Revisions to the Hospital Mortgage Insurance Program: Technical and Clarifying Amendments, 35920-35923 [E8-14131]
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35920
Federal Register / Vol. 73, No. 123 / Wednesday, June 25, 2008 / Rules and Regulations
(iv) The research result(s) has the
potential to address the technical needs
associated with a major societal
challenge not currently being addressed;
and
(v) The proposed research plan is
scientifically sound with tasks,
milestones, timeline, decision points
and alternate strategies.
(2) Total weight of (a)(1)(i) through (v)
is 50%.
(b)(1) The proposer(s) adequately
establishes that the proposed research
has strong potential for advancing the
state-of-the-art and contributing
significantly to the United States
science and technology knowledge base
and to address areas of critical national
need through transforming the Nation’s
capacity to deal with a major societal
challenge(s) that is not currently being
addressed, and generate substantial
benefits to the Nation that extend
significantly beyond the direct return to
the proposer including an explanation
in the proposal:
(i) Of the potential magnitude of
transformational results upon the
Nation’s capabilities in an area;
(ii) Of how and when the ensuing
transformational results will be useful to
the Nation; and
(iii) Of the capacity and commitment
of each award participant to enable or
advance the transformation to the
proposed research results (technology).
(2) Total weight of (b)(1)(i) through
(iii) is 50%.
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§ 296.22
Award criteria.
NIST must determine that a proposal
successfully meets all of the Award
Criteria set forth in this section for the
proposal to receive funding under the
Program. The Award Criteria are:
(a) The proposal explains why TIP
support is necessary, including
evidence that the research will not be
conducted within a reasonable time
period in the absence of financial
assistance from TIP;
(b) The proposal demonstrates that
reasonable and thorough efforts have
been made to secure funding from
alternative funding sources and no other
alternative funding sources are
reasonably available to support the
proposal;
(c) The proposal explains the novelty
of the research (technology) and
demonstrates that other entities have
not already developed, commercialized,
marketed, distributed, or sold similar
research results (technologies);
(d) The proposal has scientific and
technical merit and may result in
intellectual property vesting in a United
States entity that can commercialize the
technology in a timely manner;
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(e) The proposal establishes that the
research has strong potential for
advancing the state-of-the-art and
contributing significantly to the United
States science and technology
knowledge base; and
(f) The proposal establishes that the
proposed transformational research
(technology) has strong potential to
address areas of critical national need
through transforming the Nation’s
capacity to deal with major societal
challenges that are not currently being
addressed, and generate substantial
benefits to the Nation that extend
significantly beyond the direct return to
the proposer.
(b) In no event will NIST enter into a
cooperative research and development
agreement with a recipient of an award
under the Program which provides for
the payment of Program funds from the
award recipient to NIST.
(c) From time to time, TIP may
conduct public workshops and
undertake other educational activities to
foster the collaboration of funding
Recipients with other funding resources
for purposes of further development and
diffusion of TIP-related technologies. In
no event will TIP provide
recommendations, endorsements, or
approvals of any TIP funding Recipients
to any outside party.
Subpart C—Dissemination of Program
Results
§ 296.33
§ 296.30
Monitoring and evaluation.
The Program will provide monitoring
and evaluation of areas of critical
national need and its investments
through periodic analyses. It will
develop methods and metrics for
assessing impact at all stages. These
analyses will contribute to the
establishment and adoption of best
practices.
§ 296.31
Dissemination of results.
Results stemming from the analyses
required by § 296.30 will be
disseminated in periodic working
papers, fact sheets, and meetings, which
will address the progress that the
Program has made from both a project
and a portfolio perspective. Such
disseminated results will serve to
educate both external constituencies as
well as internal audiences on research
results, best practices, and
recommended changes to existing
operations based on solid analysis.
§ 296.32 Technical and educational
services.
(a) Under the Federal Technology
Transfer Act of 1986, NIST has the
authority to enter into cooperative
research and development agreements
with non-Federal parties to provide
personnel, services, facilities,
equipment, or other resources except
funds toward the conduct of specified
research or development efforts which
are consistent with the missions of the
laboratory. In turn, NIST has the
authority to accept funds, personnel,
services, facilities, equipment and other
resources from the non-Federal party or
parties for the joint research effort.
Cooperative research and development
agreements do not include procurement
contracts or cooperative agreements as
those terms are used in sections 6303,
6304, and 6305 of title 31, United States
Code.
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Annual report.
The Director shall submit annually to
the Committee on Commerce, Science,
and Transportation of the Senate and
the Committee on Science and
Technology of the House of
Representatives a report describing the
Technology Innovation Program’s
activities, including a description of the
metrics upon which award funding
decisions were made in the previous
fiscal year, any proposed changes to
those metrics, metrics for evaluating the
success of ongoing and completed
awards, and an evaluation of ongoing
and completed awards. The first annual
report shall include best practices for
management of programs to stimulate
high-risk, high-reward research.
[FR Doc. E8–14083 Filed 6–24–08; 8:45 am]
BILLING CODE 3510–13–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 242
[Docket No. FR–4927–F–03]
RIN 2502–A122
Revisions to the Hospital Mortgage
Insurance Program: Technical and
Clarifying Amendments
Office of Assistant Secretary for
Housing—Federal Housing
Commissioner, HUD.
ACTION: Final rule.
AGENCY:
SUMMARY: On November 28, 2007, HUD
published a final rule revising HUD’s
regulations on mortgage insurance for
hospitals. This publication corrects
certain non-substantive errors and
omissions that occurred in the final
rule, as well as makes certain additional
amendments designed to enhance
clarity of certain of the rule’s provisions.
DATES: Effective Date: July 25, 2008.
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FOR FURTHER INFORMATION CONTACT:
Roger E. Miller, Director, Office of
Insured Health Care Facilities, Office of
Housing, Department of Housing and
Urban Development, 451 Seventh Street,
SW., Room 9224, Washington, DC
20410–8000; telephone (202) 708–0599
(this is not a toll-free number). Hearingand speech-impaired persons may
access this number through TTY by
calling the Federal Information Relay
Service at (800) 877–8339 (this is a tollfree number).
SUPPLEMENTARY INFORMATION:
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I. Background
On November 28, 2007 (72 FR 67524),
HUD published a final rule revising its
regulations governing mortgage
insurance for hospitals. This final rule
followed a January 10, 2005 (70 FR
1750), proposed rule and took into
consideration public comment
submitted on the proposed rule. The
November 2007 final rule made certain
changes in response to public comment
and became effective on January 28,
2008. HUD’s regulations promulgated by
the November 2007 final rule
implement section 242 of the National
Housing Act (12 U.S.C. 1715z–7), and
are codified at 24 CFR part 242.
II. Technical and Clarifying
Amendments
Following publication of the
November 2007 final rule, it was
brought to HUD’s attention that certain
provisions of the regulatory text
contained technical errors. In addition,
upon reviewing the final rule in
response to notification of technical
errors, HUD identified other provisions
in the regulatory text that HUD
determined should be revised to
improve clarity. The correction of these
errors and the clarifying amendments
made to the November 2007 final rule
by this rule are as follows:
• Authority. The main authority for
hospital mortgage insurance, section
242 of the National Housing Act (12
U.S.C. 1715z–7) was inadvertently
omitted. This technical correction
makes the appropriate revision to the
authority citation.
• 24 CFR 242.1 (Definitions). The
definition in the rule of ‘‘chronic
convalescent and rest’’ refers to
‘‘rehabilitation services.’’ This element
is not required by statute. This technical
correction removes this term from the
definition. A comment submitted on the
proposed rule requested that HUD
remove from the definition of ‘‘chronic
convalescent and rest’’ the following
terms: ‘‘respite care services,’’ ‘‘hospice
services,’’ and ‘‘rehabilitation services.’’
HUD responded to the comment citing
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the statutory definition of ‘‘chronic
convalescent and rest’’ as the reason for
not removing these terms. However,
while the terms ‘‘respite care services’’
and ‘‘hospice services’’ are part of the
definition of ‘‘chronic convalescent and
rest,’’ the term ‘‘rehabilitation services’’
is not part of the definition. (See 72 FR
67526–67527.) Accordingly, reference to
‘‘rehabilitation services’’ is removed
from the definition of ‘‘chronic
convalescent and rest.’’
This rule also amends the definition
of ‘‘mortgagee or lender’’ because the
rule used the term ‘‘mortgagee’’ to refer
to the applicant as well as the original
lender. Therefore, a definition of
‘‘mortgagee’’ will clarify any possible
ambiguity regarding to whom
‘‘mortgagee’’ refers.
The definition of ‘‘construction’’
inadvertently omitted reference to
‘‘substantial rehabilitation’’. As is made
clear in other parts of the rule, including
in the definition of ‘‘project,’’
substantial rehabilitation such as
additions and renovations are supported
by the program. However, to remove any
possible ambiguity, the phrase ‘‘or the
substantial rehabilitation of an existing
facility’’ is being added to the definition
of ‘‘construction’’.
With respect to the definition of
‘‘surplus cash,’’ it was the intent of the
final rule that ‘‘surplus cash’’ includes
cash from prior periods. This statement
was made in the preamble of the final
rule in response to public comments.
(See 72 FR 67529.) This technical
correction adds language to make this
explicit in the definition of ‘‘surplus
cash’’.
• 24 CFR 242.10 (Eligible
Mortgagors). This final rule amends the
second sentence of this section because
HUD discovered a possible unintended
contradiction between § 242.10 and
§ 242.72. Section 242.10 provides that
the mortgagor ‘‘shall possess the powers
necessary and incidental to operating a
hospital’’. Under normal circumstances,
that is indeed a requirement. However,
§ 242.72 creates a contradiction by
permitting leasing arrangements to
comply with certain state laws that
prohibit public hospitals from
mortgaging their property. Under such
arrangements, the mortgagor of record is
an entity (which may be created solely
for the purpose of enabling the
financing to take place) that does not
‘‘possess the powers necessary and
incidental to operating a hospital’’. The
mortgagor simply serves as the owner,
and it is the lessee-operator who
possesses those powers. This
amendment therefore removes any
possible contradiction.
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35921
• 24 CFR 242.23 (Maximum Mortgage
Amounts and Cash Equity
Requirements). Where excess cash
equity is needed, section 242(d)(6) of
the National Housing Act (12 U.S.C.
1715z-7(d)(6)), entitles the mortgagor to
fund the excess with a letter of credit at
the option of the mortgagee. This is the
mortgagee’s option, not an option of
HUD, but the November 28, 2007, final
rule inadvertently presents this option
as HUD’s option. This rule corrects that
error.
• 24 CFR 242.23, 242.35, 242.52, and
242.90 (Reference to ‘‘Rehabilitation’’).
The rule contains several references to
the term ‘‘rehabilitation.’’ The program
insures ‘‘substantial rehabilitation’’ in
addition to new construction and,
therefore, references to the term
‘‘rehabilitation’’ are generally in the
context of ‘‘substantial rehabilitation.’’
Therefore, to avoid any possible
ambiguity where the term
‘‘rehabilitation’’ is used alone, the term
‘‘substantial’’ has been added to precede
this term wherever it appears.
• 24 CFR 242.33 (Covenant for
Malpractice, Fire, and Other Hazard
Insurance). Section 242.33 requires that
the hospital have insurance coverage
‘‘acceptable to the mortgagee and HUD.’’
The amendment removes the word
‘‘and’’ from this phrase and substitutes
the word ‘‘or.’’ The final rule did not
intend to place the evaluation of
acceptable insurance solely on the
mortgagee. This amendment therefore
provides the mortgagee with the option
of assuming responsibility to determine
the adequacy of insurance coverage, or
leaving such determination to HUD.
• 24 CFR 50 (Funds and Finances:
Off-Site Utilities and Streets). The
November 2007 final rule inadvertently
omitted ‘‘letter of credit’’ and use of a
letter of credit has been a longstanding
practice in this program. This rule
corrects that omission.
• 24 CFR 242.56 (Form of
Regulation). HUD amends this section to
add a new sentence at the section’s end
which would restore a provision
consistent with longstanding practice.
This amendment relates to the issue of
leasing, which is addressed in §§ 242.10
and 242.72. When leasing is permitted
under § 242.72, it is the lessee that
operates the hospital and whose
financial results determine whether or
not there is an insurance claim. HUD’s
established practice, prior to the final
rule, has been to have the lessee, as well
as the mortgagor of record, sign the
Regulatory Agreement and be governed
by its provisions. HUD did not intend
for the revisions to §§ 242.10 and 242.72
to cause a departure from established
practice.
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Federal Register / Vol. 73, No. 123 / Wednesday, June 25, 2008 / Rules and Regulations
• 24 CFR 242.58 (Books, Accounts,
and Financial Statements). Paragraph (c)
of this regulatory section describes the
organizations that are subject to audit.
While paragraph (c)(1) references notfor-profit organizations, this paragraph
inadvertently omits reference to state
and local governments, which have long
been among those organizations that are
audited in accordance with the
Consolidated Audit Guide for Audits of
HUD Programs and OMB Circular A–
133, which authorities are referenced in
paragraph (c)(1). This rule corrects that
omission.
Additionally, a new paragraph (h) is
added for the same reasons provided in
the amendment to § 242.56.
• 24 CFR 242.61 (Management).
Section 242.61(a) requires HUD’s
written approval before a mortgagor can
execute a contract for management of
the hospital. This technical correction
makes explicit that this approval
requirement refers to the management of
the hospital, not to management of
specific components of the hospital
such as the pharmacy, cafeteria, etc.
National Environmental Policy Act of
1969 (42 U.S.C. 4332(2)(C)). The
Finding of No Significant Impact
remains applicable, and is available for
public inspection between 8 a.m. and 5
p.m. weekdays in the Regulations
Division, Office of General Counsel,
Department of Housing and Urban
Development, 451 Seventh Street, SW.,
Room 10276, Washington, DC 20410–
5000.
Executive Order 13132, Federalism
Findings and Certifications
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits, to the extent
practicable and permitted by law, an
agency from promulgating a regulation
that has federalism implications and
either imposes substantial direct
compliance costs on state and local
governments and is not required by
statute, or preempts state law, unless the
relevant requirements of section 6 of the
Executive Order are met. 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.
Justification for Final Rulemaking
Unfunded Mandates Reform Act
In general, the Department publishes
a rule for public comment before issuing
a rule for effect, in accordance with its
own regulations on rulemaking, 24 CFR
part 10. However, part 10 does provide
for exceptions from that general rule
where the agency finds good cause to
omit advance notice and public
participation. The good cause
requirement is satisfied when prior
public procedure is ‘‘impracticable,
unnecessary, or contrary to the public
interest’’ (24 CFR 10.1). In this case,
public comment is unnecessary because
HUD is making only technical
corrections and clarifying amendments
to a previously published final rule.
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.
Regulatory Flexibility Act
The undersigned, in accordance with
the Regulatory Flexibility Act (5 U.S.C.
605(b)), has reviewed and approved this
rule, and in so doing certified that this
rule will not have a significant
economic impact on a substantial
number of small entities. This rule only
makes technical corrections and
clarifying amendments to a previously
published final rule.
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Environmental Impact
A Finding of No Significant Impact
with respect to the environment was
made in connection with this
rulemaking in accordance with HUD
regulations at 24 CFR part 50, which
implement section 102(2)(C) of the
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List of Subjects in 24 CFR Part 242
Hospitals, Mortgage insurance,
Reporting and recordkeeping
requirements.
I Accordingly, for the reasons described
in the preamble, HUD amends 24 CFR
part 242 to read as follows:
PART 242—MORTGAGE INSURANCE
FOR HOSPITALS
1. The authority citation is revised to
read:
I
Authority: 12 U.S.C. 1709, 1710, 1715b,
1715u, and 1715z–7; 42 U.S.C. 3535d.
Subpart A—General Eligibility
Requirements
2. Amend § 242.1 by revising the
definitions of ‘‘chronic convalescent
and rest,’’ ‘‘construction,’’ ‘‘mortgagee or
lender’’ and first sentence of the
definition of ‘‘surplus cash,’’ to read as
follows:
I
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§ 242.1
Definitions.
*
*
*
*
*
Chronic convalescent and rest means
skilled nursing services, intermediate
care services, respite care services,
hospice services, and other services of a
similar nature.
Construction means the creation of a
new or replacement hospital facility, or
the substantial rehabilitation of an
existing facility. The cost of acquiring
new or replacement equipment may be
included in the cost of construction.
* * *
Mortgagee or lender means the
applicant for insurance or the original
lender under a mortgage. * * *
Surplus Cash means any cash
remaining after all of the following
conditions have been met:
*
*
*
*
*
I 3. Revise the second sentence of
§ 242.10 as follows:
§ 242.10
Eligible mortgagors.
* * * The mortgagor shall be
approved by HUD and, except in those
cases where the hospital is leased as
permitted in § 242.72, shall possess the
powers necessary and incidental to
operating a hospital. * * *
Subpart B—Application Procedures
and Commitments
4. Revise § 242.23(a) and the last
sentence of paragraph (c) to read as
follows:
I
§ 242.23 Maximum mortgage amounts and
cash equity requirements.
(a) Adjusted mortgage amountrehabilitation projects. A mortgage
financing the substantial rehabilitation
of an existing hospital shall be subject
to the following limitations, in addition
to those set forth in § 242.7:
(1) Property held unencumbered. If
the mortgagor is the fee simple owner of
the property and the property is not
encumbered by an outstanding
indebtedness, the mortgage shall not
exceed 100 percent of HUD’s estimate of
the cost of the proposed substantial
rehabilitation.
(2) Property subject to existing
mortgage. If the mortgagor owns the
property subject to an outstanding
indebtedness, which is to be refinanced
with part of the insured mortgage, the
mortgage shall not exceed the total of
the following:
(i) The Commissioner’s estimate of the
cost of substantial rehabilitation, plus
(ii) Such portion of the outstanding
indebtedness as does not exceed 90
percent of HUD’s estimate of the fair
market value of such land and
improvements prior to substantial
rehabilitation.
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(3) Property to be acquired. If the
property is to be acquired by the
mortgagor and the purchase price is to
be financed with a part of the insured
mortgage, the mortgage shall not exceed
90 percent of the total of the following:
(i) The Commissioner’s estimate of the
cost of substantial rehabilitation, plus
(ii) The actual purchase price of the
land and improvements or HUD’s
estimate (prior to substantial
rehabilitation) of the fair market value of
such land and improvements,
whichever is the lesser. * * *
(c) Cash equity. * * *. A private
nonprofit or public mortgagor, but not a
proprietary mortgagor, at the
mortgagee’s option and subject to 24
CFR 242.49, may provide any such
required equity in the form of a letter of
credit.
Subpart C—Mortgage Requirements
I
The mortgage shall contain a covenant
binding the mortgagor to maintain
adequate liability, fire, and extended
coverage insurance on the property. The
mortgage shall also contain a covenant
binding the mortgagor to maintain
adequate malpractice coverage. All
coverage shall be acceptable to the
mortgagee or HUD.
I 6. Revise § 242.35(d) to read as
follows:
Mortgage lien certifications.
*
*
*
*
*
(d) The mortgagor has notified HUD
in writing of all unpaid obligations in
connection with the mortgage
transaction, the purchase of the
mortgaged property, the construction or
substantial rehabilitation of the project,
or the purchase of the equipment
financed with mortgage proceeds.
Subpart E—Construction
7. Revise the second sentence of
§ 242.50 to read as follows:
I
§ 242.50 Funds and finances: off-site
utilities and streets.
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9. Amend § 242.56 by adding a new
sentence at the end of the section to
read as follows:
I
§ 242.56
Form of regulation.
* * * In those cases in which the
hospital facility is leased as permitted
by § 242.72, the provisions of this
section also shall apply to the lessee.
10. Revise § 242.58(c)(1) and add a
new paragraph (h) to read as follows:
I
*
§ 242.33 Covenant for malpractice, fire,
and other hazard insurance.
* * * Where such assurance is
required, it shall be in the form of a cash
escrow deposit, a letter of credit, the
retention of a specified amount of
mortgage proceeds by the mortgagee, or
a combination thereof.
*
*
*
*
*
I 8. Revise § 242.52(a) to read as
follows:
§ 242.52
Subpart G—Regulatory Agreement,
Accounting and Reporting, and
Financial Requirements
§ 242.58 Books, accounts, and financial
statements.
5. Revise § 242.33 to read as follows:
§ 242.35
rehabilitation of a hospital shall be
entered into by a mortgagor, with a
builder selected by a competitive
bidding procedure acceptable to HUD.
*
*
*
*
*
*
*
*
*
(c) * * * (1) Not-for-profit and state
and local governments shall conduct
audits in accordance with the
Consolidated Audit Guide for Audits of
HUD Programs (Handbook 2000.04) and
OMB Circular A–133 (Audits of states,
local governments, and nonprofit
organizations). * * *
(h) In those cases in which the
hospital facility is leased as permitted
by § 242.72, the requirements pertaining
to the mortgagor in § 242.58 (a) through
(g) also shall pertain to the lessee.
11. Revise § 242.61(a) to read as
follows:
I
§ 242.61
Management.
* * * (a) Contract Management of
Hospital. The mortgagor shall not
execute a management agreement or any
other contract for management of the
hospital without HUD’s prior written
approval. (Management of the hospital,
which requires HUD’s prior written
approval, refers to management of the
hospital not management of components
within the hospital such as the hospital
cafeteria or hospital pharmacy.) Any
management agreement or contract for
management of the hospital shall
contain a provision that it shall be
subject to termination without penalty
and with or without cause, upon written
request by HUD addressed to the
mortgagor and management agent.
*
*
*
*
*
Subpart H—Miscellaneous
Requirements
Construction contracts.
(a) Awarding of contract. A contract
for the construction or substantial
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12. Revise § 242.90(a) to read as
follows:
I
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35923
§ 242.90 Eligibility of mortgages covering
hospitals in certain neighborhoods.
(a) A mortgage financing the repair,
substantial rehabilitation, or
construction of a hospital located in an
older declining urban area shall be
eligible for insurance under this
subpart, subject to compliance with the
additional requirements of this section.
*
*
*
*
*
Dated: June 16, 2008.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal
Housing Commissioner.
[FR Doc. E8–14131 Filed 6–24–08; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 100
[Docket No. USCG–2008–0163]
RIN 1625–AA08
Special Local Regulations for Marine
Events; Marine Events in San Diego
Harbor
Coast Guard, DHS.
Notice of enforcement of
regulation.
AGENCY:
ACTION:
SUMMARY: The Coast Guard will enforce
the special local regulations in 33 CFR
100.1101 during the Coronado 4th of
July Fireworks Display, to be held 8:30
p.m. to 10 p.m. on July 4, 2008, on the
waters of San Diego Bay, San Diego,
California. These special local
regulations are necessary to provide for
the safety of the participants, crew,
spectators, sponsor vessels of the race,
and general users of the waterway.
Persons and vessels are prohibited from
entering into, transiting through, or
anchoring within this safety zone unless
authorized by the Captain of the Port, or
his designated representative.
DATES: 33 CFR 100.1101 will be
enforced on July 4, 2008 from 8:30 p.m.
until 10 p.m.
FOR FURTHER INFORMATION CONTACT:
Petty Officer Kristen Beer, USCG, c/o
U.S. Coast Guard Captain of the Port, at
(619) 278–7277.
SUPPLEMENTARY INFORMATION: The Coast
Guard will enforce special local
regulations (SLR) on the navigable
waters of Glorietta Bay in support of the
Coronado July 4th Fireworks Show on
July 4, 2008, from 8:30 p.m. until 10
p.m. These SLR will encompass a 100foot radius around and under each
fireworks barge while the fireworks
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]]>Agencies
[Federal Register Volume 73, Number 123 (Wednesday, June 25, 2008)]
[Rules and Regulations]
[Pages 35920-35923]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-14131]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 242
[Docket No. FR-4927-F-03]
RIN 2502-A122
Revisions to the Hospital Mortgage Insurance Program: Technical
and Clarifying Amendments
AGENCY: Office of Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
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SUMMARY: On November 28, 2007, HUD published a final rule revising
HUD's regulations on mortgage insurance for hospitals. This publication
corrects certain non-substantive errors and omissions that occurred in
the final rule, as well as makes certain additional amendments designed
to enhance clarity of certain of the rule's provisions.
DATES: Effective Date: July 25, 2008.
[[Page 35921]]
FOR FURTHER INFORMATION CONTACT: Roger E. Miller, Director, Office of
Insured Health Care Facilities, Office of Housing, Department of
Housing and Urban Development, 451 Seventh Street, SW., Room 9224,
Washington, DC 20410-8000; telephone (202) 708-0599 (this is not a
toll-free number). Hearing- and speech-impaired persons may access this
number through TTY by calling the Federal Information Relay Service at
(800) 877-8339 (this is a toll-free number).
SUPPLEMENTARY INFORMATION:
I. Background
On November 28, 2007 (72 FR 67524), HUD published a final rule
revising its regulations governing mortgage insurance for hospitals.
This final rule followed a January 10, 2005 (70 FR 1750), proposed rule
and took into consideration public comment submitted on the proposed
rule. The November 2007 final rule made certain changes in response to
public comment and became effective on January 28, 2008. HUD's
regulations promulgated by the November 2007 final rule implement
section 242 of the National Housing Act (12 U.S.C. 1715z-7), and are
codified at 24 CFR part 242.
II. Technical and Clarifying Amendments
Following publication of the November 2007 final rule, it was
brought to HUD's attention that certain provisions of the regulatory
text contained technical errors. In addition, upon reviewing the final
rule in response to notification of technical errors, HUD identified
other provisions in the regulatory text that HUD determined should be
revised to improve clarity. The correction of these errors and the
clarifying amendments made to the November 2007 final rule by this rule
are as follows:
Authority. The main authority for hospital mortgage
insurance, section 242 of the National Housing Act (12 U.S.C. 1715z-7)
was inadvertently omitted. This technical correction makes the
appropriate revision to the authority citation.
24 CFR 242.1 (Definitions). The definition in the rule of
``chronic convalescent and rest'' refers to ``rehabilitation
services.'' This element is not required by statute. This technical
correction removes this term from the definition. A comment submitted
on the proposed rule requested that HUD remove from the definition of
``chronic convalescent and rest'' the following terms: ``respite care
services,'' ``hospice services,'' and ``rehabilitation services.'' HUD
responded to the comment citing the statutory definition of ``chronic
convalescent and rest'' as the reason for not removing these terms.
However, while the terms ``respite care services'' and ``hospice
services'' are part of the definition of ``chronic convalescent and
rest,'' the term ``rehabilitation services'' is not part of the
definition. (See 72 FR 67526-67527.) Accordingly, reference to
``rehabilitation services'' is removed from the definition of ``chronic
convalescent and rest.''
This rule also amends the definition of ``mortgagee or lender''
because the rule used the term ``mortgagee'' to refer to the applicant
as well as the original lender. Therefore, a definition of
``mortgagee'' will clarify any possible ambiguity regarding to whom
``mortgagee'' refers.
The definition of ``construction'' inadvertently omitted reference
to ``substantial rehabilitation''. As is made clear in other parts of
the rule, including in the definition of ``project,'' substantial
rehabilitation such as additions and renovations are supported by the
program. However, to remove any possible ambiguity, the phrase ``or the
substantial rehabilitation of an existing facility'' is being added to
the definition of ``construction''.
With respect to the definition of ``surplus cash,'' it was the
intent of the final rule that ``surplus cash'' includes cash from prior
periods. This statement was made in the preamble of the final rule in
response to public comments. (See 72 FR 67529.) This technical
correction adds language to make this explicit in the definition of
``surplus cash''.
24 CFR 242.10 (Eligible Mortgagors). This final rule
amends the second sentence of this section because HUD discovered a
possible unintended contradiction between Sec. 242.10 and Sec.
242.72. Section 242.10 provides that the mortgagor ``shall possess the
powers necessary and incidental to operating a hospital''. Under normal
circumstances, that is indeed a requirement. However, Sec. 242.72
creates a contradiction by permitting leasing arrangements to comply
with certain state laws that prohibit public hospitals from mortgaging
their property. Under such arrangements, the mortgagor of record is an
entity (which may be created solely for the purpose of enabling the
financing to take place) that does not ``possess the powers necessary
and incidental to operating a hospital''. The mortgagor simply serves
as the owner, and it is the lessee-operator who possesses those powers.
This amendment therefore removes any possible contradiction.
24 CFR 242.23 (Maximum Mortgage Amounts and Cash Equity
Requirements). Where excess cash equity is needed, section 242(d)(6) of
the National Housing Act (12 U.S.C. 1715z-7(d)(6)), entitles the
mortgagor to fund the excess with a letter of credit at the option of
the mortgagee. This is the mortgagee's option, not an option of HUD,
but the November 28, 2007, final rule inadvertently presents this
option as HUD's option. This rule corrects that error.
24 CFR 242.23, 242.35, 242.52, and 242.90 (Reference to
``Rehabilitation''). The rule contains several references to the term
``rehabilitation.'' The program insures ``substantial rehabilitation''
in addition to new construction and, therefore, references to the term
``rehabilitation'' are generally in the context of ``substantial
rehabilitation.'' Therefore, to avoid any possible ambiguity where the
term ``rehabilitation'' is used alone, the term ``substantial'' has
been added to precede this term wherever it appears.
24 CFR 242.33 (Covenant for Malpractice, Fire, and Other
Hazard Insurance). Section 242.33 requires that the hospital have
insurance coverage ``acceptable to the mortgagee and HUD.'' The
amendment removes the word ``and'' from this phrase and substitutes the
word ``or.'' The final rule did not intend to place the evaluation of
acceptable insurance solely on the mortgagee. This amendment therefore
provides the mortgagee with the option of assuming responsibility to
determine the adequacy of insurance coverage, or leaving such
determination to HUD.
24 CFR 50 (Funds and Finances: Off-Site Utilities and
Streets). The November 2007 final rule inadvertently omitted ``letter
of credit'' and use of a letter of credit has been a longstanding
practice in this program. This rule corrects that omission.
24 CFR 242.56 (Form of Regulation). HUD amends this
section to add a new sentence at the section's end which would restore
a provision consistent with longstanding practice. This amendment
relates to the issue of leasing, which is addressed in Sec. Sec.
242.10 and 242.72. When leasing is permitted under Sec. 242.72, it is
the lessee that operates the hospital and whose financial results
determine whether or not there is an insurance claim. HUD's established
practice, prior to the final rule, has been to have the lessee, as well
as the mortgagor of record, sign the Regulatory Agreement and be
governed by its provisions. HUD did not intend for the revisions to
Sec. Sec. 242.10 and 242.72 to cause a departure from established
practice.
[[Page 35922]]
24 CFR 242.58 (Books, Accounts, and Financial Statements).
Paragraph (c) of this regulatory section describes the organizations
that are subject to audit. While paragraph (c)(1) references not-for-
profit organizations, this paragraph inadvertently omits reference to
state and local governments, which have long been among those
organizations that are audited in accordance with the Consolidated
Audit Guide for Audits of HUD Programs and OMB Circular A-133, which
authorities are referenced in paragraph (c)(1). This rule corrects that
omission.
Additionally, a new paragraph (h) is added for the same reasons
provided in the amendment to Sec. 242.56.
24 CFR 242.61 (Management). Section 242.61(a) requires
HUD's written approval before a mortgagor can execute a contract for
management of the hospital. This technical correction makes explicit
that this approval requirement refers to the management of the
hospital, not to management of specific components of the hospital such
as the pharmacy, cafeteria, etc.
Findings and Certifications
Justification for Final Rulemaking
In general, the Department publishes a rule for public comment
before issuing a rule for effect, in accordance with its own
regulations on rulemaking, 24 CFR part 10. However, part 10 does
provide for exceptions from that general rule where the agency finds
good cause to omit advance notice and public participation. The good
cause requirement is satisfied when prior public procedure is
``impracticable, unnecessary, or contrary to the public interest'' (24
CFR 10.1). In this case, public comment is unnecessary because HUD is
making only technical corrections and clarifying amendments to a
previously published final rule.
Regulatory Flexibility Act
The undersigned, in accordance with the Regulatory Flexibility Act
(5 U.S.C. 605(b)), has reviewed and approved this rule, and in so doing
certified that this rule will not have a significant economic impact on
a substantial number of small entities. This rule only makes technical
corrections and clarifying amendments to a previously published final
rule.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was made in connection with this rulemaking 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 remains applicable, and is available
for public inspection between 8 a.m. and 5 p.m. weekdays in the
Regulations Division, Office of General Counsel, Department of Housing
and Urban Development, 451 Seventh Street, SW., Room 10276, Washington,
DC 20410-5000.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits, to the
extent practicable and permitted by law, an agency from promulgating a
regulation that has federalism implications and either imposes
substantial direct compliance costs on state and local governments and
is not required by statute, or preempts state law, unless the relevant
requirements of section 6 of the Executive Order are met. 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 242
Hospitals, Mortgage insurance, Reporting and recordkeeping
requirements.
0
Accordingly, for the reasons described in the preamble, HUD amends 24
CFR part 242 to read as follows:
PART 242--MORTGAGE INSURANCE FOR HOSPITALS
0
1. The authority citation is revised to read:
Authority: 12 U.S.C. 1709, 1710, 1715b, 1715u, and 1715z-7; 42
U.S.C. 3535d.
Subpart A--General Eligibility Requirements
0
2. Amend Sec. 242.1 by revising the definitions of ``chronic
convalescent and rest,'' ``construction,'' ``mortgagee or lender'' and
first sentence of the definition of ``surplus cash,'' to read as
follows:
Sec. 242.1 Definitions.
* * * * *
Chronic convalescent and rest means skilled nursing services,
intermediate care services, respite care services, hospice services,
and other services of a similar nature.
Construction means the creation of a new or replacement hospital
facility, or the substantial rehabilitation of an existing facility.
The cost of acquiring new or replacement equipment may be included in
the cost of construction. * * *
Mortgagee or lender means the applicant for insurance or the
original lender under a mortgage. * * *
Surplus Cash means any cash remaining after all of the following
conditions have been met:
* * * * *
0
3. Revise the second sentence of Sec. 242.10 as follows:
Sec. 242.10 Eligible mortgagors.
* * * The mortgagor shall be approved by HUD and, except in those
cases where the hospital is leased as permitted in Sec. 242.72, shall
possess the powers necessary and incidental to operating a hospital. *
* *
Subpart B--Application Procedures and Commitments
0
4. Revise Sec. 242.23(a) and the last sentence of paragraph (c) to
read as follows:
Sec. 242.23 Maximum mortgage amounts and cash equity requirements.
(a) Adjusted mortgage amount-rehabilitation projects. A mortgage
financing the substantial rehabilitation of an existing hospital shall
be subject to the following limitations, in addition to those set forth
in Sec. 242.7:
(1) Property held unencumbered. If the mortgagor is the fee simple
owner of the property and the property is not encumbered by an
outstanding indebtedness, the mortgage shall not exceed 100 percent of
HUD's estimate of the cost of the proposed substantial rehabilitation.
(2) Property subject to existing mortgage. If the mortgagor owns
the property subject to an outstanding indebtedness, which is to be
refinanced with part of the insured mortgage, the mortgage shall not
exceed the total of the following:
(i) The Commissioner's estimate of the cost of substantial
rehabilitation, plus
(ii) Such portion of the outstanding indebtedness as does not
exceed 90 percent of HUD's estimate of the fair market value of such
land and improvements prior to substantial rehabilitation.
[[Page 35923]]
(3) Property to be acquired. If the property is to be acquired by
the mortgagor and the purchase price is to be financed with a part of
the insured mortgage, the mortgage shall not exceed 90 percent of the
total of the following:
(i) The Commissioner's estimate of the cost of substantial
rehabilitation, plus
(ii) The actual purchase price of the land and improvements or
HUD's estimate (prior to substantial rehabilitation) of the fair market
value of such land and improvements, whichever is the lesser. * * *
(c) Cash equity. * * *. A private nonprofit or public mortgagor,
but not a proprietary mortgagor, at the mortgagee's option and subject
to 24 CFR 242.49, may provide any such required equity in the form of a
letter of credit.
Subpart C--Mortgage Requirements
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5. Revise Sec. 242.33 to read as follows:
Sec. 242.33 Covenant for malpractice, fire, and other hazard
insurance.
The mortgage shall contain a covenant binding the mortgagor to
maintain adequate liability, fire, and extended coverage insurance on
the property. The mortgage shall also contain a covenant binding the
mortgagor to maintain adequate malpractice coverage. All coverage shall
be acceptable to the mortgagee or HUD.
0
6. Revise Sec. 242.35(d) to read as follows:
Sec. 242.35 Mortgage lien certifications.
* * * * *
(d) The mortgagor has notified HUD in writing of all unpaid
obligations in connection with the mortgage transaction, the purchase
of the mortgaged property, the construction or substantial
rehabilitation of the project, or the purchase of the equipment
financed with mortgage proceeds.
Subpart E--Construction
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7. Revise the second sentence of Sec. 242.50 to read as follows:
Sec. 242.50 Funds and finances: off-site utilities and streets.
* * * Where such assurance is required, it shall be in the form of
a cash escrow deposit, a letter of credit, the retention of a specified
amount of mortgage proceeds by the mortgagee, or a combination thereof.
* * * * *
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8. Revise Sec. 242.52(a) to read as follows:
Sec. 242.52 Construction contracts.
(a) Awarding of contract. A contract for the construction or
substantial rehabilitation of a hospital shall be entered into by a
mortgagor, with a builder selected by a competitive bidding procedure
acceptable to HUD.
* * * * *
Subpart G--Regulatory Agreement, Accounting and Reporting, and
Financial Requirements
0
9. Amend Sec. 242.56 by adding a new sentence at the end of the
section to read as follows:
Sec. 242.56 Form of regulation.
* * * In those cases in which the hospital facility is leased as
permitted by Sec. 242.72, the provisions of this section also shall
apply to the lessee.
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10. Revise Sec. 242.58(c)(1) and add a new paragraph (h) to read as
follows:
Sec. 242.58 Books, accounts, and financial statements.
* * * * *
(c) * * * (1) Not-for-profit and state and local governments shall
conduct audits in accordance with the Consolidated Audit Guide for
Audits of HUD Programs (Handbook 2000.04) and OMB Circular A-133
(Audits of states, local governments, and nonprofit organizations). * *
*
(h) In those cases in which the hospital facility is leased as
permitted by Sec. 242.72, the requirements pertaining to the mortgagor
in Sec. 242.58 (a) through (g) also shall pertain to the lessee.
0
11. Revise Sec. 242.61(a) to read as follows:
Sec. 242.61 Management.
* * * (a) Contract Management of Hospital. The mortgagor shall not
execute a management agreement or any other contract for management of
the hospital without HUD's prior written approval. (Management of the
hospital, which requires HUD's prior written approval, refers to
management of the hospital not management of components within the
hospital such as the hospital cafeteria or hospital pharmacy.) Any
management agreement or contract for management of the hospital shall
contain a provision that it shall be subject to termination without
penalty and with or without cause, upon written request by HUD
addressed to the mortgagor and management agent.
* * * * *
Subpart H--Miscellaneous Requirements
0
12. Revise Sec. 242.90(a) to read as follows:
Sec. 242.90 Eligibility of mortgages covering hospitals in certain
neighborhoods.
(a) A mortgage financing the repair, substantial rehabilitation, or
construction of a hospital located in an older declining urban area
shall be eligible for insurance under this subpart, subject to
compliance with the additional requirements of this section.
* * * * *
Dated: June 16, 2008.
Brian D. Montgomery,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. E8-14131 Filed 6-24-08; 8:45 am]
BILLING CODE 4210-67-P
