Prohibition of the Escrowing of Tax Credit Equity, 52354-52356 [E9-24338]

Download as PDF 52354 Federal Register / Vol. 74, No. 195 / Friday, October 9, 2009 / Proposed Rules interested members of the public. Commenters should follow the instructions provided on that Web site to submit comments electronically. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 200 [Docket No. FR–5290–P–01] RIN 2502–AI73 Prohibition of the Escrowing of Tax Credit Equity mstockstill on DSKH9S0YB1PROD with PROPOSALS3 AGENCY: Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD. ACTION: Proposed rule. SUMMARY: This proposed rule would conform HUD’s Federal Housing Administration (FHA) multifamily mortgage insurance regulations to a provision in Title VIII of the Housing and Economic Recovery Act of 2008 that prohibits a requirement that tax credit sales proceeds be placed into escrow, at the time of initial endorsement, for assurance of project completion and to pay the initial service charge, carrying charges, and legal and organizational expenses incident to the construction of the project. This rule would not prohibit HUD from requiring escrows of funds for other purposes, such as for working capital. The rule would also make other changes intended to reduce burdens on the use of tax credits. DATES: Comments Due Date: December 8, 2009. ADDRESSES: Interested persons are invited to submit comments regarding this proposed rule. There are two methods for comments to be submitted as public comments and to be included in the public comment docket for this rule. Regardless of the method selected, all submissions must refer to the above docket number and title. 1. Submission of Comments by Mail. Comments may be submitted by mail to the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410–0001. 2. Electronic Submission of Comments. Interested persons may submit comments electronically through the Federal eRulemaking Portal at www.regulations.gov. HUD strongly encourages commenters to submit comments electronically. Electronic submission of comments allows commenters maximum time to prepare and submit comments, ensures their timely receipt by HUD, and enables HUD to make them immediately available to the public. Comments submitted electronically through the www.regulations.gov Web site can be viewed by other commenters and VerDate Nov<24>2008 16:10 Oct 08, 2009 Jkt 222001 Note: To receive consideration as public comments, comments must be submitted through one of the two methods specified above. Again, all submissions must refer to the docket number and title of the rule. No Facsimile Comments. Facsimile (FAX) comments are not acceptable. Public Inspection of Public Comments. All properly submitted comments and communications submitted to HUD will be available, without charge, for public inspection and copying between 8 a.m. and 5 p.m. weekdays at the above address. Due to security measures at the HUD Headquarters building, an advance appointment to review the public comments must be scheduled by calling the Regulations Division at 202–708– 3055 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number through TTY by calling the toll-free Federal Information Relay Service at 800–877–8339. Copies of all comments submitted are available for inspection and downloading at www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Iris Agubuzo, Project Manager, Policy Division, Office of Multifamily Housing, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 6158, Washington, DC 20410– 8000, Telephone 202–402–2662 (this is not a toll-free number). Individuals with speech or hearing impairments may access this number through TTY by calling the toll-free Federal Information Relay Service at 800–877–8339. SUPPLEMENTARY INFORMATION: I. Background The low-income housing tax credit is a tax incentive provided under section 42 of the Internal Revenue Code of 1986, 26 U.S.C. 42, to increase the availability of low-income housing. Section 42 provides a nonrefundable income tax credit to owners of qualified buildings. Qualified buildings are newly constructed or substantially rehabilitated buildings in which a percentage of the units are designated for low-income rental housing, or certain newly acquired, federally subsidized buildings. The owner of a qualified building may claim a credit against taxes for 10 years equivalent to the applicable credit percentage, dependent on the type of building, multiplied by the qualified basis of the building. The qualified basis is the applicable fraction of the eligible basis PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 of the building. The fraction is calculated by one of two methods, either the floor space devoted to low-income units as a percentage of the total floor space of residential units, or the number of low-income units in the building as a percentage of the total number of units. To calculate the tax credit, the qualified basis is multiplied by a percentage that differs depending on the type of building, the year it was placed in service, and possibly other factors affecting the eligible basis, as stated in the statute. The owners of low-income housing buildings must apply to state and local agencies for the tax credits, which are actually granted only by state governments. The owners that receive tax credit allocations can then sell or syndicate the tax credits. The New Markets Tax Credit is a tax credit provided under section 45D of the Internal Revenue Code of 1986, 26 U.S.C. 45D. This tax credit is for investments in a qualified community development entity that uses ‘‘substantially all’’ of the investment to make qualified low-income community investments, and designates the investment for the purposes of section 45D. The credit given is an applicable percentage of the investment at the date of initial issue, as determined under the statute. The historic tax credit referenced in 24 CFR 200.54 is a credit against taxes for rehabilitation of historic structures authorized under section 47(a)(2) of the Internal Revenue Code of 1986, 26 U.S.C. 47(a)(2). The amount of the credit is 20 percent of the qualified rehabilitation expenditures for certified historic structures, or 10 percent for qualified rehabilitated buildings first placed in service before 1936, other than certified historic structures. The program is jointly administered by the U.S. Department of the Interior and the U.S. Department of the Treasury, and applies to rehabilitation of certified historic structures. Section 2834(c) of HERA, Public Law 110–289 (approved July 30, 2008) adds a new section to the National Housing Act. This new section is codified at 12 U.S.C. 1715s, which is section 228 of the National Housing Act (this is a previously repealed section). This new section states, in relevant part: (b) Acceptance of Letters of Credit.—In the case of an insured mortgage covering a tax credit project, the Secretary may not require the escrowing of equity provided by the sale of any low-income housing tax credits for the project pursuant to section 42 of the Internal Revenue Code of 1986, or any other form of security, such as a letter of credit. This provision changes the practice allowed by current HUD regulations and E:\FR\FM\09OCP2.SGM 09OCP2 mstockstill on DSKH9S0YB1PROD with PROPOSALS3 Federal Register / Vol. 74, No. 195 / Friday, October 9, 2009 / Proposed Rules policies, which is to require a substantial portion of the low-income housing tax credit equity under 26 U.S.C. 42 to be placed in escrow for potential future use over the life of the project at the time of initial endorsement. That requirement often means that mortgage borrowers, who have not realized their tax credit proceeds at this point, would have to obtain costly bridge loan financing. This requirement has had an inhibiting effect on the building of new low-income housing tax credit projects. The new law prevents HUD from requiring the escrow of tax credit proceeds. HUD believes that, as a result, the need for bridge loans will be substantially reduced and hence make multifamily housing more available and affordable. The new law does not prohibit HUD from requiring the use of monies, which may derive from tax credit proceeds, for upfront expenses. Such an amount would vary depending on the underwriting requirements of the project. HUD’s regulation at 24 CFR 200.54 is designed to allow HUD to require a payment of funds sufficient to ensure project completion. That regulation states: ‘‘The mortgagor shall deposit with the mortgagee cash deemed by the Commissioner to be sufficient, when added to the proceeds of the insured mortgage, to assure completion of the project and to pay the initial service charge, carrying charges, and legal and organizational expenses incident to the construction of the project.’’ (24 CFR 200.54 undesignated introductory paragraph.) The regulation also allows for a ‘‘lesser cash deposit’’ in cases where ‘‘required funding is to be provided by a grant or loan from a Federal, State, or local government agency or instrumentality.’’ However, because proceeds from tax credits are not explicitly mentioned, HUD’s position has been that the allowance of a ‘‘lesser cash deposit’’ does not apply in cases where a portion of the funding will be realized from tax-credit proceeds. To be considered sufficient, HUD deemed it necessary to require the escrowing of all, or a substantial portion of, an amount equal to the tax credit proceeds expected to be realized. Thus, HUD has required a substantial cash deposit, often derived from a bridge loan, in such cases. On July 22, 2008, HUD issued Mortgagee Letter 2008–19, entitled ‘‘Streamlined Processing of Multifamily Mortgage Insurance Applications Involving Low-Income Housing Tax Credits.’’ This mortgagee letter reduced the amount of tax-credit proceeds required for the cash escrow from 100 VerDate Nov<24>2008 16:10 Oct 08, 2009 Jkt 222001 percent of such proceeds to a varying amount, but generally at least 20 percent of such proceeds, unless HUD authorizes a lower amount. This aspect of the mortgagee letter is now superseded by the new statutory provision, which precludes the ‘‘escrowing of equity provided by the sale of any low-income housing tax credits [emphasis added].’’ II. This 2009 Proposed Rule This proposed rule would conform 24 CFR 200.54 to section 2834(c) of HERA, codified as 12 U.S.C. 1715s. The regulatory section would now specifically prohibit HUD from requiring the escrowing of equity from the sales of tax credits. This change is mandated directly by the statute, so HUD has no discretion in this regard. In addition, the proposed rule would change the current treatment of historic and new market housing tax credits, which are not controlled by the statute. Hence, HUD has some discretion as to how these types of tax credits are considered in the underwriting of projects. Specifically, the escrow requirement would be eliminated when equity is provided from these types of tax credits. Finally, proceeds from New Market Tax Credits would be added to 24 CFR 200.54(b) as a type of funding that need not be fully disbursed prior to the disbursement of the mortgage proceeds, where approved by the Commissioner. III. Findings and Certifications Environmental Impact This proposed rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction, or establish, revise or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this proposed rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321). Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. In accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), this PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 52355 proposed rule was reviewed before publication, and the undersigned certifies that this rule does not have a significant economic impact on a substantial number of small entities. There are no anticompetitive discriminatory aspects of the rule with regard to small entities and there are no unusual procedures that need to be complied with by small entities. This rule will allow mortgagors to retain more of their tax credit proceeds and, in many cases, relieve them of the need to take out a costly bridge loan to pay the costs for assurance of completion. Therefore, this rule, in conformance with statutory mandate, removes a costly regulatory requirement and does not impose any substantial economic impact on small entities. Therefore, the undersigned certifies that this proposed rule will not have a significant economic impact on a substantial number of small entities, and that an initial regulatory flexibility analysis is not required. Executive Order 13132, Federalism Executive Order 13132 (entitled ‘‘Federalism’’) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial direct compliance costs on state and local governments and is not required by statute, or the rule preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the executive order. This proposed 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 proposed rule does not impose any federal mandates on any state, local, or tribal government, or on the private sector, within the meaning of UMRA. List of Subjects in 24 CFR Part 200 Administrative practice and procedure, Government contracts, Organization and functions (Government agencies). Catalog of Federal Domestic Assistance The Catalog of Federal Domestic Assistance (CFDA) program numbers for the programs related to this rulemaking are 14.112, 14.123, 14.126, 14.134, E:\FR\FM\09OCP2.SGM 09OCP2 52356 Federal Register / Vol. 74, No. 195 / Friday, October 9, 2009 / Proposed Rules 14.135, 14.138, 14.139, 14.151, and 14.155. For the foregoing reasons, HUD proposes to amend 24 CFR part 200 as follows: PART 200—INTRODUCTION TO FHA PROGRAMS 1. The authority citation for part 200 continues to read as follows: Authority: 12 U.S.C. 1702–1715z–21; 42 U.S.C. 3535(d). 2. Revise § 200.54 to read as follows: § 200.54 Project completion funding. mstockstill on DSKH9S0YB1PROD with PROPOSALS3 (a) Except as provided in paragraph (c) of this section, the mortgagor shall deposit with the mortgagee cash deemed by the Commissioner to be sufficient, when added to the proceeds of the insured mortgage, to assure completion of the project and to pay the initial service charge, carrying charges, and legal and organizational expenses VerDate Nov<24>2008 16:10 Oct 08, 2009 Jkt 222001 incident to the construction of the project. The Commissioner may accept a lesser cash deposit or an alternative to a cash deposit in accordance with terms and conditions established by the Commissioner, where the required funding is to be provided by a grant or loan from a federal, state, or local government agency or instrumentality. (b) An agreement acceptable to the Commissioner shall require that funds provided by the mortgagor under requirements of this section must be disbursed in full for project work, material, and incidental charges and expenses before disbursement of any mortgage proceeds, except that lowincome housing tax credit syndication proceeds, historic tax-credit syndication proceeds, New Markets Tax Credits proceeds, or funds provided by a grant or loan from a federal, state, or local governmental agency or instrumentality under requirements of this section need not be fully disbursed before the PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 disbursement of mortgage proceeds, where approved by (c) In the case of a mortgage insured under any provision of this title executed in connection with the purchase, construction, rehabilitation, or refinancing of a multifamily tax credit project, the Commissioner may not require: (1) The escrowing of equity provided by Low-Income Housing Tax Credits for the project pursuant to Title 26, section 42 of the Internal Revenue Code of 1986; (2) The escrowing of equity provided by historic rehabilitation tax credits, New Markets Tax Credits, or any other form of security, such as a letter of credit. Dated: September 4, 2009. David H. Stevens, Assistant Secretary for Housing—Federal Housing Commissioner. [FR Doc. E9–24338 Filed 10–8–09; 8:45 am] BILLING CODE 4210–67–P E:\FR\FM\09OCP2.SGM 09OCP2

Agencies

[Federal Register Volume 74, Number 195 (Friday, October 9, 2009)]
[Proposed Rules]
[Pages 52354-52356]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-24338]



[[Page 52353]]

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Part III





Department of Housing and Urban Development





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24 CFR Part 200



Prohibition of the Escrowing of Tax Credit Equity; Proposed Rule

Federal Register / Vol. 74, No. 195 / Friday, October 9, 2009 / 
Proposed Rules

[[Page 52354]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 200

[Docket No. FR-5290-P-01]
RIN 2502-AI73


Prohibition of the Escrowing of Tax Credit Equity

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would conform HUD's Federal Housing 
Administration (FHA) multifamily mortgage insurance regulations to a 
provision in Title VIII of the Housing and Economic Recovery Act of 
2008 that prohibits a requirement that tax credit sales proceeds be 
placed into escrow, at the time of initial endorsement, for assurance 
of project completion and to pay the initial service charge, carrying 
charges, and legal and organizational expenses incident to the 
construction of the project. This rule would not prohibit HUD from 
requiring escrows of funds for other purposes, such as for working 
capital. The rule would also make other changes intended to reduce 
burdens on the use of tax credits.

DATES: Comments Due Date: December 8, 2009.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule. There are two methods for comments to be submitted 
as public comments and to be included in the public comment docket for 
this rule. Regardless of the method selected, all submissions must 
refer to the above docket number and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, 
Washington, DC 20410-0001.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows 
commenters maximum time to prepare and submit comments, ensures their 
timely receipt by HUD, and enables HUD to make them immediately 
available to the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that Web site to submit comments 
electronically.

    Note: To receive consideration as public comments, comments must 
be submitted through one of the two methods specified above. Again, 
all submissions must refer to the docket number and title of the 
rule. No Facsimile Comments. Facsimile (FAX) comments are not 
acceptable.

    Public Inspection of Public Comments. All properly submitted 
comments and communications submitted to HUD will be available, without 
charge, for public inspection and copying between 8 a.m. and 5 p.m. 
weekdays at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at 202-
708-3055 (this is not a toll-free number). Individuals with speech or 
hearing impairments may access this number through TTY by calling the 
toll-free Federal Information Relay Service at 800-877-8339. Copies of 
all comments submitted are available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Iris Agubuzo, Project Manager, Policy 
Division, Office of Multifamily Housing, Department of Housing and 
Urban Development, 451 Seventh Street, SW., Room 6158, Washington, DC 
20410-8000, Telephone 202-402-2662 (this is not a toll-free number). 
Individuals with speech or hearing impairments may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    The low-income housing tax credit is a tax incentive provided under 
section 42 of the Internal Revenue Code of 1986, 26 U.S.C. 42, to 
increase the availability of low-income housing. Section 42 provides a 
nonrefundable income tax credit to owners of qualified buildings. 
Qualified buildings are newly constructed or substantially 
rehabilitated buildings in which a percentage of the units are 
designated for low-income rental housing, or certain newly acquired, 
federally subsidized buildings. The owner of a qualified building may 
claim a credit against taxes for 10 years equivalent to the applicable 
credit percentage, dependent on the type of building, multiplied by the 
qualified basis of the building. The qualified basis is the applicable 
fraction of the eligible basis of the building. The fraction is 
calculated by one of two methods, either the floor space devoted to 
low-income units as a percentage of the total floor space of 
residential units, or the number of low-income units in the building as 
a percentage of the total number of units. To calculate the tax credit, 
the qualified basis is multiplied by a percentage that differs 
depending on the type of building, the year it was placed in service, 
and possibly other factors affecting the eligible basis, as stated in 
the statute. The owners of low-income housing buildings must apply to 
state and local agencies for the tax credits, which are actually 
granted only by state governments. The owners that receive tax credit 
allocations can then sell or syndicate the tax credits.
    The New Markets Tax Credit is a tax credit provided under section 
45D of the Internal Revenue Code of 1986, 26 U.S.C. 45D. This tax 
credit is for investments in a qualified community development entity 
that uses ``substantially all'' of the investment to make qualified 
low-income community investments, and designates the investment for the 
purposes of section 45D. The credit given is an applicable percentage 
of the investment at the date of initial issue, as determined under the 
statute.
    The historic tax credit referenced in 24 CFR 200.54 is a credit 
against taxes for rehabilitation of historic structures authorized 
under section 47(a)(2) of the Internal Revenue Code of 1986, 26 U.S.C. 
47(a)(2). The amount of the credit is 20 percent of the qualified 
rehabilitation expenditures for certified historic structures, or 10 
percent for qualified rehabilitated buildings first placed in service 
before 1936, other than certified historic structures. The program is 
jointly administered by the U.S. Department of the Interior and the 
U.S. Department of the Treasury, and applies to rehabilitation of 
certified historic structures.
    Section 2834(c) of HERA, Public Law 110-289 (approved July 30, 
2008) adds a new section to the National Housing Act. This new section 
is codified at 12 U.S.C. 1715s, which is section 228 of the National 
Housing Act (this is a previously repealed section). This new section 
states, in relevant part:

    (b) Acceptance of Letters of Credit.--In the case of an insured 
mortgage covering a tax credit project, the Secretary may not 
require the escrowing of equity provided by the sale of any low-
income housing tax credits for the project pursuant to section 42 of 
the Internal Revenue Code of 1986, or any other form of security, 
such as a letter of credit.

This provision changes the practice allowed by current HUD regulations 
and

[[Page 52355]]

policies, which is to require a substantial portion of the low-income 
housing tax credit equity under 26 U.S.C. 42 to be placed in escrow for 
potential future use over the life of the project at the time of 
initial endorsement. That requirement often means that mortgage 
borrowers, who have not realized their tax credit proceeds at this 
point, would have to obtain costly bridge loan financing. This 
requirement has had an inhibiting effect on the building of new low-
income housing tax credit projects.
    The new law prevents HUD from requiring the escrow of tax credit 
proceeds. HUD believes that, as a result, the need for bridge loans 
will be substantially reduced and hence make multifamily housing more 
available and affordable. The new law does not prohibit HUD from 
requiring the use of monies, which may derive from tax credit proceeds, 
for upfront expenses. Such an amount would vary depending on the 
underwriting requirements of the project.
    HUD's regulation at 24 CFR 200.54 is designed to allow HUD to 
require a payment of funds sufficient to ensure project completion. 
That regulation states: ``The mortgagor shall deposit with the 
mortgagee cash deemed by the Commissioner to be sufficient, when added 
to the proceeds of the insured mortgage, to assure completion of the 
project and to pay the initial service charge, carrying charges, and 
legal and organizational expenses incident to the construction of the 
project.'' (24 CFR 200.54 undesignated introductory paragraph.) The 
regulation also allows for a ``lesser cash deposit'' in cases where 
``required funding is to be provided by a grant or loan from a Federal, 
State, or local government agency or instrumentality.'' However, 
because proceeds from tax credits are not explicitly mentioned, HUD's 
position has been that the allowance of a ``lesser cash deposit'' does 
not apply in cases where a portion of the funding will be realized from 
tax-credit proceeds. To be considered sufficient, HUD deemed it 
necessary to require the escrowing of all, or a substantial portion of, 
an amount equal to the tax credit proceeds expected to be realized. 
Thus, HUD has required a substantial cash deposit, often derived from a 
bridge loan, in such cases.
    On July 22, 2008, HUD issued Mortgagee Letter 2008-19, entitled 
``Streamlined Processing of Multifamily Mortgage Insurance Applications 
Involving Low-Income Housing Tax Credits.'' This mortgagee letter 
reduced the amount of tax-credit proceeds required for the cash escrow 
from 100 percent of such proceeds to a varying amount, but generally at 
least 20 percent of such proceeds, unless HUD authorizes a lower 
amount. This aspect of the mortgagee letter is now superseded by the 
new statutory provision, which precludes the ``escrowing of equity 
provided by the sale of any low-income housing tax credits [emphasis 
added].''

II. This 2009 Proposed Rule

    This proposed rule would conform 24 CFR 200.54 to section 2834(c) 
of HERA, codified as 12 U.S.C. 1715s. The regulatory section would now 
specifically prohibit HUD from requiring the escrowing of equity from 
the sales of tax credits. This change is mandated directly by the 
statute, so HUD has no discretion in this regard.
    In addition, the proposed rule would change the current treatment 
of historic and new market housing tax credits, which are not 
controlled by the statute. Hence, HUD has some discretion as to how 
these types of tax credits are considered in the underwriting of 
projects. Specifically, the escrow requirement would be eliminated when 
equity is provided from these types of tax credits. Finally, proceeds 
from New Market Tax Credits would be added to 24 CFR 200.54(b) as a 
type of funding that need not be fully disbursed prior to the 
disbursement of the mortgage proceeds, where approved by the 
Commissioner.

III. Findings and Certifications

Environmental Impact

    This proposed rule does not direct, provide for assistance or loan 
and mortgage insurance for, or otherwise govern or regulate, real 
property acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
proposed rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    In accordance with the Regulatory Flexibility Act (5 U.S.C. 
605(b)), this proposed rule was reviewed before publication, and the 
undersigned certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. There are no 
anticompetitive discriminatory aspects of the rule with regard to small 
entities and there are no unusual procedures that need to be complied 
with by small entities. This rule will allow mortgagors to retain more 
of their tax credit proceeds and, in many cases, relieve them of the 
need to take out a costly bridge loan to pay the costs for assurance of 
completion. Therefore, this rule, in conformance with statutory 
mandate, removes a costly regulatory requirement and does not impose 
any substantial economic impact on small entities.
    Therefore, the undersigned certifies that this proposed rule will 
not have a significant economic impact on a substantial number of small 
entities, and that an initial regulatory flexibility analysis is not 
required.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the executive order. This proposed 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 proposed rule does 
not impose any federal mandates on any state, local, or tribal 
government, or on the private sector, within the meaning of UMRA.

List of Subjects in 24 CFR Part 200

    Administrative practice and procedure, Government contracts, 
Organization and functions (Government agencies).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) program numbers 
for the programs related to this rulemaking are 14.112, 14.123, 14.126, 
14.134,

[[Page 52356]]

14.135, 14.138, 14.139, 14.151, and 14.155.
    For the foregoing reasons, HUD proposes to amend 24 CFR part 200 as 
follows:

PART 200--INTRODUCTION TO FHA PROGRAMS

    1. The authority citation for part 200 continues to read as 
follows:

    Authority:  12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).

    2. Revise Sec.  200.54 to read as follows:


Sec.  200.54  Project completion funding.

    (a) Except as provided in paragraph (c) of this section, the 
mortgagor shall deposit with the mortgagee cash deemed by the 
Commissioner to be sufficient, when added to the proceeds of the 
insured mortgage, to assure completion of the project and to pay the 
initial service charge, carrying charges, and legal and organizational 
expenses incident to the construction of the project. The Commissioner 
may accept a lesser cash deposit or an alternative to a cash deposit in 
accordance with terms and conditions established by the Commissioner, 
where the required funding is to be provided by a grant or loan from a 
federal, state, or local government agency or instrumentality.
    (b) An agreement acceptable to the Commissioner shall require that 
funds provided by the mortgagor under requirements of this section must 
be disbursed in full for project work, material, and incidental charges 
and expenses before disbursement of any mortgage proceeds, except that 
low-income housing tax credit syndication proceeds, historic tax-credit 
syndication proceeds, New Markets Tax Credits proceeds, or funds 
provided by a grant or loan from a federal, state, or local 
governmental agency or instrumentality under requirements of this 
section need not be fully disbursed before the disbursement of mortgage 
proceeds, where approved by
    (c) In the case of a mortgage insured under any provision of this 
title executed in connection with the purchase, construction, 
rehabilitation, or refinancing of a multifamily tax credit project, the 
Commissioner may not require:
    (1) The escrowing of equity provided by Low-Income Housing Tax 
Credits for the project pursuant to Title 26, section 42 of the 
Internal Revenue Code of 1986;
    (2) The escrowing of equity provided by historic rehabilitation tax 
credits, New Markets Tax Credits, or any other form of security, such 
as a letter of credit.

    Dated: September 4, 2009.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. E9-24338 Filed 10-8-09; 8:45 am]
BILLING CODE 4210-67-P