[Federal Register Volume 66, Number 192 (Wednesday, October 3, 2001)]
[Rules and Regulations]
[Pages 50296-50302]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 01-24586]
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FEDERAL HOUSING FINANCE BOARD
12 CFR Part 951
[No. 2001-18]
RIN 3069-AB04
Affordable Housing Program Amendments
AGENCY: Federal Housing Finance Board.
ACTION: Final rule.
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SUMMARY: The Federal Housing Finance Board (Finance Board) is amending
its regulation governing the operation of the Affordable Housing
Program (AHP) to improve the operation and effectiveness of the AHP.
The changes include: increasing the maximum amount of money that may be
set aside annually, in the aggregate, under a Federal Home Loan Bank's
(Bank) homeownership set-aside programs to the greater of $3.0 million
or 25 percent of the Bank's annual required AHP contribution; removing
one of the criteria for use of homeownership set-aside funds to pay for
counseling costs in order to equalize the criteria with that of the
competitive AHP application program; permitting members drawn from
community and not-for-profit organizations actively involved in
providing or promoting community lending in a Bank's district to serve
on the Bank's Advisory Council; making the AHP outlay adjustment
requirements applicable to any reduction or increase in the amount of
AHP subsidy approved for a project, regardless of whether a direct
subsidy writedown is involved; removing the requirement for annual
project sponsor certifications on household income eligibility for
owner-occupied projects; removing the requirements for project sponsor
certifications to the member and member certifications to the Bank on
tenant income and rent targeting commitments and project habitability
within the first year of completion of a rental project; and allowing
projects modifications to be eligible for AHP funds that remain
uncommitted or unused by the end of the year.
EFFECTIVE DATE: The final rule shall be effective on November 2, 2001.
FOR FURTHER INFORMATION CONTACT: Charles E. McLean, Deputy Director,
(202) 408-2537, Melissa L. Allen, Program Analyst, (202) 408-2524,
Office of Policy, Research and Analysis; or Sharon B. Like, Senior
Attorney-Advisor, (202) 408-2930, Office of General Counsel, Federal
Housing Finance Board, 1777 F Street, NW., Washington, DC 20006.
SUPPLEMENTARY INFORMATION:
I. Statutory and Regulatory Background
Section 10(j)(1) of the Federal Home Loan Bank Act (Bank Act)
requires each Bank to establish a program to subsidize the interest
rate on advances to members of the Bank System engaged in lending for
long-term, low- and moderate-income, owner-occupied and affordable
rental housing at subsidized interest rates. See 12 U.S.C. 1430(j)(1).
The Finance Board is required to promulgate regulations governing the
AHP. See id. The Finance Board's existing regulation governing the
operation of the AHP, which made comprehensive revisions to the AHP,
was adopted in August 1997 and became effective January 1, 1998. See 62
FR 41812 (Aug. 4, 1997) (now codified at 12 CFR part 951).
Various amendments have been made to the AHP regulation since 1998
in order to clarify AHP requirements and improve the operation and
effectiveness of the AHP. Over the course of implementation of the AHP,
the Banks and Finance Board staff have identified additional amendments
that could improve the operation and effectiveness of the AHP.
Accordingly, on May 10, 2001, the Finance Board published a proposed
rule requesting comment on these proposed amendments to the AHP
regulation. See 66 FR 23864 (May 10, 2001). The proposed rule provided
for a 30-day comment period, which closed on June 11, 2001.
The Finance Board received 23 comment letters on the proposed rule.
Commenters included: 5 Banks; 3 Bank Advisory Councils; 6 trade
associations; and 9 nonprofit housing developers. Comments that raised
issues beyond the scope of the proposed rule are not addressed in this
final rule, but will be considered by the Finance Board in any future
rulemaking under the AHP. The provisions of the proposed rule on
[[Page 50297]]
which significant comments were received are discussed below.
II. Analysis of Final Rule
A. Homeownership Set-Aside Programs--Secs. 951.3(a)(1),
951.5(a)(7)(iii)
1. Increase in Maximum Allowable Annual Homeownership Set-Aside
Amount--Sec. 951.3(a)(1)
Section 951.3(a)(1) of the existing AHP regulation provides that
each Bank, after consultation with its Advisory Council, may set aside
annually, in the aggregate, up to the greater of $1.5 million or 15
percent of its annual required AHP contribution to provide funds to
members participating in the Bank's homeownership set-aside programs.
12 CFR 951.3(a)(1). In cases where the amount of homeownership set-
aside funds applied for by members in a given year exceeds the amount
available for that year, a Bank may allocate up to the greater of $1.5
million or 15 percent of its annual required AHP contribution for the
subsequent year to the current year's homeownership set-aside programs.
Id. Section 951.3(a)(1) of the proposed rule would increase the maximum
allowable annual homeownership set-aside amount to the greater of $3.0
million or 25 percent of a Bank's annual required AHP contribution. In
addition, in cases where the amount of homeownership set-aside funds
applied for by members in a given year exceeds the amount available for
that year, the proposed rule would allow a Bank to allocate up to the
greater of $3.0 million or 25 percent of its annual required AHP
contribution for the subsequent year to the current year's
homeownership set-aside programs.
As discussed in the SUPPLEMENTARY INFORMATION section of the
proposed rule, AHP homeownership set-aside programs have proven to be
an efficient and effective means for the Banks and their members to
provide homeownership opportunities for low- and moderate-income
households, consistent with the goals of the Bank System and the AHP.
Ten Banks currently offer homeownership set-aside programs, eight of
which set aside the maximum amount allowable under the current AHP
regulation.
Experience with the homeownership set-aside programs over the past
two years has shown that the demand for homeownership set-aside funds
for low- and moderate-income families is such that an increase in the
maximum allowable annual homeownership set-aside amount is warranted.
The Banks have demonstrated that there is market demand and member
demand for financing for low- and moderate-income homeownership, with
most homeownership set-aside programs being oversubscribed within the
first three to seven months of the year. In 2000, the Finance Board
approved a waiver request from one Bank to increase its maximum
allowable homeownership set-aside amount to 25 percent of its total
annual AHP contribution. A similar waiver for 2001 was approved for all
Banks to implement at their discretion.
The homeownership set-aside programs also are consistent with the
cooperative structure of the Bank System, by involving members in
financing the mortgages of low- and moderate-income households
receiving downpayment assistance with homeownership set-aside funds.
The homeownership set-aside programs can provide an important Bank
service for members by enabling a greater number of members to become
involved in the AHP, by helping members to establish banking
relationships with new customers, and by exposing more members to
opportunities to help meet low- and moderate-income housing needs in
their markets.
The homeownership set-aside programs also are consistent with the
goals of the Bank System and the AHP to help finance affordable housing
in underserved areas and for underserved households. Homeownership set-
aside funds often are the only way to effectively meet scattered-site,
affordable housing needs in rural areas or tribal areas, which have
difficulty scoring well under the competitive AHP application program
and where rental projects are not feasible. In addition, homeownership
set-aside funds often are the only way to meet the need for
homeownership opportunities for very low-income families, which require
larger per-unit subsidies and, therefore, may not score well under the
competitive AHP application program. Homeownership set-aside programs
also allow a member to use AHP funds to finance housing for individual
eligible households on an as-needed basis, even if it is only for one
household in the member's market area. These are households that the
competitive AHP application program might not otherwise reach.
Most commenters supported the proposed increase in the maximum
allowable annual homeownership set-aside amount. Commenters cited: the
increasing demand for homeownership funds that, in some cases, has
exhausted the Banks' annual set-aside allocation within months; the
efficient and effective delivery of subsidy under the set-aside
program; greater member achievement of Community Reinvestment Act (CRA)
goals; and the positive impacts of homeownership on communities.
One commenter suggested that an increase in homeownership set-aside
funds above 15 percent should require written approval of a majority of
the Advisory Council membership and not just consultation with the
Advisory Council. The Finance Board supports Advisory Council input
into the Banks' implementation of the AHP. The Banks' boards of
directors, however, have ultimate responsibility for the AHP and,
therefore, should make the ultimate decisions on how much AHP funds to
allocate to homeownership set-aside programs.
Several commenters opposed the proposed increase in the maximum
allowable annual homeownership set-aside amount on the basis that the
need for affordable rental housing is rising, especially in certain
Bank districts, and an increase in the annual allocation of AHP funds
to homeownership set-aside funds could result in less funding of rental
housing under the competitive application program. The decision whether
or not to establish homeownership set-aside programs is within the
discretion of each Bank. Thus, a Bank, in consultation with its
Advisory Council, may decide not to establish homeownership set-aside
programs if it determines that such programs are inappropriate for its
district, or, if a Bank decides to establish such programs, it need not
allocate to the programs the maximum amount allowable under the
regulation.
Another commenter recommended that, as a way to balance the goals
of homeownership and rental funding, the Banks be allowed to increase
their homeownership set-aside allocation provided they agree to hold
the allocations to their AHP competitive application program to at
least the funding levels of 2001. Historically, approximately two-
thirds of affordable housing units funded under the AHP competitive
application program have been rental units. The commenter's proposal
would not ensure that AHP funding for rental projects under the
competitive application program would remain at 2001 levels. In
addition, the comment presumes that annual AHP contributions will
always increase each year, which has not always been the case.
A number of commenters suggested that the regulation include a
priority for homeownership projects that remain affordable in
perpetuity for future buyers without additional future
[[Page 50298]]
subsidies, such as projects involving land trusts. The AHP regulation
requires a fixed retention period of five years for homeownership
projects, which does not allow for a scoring priority for projects with
retention periods longer than five years. See id. Secs. 951.1,
951.5(b)(7)(i), 951.13(c)(4), 951.13(d)(1). A Bank, under its second
district scoring priority, could choose to adopt a scoring priority for
homeownership projects that use land trusts, but the retention period
would still have to be five years. See id. Sec. 951.6(b)(4)(iv)(G).
Accordingly, for the reasons discussed above, the final rule adopts
without change the proposed amendment to Sec. 951.3(a)(1) increasing
the maximum allowable annual homeownership set-aside amount.
2. CPI Adjustment--Sec. 951.3(a)(1)
Section 951.3(a)(1) of the proposed rule also provided that,
beginning in 2002 and for subsequent years, the maximum homeownership
set-aside dollar limits would be adjusted annually by the Finance Board
to reflect any percentage increase in the preceding year's Consumer
Price Index (CPI) for all urban consumers, as published by the
Department of Labor. Each year, as soon as practicable after the
publication of the previous year's CPI, the Finance Board would be
required to publish notice by Federal Register, distribution of a
memorandum, or otherwise, of the CPI-adjusted limits on the maximum
set-aside dollar amount.
A number of commenters supported the proposed CPI adjustment
provision, with one commenter stating that indexing the dollar limit
increase to the rate of inflation will help cause the supply of
available funds to more closely match the needs of Bank members and
customers.
Accordingly, the final rule adopts the proposed CPI adjustment
amendment to Sec. 951.3(a)(1) without change.
3. Removal of Criterion for Funding of Counseling Costs--
Sec. 951.5(a)(7)(iii)
Section 951.5(a)(7) of the existing AHP regulation provides that
homeownership set-aside funds may be used to pay for counseling costs
only where:
(i) Such costs are incurred in connection with counseling of
homebuyers who actually purchase an AHP-assisted unit;
(ii) the cost of the counseling has not been covered by another
funding source, including the member; and
(iii) the homeownership set-aside funds are used to pay only for
the amount of such reasonable and customary costs that exceeds the
highest amount the member has spent annually on homebuyer counseling
costs within the preceding three years. Id. Sec. 951.5(a)(7).
By contrast, Sec. 951.5(b)(5) of the existing AHP regulation
requires satisfaction of only the first two of the above three criteria
in authorizing the use of AHP subsidies to pay for counseling costs
under the competitive application program. Id. Sec. 951.5(b)(5). As
discussed in the SUPPLEMENTARY INFORMATION section of the proposed
rule, the criterion in paragraph (a)(7)(iii) was intended to prevent
homeownership set-aside funds from being used to pay for counseling
costs that, in the absence of such funds, customarily would be funded
by members participating in a homeownership set-aside program. In this
way, AHP funds would be used to expand the pool of resources available
to pay for counseling costs, rather than simply replace existing
sources of funding for counseling costs.
The Banks have suggested that the criterion in paragraph
(a)(7)(iii) be removed, so that the criteria applicable to the use of
AHP funds for counseling costs would be the same under both the
homeownership set-aside and competitive application programs. Because
the competitive application program does not have a comparable
counseling costs criterion, it is possible that AHP subsidies are
already being used under that program to pay for counseling costs that
the member, project sponsor or another funding source otherwise would
have funded. Further, contrary to the intent of the criterion, the
criterion may actually be inducing members not to pay for homebuyer
counseling costs in order to be eligible for AHP funding of the
counseling costs. In addition, the Banks have maintained that it can be
difficult to determine the amount that members have spent over a three-
year period on counseling costs, especially where the costs are
indirect or combined with the costs of other services also provided to
the homebuyer. The potential to be cited for noncompliance with the AHP
regulation if the accounting for the costs is not accurate could
discourage members from paying any counseling costs themselves.
Requiring that the Banks monitor these costs, which generally are small
in amount, arguably is not an efficient use of the Banks' resources.
Homebuyer counseling is vital to ensuring that AHP subsidies are used
successfully to provide homeownership opportunities to low- and
moderate-income households. The Finance Board believes that the
assurance that homebuyers will get such counseling, regardless of how
it is funded, outweighs any concerns that AHP subsidies may be funding
counseling costs that otherwise would be paid for by the member. For
all of these reasons, the proposed rule would remove the homeownership
set-aside counseling criterion in Sec. 951.5(a)(7)(iii).
A number of commenters supported the proposed amendment, citing
various reasons discussed above. One commenter opposed the proposed
change, arguing that it would result in AHP funds being used as a
substitute for other funds that were being used in the past for
counseling costs, and urged instead that the counseling costs criterion
be added to the competitive application program. As discussed above,
the Finance Board believes that assuring homebuyers will get such
counseling, regardless of how it is funded, outweighs the commenter's
concern. Accordingly, the final rule adopts without change the proposed
amendment removing Sec. 951.5(a)(7)(iii).
B. Advisory Council Membership--Sec. 951.4
Section 951.4(f) of the existing AHP regulation uses two terms--
``community investment'' and ``community development''--in describing
the role of the Advisory Councils in this area. See id. Sec. 951.4(f).
Specifically, Sec. 951.4(f)(1) provides that representatives of the
board of directors of each Bank shall meet with the Advisory Council at
least quarterly to obtain the Advisory Council's advice on ways in
which the Bank can better carry out its housing finance and community
investment mission, including advice on the low- and moderate-income
housing and community investment programs and needs in the Bank's
district. Id. Sec. 951.4(f)(1). Section 951.4(f)(3) provides that each
Advisory Council shall submit to the Finance Board annually by March 1
its analysis of the low- and moderate-income housing and community
development activity of the Bank by which it is appointed. Id.
Sec. 951.4(f)(3).
The proposed rule would replace the terms ``community investment''
and ``community development,'' wherever they appear in Sec. 951.4, with
the term ``community lending,'' which encompasses both terms and is the
term used in the Finance Board's recently adopted mission statement for
the Banks. See id. Sec. 940.2.\1\ ``Community
[[Page 50299]]
lending'' is defined in part 900 of the Finance Board's existing
regulations as ``providing financing for economic development projects
for targeted beneficiaries, and, for community financial institutions,
purchasing or funding small business loans, small farm loans or small
agri-business loans, as defined in Sec. 950.1 of this chapter.'' Id.
Sec. 900.1. ``Providing financing'' is defined to include various
lending activities and purchases of eligible assets. Id. Sec. 952.3.
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\1\ Section 940.2 states:
The mission of the Banks is to provide to their members and
[housing] associates financial products and services, including but
not limited to advances, that assist and enhance such members' and
[housing] associates' financing of:
(a) Housing, including single-family and multi-family housing
serving consumers at all income levels; and
(b) Community lending.
Id. Sec. 940.2 (emphasis added).
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In addition, because the Advisory Councils are required to give
advice on community lending, as well as housing finance, matters, the
proposed rule would revise Sec. 951.4(a) to provide that members shall
be drawn from community and not-for-profit organizations actively
involved in providing or promoting low- and moderate-income housing,
and community and not-for-profit organizations actively involved in
providing or promoting community lending, in the Bank's district. The
proposed rule also would revise Sec. 951.4(b) to provide that, in
appointing Advisory Council members, a Bank shall give consideration to
the diversity of low- and moderate-income housing, as well as community
lending, needs and activities within the Bank's district.
A number of commenters supported the proposed changes, on the basis
that they would add expertise in community lending to the Advisory
Council, thereby enabling the Advisory Council to address broader
community needs, consistent with the Bank's housing finance and
community lending mission.
One commenter opposed the proposed changes, stating that they would
dilute the role of affordable housing practitioners and advocates on
the Advisory Councils and potentially diminish the Advisory Councils'
focus on housing. Because the regulation requires that the Advisory
Council membership include persons drawn from a diverse range of
organizations with no undue proportionate membership for any one group,
and that the Advisory Council provide advice on both housing finance
and community lending, this concern appears to be unwarranted. See id.
Sec. 951.4(c), (f)(1).
Another commenter interpreted the term ``community lending'' as
narrower than the terms ``community investment'' and ``community
development,'' limiting the Advisory Council's role to advice on
lending. In fact, the definition of ``community lending'' encompasses a
wide range of economic development activities beyond just lending. See
id. Secs. 900.1, 952.3.
One commenter recommended that the final rule clarify that private,
for-profit providers of affordable housing are eligible to serve on the
Advisory Councils. Under the existing AHP regulation, such housing
providers are eligible to serve on the Advisory Councils, and the
Finance Board has previously provided this clarification to the Banks.
Accordingly, the final rule adopts the proposed amendments to
Sec. 951.4 without change.
C. AHP Outlay Adjustment--Sec. 951.8(c)(4)
Section 951.8(c)(3)(ii) of the existing AHP regulation provides
that if a Bank reduces the amount of AHP subsidy approved for a
project, the amount of such reduction shall be returned to the Bank's
AHP fund. Id. Sec. 951.8(c)(3)(ii). If a Bank increases the amount of
AHP subsidy approved for a project, the amount of such increase shall
be drawn first from any currently uncommitted or repaid AHP subsidies,
and then from the Bank's required AHP contribution for the next year.
Id. This section is included under the overall heading for paragraph
(c)(3), which addresses changes in the approved AHP subsidy amount
where a direct subsidy is used to write down prior to closing the
principal amount or interest rate on a loan. Therefore, the
requirements in paragraph (c)(3)(ii) would appear to apply only in
cases where a direct subsidy is used to write down prior to closing the
principal amount or interest rate on a loan. As discussed in the
SUPPLEMENTARY INFORMATION section of the proposed rule, in practice,
the Banks have returned to the AHP fund the amount of any reduction in
AHP subsidy approved for a project under the competitive application
program, regardless of the reason for the reduction, such as a project
modification. The question arose whether the provision in paragraph
(c)(3)(ii) regarding the funding of a subsidy increase should apply to
an increase in approved AHP subsidy for a project modification that
does not involve a direct subsidy writedown of principal or interest. A
Bank has indicated that, in its district, demand for increases in
approved AHP subsidies for project modifications not involving direct
subsidy writedowns is now exceeding the amount of repaid or uncommitted
AHP subsidies available to fund such modifications. Therefore, the Bank
would like to be able to fund such subsidy increases from the Bank's
required AHP contribution for the next year. Accordingly, the proposed
rule would make Sec. 951.8(c)(3)(ii) applicable to any reduction or
increase in the amount of AHP subsidy approved for a project,
regardless of whether a direct subsidy writedown is involved, by taking
the paragraph out from under the paragraph (c)(3) heading and
redesignating it as Sec. 951.8(c)(4). The Banks, therefore, would be
able to fund subsidy increases for project modifications using
subsidies drawn first from any currently uncommitted or repaid AHP
subsidies, and then from the Bank's required AHP contribution for the
next year.
As discussed in the SUPPLEMENTARY INFORMATION section of the
proposed rule, if a Bank is permitted to use uncommitted AHP funds from
the following year, before such funds are made available under the
competitive application program for that year, there will be fewer AHP
funds available for new projects to be approved under the competitive
application program for that year. The overall effect on the amount of
AHP funds available for the following year, however, is not likely to
be significant. Moreover, funding a new project in the next year, as
opposed to funding a modification of an existing project from a prior
year, would not necessarily result in producing more affordable
housing. It would be beneficial to have AHP funding available for
modifications of existing projects that are meeting the goals of the
AHP. The existing AHP regulation already allows the Banks to commit AHP
funds from the following year's homeownership set-aside allocation to
fund current year needs under the Banks' homeownership set-aside
programs, and the Banks arguably should have similar flexibility in
funding subsidy increases for project modifications approved under the
competitive application program. Finally, the decision whether to
approve an increase in AHP subsidy for a project modification is within
the discretion of each Bank. See id. Sec. 951.7. If a Bank does not
want to fund project modifications with subsidies from the next year's
AHP allocation, it can choose to approve the project modifications only
if additional repaid or uncommitted funds become available.
A number of commenters supported the proposed change because of the
additional flexibility it would provide the Banks to fund subsidy
increases for project modifications. One commenter
[[Page 50300]]
stated that the proposed change should not be made until the Finance
Board has studied past trends in uncommitted funds and past success
rates of new projects and makes projections as to the impact of the
proposed change based on those figures. Because the conditions
applicable to each project differ significantly, the Finance Board
believes that the Banks are the best judges of whether or not to
approve subsidy increases for project modifications from the required
AHP contribution for the next year.
Several commenters also expressed concern that the proposed change
would enable project sponsors to game the scoring system by seeking
modifications to their low-income targeting commitments after approval.
Because the AHP regulation provides that approved projects seeking
additional AHP subsidy must, as modified, continue to score
successfully in the funding period in which they were originally
approved, gaming of the scoring system should not be a problem. See id.
Accordingly, for the reasons discussed above, the final rule adopts
the proposed amendment making newly redesignated Sec. 951.8(c)(4)
applicable to any reduction or increase in the amount of AHP subsidy
approved for a project, regardless of whether a direct subsidy
writedown is involved. In addition, in order to more accurately reflect
the nature of the adjustments addressed in Sec. 951.8(c)(4), the final
rule removes the paragraph heading ``Reconciliation of AHP fund'' and
adds, in its place, the revised heading ``AHP outlay adjustment''.
D. Initial Monitoring Requirements--Sec. 951.10
1. Removal of Requirement for Annual Owner-Occupied Project Sponsor
Certifications--Sec. 951.10(a)(1)(ii)
Section 951.10(a)(1)(ii) of the existing AHP regulation provides
that where AHP subsidies are used to finance the purchase of owner-
occupied units, the project sponsor must certify annually to the member
and the Bank, until all approved AHP subsidies are provided to eligible
households in the project, that those households receiving AHP
subsidies during the year were eligible households, and such
certifications shall be supported by household income verification
documentation maintained by the project sponsor and available for
review by the member or the Bank. Id. Sec. 951.10(a)(1)(ii).
As discussed in the SUPPLEMENTARY INFORMATION section of the
proposed rule, the Banks maintain that this project sponsor
certification requirement is not necessary because the certification
merely reiterates more extensive documentation of income eligibility
previously provided by the project sponsor to the Bank and member at
the time of each request for disbursement of AHP funds from the Bank.
Under the existing AHP regulation, a Bank is required to verify prior
to each disbursement of AHP subsidies for an approved project that the
project meets the eligibility requirements of Sec. 951.5(b) and all
obligations committed to in the approved AHP application. See id.
Secs. 951.5(b), 951.8(c)(2). Because the project sponsor's annual
certification is based on the information provided to the Bank at the
time of disbursement requests, the certification requirement in
Sec. 951.10(a)(1)(ii) does not add any new information or independent
verification to the monitoring process. For these reasons, the proposed
rule would remove the requirement for annual owner-occupied project
sponsor certifications from Sec. 951.10(a)(1)(ii). A number of
commenters supported the proposed change on the basis that it would
remove redundant monitoring requirements. The proposed rule would
retain the requirement in Sec. 951.10(a)(1)(ii) that the project
sponsor maintain household income verification documentation available
for review by the member or the Bank. A number of commenters supported
retention of this requirement.
Accordingly, the final rule adopts without change the proposed
amendment to Sec. 951.10(a)(1)(ii) removing the requirement for annual
owner-occupied project sponsor certifications.
2. Removal of Requirements for Project Owner Certification to Member
and Member Certification to Bank Within the First Year of Rental
Project Completion-- Secs. 951.10(a)(2)(ii), 951.10(b)(2)(ii)
Section 951.10(a)(2)(ii) of the existing AHP regulation provides
that within the first year after completion of an AHP-assisted rental
project, the project owner must make a certification to the member and
the Bank on services and activities commitments, tenant income
targeting and rent commitments, and project habitability. See Id.
Sec. 951.10(a)(2)(ii). Section 951.10(b)(2)(ii) of the existing AHP
regulation provides that within the first year after completion of an
AHP-assisted rental project, the member must review the project
documentation and make a certification to the Bank on tenant income
targeting and rent commitments, and project habitability. See Id.
Sec. 951.10(b)(2)(ii). The Banks maintain that this member
certification requirement is essentially redundant with the requirement
in Sec. 951.10(a)(2)(ii) that the project owners make a certification
to the member and the Bank on the same items. See Id.
Sec. 951.10(a)(2)(ii).
Because the member is essentially duplicating the certification
already made by the project owner to the member and the Bank, it seems
reasonable to eliminate the requirements for project owner
certification to the member and member certification to the Bank, and
simply retain the requirement for project owner certification directly
to the Bank. Accordingly, the proposed rule would remove the
requirements for project owner certification to the member and member
certification to the Bank in Secs. 951.10(a)(2)(ii) and
951.10(b)(2)(ii), respectively. A number of commenters supported the
proposed changes on the basis that they would remove redundant
monitoring requirements.
Accordingly, the final rule adopts the proposed amendments to
Secs. 951.10(a)(2)(ii) and 951.10(b)(2)(ii) without change.
E. Uncommitted or Unused AHP Funds--Sec. 951.15(a)(2)
As discussed in the SUPPLEMENTARY INFORMATION section of the
proposed rule, a higher allowable annual homeownership set-aside amount
increases the possibility that demand for such funds may not exhaust
the available funds by the end of the year. Under section 10(j)(7) of
the Bank Act, 90 percent of such uncommitted or unused AHP funds
generally would be required to be deposited by the Bank in an
Affordable Housing Reserve Fund established and administered by the
Finance Board. See 12 U.S.C. 1430(j)(7); 12 CFR 951.15(a)(2). No such
Reserve Fund has been established to date. In order to minimize the
possibility of having to create such a Reserve Fund, the proposed rule
would have amended Sec. 951.3(a)(1) to clarify that any homeownership
set-aside funds that are not committed or used by the end of the year
in which they were set aside shall be committed or used by the end of
such year to fund project modifications or the next highest scoring AHP
applications in the Bank's final funding period of the year for its
competitive application program. A number of commenters generally
supported the proposed amendment. Several commenters recommended
allowing uncommitted or unused homeownership set-aside funds to be
carried over for use in the Bank's
[[Page 50301]]
homeownership set-aside programs during the following year.
Because Sec. 951.15(a)(2) of the existing AHP regulation already
addresses the treatment of uncommitted or unused AHP funds in general,
the final rule amends that section instead of Sec. 951.3(a)(1). See 12
CFR 951.15(a)(2). Section 951.15(a)(2) currently provides that any
homeownership set-aside or competitive application funds that remain
uncommitted or unused at year-end are deemed to be used or committed
if, in combination with AHP subsidies that have been returned to the
Bank or de-committed from canceled projects, they are insufficient to
fund: (i) the next highest scoring AHP applications in the Bank's final
funding period of the year for its competitive application program; or
(ii) pending applications for funds under the Bank's homeownership set-
aside programs. See Id. The insufficient amounts shall be carried over
for use or commitment during the following year. See Id. Because there
also may be uncommitted or unused funds remaining at year-end under the
competitive application program, it is reasonable to amend the
regulation to provide that approved competitive application projects
seeking modifications shall be eligible for such remaining competitive
application funds, in addition to being eligible for any remaining
homeownership set-aside funds. The final rule adopts this amendment in
Sec. 951.15(a)(2)(iii). In addition, while the current regulation does
not restrict the carried over amounts to commitment or use in specific
AHP programs, the final rule amends the last paragraph of
Sec. 951.15(a)(2) to clarify that such carried over amounts may be
committed or used in either the Bank's competitive application program
or homeownership set-aside programs during the following year.
III. Paperwork Reduction Act
As part of the proposed rulemaking, the Finance Board published a
request for comments concerning the proposed revisions to the
collection of information in Secs. 951.3(a)(1), 951.10(a)(1)(ii), and
951.10(b)(2)(ii) of the proposed rule. See 66 FR 23864, 23867. The
Finance Board submitted the proposed revisions to the information
collection, and accompanying analysis, to the Office of Management and
Budget (OMB) for review in accordance with section 3507(d) of the
Paperwork Reduction Act of 1995. See 44 U.S.C. 3507(d). The Finance
Board received no comments on the proposed revisions to the information
collection. OMB has approved the proposed revisions to the information
collection without conditions and assigned control number 3069-0006
with an expiration date of June 30, 2004.
Likely respondents and/or record keepers are Banks, Bank members,
project sponsors, and project owners. The Banks will use the
information collection to determine whether respondents satisfy
statutory and regulatory requirements under the AHP. Responses are
mandatory and are required to obtain or retain a benefit. The final
rule does not substantively or materially modify the approved
information collection. Potential respondents are not required to
respond to the collection of information unless the regulation
collecting the information displays a currently valid control number
assigned by OMB. See Id. section 3512(a). The final rule revises the
statements in the AHP regulation displaying the OMB control number to
reflect the new expiration date. The title, description of need and
use, and a description of the information collection requirements in
the final rule are discussed in parts I and II of the SUPPLEMENTARY
INFORMATION section of the final rule.
The following is the estimated annual reporting and recordkeeping
hour burden as approved by OMB:
a. Number of respondents: 7,720.
b. Total annual responses: 10,749. Percentage of these responses
collected electronically: 0.
c. Total annual hours requested: 65,461.
d. Current OMB inventory: 64,274.
3. Difference: 1,187.
The following is the estimated annual reporting and recordkeeping
cost burden as approved by OMB:
a. Total annualized capital/startup costs: 0.
b. Total annual costs (O&M): 0.
c. Total annualized cost requested: $2,169,795.
d. Current OMB inventory: $2,118,170.
e. Difference: $51,625.
Comments regarding the collection of information may be submitted
in writing to the Federal Housing Finance Board at 1777 F Street, NW.,
Washington, DC 20006, and to the Office of Information and Regulatory
Affairs of OMB, Attention: Desk Officer for Federal Housing Finance
Board, Washington, DC 20503.
IV. Regulatory Flexibility Act
The final rule applies only to the Banks, which do not come within
the meaning of ``small entities,'' as defined in the Regulatory
Flexibility Act (RFA). See 5 U.S.C. 601(6). Thus, in accordance with
section 605(b) of the RFA, id. section 605(b), the Finance Board hereby
certifies that the final rule will not have a significant economic
impact on a substantial number of small entities.
List of Subjects in 12 CFR Part 951
Community development, Credit, Federal home loan banks, Housing,
Reporting and recordkeeping requirements.
Accordingly, the Finance Board hereby amends part 951, title 12,
chapter IX, Code of Federal Regulations, as follows:
PART 951--AFFORDABLE HOUSING PROGRAM
1. The authority citation for part 951 continues to read as
follows:
Authority: 12 U.S.C. 1430(j).
2. In part 951, remove the date ``January 31, 2003'' wherever it
appears and, in its place, add the date ``June 30, 2004''.
3. Amend Sec. 951.3 by revising paragraph (a)(1) to read as
follows:
Sec. 951.3 Operation of Program and adoption of AHP implementation
plan.
(a) Allocation of AHP contributions--(1) Homeownership set-aside
programs. Each Bank, after consultation with its Advisory Council, may
set aside annually, in the aggregate, up to the greater of $3.0 million
or 25 percent of its annual required AHP contribution to provide funds
to members participating in the Bank's homeownership set-aside
programs, pursuant to the requirements of this part. In cases where the
amount of homeownership set-aside funds applied for by members in a
given year exceeds the amount available for that year, a Bank may
allocate up to the greater of $3.0 million or 25 percent of its annual
required AHP contribution for the subsequent year to the current year's
homeownership set-aside programs pursuant to written policies adopted
by the Bank's board of directors. Beginning in 2002 and for subsequent
years, the maximum dollar limits set forth in this paragraph shall be
adjusted annually by the Finance Board to reflect any percentage
increase in the preceding year's Consumer Price Index (CPI) for all
urban consumers, as published by the Department of Labor. Each year, as
soon as practicable after the publication of the previous year's CPI,
the Finance Board shall publish notice by Federal Register,
distribution of a memorandum, or otherwise, of the CPI-adjusted limits
on the maximum set-aside dollar amount. A Bank may establish one or
more homeownership
[[Page 50302]]
set-aside programs pursuant to written policies adopted by the Bank's
board of directors. A Bank's board of directors shall not delegate to
Bank officers or other Bank employees the responsibility for adopting
such policies.
* * * * *
Sec. 951.4 [Amended]
4. Amend Sec. 951.4 by:
a. In paragraph (a), after the term ``housing'', adding the words
``, and community and not-for-profit organizations actively involved in
providing or promoting community lending,'';
b. In paragraph (b), after the term ``housing'', adding the term
``and community lending'';
c. In paragraph (f)(1), removing the term ``community investment''
wherever it appears and adding, in its place, the term ``community
lending''; and
d. In paragraph (f)(3), removing the term ``community development''
and adding, in its place, the term ``community lending''.
Sec. 951.5 [Amended]
5. Amend Sec. 951.5 by removing paragraph (a)(7)(iii).
Sec. 951.8 [Amended]
6. Amend Sec. 951.8(c)(3) by:
a. Removing the heading for paragraph (c)(3)(i);
b. Removing paragraph designation (c)(3)(i); and
c. Redesignating paragraph (c)(3)(ii) as paragraph (c)(4); and
removing the paragraph heading ``Reconciliation of AHP fund'' and
adding, in its place, the revised heading ``AHP outlay adjustment''.
7. Amend Sec. 951.10 by:
a. Revising paragraph (a)(1)(ii);
b. In paragraph (a)(2)(ii), removing the words ``the member and''
and the words ``the member or'' wherever they appear; and
c. In paragraph (b)(2), removing paragraph (b)(2)(ii), and removing
paragraph designation (b)(2)(i).
The revision reads as follows:
Sec. 951.10 Initial monitoring requirements.
(a) * * *
(1) * * *
(ii) Where AHP subsidies are used to finance the purchase of owner-
occupied units, the project sponsor must maintain household income
verification documentation available for review by the member or the
Bank.
* * * * *
8. Amend Sec. 951.15(a)(2) by:
a. In paragraph (a)(2)(ii), removing the period and adding a
semicolon in its place;
b. Adding a paragraph (a)(2)(iii); and
c. Redesignating the last sentence of the section as paragraph
(a)(3) and revising it.
The addition and revisions read as follows:
Sec. 951.15 Affordable Housing Reserve Fund.
(a) * * *
(2) * * *
(iii) Project modifications approved by the Bank pursuant to the
requirements of this part.
(3) Carryover of insufficient amounts. Such insufficient amounts as
described in paragraph (a)(2) of this section shall be carried over for
use or commitment in the following year in the Bank's competitive
application program or homeownership set-aside programs.
* * * * *
Dated: September 26, 2001.
By the Board of Directors of the Federal Housing Finance Board.
J. Timothy O'Neill,
Chairman.
[FR Doc. 01-24586 Filed 10-2-01; 8:45 am]
BILLING CODE 6725-01-P