Federal Housing Administration (FHA) Section 232 Healthcare Mortgage Insurance Program: Partial Payment of Claims, 40310-40314 [2012-16559]
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Federal Register / Vol. 77, No. 131 / Monday, July 9, 2012 / Proposed Rules
Service Bulletin 747–28A2330, dated April 2,
2012. Do all applicable corrective actions
before further flight. Repeat the operational
test thereafter at intervals not to exceed
30,000 flight hours. Thereafter, except as
provided in paragraph (h) of this AD, no
alternative procedures or repeat test intervals
will be allowed.
(h) Alternative Methods of Compliance
(AMOCs)
(1) The Manager, Seattle Aircraft
Certification Office (ACO), FAA, has the
authority to approve AMOCs for this AD, if
requested using the procedures found in 14
CFR 39.19. In accordance with 14 CFR 39.19,
send your request to your principal inspector
or local Flight Standards District Office, as
appropriate. If sending information directly
to the manager of the ACO, send it to the
attention of the person identified in the
Related Information section of this AD.
Information may be emailed to: 9-ANMSeattle-ACO-AMOC-Requests@faa.gov.
(2) Before using any approved AMOC,
notify your appropriate principal inspector,
or lacking a principal inspector, the manager
of the local flight standards district office/
certificate holding district office.
(i) Related Information
(1) For more information about this AD,
contact Sue Lucier, Aerospace Engineer,
Propulsion Branch, ANM–140S, 1601 Lind
Avenue SW., Renton, Washington 98057–
3356; phone: 425–917–6438; fax: 425–917–
6590; email: suzanne.lucier@faa.gov.
(2) For service information identified in
this AD, contact Boeing Commercial
Airplanes, Attention: Data & Services
Management, P. O. Box 3707, MC 2H–65,
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information at the FAA, Transport Airplane
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Washington. For information on the
availability of this material at the FAA, call
425–227–1221.
Issued in Renton, Washington, on June 27,
2012.
Kalene C. Yanamura,
Acting Manager, Transport Airplane
Directorate, Aircraft Certification Service.
[FR Doc. 2012–16668 Filed 7–6–12; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Chapter 1
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[Docket No. FAA–2012–0658]
Proposed Policy Clarification for the
Registration of Aircraft to U.S. Citizen
Trustees in Situations Involving NonU.S. Citizen Trustors and
Beneficiaries; Correction
Federal Aviation
Administration (FAA).
AGENCY:
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Proposed Policy; Availability of
Documents for Inspection and Extension
of Time in which to Submit Written
Comments; Correction.
ACTION:
The Federal Aviation
Administration is correcting a document
published on June 26, 2012 (77 FR
38016). That document extended the
comment period on its proposed policy
regarding the registration of aircraft to
U.S. citizen trustees in situations
involving non-U.S. citizen trustors and
beneficiaries. This document revises the
SUPPLEMENTARY INFORMATION section of
that document. Due to a clerical error,
language from a prior document was
inadvertently included; this correction
is made to provide clarity. Also, this
document corrects the Authority cite.
DATES: The FAA is extending the
comment period to August 17, 2012.
FOR FURTHER INFORMATION CONTACT:
LaDeana Peden at 405 954–3296, Office
of Aeronautical Center Counsel, Federal
Aviation Administration.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Corrections
In FR Doc. 2012–15339 published on
June 26, 2012, on page 38016, in the
third column and page 38017 in the first
column, revise the paragraphs in
SUPPLEMENTARY INFORMATION to read as
follows:
The FAA published a notice in the
Federal Register on February 9, 2012
(77 FR 6694), proposing to clarify its
policy regarding the registration of
aircraft to U.S. citizen trustees in
situations involving non-U.S. citizen
trustors and beneficiaries. The notice
requested that interested parties submit
written comments on the proposed
policy clarification by March 31, 2012.
In a notice published on March 14, 2012
(77 FR 15180), the FAA scheduled a
public meeting on the proposed policy
clarification for June 6, 2012, in
Oklahoma City, Oklahoma, and
extended the deadline for written
comments until July 6, 2012.
During the June 6 public meeting,
among the comments received were
several suggestions that additional time
would be needed to prepare
comprehensive written comments on
the FAA’s proposed policy clarification.
The FAA agrees that additional time for
the submission of comments would be
helpful, and therefore has decided to
extend the comment period until
August 17, 2012. The FAA expects that
the comments received through the end
of the extended comment period and
during the public meeting will enable it
to determine what steps it should take
next in addressing the trust registration
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issue, including the development of a
final policy clarification.
Comments should be sent by email to
ladeana.peden@faa.gov. Comments
received by FAA may be viewed at the
Office of Chief Counsel’s FAA Web site
located at https://www.faa.gov/about/
office_org/headquarters_offices/agc/.
Authority: 49 U.S.C. 106(g), 40113, 44102,
44103.
Issued in Oklahoma City, Oklahoma on
June 29, 2012.
Joseph R. Standell,
Aeronautical Center Counsel.
[FR Doc. 2012–16719 Filed 7–6–12; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 232
[Docket No. FR–5537–P–01]
RIN–2502–AJ04
Federal Housing Administration (FHA)
Section 232 Healthcare Mortgage
Insurance Program: Partial Payment of
Claims
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
AGENCY:
This proposed rule would
amend the regulations governing FHA’s
Section 232 Healthcare Mortgage
Insurance program (Section 232
program). The Section 232 program
insures mortgage loans to facilitate the
construction, substantial rehabilitation,
purchase, and refinancing of nursing
homes, intermediate care facilities,
board and care homes, and assistedliving facilities. The amendments
proposed by this rule would reduce risk
to the FHA insurance fund by
establishing the criteria and process by
which FHA will accept and pay a partial
payment of the claim under the FHA
mortgage insurance contract. Through
acceptance and payment of a partial
payment of claim, FHA pays the lender
a portion of the unpaid principal
balance and recasts a portion of the
mortgage under terms and conditions
determined by FHA, as an alternative to
the lender assigning the entire mortgage
to HUD. Partial payment of claim would
also allow FHA insured healthcare
projects to continue operating and
providing services.
DATES: Comment Due Date: September
7, 2012.
ADDRESSES: Interested persons are
invited to submit comments regarding
SUMMARY:
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this proposed rule to the Regulations
Division, Office of General Counsel,
Department of Housing and Urban
Development, 451 7th Street SW., Room
10276, Washington, DC 20410–0500.
Communications must refer to the above
docket number and title. There are two
methods for submitting public
comments. 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
7th Street SW., Room 10276,
Washington, DC 20410–0500.
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 the
commenter maximum time to prepare
and submit a comment, ensures 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 site to
submit comments electronically.
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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 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
appointment to review the public
comments must be scheduled in
advance 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 via TTY by calling
the Federal 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:
Roger E. Miller, Deputy Assistant
Secretary, Office of Healthcare
Programs, Office of Housing,
Department of Housing and Urban
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Development, 451 7th Street SW., Room
6264, Washington, DC 20410–8000;
telephone 202–708–0599 (this is not a
toll-free number). Persons with hearing
or speech disabilities may access this
number through TTY by calling the tollfree Federal Relay Service at 1–800–
877–8339.
SUPPLEMENTARY INFORMATION:
I. Background
FHA’s Section 232 program insures
mortgage loans to facilitate the
construction, substantial rehabilitation,
purchase, and refinancing of nursing
homes, intermediate care facilities,
board and care homes, and assistedliving facilities. A project may include
more than one type of facility and
financing, and a combination of these
uses is acceptable. The Section 232
program is authorized under the
National Housing Act (12 U.S.C.
1715w). HUD’s regulations for the
Section 232 program are codified in 24
CFR part 232. While many aspects of
HUD’s healthcare facility operations,
including the basic contract and
eligibility requirements, are governed by
the regulations applicable to HUD’s
multifamily mortgage insurance
programs, separate healthcare
regulations have been adopted to
address program operations specific to
healthcare facilities, such as state
licensing requirements.1
One process well-established and long
used in HUD’s multifamily housing
programs is acceptance of partial
payment of claims (PPCs). Under the
PPC process, FHA pays the mortgagee a
portion of the unpaid principal balance
and recasts a portion of the mortgage
under terms and conditions determined
by the FHA Commissioner (the
Commissioner), as an alternative to
assigning the entire mortgage. Prior to
processing the PPC, the mortgagee must
voluntarily agree to accept a partial
payment of the insurance claim in
accordance with the terms and
conditions established by the
Commissioner. The mortgagee must also
waive any prepayment and lock out
provisions in the mortgage.
Congress granted FHA authority to
allow PPCs for subsidized insured
multifamily properties in the Housing
and Community Development
Amendments of 1978 (12 U.S.C. 1701z–
11). The legislative history reflects that
a mortgagee’s participation in a partial
1 The regulations codified at 24 CFR part 200
(entitled ‘‘Introduction to FHA programs’’) set forth,
in a single location of the Code of Federal
Regulations, requirements that are generally
applicable to FHA programs. The regulations at 24
CFR 232.2 require that facilities meet state licensing
requirements.
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40311
payment was voluntary and based on its
own determination that such an
arrangement would be in the
mortgagee’s own best interests.2 In the
Housing and Community Development
Act of 1980 (12 U.S.C. 1701z–11),
Congress expanded FHA’s authority to
allow partial payments of claims beyond
subsidized projects to nonsubsidized
multifamily rental housing project
insured under the National Housing
Act. In the Multifamily Housing
Property Disposition Reform Act of 1994
(12 U.S.C. 1735f–19), a statute primarily
directed to a broad overhaul of
multifamily program operations,
Congress clarified the voluntary nature
of the PPC process and the program
coverage. The regulations implementing
the statutory authority to accept PPCs,
which FHA adopted in 1985, and which
are codified in § 207.258b, specifically
excluded FHA’s Section 232 program
from the multifamily PPC process. (See
24 CFR 232.251(a).)
In 1997, Congress specifically
authorized PPCs for the Section 232
program. (See 12 U.S.C. 1735f–19.)
However, the regulatory provisions
governing the multifamily programs,
which predated the 1997 statutory
amendments, were not revised to reflect
the statutory authority to use PPCs for
healthcare facilities. Thus, the current
regulations for the multifamily programs
establishing the procedures and criteria
for partial payments of claims for
properties insured under other FHA
programs are not applicable to the
Section 232 program.
II. This Proposed Rule
This proposed rule would provide, in
regulation, the procedures and criteria
for FHA to determine when PPCs
should be considered and paid for
healthcare facilities. To date, HUD has
accepted PPCs in the Section 232
program on a periodic basis, but HUD
has concluded that the criteria and
procedures for granting PPCs in the
Section 232 program should be
established and codified in regulation.
In developing regulations governing
PPCs in the Section 232 program, the
current regulations governing PPCs,
codified at 24 CFR 207.258b, for the
multifamily programs serve as a helpful
starting base. Additionally, this
proposed rule is informed by FHA’s
experience implementing the PPC
process in its multifamily housing
programs, and FHA’s experience in
utilizing PPCs in the Section 232
2 Legislative History (H. Rep. No. 95–1792, 95th
Congress, 2nd session) cited the preamble to the
final rule establishing the regulations for PPCs. The
cited preamble language is found at 50 FR 38784
(September 24, 1985).
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program on a periodic and temporary
basis.
This proposed rule adds a new
§ 232.882, entitled ‘‘Partial Payment of
Claims,’’ to the Section 232 program
regulations in 24 CFR part 232. This
new section provides that if the
mortgagee elects to assign a mortgage to
the Commissioner, under certain
circumstances the Commissioner may
request the mortgagee to accept a partial
payment of the claim. The proposed
PPC regulations for the Section 232
program differ from the current
regulations establishing the PPC process
for the multifamily programs primarily
because the focus of the Section 232
program is on healthcare facilities.
While FHA must make a finding for
multifamily programs that the project is,
or potentially could serve as, a low- and
moderate-income housing resource, the
proposed PPC regulations for the
Section 232 program provide for FHA to
review, in its underwriting evaluation,
the continued viability of the
healthcare-specific aspects of the
project. FHA must find that the project
meets community healthcare needs, and
will have sound management and
project operation. Under the statute,
FHA must make a determination that a
PPC would be less costly to the
government than other reasonable
alternatives and would keep the
healthcare facility operational to serve
community needs.3 The proposed rule
specifies that requirement in § 232.882.
In addition, in an effort to ensure that
the project will continue to be viable,
and therefore beneficial to accept and
pay the PPC, the proposed rule provides
for certain determinations to be made.
Specifically, FHA must find, as
provided in proposed § 232.882(b)(4),
that the current or proposed operator of
the facility is satisfactory, as
demonstrated by past experience in
operating similar type healthcare
facilities and by state regulatory
performance evaluations. An example of
the type of information that FHA may
require is surveys/assessments by the
state regulatory agency regarding the
subject facility’s performance. If there
are outstanding deficiencies identified
by the state regulatory authority or the
Centers for Medicare and Medicaid
Services, then FHA anticipates that an
applicant would provide materials to
FHA clearly establishing how those
matters would be fully resolved.
In addition, FHA must determine that
the default under the insured mortgage
3 See section 210 of the Department of Veterans
Affairs and Housing and Urban Development Act of
1998. Public Law 105–65, approved October 27,
1997.
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was beyond the control of the borrower
and/or operator, or, in the case of a
transfer of physical assets, the proposed
borrower or operator, unless FHA
determines that any borrower/operator
deficiencies giving rise to the default
have clearly been addressed. (See
proposed § 232.882(b)(5).) For a new
operator, for example, FHA would
review information about the entity’s
experience and performance.
It should be noted that FHA’s partial
payment of claim is made pursuant to
the contract of mortgage insurance
between FHA and the mortgage lender,
which are the only parties to the
contract. Borrowers and operators are
neither parties to the contract of
insurance, nor are they third-party
beneficiaries, and thus they do not have
any rights or expectations in regard to
any decision made by FHA to accept or
reject a mortgagee’s request for a partial
payment of claim.
Further, FHA must specifically find
that the project is serving or potentially
could serve as a needed nursing home,
intermediate care facility, board and
care home, or assisted living facility.
(See proposed § 232.882(b)(6).) Such a
finding might be supported by a review
of, for example, a market-need study or
a project comprehensive needs
assessment.
Other requirements specified in the
proposed rule mirror the requirements
for PPCs for multifamily projects. The
proposed rule provides that FHA must
find that:
• The mortgagee is entitled, after a
default, to assign the mortgage in
exchange for the payment of insurance
benefits (see proposed § 232.882(b)(1));
• The relief resulting from partial
payment, when considered with other
resources available to the project, would
be sufficient to restore the financial
viability of the project (see proposed
§ 232.882(b)(2));
• The project is or can (at reasonable
cost) be made structurally sound (see
proposed § 232.882(b)(3));
• The default under the insured
mortgage was beyond the control of the
owner (see proposed § 232.882(b)(5));
• The property covered by the
mortgage is free and clear of all liens
other than the insured first mortgage
and other liens approved by the
Commissioner (see proposed § 232.882
(c)(1));
• The mortgagee has voluntarily
agreed to accept a PPC under the
mortgage insurance contract and to
recast the remaining mortgage amount
under terms and conditions prescribed
by the Commissioner (see proposed
§ 232.882(c)(2)); and
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• The owner has agreed to repay to
the FHA Commissioner an amount
equal to the partial payment, with the
obligation secured by a second mortgage
on the project containing terms and
conditions prescribed by the FHA
Commissioner. The terms of the second
mortgage will be case-specific to ensure
that the estimated project income will
be sufficient to cover estimated
operating expenses and debt service on
the recast insured mortgage (see
proposed § 232.882(c)(3)).
By establishing a standard process
and criteria for acceptance and payment
of PPCs in the Section 232 program,
partial payment of claims may occur
more frequently than they do now in the
Section 232 program, not only resulting
in savings to the FHA insurance fund,
but helping to restore a project to
financial stability.
III. Costs and Benefits of Rule
In providing mortgage insurance for
skilled nursing, intermediate care,
assisted living, and board and care
facilities, as compared to multifamily
residential or other commercial
properties, FHA’s Section 232 program
poses a significantly different risk to
FHA because these facilities are
designed specifically for healthcare use
and may not retain the mortgaged value
at resale due to a lack of alternative
uses. Thus, when HUD becomes the
mortgagee following a claim, the
recovery rate—the sales price as a
percentage of the unpaid balance—may
be lower for healthcare facilities than for
other types of properties.
HUD is proposing in this rule to
establish standards for the use of PPC to
minimize losses in the Section 232
program. Rather than paying the full
claim to the lender, a PPC involves FHA
and the lender restructuring the unpaid
mortgage balance and accrued interest
into two mortgages: One held by the
lender and the second held by HUD.
The lender’s modified FHA-insured
mortgage would range from 50 percent
to 75 percent of the remaining unpaid
principal balance. HUD’s loan would
include the remainder of the unpaid
balance and the accrued interest.
The lenders, FHA, and the facility
owners each benefit from the use of
PPCs. The lender receives a portion of
the unpaid balance, the full unpaid
interest, and a performing loan. This is
a method of curing the default with
FHA rather than the borrower paying
the lender. FHA avoids a full claim
payment and sale of the mortgage and
is entitled to be repaid the partial claim
payment with interest. The facility
owners receive restructured debt and
are able to continue operating the
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facility, which is also beneficial to the
community that the facility serves.
The accompanying more detailed
cost-benefit analysis is based on the
Section 232 current portfolio, and based
on the characteristics of the portfolio
and the few cases where PPC was used
in the program. FHA expects the typical
mortgage accepted for PPC would range
from $5 million to $20 million (original
amount) and would occur 3 to 7 years
after origination, following 10 to 30
months of delinquency. The savings to
HUD equals the difference between the
full claim amount and the partial claim
paid, minus the discounted amount
HUD receives from the HUD-held postPPC mortgage.
Use of PPC also allows an assisted
living, skilled nursing, board and care,
or intermediate care facility to remain
open to serve its residents and
community. The extent of this benefit
varies with the local market for longterm care. In smaller, less competitive
markets, the facility may be the only
option for its residents. In this case, if
the facility were to close, residents and
their families will have higher search
and relocation costs, since local options
would be limited, possibly requiring
residents to have to relocate to another
city or state. However, in larger, more
competitive markets, residents may be
able to find an alternative facility of
similar cost and quality in the same
community. In any event, residents will
face relocation costs and possibly higher
room rates or end up in a lower-quality
facility.
The benefits of allowing PPC in the
Section 232 program total $891,000 per
facility, which stem from avoided costs
of moving by the facility’s residents.
Transfers totaling $2.874 million occur
from FHA and lenders that opt for PPC
to FHA borrowers, as the avoided costs
allow FHA premiums to not increase.
FHA expects approximately five PPCs
annually in the section 232 program.
Aggregating these effects produces
annual benefits of $4.455 million and
annual transfers of $14.369 million. For
the full cost-benefit analysis, please see
HUD’s docket on www.regulations.gov
under the docket number of FR–5537–
P–01.
IV. Findings and Certifications
Information Collection Requirements
The information collection
requirements contained in this proposed
rule have been submitted to the Office
of Management and Budget (OMB)
under the Paperwork Reduction Act of
1995 (44 U.S.C. 3501–3520). In
accordance with the Paperwork
Reduction Act, an agency may not
conduct or sponsor, and a person is not
required to respond to, a collection of
information, unless the collection
displays a currently valid OMB control
number.
The burden of the information
collections in this proposed rule is
estimated as follows:
REPORTING AND RECORDKEEPING BURDEN
Number of
respondents
Section reference
Number of
responses per
respondent
Estimated
average time
for
requirement
(in hours)
Estimated
annual burden
(in hours)
10
1
100
1,000
Totals ........................................................................................................
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24 CFR 232.882 ..............................................................................................
10
1
100
1,000
In accordance with 5 CFR
1320.8(d)(1), HUD is soliciting
comments from members of the public
and affected agencies concerning this
collection of information to:
(1) Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
(2) Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information;
(3) Enhance the quality, utility, and
clarity of the information to be
collected; and
(4) Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated collection
techniques or other forms of information
technology; e.g., permitting electronic
submission of responses.
Interested persons are invited to
submit comments regarding the
information collection requirements in
this rule. Comments must refer to the
proposal by name and docket number
(FR–5537–P–01) and be sent to:
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HUD Desk Officer, Office of
Management and Budget, New
Executive Office Building,
Washington, DC 20503, Fax number:
202–395–6947, and
Reports Liaison Officer, Office of
Housing, Department of Housing and
Urban Development, 451 Seventh
Street SW., Room 9116, Washington,
DC 20410–8000.
Interested persons may submit
comments regarding the information
collection requirements electronically
through the Federal eRulemaking Portal
at https://www.regulations.gov. HUD
strongly encourages commenters to
submit comments electronically.
Electronic submission of comments
allows the commenter maximum time to
prepare and submit a comment, ensures
timely receipt by HUD, and enables
HUD to make them immediately
available to the public. Comments
submitted electronically through the
https://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 site to
submit comments electronically.
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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.
This rule is directed to strengthening
HUD’s Section 232 program by
establishing a process and criteria by
which the FHA may allow partial
payment of claims for Section 232
projects. Establishment of this process
also opens up another means by which
healthcare project owners can restore
troubled projects to financial stability.
Acceptance of PPCs helps healthcare
project owners and operators to lower
project debt, and continue to provide
valued healthcare services to the
communities they serve. This
established process for acceptance of
PPCs will help all healthcare project
owners, large and small. Accordingly,
the undersigned certifies that this rule
will not have a significant economic
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impact on a substantial number of small
entities.
Notwithstanding HUD’s
determination that this rule will not
have a significant effect on a substantial
number of small entities, HUD
specifically invites comments regarding
any less burdensome alternatives to this
rule that will meet HUD’s objectives as
described in this preamble.
Environmental Impact
A Finding of No Significant Impact
with respect to the environment has
been made, 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)). That
finding is available for public inspection
between the hours of 8 a.m. and 5 p.m.
weekdays in the Regulations Division,
Office of General Counsel, Department
of Housing and Urban Development,
451 7th Street SW., Room 10276,
Washington, DC 20410–0500. Due to
security measures at the HUD
Headquarters building, please schedule
an appointment to review the finding by
calling the Regulations Division at 202–
402–3055 (this is not a toll-free
number).
sroberts on DSK5SPTVN1PROD with PROPOSALS
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
rule will not have federalism
implications and would 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 governments, or on
the private sector, within the meaning of
UMRA.
Catalogue of Federal Domestic
Assistance
The Catalogue of Federal Domestic
Assistance Number for the Mortgage
Insurance Nursing Homes, Intermediate
VerDate Mar<15>2010
16:02 Jul 06, 2012
Jkt 226001
Care Facilities, Board and Care Homes,
and Assisted Living Facilities program
is 14.129.
List of Subjects in 24 CFR Part 232
Fire prevention, Health facilities,
Loan programs—health, Loan
programs—housing and community
development, Mortgage insurance,
Nursing homes, Reporting and
recordkeeping requirements.
Accordingly, for the reasons cited in
the preamble, HUD proposes to amend
part 232 of title 24 of the Code of
Federal Regulations as follows:
PART 232—MORTGAGE INSURANCE
FOR NURSING HOMES,
INTERMEDIATE CARE FACILITIES,
BOARD AND CARE HOMES, AND
ASSISTED LIVING FACILITIES
1. The authority citation for 24 CFR
part 232 is revised to read as follows:
Authority: 12 U.S.C. 1715b, 1715w, 1735f–
19; 42 U.S.C. 3535(d).
2. Add § 232.882 to read as follows:
§ 232.882
Partial payment of claims.
(a) When a lender for a loan on a
healthcare project becomes eligible to
file an insurance claim and to assign the
mortgage to the Commissioner pursuant
to § 232.865, the Commissioner may
request the lender, in lieu of
assignment, to accept a partial payment
of the claim under the mortgage
insurance contract and to recast the
mortgage, under such terms and
conditions as the Commissioner may
determine.
(b) The Commissioner may request
the lender to participate in a partial
payment of claim in lieu of assignment
only after a determination that partial
payment would be less costly to the
Federal Government than other
reasonable alternatives for maintaining
the project and would keep the
healthcare facility operational to serve
community needs. In addition to any
findings that may be provided in other
guidance, the Commissioner shall base
the determination on the findings listed
below:
(1) The lender is entitled, after a
default as defined in § 232.830, to assign
the mortgage in exchange for the
payment of insurance benefits;
(2) The relief resulting from partial
payment when considered with other
resources available to the project would
be sufficient to restore the financial
viability of the project;
(3) The project is or can (at reasonable
cost) be made physically sound;
(4) The current or proposed operator
of the facility is satisfactory to the
Commissioner, as demonstrated by past
PO 00000
Frm 00008
Fmt 4702
Sfmt 9990
experience in operating similar type
healthcare facilities and by state
regulatory performance;
(5) The default under the insured
mortgage was beyond the control of the
borrower and/or operator, or in the case
of a transfer of physical assets (TPA),
the proposed borrower or operator,
unless the Commissioner determines
that any borrower/operator deficiencies
giving rise to the default have clearly
been addressed; and
(6) The project is serving as, or
potentially could serve as, a needed
nursing home, intermediate care facility,
or board and care home, or assisted
living facility.
(c) Partial payment of a claim under
this section shall be made only when:
(1) The property covered by the
mortgage is free and clear of all liens
other than the insured first mortgage
and such other liens as the
Commissioner may have approved;
(2) The lender has voluntarily agreed
to accept a PPC under the mortgage
insurance contract and to recast the
remaining mortgage amount under
terms and conditions prescribed by the
Commissioner; and
(3) The borrower has agreed to repay
to the Commissioner an amount equal to
the partial payment, with the obligation
secured by a second mortgage on the
project containing terms and conditions
prescribed by the Commissioner. The
terms of the second mortgage will be
determined on a case-by-case basis to
ensure that the estimated project income
will be sufficient to cover estimated
operating expenses and debt service on
the recast insured mortgage. The
Commissioner may provide for
postponed amortization of the second
mortgage.
(d) Payment of insurance benefits
under this section shall be in cash.
(e) A lender receiving a partial
payment of claim, following the
Commissioner’s endorsement of the
mortgage for full insurance under 24
CFR part 252, will pay HUD a fee in an
amount set forth through Federal
Register notice. HUD, in its discretion,
may collect this fee or deduct the fee
from any payment it makes in the claim
process.
Dated: June 28, 2012.
Carol J. Galante,
Acting Assistant Secretary for Housing—
Federal Housing Commissioner.
[FR Doc. 2012–16559 Filed 7–6–12; 8:45 am]
BILLING CODE 4210–67–P
E:\FR\FM\09JYP1.SGM
09JYP1
]]>Agencies
[Federal Register Volume 77, Number 131 (Monday, July 9, 2012)]
[Proposed Rules]
[Pages 40310-40314]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16559]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 232
[Docket No. FR-5537-P-01]
RIN-2502-AJ04
Federal Housing Administration (FHA) Section 232 Healthcare
Mortgage Insurance Program: Partial Payment of Claims
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would amend the regulations governing FHA's
Section 232 Healthcare Mortgage Insurance program (Section 232
program). The Section 232 program insures mortgage loans to facilitate
the construction, substantial rehabilitation, purchase, and refinancing
of nursing homes, intermediate care facilities, board and care homes,
and assisted-living facilities. The amendments proposed by this rule
would reduce risk to the FHA insurance fund by establishing the
criteria and process by which FHA will accept and pay a partial payment
of the claim under the FHA mortgage insurance contract. Through
acceptance and payment of a partial payment of claim, FHA pays the
lender a portion of the unpaid principal balance and recasts a portion
of the mortgage under terms and conditions determined by FHA, as an
alternative to the lender assigning the entire mortgage to HUD. Partial
payment of claim would also allow FHA insured healthcare projects to
continue operating and providing services.
DATES: Comment Due Date: September 7, 2012.
ADDRESSES: Interested persons are invited to submit comments regarding
[[Page 40311]]
this proposed rule to the Regulations Division, Office of General
Counsel, Department of Housing and Urban Development, 451 7th Street
SW., Room 10276, Washington, DC 20410-0500. Communications must refer
to the above docket number and title. There are two methods for
submitting public comments. 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 7th Street SW., Room 10276,
Washington, DC 20410-0500.
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 the
commenter maximum time to prepare and submit a comment, ensures 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 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 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 appointment to review the public comments must be
scheduled in advance 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 via TTY by calling the
Federal 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: Roger E. Miller, Deputy Assistant
Secretary, Office of Healthcare Programs, Office of Housing, Department
of Housing and Urban Development, 451 7th Street SW., Room 6264,
Washington, DC 20410-8000; telephone 202-708-0599 (this is not a toll-
free number). Persons with hearing or speech disabilities may access
this number through TTY by calling the toll-free Federal Relay Service
at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
FHA's Section 232 program insures mortgage loans to facilitate the
construction, substantial rehabilitation, purchase, and refinancing of
nursing homes, intermediate care facilities, board and care homes, and
assisted-living facilities. A project may include more than one type of
facility and financing, and a combination of these uses is acceptable.
The Section 232 program is authorized under the National Housing Act
(12 U.S.C. 1715w). HUD's regulations for the Section 232 program are
codified in 24 CFR part 232. While many aspects of HUD's healthcare
facility operations, including the basic contract and eligibility
requirements, are governed by the regulations applicable to HUD's
multifamily mortgage insurance programs, separate healthcare
regulations have been adopted to address program operations specific to
healthcare facilities, such as state licensing requirements.\1\
---------------------------------------------------------------------------
\1\ The regulations codified at 24 CFR part 200 (entitled
``Introduction to FHA programs'') set forth, in a single location of
the Code of Federal Regulations, requirements that are generally
applicable to FHA programs. The regulations at 24 CFR 232.2 require
that facilities meet state licensing requirements.
---------------------------------------------------------------------------
One process well-established and long used in HUD's multifamily
housing programs is acceptance of partial payment of claims (PPCs).
Under the PPC process, FHA pays the mortgagee a portion of the unpaid
principal balance and recasts a portion of the mortgage under terms and
conditions determined by the FHA Commissioner (the Commissioner), as an
alternative to assigning the entire mortgage. Prior to processing the
PPC, the mortgagee must voluntarily agree to accept a partial payment
of the insurance claim in accordance with the terms and conditions
established by the Commissioner. The mortgagee must also waive any
prepayment and lock out provisions in the mortgage.
Congress granted FHA authority to allow PPCs for subsidized insured
multifamily properties in the Housing and Community Development
Amendments of 1978 (12 U.S.C. 1701z-11). The legislative history
reflects that a mortgagee's participation in a partial payment was
voluntary and based on its own determination that such an arrangement
would be in the mortgagee's own best interests.\2\ In the Housing and
Community Development Act of 1980 (12 U.S.C. 1701z-11), Congress
expanded FHA's authority to allow partial payments of claims beyond
subsidized projects to nonsubsidized multifamily rental housing project
insured under the National Housing Act. In the Multifamily Housing
Property Disposition Reform Act of 1994 (12 U.S.C. 1735f-19), a statute
primarily directed to a broad overhaul of multifamily program
operations, Congress clarified the voluntary nature of the PPC process
and the program coverage. The regulations implementing the statutory
authority to accept PPCs, which FHA adopted in 1985, and which are
codified in Sec. 207.258b, specifically excluded FHA's Section 232
program from the multifamily PPC process. (See 24 CFR 232.251(a).)
---------------------------------------------------------------------------
\2\ Legislative History (H. Rep. No. 95-1792, 95th Congress, 2nd
session) cited the preamble to the final rule establishing the
regulations for PPCs. The cited preamble language is found at 50 FR
38784 (September 24, 1985).
---------------------------------------------------------------------------
In 1997, Congress specifically authorized PPCs for the Section 232
program. (See 12 U.S.C. 1735f-19.) However, the regulatory provisions
governing the multifamily programs, which predated the 1997 statutory
amendments, were not revised to reflect the statutory authority to use
PPCs for healthcare facilities. Thus, the current regulations for the
multifamily programs establishing the procedures and criteria for
partial payments of claims for properties insured under other FHA
programs are not applicable to the Section 232 program.
II. This Proposed Rule
This proposed rule would provide, in regulation, the procedures and
criteria for FHA to determine when PPCs should be considered and paid
for healthcare facilities. To date, HUD has accepted PPCs in the
Section 232 program on a periodic basis, but HUD has concluded that the
criteria and procedures for granting PPCs in the Section 232 program
should be established and codified in regulation.
In developing regulations governing PPCs in the Section 232
program, the current regulations governing PPCs, codified at 24 CFR
207.258b, for the multifamily programs serve as a helpful starting
base. Additionally, this proposed rule is informed by FHA's experience
implementing the PPC process in its multifamily housing programs, and
FHA's experience in utilizing PPCs in the Section 232
[[Page 40312]]
program on a periodic and temporary basis.
This proposed rule adds a new Sec. 232.882, entitled ``Partial
Payment of Claims,'' to the Section 232 program regulations in 24 CFR
part 232. This new section provides that if the mortgagee elects to
assign a mortgage to the Commissioner, under certain circumstances the
Commissioner may request the mortgagee to accept a partial payment of
the claim. The proposed PPC regulations for the Section 232 program
differ from the current regulations establishing the PPC process for
the multifamily programs primarily because the focus of the Section 232
program is on healthcare facilities. While FHA must make a finding for
multifamily programs that the project is, or potentially could serve
as, a low- and moderate-income housing resource, the proposed PPC
regulations for the Section 232 program provide for FHA to review, in
its underwriting evaluation, the continued viability of the healthcare-
specific aspects of the project. FHA must find that the project meets
community healthcare needs, and will have sound management and project
operation. Under the statute, FHA must make a determination that a PPC
would be less costly to the government than other reasonable
alternatives and would keep the healthcare facility operational to
serve community needs.\3\ The proposed rule specifies that requirement
in Sec. 232.882.
---------------------------------------------------------------------------
\3\ See section 210 of the Department of Veterans Affairs and
Housing and Urban Development Act of 1998. Public Law 105-65,
approved October 27, 1997.
---------------------------------------------------------------------------
In addition, in an effort to ensure that the project will continue
to be viable, and therefore beneficial to accept and pay the PPC, the
proposed rule provides for certain determinations to be made.
Specifically, FHA must find, as provided in proposed Sec.
232.882(b)(4), that the current or proposed operator of the facility is
satisfactory, as demonstrated by past experience in operating similar
type healthcare facilities and by state regulatory performance
evaluations. An example of the type of information that FHA may require
is surveys/assessments by the state regulatory agency regarding the
subject facility's performance. If there are outstanding deficiencies
identified by the state regulatory authority or the Centers for
Medicare and Medicaid Services, then FHA anticipates that an applicant
would provide materials to FHA clearly establishing how those matters
would be fully resolved.
In addition, FHA must determine that the default under the insured
mortgage was beyond the control of the borrower and/or operator, or, in
the case of a transfer of physical assets, the proposed borrower or
operator, unless FHA determines that any borrower/operator deficiencies
giving rise to the default have clearly been addressed. (See proposed
Sec. 232.882(b)(5).) For a new operator, for example, FHA would review
information about the entity's experience and performance.
It should be noted that FHA's partial payment of claim is made
pursuant to the contract of mortgage insurance between FHA and the
mortgage lender, which are the only parties to the contract. Borrowers
and operators are neither parties to the contract of insurance, nor are
they third-party beneficiaries, and thus they do not have any rights or
expectations in regard to any decision made by FHA to accept or reject
a mortgagee's request for a partial payment of claim.
Further, FHA must specifically find that the project is serving or
potentially could serve as a needed nursing home, intermediate care
facility, board and care home, or assisted living facility. (See
proposed Sec. 232.882(b)(6).) Such a finding might be supported by a
review of, for example, a market-need study or a project comprehensive
needs assessment.
Other requirements specified in the proposed rule mirror the
requirements for PPCs for multifamily projects. The proposed rule
provides that FHA must find that:
The mortgagee is entitled, after a default, to assign the
mortgage in exchange for the payment of insurance benefits (see
proposed Sec. 232.882(b)(1));
The relief resulting from partial payment, when considered
with other resources available to the project, would be sufficient to
restore the financial viability of the project (see proposed Sec.
232.882(b)(2));
The project is or can (at reasonable cost) be made
structurally sound (see proposed Sec. 232.882(b)(3));
The default under the insured mortgage was beyond the
control of the owner (see proposed Sec. 232.882(b)(5));
The property covered by the mortgage is free and clear of
all liens other than the insured first mortgage and other liens
approved by the Commissioner (see proposed Sec. 232.882 (c)(1));
The mortgagee has voluntarily agreed to accept a PPC under
the mortgage insurance contract and to recast the remaining mortgage
amount under terms and conditions prescribed by the Commissioner (see
proposed Sec. 232.882(c)(2)); and
The owner has agreed to repay to the FHA Commissioner an
amount equal to the partial payment, with the obligation secured by a
second mortgage on the project containing terms and conditions
prescribed by the FHA Commissioner. The terms of the second mortgage
will be case-specific to ensure that the estimated project income will
be sufficient to cover estimated operating expenses and debt service on
the recast insured mortgage (see proposed Sec. 232.882(c)(3)).
By establishing a standard process and criteria for acceptance and
payment of PPCs in the Section 232 program, partial payment of claims
may occur more frequently than they do now in the Section 232 program,
not only resulting in savings to the FHA insurance fund, but helping to
restore a project to financial stability.
III. Costs and Benefits of Rule
In providing mortgage insurance for skilled nursing, intermediate
care, assisted living, and board and care facilities, as compared to
multifamily residential or other commercial properties, FHA's Section
232 program poses a significantly different risk to FHA because these
facilities are designed specifically for healthcare use and may not
retain the mortgaged value at resale due to a lack of alternative uses.
Thus, when HUD becomes the mortgagee following a claim, the recovery
rate--the sales price as a percentage of the unpaid balance--may be
lower for healthcare facilities than for other types of properties.
HUD is proposing in this rule to establish standards for the use of
PPC to minimize losses in the Section 232 program. Rather than paying
the full claim to the lender, a PPC involves FHA and the lender
restructuring the unpaid mortgage balance and accrued interest into two
mortgages: One held by the lender and the second held by HUD. The
lender's modified FHA-insured mortgage would range from 50 percent to
75 percent of the remaining unpaid principal balance. HUD's loan would
include the remainder of the unpaid balance and the accrued interest.
The lenders, FHA, and the facility owners each benefit from the use
of PPCs. The lender receives a portion of the unpaid balance, the full
unpaid interest, and a performing loan. This is a method of curing the
default with FHA rather than the borrower paying the lender. FHA avoids
a full claim payment and sale of the mortgage and is entitled to be
repaid the partial claim payment with interest. The facility owners
receive restructured debt and are able to continue operating the
[[Page 40313]]
facility, which is also beneficial to the community that the facility
serves.
The accompanying more detailed cost-benefit analysis is based on
the Section 232 current portfolio, and based on the characteristics of
the portfolio and the few cases where PPC was used in the program. FHA
expects the typical mortgage accepted for PPC would range from $5
million to $20 million (original amount) and would occur 3 to 7 years
after origination, following 10 to 30 months of delinquency. The
savings to HUD equals the difference between the full claim amount and
the partial claim paid, minus the discounted amount HUD receives from
the HUD-held post-PPC mortgage.
Use of PPC also allows an assisted living, skilled nursing, board
and care, or intermediate care facility to remain open to serve its
residents and community. The extent of this benefit varies with the
local market for long-term care. In smaller, less competitive markets,
the facility may be the only option for its residents. In this case, if
the facility were to close, residents and their families will have
higher search and relocation costs, since local options would be
limited, possibly requiring residents to have to relocate to another
city or state. However, in larger, more competitive markets, residents
may be able to find an alternative facility of similar cost and quality
in the same community. In any event, residents will face relocation
costs and possibly higher room rates or end up in a lower-quality
facility.
The benefits of allowing PPC in the Section 232 program total
$891,000 per facility, which stem from avoided costs of moving by the
facility's residents. Transfers totaling $2.874 million occur from FHA
and lenders that opt for PPC to FHA borrowers, as the avoided costs
allow FHA premiums to not increase. FHA expects approximately five PPCs
annually in the section 232 program. Aggregating these effects produces
annual benefits of $4.455 million and annual transfers of $14.369
million. For the full cost-benefit analysis, please see HUD's docket on
www.regulations.gov under the docket number of FR-5537-P-01.
IV. Findings and Certifications
Information Collection Requirements
The information collection requirements contained in this proposed
rule have been submitted to the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In
accordance with the Paperwork Reduction Act, an agency may not conduct
or sponsor, and a person is not required to respond to, a collection of
information, unless the collection displays a currently valid OMB
control number.
The burden of the information collections in this proposed rule is
estimated as follows:
Reporting and Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
Estimated
Number of average time Estimated
Section reference Number of responses per for annual burden
respondents respondent requirement (in hours)
(in hours)
----------------------------------------------------------------------------------------------------------------
24 CFR 232.882.................................. 10 1 100 1,000
---------------------------------------------------------------
Totals...................................... 10 1 100 1,000
----------------------------------------------------------------------------------------------------------------
In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments
from members of the public and affected agencies concerning this
collection of information to:
(1) Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the agency,
including whether the information will have practical utility;
(2) Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
(3) Enhance the quality, utility, and clarity of the information to
be collected; and
(4) Minimize the burden of the collection of information on those
who are to respond, including through the use of appropriate automated
collection techniques or other forms of information technology; e.g.,
permitting electronic submission of responses.
Interested persons are invited to submit comments regarding the
information collection requirements in this rule. Comments must refer
to the proposal by name and docket number (FR-5537-P-01) and be sent
to:
HUD Desk Officer, Office of Management and Budget, New Executive Office
Building, Washington, DC 20503, Fax number: 202-395-6947, and
Reports Liaison Officer, Office of Housing, Department of Housing and
Urban Development, 451 Seventh Street SW., Room 9116, Washington, DC
20410-8000.
Interested persons may submit comments regarding the information
collection requirements electronically through the Federal eRulemaking
Portal at https://www.regulations.gov. HUD strongly encourages
commenters to submit comments electronically. Electronic submission of
comments allows the commenter maximum time to prepare and submit a
comment, ensures timely receipt by HUD, and enables HUD to make them
immediately available to the public. Comments submitted electronically
through the https://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 site to submit comments
electronically.
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.
This rule is directed to strengthening HUD's Section 232 program by
establishing a process and criteria by which the FHA may allow partial
payment of claims for Section 232 projects. Establishment of this
process also opens up another means by which healthcare project owners
can restore troubled projects to financial stability. Acceptance of
PPCs helps healthcare project owners and operators to lower project
debt, and continue to provide valued healthcare services to the
communities they serve. This established process for acceptance of PPCs
will help all healthcare project owners, large and small. Accordingly,
the undersigned certifies that this rule will not have a significant
economic
[[Page 40314]]
impact on a substantial number of small entities.
Notwithstanding HUD's determination that this rule will not have a
significant effect on a substantial number of small entities, HUD
specifically invites comments regarding any less burdensome
alternatives to this rule that will meet HUD's objectives as described
in this preamble.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made, 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)). That finding is available for
public inspection between the hours of 8 a.m. and 5 p.m. weekdays in
the Regulations Division, Office of General Counsel, Department of
Housing and Urban Development, 451 7th Street SW., Room 10276,
Washington, DC 20410-0500. Due to security measures at the HUD
Headquarters building, please schedule an appointment to review the
finding by calling the Regulations Division at 202-402-3055 (this is
not a toll-free number).
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 rule will not have federalism
implications and would 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 governments,
or on the private sector, within the meaning of UMRA.
Catalogue of Federal Domestic Assistance
The Catalogue of Federal Domestic Assistance Number for the
Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board
and Care Homes, and Assisted Living Facilities program is 14.129.
List of Subjects in 24 CFR Part 232
Fire prevention, Health facilities, Loan programs--health, Loan
programs--housing and community development, Mortgage insurance,
Nursing homes, Reporting and recordkeeping requirements.
Accordingly, for the reasons cited in the preamble, HUD proposes to
amend part 232 of title 24 of the Code of Federal Regulations as
follows:
PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE
FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES
1. The authority citation for 24 CFR part 232 is revised to read as
follows:
Authority: 12 U.S.C. 1715b, 1715w, 1735f-19; 42 U.S.C. 3535(d).
2. Add Sec. 232.882 to read as follows:
Sec. 232.882 Partial payment of claims.
(a) When a lender for a loan on a healthcare project becomes
eligible to file an insurance claim and to assign the mortgage to the
Commissioner pursuant to Sec. 232.865, the Commissioner may request
the lender, in lieu of assignment, to accept a partial payment of the
claim under the mortgage insurance contract and to recast the mortgage,
under such terms and conditions as the Commissioner may determine.
(b) The Commissioner may request the lender to participate in a
partial payment of claim in lieu of assignment only after a
determination that partial payment would be less costly to the Federal
Government than other reasonable alternatives for maintaining the
project and would keep the healthcare facility operational to serve
community needs. In addition to any findings that may be provided in
other guidance, the Commissioner shall base the determination on the
findings listed below:
(1) The lender is entitled, after a default as defined in Sec.
232.830, to assign the mortgage in exchange for the payment of
insurance benefits;
(2) The relief resulting from partial payment when considered with
other resources available to the project would be sufficient to restore
the financial viability of the project;
(3) The project is or can (at reasonable cost) be made physically
sound;
(4) The current or proposed operator of the facility is
satisfactory to the Commissioner, as demonstrated by past experience in
operating similar type healthcare facilities and by state regulatory
performance;
(5) The default under the insured mortgage was beyond the control
of the borrower and/or operator, or in the case of a transfer of
physical assets (TPA), the proposed borrower or operator, unless the
Commissioner determines that any borrower/operator deficiencies giving
rise to the default have clearly been addressed; and
(6) The project is serving as, or potentially could serve as, a
needed nursing home, intermediate care facility, or board and care
home, or assisted living facility.
(c) Partial payment of a claim under this section shall be made
only when:
(1) The property covered by the mortgage is free and clear of all
liens other than the insured first mortgage and such other liens as the
Commissioner may have approved;
(2) The lender has voluntarily agreed to accept a PPC under the
mortgage insurance contract and to recast the remaining mortgage amount
under terms and conditions prescribed by the Commissioner; and
(3) The borrower has agreed to repay to the Commissioner an amount
equal to the partial payment, with the obligation secured by a second
mortgage on the project containing terms and conditions prescribed by
the Commissioner. The terms of the second mortgage will be determined
on a case-by-case basis to ensure that the estimated project income
will be sufficient to cover estimated operating expenses and debt
service on the recast insured mortgage. The Commissioner may provide
for postponed amortization of the second mortgage.
(d) Payment of insurance benefits under this section shall be in
cash.
(e) A lender receiving a partial payment of claim, following the
Commissioner's endorsement of the mortgage for full insurance under 24
CFR part 252, will pay HUD a fee in an amount set forth through Federal
Register notice. HUD, in its discretion, may collect this fee or deduct
the fee from any payment it makes in the claim process.
Dated: June 28, 2012.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2012-16559 Filed 7-6-12; 8:45 am]
BILLING CODE 4210-67-P
