Federal Register/Vol. 85, No. 246/Tuesday, December 22, 2020
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Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Rules and Regulations 83435 DEPARTMENT OF HOUSING AND provide more mortgage insurance and and synchronize the risk sharing URBAN DEVELOPMENT credit for new multifamily loans. Under program with the LIHTC rules. the program, qualified state and local HUD Response: HUD appreciates the 24 CFR Part 266 HFAs are delegated to originate and support but emphasizes that the revised [Docket No FR–5881–F–02] underwrite loans for new construction, definition of ‘‘affordable housing’’ is substantial rehabilitation, acquisition, technical and does not expand the RIN 2502–AJ35 refinancing, and housing for the elderly. program’s scope. As discussed in the HFAs may elect to share from 10 to 90 proposed rule, the existing definition of Section 542(c) Housing Finance percent of the loss on a mortgage with ‘‘affordable housing,’’ as well as the Agency Risk Sharing Program HUD. In the event of a claim, HFAs will definitions of ‘‘gross rent’’ and AGENCY: Office of the Assistant reimburse HUD for their portion of the ‘‘supportive services,’’ are unnecessarily Secretary for Housing-Federal Housing loss pursuant to their risk-sharing repetitive so the proposed change Commissioner, HUD. agreement’s terms. removes redundant verbiage and ACTION: Final rule. On March 8, 2016, HUD proposed a simplifies the regulatory language new rule to update the Section 542(c) without substantively changing the SUMMARY: Through the Section 542(c) HFA Risk Sharing regulations set out in program’s scope. This rule amends the Housing Finance Agency (HFA) Risk 24 CFR part 266, which were last ‘‘affordable housing’’ definition to more Sharing program, HUD enters into risk- updated over fifteen years ago. closely conform to the statutory sharing agreements with qualified state Additional details about the proposed language in Section 542(c)(7) of the and local HFAs so they can provide rule may be found at 81 FR 12051 Housing and Community Development FHA (Federal Housing Administration) (March 8, 2016). Act of 1992 and meet the requirements mortgage insurance and credit for a qualified low-income housing tax enhancement for new loans on II. This Final Rule credit project under section 42(g) of the multifamily affordable housing This final rule follows publication of Internal Revenue Code. Comment: The rule should clarify that properties. This final rule amends the the March 8, 2016 proposed rule and cooperatives meet the proposed rule’s program’s existing regulations, to better considers the public comments definition of ‘‘affordable housing,’’ and align with the policies of other HUD received. HUD is adopting the proposed that ‘‘gross rent’’ includes charges for programs, reflect current industry and rule as final with no substantive the occupancy of a cooperative unit. A HUD practices, and conform to statutory changes. amendments. Additionally, this rule commenter stated that the existing Risk- provides HUD with greater flexibility to III. Discussion of Public Comments Sharing regulations make it clear that loans for cooperatives with five or more operate the Section 542(c) HFA Risk HUD received eight public comments units are eligible for Risk-Sharing Sharing program more efficiently and on the proposed rule from housing and mortgage insurance, but the rule’s provides HFAs which accept a greater finance agencies, a law firm, and other revision of the ‘‘affordable housing’’ share of the risk of loss on mortgages interested parties. One commenter did insured under the program with definition makes that less clear. not discuss the proposed rule and According to the commenter, the expanded program delegation. This rule therefore the comment will not be also updates outdated references and revision should incorporate all the addressed here as it is outside the requirements for a qualified low-income terminology and clarifies other rulemaking’s scope. In general, the provisions. housing project that are set forth in comments received supported the rule, I.R.C. Section 42(g) and not simply the DATES: Effective January 21, 2021. with no expressed opposition. gross rent rules that are required by the FOR FURTHER INFORMATION CONTACT: The comments largely contained Section 542(c) Risk-Sharing statute. Carmelita A. James, Office of requests for clarification, suggested The commenter stated further that Multifamily Production, Office of technical changes, and provided Section 42(g) contains several LIHTC- Housing, Department of Housing and additional recommendations. Several specific concepts that may need to be Urban Development, 451 7th Street SW, commenters stated the proposed rule’s disregarded when they are applied to Room 6146, Washington, DC 20410; revisions were necessary updates that non-LIHTC, Risk-Sharing projects. telephone number (202)–402–2579 (this would help streamline the regulation, Further, Section 42(g) should not be is not a toll-free number). Persons with add flexibility, and make the program interpreted as implying that hearing or speech impairments may more effective. In addition, commenters cooperatives are not eligible for Risk access this number through TTY by stated they appreciated HUD’s extensive Sharing. The commenter suggested calling the toll-free Federal Relay outreach and exchanges with HFAs clarifying the definition of affordable Service at 800–877–8339. prior to issuing the proposed rule. housing so that, for purposes of the SUPPLEMENTARY INFORMATION: HUD appreciates the time that Risk-Sharing regulations, any reference commenters took to provide helpful to a residential rental project in Section I. Background information and valuable suggestions. 42(g) includes cooperative projects. Section 542 of the Housing and In addition, the commenter stated that A. Affordable Housing Definition Community Development Act of 1992 the proposed rule continues existing (12 U.S.C. 1715z–22) (Section 542) Comment: The revisions to the cooperative-related language from the directs HUD to carry out programs definition of ‘‘affordable housing’’ are current rule that is unnecessarily through FHA to demonstrate the helpful. Commenters supported HUD confusing because charges for a effectiveness of providing new forms of amending the proposed rule’s definition cooperative unit occupancy are said to Federal credit enhancement for loans on of ‘‘affordable housing.’’ One be a form of utility allowance. Lastly, multifamily affordable housing commenter supported the proposed the commenter said it is awkward to properties which are underwritten, revisions because they would expand refer to cooperative occupancy charges processed, serviced, and disposed of by the Section 542(c) program to better in such terms, which are otherwise HFAs. HUD and the HFAs share in the support loans on projects with Federal known as ‘‘maintenance fees,’’ and the risk of loss, which enables the HFAs to low-income housing tax credits (LIHTC) final rule should specify that gross rent, VerDate Sep<11>2014 16:23 Dec 21, 2020 Jkt 253001 PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 E:\FR\FM\22DER1.SGM 22DER1 jbell on DSKJLSW7X2PROD with RULES 83436 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Rules and Regulations and not just the utility allowance, is HUD Response: HUD has the statutory commenter indicated that included in the charges for a authority to impose additional § 266.200(c)(4), (5), and (7) of the cooperative unit occupancy. underwriting criteria, loan terms, and proposed rule, which describe eligibility HUD Response: HUD appreciates the conditions when HUD assumes more requirements for existing projects, relate comments on ensuring that the rule is than 50% of the risk of loss and may do to projects with Section 8 contracts, but clear that cooperative units are eligible so for a variety of risk management and none of them states that explicitly, and as ‘‘affordable housing’’ for purposes of program oversight reasons. HUD that beginning each of these paragraphs the Risk Sharing program, if they interprets the commenters reference to with a phrase such as ‘‘If the project is otherwise meet the Risk Sharing ‘‘large claims made’’ as intending to the subject of a Housing Assistance statute’s other requirements. This rule refer to mortgage insurance Payments (HAP) contract . .’’ would continues to apply to cooperative commitments issued for large loans. provide clarity. Alternatively, this housing units, and HUD does not HUD disagrees that reviewing commenter said that § 266.200(c)(4), (5), believe any additional changes are underwriting standards, loan terms and and (7) could be consolidated into a necessary to confirm that. conditions only as they apply to large single subsection that addresses Section loans would be sufficient to manage risk 8 assisted projects. B. Housing Finance Agency and to protect the Risk Sharing HUD Response: HUD agreed with the Requirements program’s safety and soundness. suggestions. Sections 266.200(c)(4), (5) Comment: Be consistent regarding Comment: Termination. One and (7) were consolidated into a single rating requirements. A commenter commenter objected to the proposed subsection (5) for Section 8 assisted stated the HFA qualifier with an change allowing HUD to withdraw projects which begins with the phrase ‘‘overall rating of ‘A’ on general program approval for Level II HFAs that ‘‘If the project is subject to a Housing obligation bonds’’ used in § 266.110(a) do not adopt new underwriting Assistance Payment (HAP) contract and § 266.120(e)(5) should also be used standards, loan terms and conditions, . .’’ This paragraph was moved to in § 266.100(a)(l). This commenter also and asset management and servicing clarify the circumstances to which this indicated that while HFAs may qualify procedures that HUD may establish applies, after the general provisions in to participate in the program if they every five years. The comment stated § 266.200. carry an issuer credit rating of ‘‘A’’ or that termination seems inappropriate for Comment: Differences between better, the regulations do not provide HFAs that are otherwise performing § 266.200(c)(7) and § 266.200(d). Under that HFAs may qualify if they receive a under the program.