[Federal Register Volume 75, Number 162 (Monday, August 23, 2010)]
[Rules and Regulations]
[Pages 51914-51915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20630]
[[Page 51913]]
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Part III
Department of Housing and Urban Development
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24 CFR Part 200
Prohibition of the Escrowing of Tax Credit Equity; Final Rule
Federal Register / Vol. 75 , No. 162 / Monday, August 23, 2010 /
Rules and Regulations
[[Page 51914]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 200
[Docket No. FR-5290-F-02]
RIN 2502-AI73
Prohibition of the Escrowing of Tax Credit Equity
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: This rule conforms HUD's Federal Housing Administration
multifamily mortgage insurance regulations to a provision in Title VIII
of the Housing and Economic Recovery Act of 2008 that prohibits a
requirement that tax credit sales proceeds be placed into escrow, at
the time of initial endorsement, for assurance of project completion
and to pay the initial service charge, carrying charges, and legal and
organizational expenses incident to the construction of the project.
This rule does not prohibit HUD from requiring escrows of funds for
other purposes, such as for working capital. The rule also makes other
changes to reduce burdens on the use of tax credits.
DATES: Effective Date: September 22, 2010.
FOR FURTHER INFORMATION CONTACT: Iris Agubuzo, Project Manager, Policy
Division, Office of Multifamily Housing, Department of Housing and
Urban Development, 451 Seventh Street, SW., Room 6158, Washington, DC
20410-8000, telephone number 202-402-2662 (this is not a toll-free
number). Individuals with speech or hearing impairments may access this
number through TTY by calling the toll-free Federal Information Relay
Service at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
On October 9, 2009, HUD published a proposed rule (74 FR 52354)
implementing section 2834(c) of the Housing and Economic Development
Act of 2008, Public Law 110-289 (approved July 30, 2008) (HERA),
codified at 12 U.S.C. 1715s, which prohibits HUD from requiring the
escrowing of tax credit proceeds to assure project completion. This
statutory provision changes HUD's practice of requiring a substantial
portion of the low-income housing tax credit equity under 26 U.S.C. 42
to be placed in escrow for potential future use over the life of the
project at the time of initial endorsement. This requirement has had an
inhibiting effect on the building of new low-income housing tax credit
projects, and often required the use of bridge loans until the escrowed
proceeds were released. A full discussion of section 2834(c) of HERA,
the tax credit programs related to this rule, and the proposed rule can
be found in the proposed rule at 74 FR 52354-52355.
II. Public Comments
The public comment period for this rule closed on December 8, 2009.
HUD received one comment during the public comment period, from a trade
association involved with the mortgage industry, which was supportive
of the rule. This comment may be viewed at http://www.regulations.gov.
III. This Final Rule
This final rule conforms 24 CFR 200.54 to section 2834(c) of HERA,
codified as 12 U.S.C. 1715s. This final rule prohibits HUD from
requiring the escrowing of equity from the sales of tax credits. In
addition, the rule extends the same treatment to historic and New
Markets Tax Credits so that the escrow requirement is eliminated when
equity is provided from these types of tax credits. Finally, proceeds
from New Markets Tax Credits are added to 24 CFR 200.54(c) as a type of
funding that need not be fully disbursed prior to the disbursement of
the mortgage proceeds, where approved by the Federal Housing
Commissioner.
IV. Findings and Certifications
Environmental Impact
This final rule does not direct, provide for assistance or loan and
mortgage insurance for, or otherwise govern or regulate, real property
acquisition, disposition, leasing, rehabilitation, alteration,
demolition, or new construction, or establish, revise, or provide for
standards for construction or construction materials, manufactured
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this
final rule is categorically excluded from environmental review under
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
generally requires an agency to conduct a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements, unless the agency certifies that the rule will not have a
significant economic impact on a substantial number of small entities.
In accordance with the Regulatory Flexibility Act (5 U.S.C.
605(b)), this final rule was reviewed before publication, and the
undersigned certifies that this rule does not have a significant
economic impact on a substantial number of small entities. There are no
anticompetitive discriminatory aspects of the rule with regard to small
entities, and there are no unusual procedures that need to be complied
with by small entities. This rule will allow mortgagors to retain more
of their tax credit proceeds and, in many cases, relieve them of the
need to take out a costly bridge loan to pay the costs for assurance of
completion. Therefore, this rule, in conformance with statutory
mandate, removes a costly regulatory requirement and does not impose
any substantial economic impact on small entities. Therefore, the
undersigned certifies that this proposed rule will not have a
significant economic impact on a substantial number of small entities,
and that an initial regulatory flexibility analysis is not required.
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 final rule does not have
federalism implications and does not impose substantial direct
compliance costs on State and local governments or preempt State law
within the meaning of the executive order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.
1531-1538) (UMRA) establishes requirements for Federal agencies to
assess the effects of their regulatory actions on State, local, and
tribal governments, and on the private sector. This final rule does not
impose any Federal mandates on any State, local, or tribal government,
or on the private sector, within the meaning of UMRA.
List of Subjects in 24 CFR Part 200
Administrative practice and procedure, Government contracts,
Organization and functions (Government agencies).
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance (CFDA) program numbers
for
[[Page 51915]]
the programs related to this rulemaking are 14.112, 14.123, 14.126,
14.134, 14.135, 14.138, 14.139, 14.151, and 14.155.
0
For the foregoing reasons, HUD amends 24 CFR part 200, as follows:
PART 200--INTRODUCTION TO FHA PROGRAMS
0
1. The authority citation for part 200 continues to read as follows:
Authority: 12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).
0
2. Revise Sec. 200.54 to read as follows:
Sec. 200.54 Project completion funding.
(a) Except as provided in paragraph (d) of this section, the
mortgagor shall deposit with the mortgagee cash deemed by the
Commissioner to be sufficient, when added to the proceeds of the
insured mortgage, to assure completion of the project and to pay the
initial service charge, carrying charges, and legal and organizational
expenses incident to the construction of the project. The Commissioner
may accept a lesser cash deposit or an alternative to a cash deposit in
accordance with terms and conditions established by the Commissioner,
where the required funding is to be provided by a grant or loan from a
Federal, State, or local government agency or instrumentality.
(b) An agreement acceptable to the Commissioner shall require that
funds provided by the mortgagor under requirements of this section must
be disbursed in full for project work, material, and incidental charges
and expenses before disbursement of any mortgage proceeds, except:
(c) Low-income housing tax credit syndication proceeds, historic
tax-credit syndication proceeds, New Markets Tax Credits proceeds, or
funds provided by a grant or loan from a Federal, State, or local
governmental agency or instrumentality under requirements of this
section need not be fully disbursed before the disbursement of mortgage
proceeds, where approved by the Commissioner in accordance with terms,
conditions, and standards established by the Commissioner;
(d) In the case of a mortgage insured under any provision of this
title executed in connection with the purchase, construction,
rehabilitation, or refinancing of a multifamily tax credit project, the
Commissioner may not require:
(1) The escrowing of equity provided by Low-Income Housing Tax
Credits for the project pursuant to Title 26, section 42 of the
Internal Revenue Code of 1986;
(2) The escrowing of equity provided by historic rehabilitation tax
credits, New Markets Tax Credits, or any other form of security, such
as a letter of credit.
Dated: August 11, 2010.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2010-20630 Filed 8-20-10; 8:45 am]
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