain:
(a) In the case of Preferred Purchasers:
(1) The goals of the Homeownership Plan for the Eligible Assets
purchased and for the ACA subject to the Homeownership Plan;
(2) The Revitalization Areas (or portions thereof) and ACAs in
which the Homeownership Plan is operating or will operate, including
geographic descriptions and maps;
(3) The specific use or disposition of the Eligible Assets under
the Homeownership Plan;
(4) Any activities to be conducted and services to be provided
under the Homeownership Plan; and
(5) Goals for the acquisition, management, and resale of the
respective HUD-owned assets already in HUD's inventory or to be
acquired during the time frame of the Sale Agreement.
(b) In the case of both Preferred and Non-Preferred Purchasers:
(1) A home buyer selection process that includes the requirements
for Eligible Buyers and methods to fairly and equitably provide
opportunities for Eligible Buyers, in accordance with the Fair Housing
Act (42 U.S.C. 3601 et seq.), and nondiscrimination requirements of 24
CFR 5.105;
(2) A description of the housing counseling opportunities that will
be available to Eligible Buyers;
(3) A description of the Purchaser's accounting systems that will
clearly enable the Purchaser to ensure that funds associated with
activities under this subpart are not commingled with other funds for
programs administered by the Purchaser;
(4) An operating plan that includes:
(i) The acquisition schedule that describes an agreed timeline for
concluding individual asset sales to the Purchaser; and
(ii) The rehabilitation standard for the asset properties, which
must comply with local building code standards under Sec. 291.635;
(5) A certification from the Purchaser that it will comply with the
performance goals contained in the Sale Agreement; and
(6) A certification that the Purchaser, its officers, directors,
and principals are not subject to suspension, debarment, limited denial
of participation, and are not otherwise prohibited from participating
in a federal program, subject to applicable penalties for false
statements and perjury.
Sec. 291.635 Asset Property condition requirements.
All Asset Properties purchased under this subpart must meet, or be
rehabilitated to meet, local building code standards.
Sec. 291.640 Discount classes for Preferred Purchasers.
(a) Three discount classes. Eligible Assets will be priced
according to one of three discounts, based on the relationship of the
appraised value to the dollar cost of the eligible repairs, as follows:
(b) Fifty percent discount. Eligible Assets with an appraised value
of $50,000 or greater shall receive a discount of 50 percent of the
appraised value of the property.
(c) $24,900 discount. Eligible Assets with an appraised value of
greater than $25,000, but less than $50,000, shall receive a discount
of $24,900 from the appraised value of the property.
(d) Maximum Discount. Eligible Assets with an appraised value of
$25,000 or less will have a purchase price of $100.
Sec. 291.645 Appraisal and pricing of Asset Properties that are real
properties.
(a) Appraisal of Asset Properties. HUD will order an appraisal by
an appraiser on the Federal Housing Administration (FHA) appraiser
roster under 24 CFR part 200, subpart G, for each Asset Property in the
ACA to be sold. The property will be appraised based on the market
value of the property in ``as-is'' physical condition. If the property
was appraised by an appraiser from the FHA appraiser roster within the
previous calendar year, the property need not be reappraised, unless
the Purchaser requests a reappraisal or disputes the appraised value
under paragraph (b) of this section.
(b) Resolving disputes about appraised value. If the Purchaser
disputes the initial appraisal, it may request a second appraisal from
HUD. In such cases, the second appraisal will be used to determine the
current appraised value. The Purchaser may request an individual new
appraisal if the request is made prior to sale and the Purchaser
demonstrates, in HUD's sole discretion, a reasonable likelihood that a
second appraisal would indicate a value that differs by 20 percent or
more, higher or lower, from the original appraisal. HUD will retain
services of one of the appraisers on the FHA appraiser roster to review
the original appraisal and
[[Page 78565]]
perform a new appraisal. Additional costs for any new appraisals will
be borne by the Purchaser, unless the new appraisal indicates a value
that differs by 20 percent or more, higher or lower, from the original
appraisal.
(c) Pricing Eligible Assets. If there is one appraisal, the price
to the Purchaser will be calculated by applying the appropriate
discount under Sec. 291.640 to the appraised value. If HUD approves
additional appraisals under paragraph (b) of this section and such
appraisals result in a change in value, the price will be calculated by
applying the appropriate discount under Sec. 291.640 to the final
approved appraised value.
Sec. 291.650 Conveyance of Eligible Assets.
(a) Eligible Assets initially available in the ACA or
Revitalization Area. Prior to entering into the Sale Agreement, HUD
will identify all the categories of Eligible Assets along with the
Eligible Assets available in those categories within the proposed ACA
(in the case of a Preferred Purchaser) or Revitalization Area (in the
case of a Non-Preferred Purchaser) and provide this information in a
``designation notice'' to the Purchaser. The Purchaser or Partnership,
after reviewing the designation notice, will present an acquisition
schedule to HUD for review. HUD will review the acquisition schedule
along with the Purchaser or Partnership's capacity and the units to
determine whether to approve the acquisition schedule as is, or to
approve it with modifications.
(b) Assets acquired during the life of the Sale Agreement. (1) As
HUD acquires and makes available new Eligible Assets in the ACA during
the life of the Sale Agreement, HUD will provide official notification
of availability of these assets to the Preferred Purchaser or
Partnership.
(2) As HUD acquires and makes available new Eligible Assets in the
Revitalization Area during the life of the Sale Agreement, HUD will
provide official notification of availability of the assets to the Non-
Preferred Purchaser.
(3) Within 5 days after receiving the official notification from
HUD, the Preferred Purchaser or Partnership shall complete and submit a
report to HUD stating the repairs required for each Asset Property in
the ACA to meet the property condition standards in Sec. 291.635.
(4) HUD will apply the appropriate level of discount pursuant to
Sec. 291.640 and, within 15 days of the date of initial notification
from HUD, notify the Preferred Purchaser or Partnership of the sale
price and provide the Preferred Purchaser with a copy of the appraisal
report.
(c) Closing of sales. Sales will be closed according to the terms
of the Sale Agreement under this section and specific closing
procedures specified by HUD.
(d) Subordinate lien. HUD shall secure the sale of Asset Properties
(including HUD-financed sales under Sec. 291.655) with a subordinate
mortgage in the amount of the difference between the appraised value of
the Asset Property and the sales price. HUD shall release the
subordination upon compliance of the provisions of the Sale Agreement
and sale of the Asset Property to an Eligible Buyer pursuant to Sec.
291.660.
Sec. 291.655 HUD financing and assistance to Preferred Purchasers and
their Partnerships.
(a) HUD may offer 100 percent financing to Units of General Local
Government, states, Indian tribes, and nonprofit organizations on the
purchase of Eligible Assets for up to 180 days from the date of
closing, subject to the availability of appropriations. Such financing
will be interest-free for the first 89 days from the date of closing,
and at market rate commencing with the 90th day until the end of the
loan or the 180th day from the date of closing, whichever occurs first.
(b) Payment date. When using the methods in paragraph (a) of this
section, the Purchaser must pay the full amount for the asset and any
accrued interest on the earlier of two dates:
(1) The date after the resale of the asset to the ultimate buyer;
or
(2) The expiration date of the loan.
(c) $5,000 threshold. Notwithstanding paragraphs (a) and (b) of
this section, the Purchaser must pay the full amount at closing for
Eligible Assets sold for less than $5,000.
(d) Delinquent loans. In the case of delinquent HUD-financed loans
under this section, HUD has the right to take legal action to recover
the property or enforce the borrower's payment obligations.
(e) Non-Preferred Purchasers. HUD will not offer financing to Non-
Preferred Purchasers.
Sec. 291.660 Resale of assets to Eligible Buyers.
(a) General. Resale of Asset Properties by Purchasers to Eligible
Buyers as defined in Sec. 291.605 must take place in accordance with
the goals and timetables submitted to HUD as part of the Homeownership
Plan and the Sale Agreement. Resale of mortgages under this subpart
must promote homeownership opportunities.
(b) Sales price--(1) Two methods for determining sales price. The
Purchaser may elect to establish the sales price of Asset Properties to
Eligible Buyers using either an individual transaction method or a
portfolio-wide method.
(2) Transaction method for determining sales price. Under the
transaction method, the sales price of an Asset Property to an Eligible
Buyer may not exceed the lesser of:
(i) The as-rehabilitated appraised value of the Asset Property; or
(ii) The HUD-established percentage of the Net Development Cost
(see paragraph (b)(4) of this section).
(3) Portfolio method for determining sales price. Under the
portfolio method, the cumulative sales prices of Asset Properties sold
to Eligible Buyers during the Purchaser's ``portfolio reporting
period'' (see paragraph (b)(4) of this section) may not exceed the
lesser of:
(i) The total as-rehabilitated appraised value of the asset
properties; or
(ii) The HUD-established percentage of the total Net Development
Cost for those properties (see paragraph (b)(4) of this section).
(4) HUD-established percentage of Net Development Cost and
portfolio reporting period. (i) Initially, HUD establishes the
allowable percentage of Net Development Cost under paragraphs (b)(2)
and (b)(3) of this section at 115 percent. The portfolio reporting
period described in paragraph (b)(3) of this section is a 12-month
period covered by the Sale Agreement, generally commencing on the date
of the Sale Agreement's execution or anniversary thereof.
(ii) To better reflect market conditions, HUD may periodically
propose to adjust the allowable percentage of Net Development Cost and/
or the portfolio reporting period. Such proposed adjustments shall be
announced through publication of a notice in the Federal Register that
will provide the public with the opportunity to comment for a period of
at least 30 days. After the comments have been considered, HUD will
publish a final notice announcing the adjustment and its effective
date.
(5) Sale method election. Use of the portfolio method is optional.
During each portfolio reporting period, a Purchaser may elect either
the portfolio method or the transaction method; however, the Purchaser
may not use both methods concurrently and may not change methods during
a portfolio reporting period.
(c) Escrow and principal reduction requirements for Purchasers
using portfolio method.
[[Page 78566]]
(1) A Purchaser electing the portfolio option must deposit into an
escrow account the difference between the actual sales price and the
HUD-established percentage of the Net Development Cost for each
transaction.
(2) The purchaser must reduce the principal on each mortgage when
cumulative actual sales are more than 115 percent of the total Net
Development Costs of the properties sold during the portfolio reporting
period. The amount of principal reduction is calculated by subtracting
the HUD-established percentage of total Net Development Costs from
actual cumulative sales for the portfolio reporting period, and
prorating the result as a percentage of actual sales. The balance in
the escrow account after principal reductions on mortgages, if any, is
allocable to the Purchaser. Distributions from the escrow account must
be made by the Purchaser no later than 90 days after its fiscal year
end.
(d) Owner-occupancy term. (1) An Eligible Buyer who purchases an
Asset Property at below its as-rehabilitated appraised value must
comply with the owner-occupancy requirements described in this
paragraph. An Eligible Buyer who purchases an Asset Property for the
as-rehabilitated appraised value is not subject to the owner-occupancy
requirements.
(2) The owner-occupancy term is the number of months that an
Eligible Buyer must agree to own, and live in as his/her sole
residence, an Asset Property purchased under this part. The owner-
occupancy term is 36 months commencing on the date of closing.
(3) HUD may, at its sole discretion, allow interruptions to the 36-
month owner-occupancy term if it determines that the interruption is
necessary to prevent hardship, but only if the Eligible Buyer submits a
written and signed request to HUD containing the following information:
(i) The reason(s) why the interruption is necessary;
(ii) The dates of the intended interruption; and
(iii) A certification from the Eligible Buyer that the Eligible
Buyer is not abandoning the Asset Property as his/her permanent
residence and will resume occupancy of the home upon the conclusion of
the interruption and complete the remainder of the 36-month owner-
occupancy term.
(4) The written request for approval of an interruption to the
owner-occupancy term must be submitted to HUD at least 30 calendar days
before the anticipated interruption. Military service members protected
by the Servicemembers Civil Relief Act need not submit their written
request to HUD 30 days in advance of an anticipated interruption, but
should submit their written request as soon as practicable upon
learning of a potential interruption, in order to ensure timely
processing and approval of the request.
(e) Subordinate mortgage. (1) For purposes of ensuring compliance
with owner occupancy requirements, HUD shall secure the sale of Asset
Properties (including HUD-financed sales under Sec. 291.655) to
Eligible Buyers with a subordinate mortgage in the amount of the
difference between the appraised value of the Asset Property and the
sales price.
(2) The term of the subordinate mortgage is equal to the owner-
occupancy term (36 months). The amount of the subordinate mortgage will
be reduced by \1/36\th on the last day of each month of occupancy
following the occupancy start date. At the end of the 36th month of
occupancy, the amount of the subordinate mortgage will be zero.
(3) If the Eligible Buyer sells his/her home or stops living in the
home as his/her sole residence prior to the expiration of the owner-
occupancy term, he/she will owe HUD the amount due on the second
mortgage as of the date the property is either sold or vacated.
Sec. 291.665 Reporting and disclosures.
(a) Reporting to HUD. Purchasers must complete a repair report with
the initial cost estimate for each Asset Property repaired, along with
the actual expenditures for repair and supporting documentation for
those expenditures. Purchasers must retain this report for the term of
the Sale Agreement plus 24 months, and make such reports available for
inspection by HUD.
(b) Disclosure to Eligible Buyer on resale. Upon the resale of each
Asset Property, the Purchaser must provide to the Eligible Buyer a
disclosure notice containing an itemized list of all rehabilitation
work that the Purchaser has performed or contracted out to be performed
on each Asset Property being sold. At closing, the Purchaser must also
provide the Eligible Buyer with a one-year homeowner's warranty,
covering and warranting the rehabilitation work for one year.
(c) Obligation to ensure eligibility. The Eligible Buyer must
certify to the Purchaser that he or she is eligible under this subpart.
The Eligible Buyer must certify that he or she has an annual income of
no more than 115 percent of area median income and agrees to reside in
the property as the owner for 3 years from the date of closing of the
sale; or that he or she has a resident member who is a teacher, police
officer, firefighter, or emergency medical technician. The Purchaser
must retain this certification as long as the Purchaser participates in
the program under this subpart and provide it to HUD upon request.
(d) Financial statements. Purchasers must submit annual audited
financial statements to HUD or HUD's designee. All Preferred Purchasers
shall comply with the Single Audit Act Amendments of 1996 and, as
applicable, OMB Circular A-133, ``Audits of States, Local Governments,
and Non-Profit Organizations.''
(e) Other reports. Purchasers under this subpart must comply with
any other annual, quarterly, and monthly reporting requirements as HUD
may establish from time to time.
Sec. 291.670 Conflicts of interest.
(a) No employee, officer, or agent of a Preferred Purchaser under
this subpart shall engage in activities that would involve a real or
apparent conflict of interest. Such a conflict would arise when the
employee, officer, agent, any member of his or her immediate family,
his or her partner, or an organization which employs or is about to
employ any of the parties indicated herein has a financial or other
interest in any contractor, firm, or other persons or entities selected
to rehabilitate, sell, purchase, act as a real estate agent, or
otherwise participate in the acquisition, financing, rehabilitation,
management, marketing, and sale of Eligible Assets under this subpart.
This section does not apply when the Preferred Purchaser itself engages
in any of these activities. Preferred Purchasers that receive discounts
in the purchase price of assets under this subpart (as well as other
federal assistance, such as financing) must comply with the conflict-
of-interest provisions of this paragraph and 24 CFR parts 84 and 85, as
applicable.
(b) The officers, agents, and employees of Preferred Purchasers
under this subpart shall neither solicit nor accept gratuities, favors,
or anything of monetary value from contractors or parties to sub-
agreements, absent an exception for unsolicited items of nominal value
granted by HUD.
(c) A Preferred Purchaser may not sell an Asset Property to an
Eligible Buyer with whom the Purchaser has a business or close familial
relationship, unless HUD provides a specific exception. HUD may provide
such an exception under the following conditions:
(1) The Preferred Purchaser has disclosed the nature of the
conflict to HUD, accompanied by an assurance that there was a public
disclosure of the
[[Page 78567]]
conflict and a description of how the disclosure was made;
(2) The Preferred Purchaser's attorney has provided a signed
opinion that the conflict for which the exception is sought would not
violate state, tribal, or local law;
(3) The Preferred Purchaser makes a written showing that the
conflict will not result in any influence on the discount, amount of
rehabilitation, or price of an asset to the Eligible Buyer; and
(4) The proposed buyer meets the definition of Eligible Buyer in
Sec. 291.605 of this subpart.
Sec. 291.675 Sanctions for failure to comply.
(a) HUD may impose sanctions against a Purchaser or Eligible Buyer
who commits an act of default as defined herein. An act of default is:
(1) A material violation of this subpart;
(2) A material violation of the Sale Agreement or the Homeownership
Plan; or
(3) Any act of fraud or any false statements committed by a party
during its participation in the activities described in this subpart.
(b) Sanctions may include:
(1) Termination of the Purchasers' rights under the Sale Agreement,
including, without limitation, HUD's obligation to sell any asset
properties to Purchaser; and
(2) Termination of approval of a Preferred Purchaser or Non-
Preferred Purchaser to participate under this subpart.
(c) HUD has the right to take any other enforcement action
permitted by law, including, but not limited to, suspension, debarment,
and actions under the Program Fraud Civil Remedies Act.
(d)(1) HUD shall provide a program participant with written notice
of its intent to pursue a sanction under paragraph (b) of this section.
The notice will include the reasons for the proposed sanction.
(2) The program participant will have 20 days from the date of the
notice to submit a written response appealing the proposed sanction and
to request a conference. A request for a conference must be in writing
and must be submitted along with the written response.
(3) Within 30 days of receiving the written response or, if the
program participant has requested a conference, within 30 days after
completion of the conference, a HUD official designated by the
Secretary will review the appeal and provide the program participant
with a written final decision either affirming, modifying, or
cancelling the proposed sanction. HUD may extend this time by providing
the program participant with notice. The HUD official designated by the
Secretary to review the appeal will not be someone involved in the
original decision or someone who reports to a person involved in that
initial decision. In all such cases, the decision on such appeal is a
final agency action.
Sec. 291.681 Termination for convenience of the government.
In addition to termination under Sec. 291.675, the Sale Agreement
may be terminated at any time for the convenience of the government.
Sec. 291.683 Audits and reviews.
HUD will conduct compliance reviews of each Purchaser under this
subpart on an annual basis or such other time as HUD determines.
Purchasers and their partners and agents shall comply with all requests
for information regarding their activities under this subpart.
Dated: November 6, 2008.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. E8-30291 Filed 12-19-08; 8:45 am]
BILLING CODE 4210-67-P