Federal Housing Administration (FHA) Section 232 Healthcare Mortgage Insurance Program: Partial Payment of Claims, 72920-72923 [2012-29545]
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is amended by removing the heading ‘‘I.
Telecommunications’’ and adding in its
place ‘‘Part 1—Telecommunications’’ to
read as follows:
CATEGORY 5—
TELECOMMUNICATIONS AND
‘‘INFORMATION SECURITY’’
Items:
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c. * * *
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12. In Supplement No. 1 to Part 774
(the Commerce Control List), Category 5,
Part 1, ECCN 5A101 is amended by
revising the final Note in the Items
paragraph of the List of Items Controlled
section to read as follows:
■
5A101 Telemetering and Telecontrol
Equipment, Including Ground
Equipment, Designed or Modified for
Unmanned Aerial Vehicles or Rocket
Systems (Including Ballistic Missile
Systems, Space Launch Vehicles,
Sounding Rockets, Cruise Missile
Systems, Target Drones, and
Reconnaissance Drones) Capable of a
Maximum ‘‘Range’’ Equal to or Greater
Than 300 km.
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List of Items Controlled
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Items:
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Note: 5A101 does not include items
not designed or modified for unmanned
aerial vehicles or rocket systems
(including ballistic missile systems,
space launch vehicles, sounding
rockets, cruise missile systems, target
drones, and reconnaissance drones)
capable of a maximum ‘‘range’’ equal to
or greater than 300 km (e.g., telemetry
circuit cards limited by design to
reception only and designed for use in
personal computers).
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■ 13. In Supplement No. 1 to Part 774
(the Commerce Control List), Category 5,
Part 1, ECCN 5A991, List of Items
Controlled section is amended by:
a. Revising the second sentence of the
Related Controls paragraph; and
b. Amending the Items Paragraph by
removing the Note that reads
‘‘5A991.c.10 does not control packet
switches or routers with ports or lines
not exceeding the limits in 5A991.c.10.’’
and adding it above paragraph c.11, to
read as follows:
srobinson on DSK4SPTVN1PROD with
5A991 Telecommunication
Equipment, Not Controlled by 5A001.
*
*
*
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*
List of Items Controlled
Unit: * * *
Related Controls: * * * See also
5E001.c, 5E101 and 5E991.
Related Definitions: * * *
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Note: 5A991.c.10 does not control packet
switches or routers with ports or lines not
exceeding the limits in 5A991.c.10.
PART 1—TELECOMMUNICATIONS
*
*
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c.11. ‘‘Optical switching’’;
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14. In Supplement No. 1 to Part 774
(the Commerce Control List), Category 5
is amended by removing the heading
‘‘II. Information Security’’ and adding in
its place ‘‘Part 2—Information Security’’
to read as follows:
■
CATEGORY 5—
TELECOMMUNICATIONS AND
‘‘INFORMATION SECURITY’’
9B116 Specially Designed
‘‘Production Facilities’’ for the Systems,
Sub-Systems, and Components
Controlled by 9A004 to 9A009, 9A011,
9A012, 9A101, 9A104 to 9A109, 9A111,
9A116 to 9A119.
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List of Items Controlled
*
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*
Related Controls: Although items
described in ECCNs 9A004 to 9A009,
9A011, 9A101, 9A104 to 9A109, 9A111,
and 9A116 to 9A119 are subject to the
export licensing authority of the
Department of State, Directorate of
Defense Trade Controls (22 CFR part
121), the ‘‘production facilities’’
controlled in this entry that are related
to these items is subject to the export
licensing authority of BIS.
*
*
*
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*
PART 2—‘‘INFORMATION
SECURITY’’
Dated: November 26, 2012.
Kevin J. Wolf,
Assistant Secretary for Export
Administration.
*
[FR Doc. 2012–29143 Filed 12–6–12; 8:45 am]
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15. In Supplement No. 1 to Part 774
(the Commerce Control List), Category 6,
ECCN 6A005, List of Items Controlled
section is amended by removing the
word ‘‘lambda’’ and inserting the
symbol ‘‘l’’ in its place in paragraph f.3.
of the Items paragraph.
■ 16. In Supplement No. 1 to Part 774
(the Commerce Control List), Category 8,
ECCN 8A992, List of Items Controlled
section is amended by revising
paragraph b. in the Items paragraph to
read as follows:
BILLING CODE 3510–33–P
8A992 Vessels, Marine Systems or
Equipment, Not Controlled by 8A001,
8A002 or 8A018, and Specially
Designed Parts Therefor.
AGENCY:
■
*
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*
List of Items Controlled
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Items:
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b. Photographic still cameras specially
designed or modified for underwater
use, having a film format of 35 mm or
larger, and having autofocusing or
remote focusing specially designed for
underwater use;
*
*
*
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*
17. In Supplement No. 1 to Part 774
(the Commerce Control List), Category 9,
ECCN 9B116, List of Items Controlled
section is amended by revising the
Related Controls paragraph to read as
follows:
■
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DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 232
[Docket No. FR–5537–F–02]
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: Final rule.
This rule amends the
regulations governing FHA’s Section
232 Healthcare Mortgage Insurance
program (Section 232 program) by
establishing the criteria and process by
which FHA will accept and pay a partial
payment of a claim under the FHA
mortgage insurance contract. 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. 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
SUMMARY:
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Federal Register / Vol. 77, No. 236 / Friday, December 7, 2012 / Rules and Regulations
entire mortgage to HUD. Partial payment
of claim also allows FHA-insured
healthcare projects to continue
operating and providing services.
DATES: Effective Date: January 7, 2013.
FOR FURTHER INFORMATION CONTACT:
Kelly Haines, Director, Office of
Residential Care Facilities, Office of
Healthcare Programs, Office of Housing,
Department of Housing and Urban
Development, 451 7th Street SW., Room
6264, Washington, DC 20410–8000;
telephone number 202–708–0599 (this
is not a toll-free number). Persons with
hearing or speech impairments may
access this number through TTY by
calling the toll-free Federal Relay
Service at 1–800–877–8339.
SUPPLEMENTARY INFORMATION:
A. Background
srobinson on DSK4SPTVN1PROD with
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). The
regulations implementing the statutory
authority to accept PPCs, which FHA
adopted in 1985, and which are codified
in 24 CFR 207.258b, specifically
excluded FHA’s Section 232 program
from the multifamily PPC process. (See
24 CFR 232.251(a).)
Congress specifically authorized PPCs
for the Section 232 program in 1997.
(See 12 U.S.C. 1735 f–19.) However, as
the regulatory provisions governing the
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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multifamily programs, which predated
the 1997 statutory amendments, were
not revised to reflect the statutory
authority to use PPCs for healthcare
facilities, HUD proposed revisions
specifically to address PPCs.
B. The Proposed Rule and Public
Comments
On July 9, 2012, HUD published a
proposed rule at 77 FR 40301, in which
it submitted for public comment a
proposed revision to the Section 232
program regulations to provide, in
regulation, the procedures and criteria
for FHA to determine when PPCs
should be considered and paid for
healthcare facilities.
The proposed regulations governing
PPCs in the Section 232 program used
the current multifamily program
regulations governing PPCs, codified at
24 CFR 207.258b, as a baseline. Those
PPC regulations were modified based on
FHA’s experience in implementing the
PPC process in its multifamily housing
programs, and in utilizing PPCs in the
Section 232 program on a periodic and
temporary basis.
The proposed rule added a new
§ 232.882, entitled ‘‘Partial Payment of
Claims,’’ to the Section 232 program
regulations in 24 CFR part 232 to
provide that if the mortgagee elects to
assign a mortgage to the FHA
Commissioner, under certain
circumstances the Commissioner may
request the mortgagee to accept a partial
payment of the claim. That proposed
PPC regulation for the Section 232
program differed from the regulations
establishing the PPC process for the
multifamily programs primarily because
the focus of the Section 232 program is
on healthcare facilities.
As stated in the proposed rule
preamble and emphasized here in this
preamble to the final rule, 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.
By establishing a standard process
and criteria for acceptance and payment
of PPCs in the Section 232 program,
partial payment of claims can 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.
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The public comment period for the
July 9, 2012, proposed rule closed on
September 7, 2012, and HUD received
one public comment through the
www.regulations.gov Web site. The
commenter, an association of healthcare
finance bankers and healthcare
consultants, expressed strong support
for the proposed PPC change, as it
would make the Section 232 program
stronger by allowing appropriate use of
the partial-payment-of-claim option and
provide another tool to help struggling
projects. The commenter offered no
suggested changes, and urged HUD to
implement the final rule as quickly as
possible.
C. This Final Rule
In this final rule, HUD adopts the
proposed rule without substantive
change, but makes an organizational
change and makes certain citation
revisions as a result of the
organizational change. In this final rule,
HUD is adding the PPC provisions to
subpart B, entitled Contract Rights and
Obligations. In the proposed rule, these
changes were proposed to be added to
subpart D, which is also titled Contract
Rights and Obligations, but subpart D
follows subpart C, Supplemental Loans
to Finance Purchase and Install Fire
Safety Equipment, and focuses on
payments and claims related to loans to
finance the purchase and installation of
fire safety equipment. Relocating the
PPC provisions to part 232 subpart B,
which addresses contract rights and
obligations generally under the Section
232 program, was determined to be a
more appropriate fit. Further, HUD has
made several minor revisions in the
final rule stage to conform the
references in this rule to the relevant
sections describing the claims process to
reflect the change from subpart D.
Findings and Certifications
Executive Order 13563, Regulatory
Review
The President’s Executive Order (EO)
13563, entitled ‘‘Improving Regulation
and Regulatory Review,’’ was signed by
the President on January 18, 2011, and
published on January 21, 2011, at 76 FR
3821. This EO requires executive
agencies to analyze regulations that are
‘‘outmoded, ineffective, insufficient, or
excessively burdensome, and to modify,
streamline, expand, or repeal them in
accordance with what has been
learned.’’ Section 4 of the EO, entitled
‘‘Flexible Approaches,’’ provides, in
relevant part, that where relevant,
feasible, and consistent with regulatory
objectives, and to the extent permitted
by law, each agency shall identify and
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consider regulatory approaches that
reduce burdens and maintain flexibility
and freedom of choice for the public. As
this rule will include guidance for PPCs
in the Code of Federal Regulations, HUD
submits that the changes by this rule to
the Section 232 regulations are
consistent with the EO’s directions. The
existing Section 232 regulations provide
insufficient guidance to the public on
PPCs for the Section 232 program. These
changes will 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, as an alternative to
the lender assigning the entire mortgage
to HUD. It therefore strengthens the
Section 232 program, and helps to
ensure that healthcare facilities remain
financially viable.
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. As noted under the discussion
of EO 13563, 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. Additionally,
by clarifying and codifying existing
requirements, the rule makes it easier
for borrowers and operators to comply
with their legal obligations.
Accordingly, the undersigned certifies
that this rule will not have a significant
economic impact on a substantial
number of small entities.
srobinson on DSK4SPTVN1PROD with
Information Collection Requirements
The information collection
requirements contained in this rule
were reviewed by the Office of
Management and Budget (OMB) under
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520), and assigned
OMB Control Numbers 2502–0418.
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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 docket file is available for public
inspection.
Environmental Impact
A Finding of No Significant Impact
with respect to the environment for this
rule was made at the proposed rule
stage 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 of No Significant Impact
remains applicable to this final rule and
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 Seventh 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). Individuals with speech or
hearing impairments may access this
number via TTY by calling the Federal
Relay Service at 800–877–8339.
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 rule does not
impose any federal mandates on any
state, local, or tribal governments, or on
the private sector, within the meaning of
UMRA.
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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 amends 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 § 232.256 to subpart B to read
as follows:
■
§ 232.256
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 § 207.258, the Commissioner may
request the lender, in lieu of
assignment, to accept a partial payment
of the claim under the mortgage
insurance contract and 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 that 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 § 207.255, 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
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Federal Register / Vol. 77, No. 236 / Friday, December 7, 2012 / Rules and Regulations
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 types of
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,
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.
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Dated: December 3, 2012.
Carol J. Galante,
Acting Assistant Secretary for Housing—
Federal Housing Commissioner.
[FR Doc. 2012–29545 Filed 12–6–12; 8:45 am]
BILLING CODE 4210–67–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9603]
RIN 1545–BJ23
Deduction for Qualified Film and
Television Production Costs
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations and removal of
temporary regulations.
AGENCY:
This document contains final
regulations relating to deductions for
the cost of producing qualified film and
television productions. These final
regulations reflect changes to the law
made by the Tax Extenders and
Alternative Minimum Tax Relief Act of
2008 and affect taxpayers that produce
films and television productions within
the United States.
DATES: Effective Date: These regulations
are effective on December 7, 2012.
Applicability Dates: For dates of
applicability, see § 1.181–6.
FOR FURTHER INFORMATION CONTACT:
Bernard P. Harvey, (202) 622–4930 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
This document contains final
regulations that amend 26 CFR part 1 to
reflect amendments made to section 181
of the Internal Revenue Code of 1986
(Code) by section 502 of the Tax
Extenders and Alternative Minimum
Tax Relief Act of 2008, Public Law 110–
343 (122 Stat. 3765) (October 3, 2008).
On October 19, 2011, the IRS and the
Treasury Department published in the
Federal Register (TD 9552, 76 FR
64816) temporary regulations amending
the rules under section 181 for
deductions relating to the cost of
producing qualified film and television
productions to reflect section 502 of the
Tax Extenders and Alternative
Minimum Tax Relief Act of 2008. A
notice of proposed rulemaking (REG–
146297–09) cross-referencing the
temporary regulations was published in
the Federal Register (76 FR 64879) on
the same day. No comments were
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72923
received from the public in response to
the notice of proposed rulemaking. No
public hearing was requested or held.
The proposed regulations under section
181 are adopted by this Treasury
decision and the corresponding
temporary regulations are removed.
Effective/Applicability Date
These final regulations apply to
qualified film and television
productions to which section 181 is
applicable and for which the first day of
principal photography or in-between
animation occurs on or after December
7, 2012. The owner of a qualified film
or television production may apply the
final regulations to productions to
which section 181 applies and for
which principal photography or, for an
animated production, in-between
animation commenced before December
7, 2012.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866, as
supplemented by Executive Order
13563. Therefore, a regulatory
assessment is not required. It also has
been determined that section 553(b) and
(d) of the Administrative Procedure Act
(5 U.S.C. chapter 5) does not apply to
these regulations. Because the
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Code, the notice
of proposed rulemaking that preceded
these final regulations was submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for
comment on its impact on small
business, and no comments were
received.
Drafting Information
The principal author of these
regulations is Bernard P. Harvey, Office
of Associate Chief Counsel (Income Tax
and Accounting). However, other
personnel from the IRS and the Treasury
Department participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
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]]>Agencies
[Federal Register Volume 77, Number 236 (Friday, December 7, 2012)]
[Rules and Regulations]
[Pages 72920-72923]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29545]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 232
[Docket No. FR-5537-F-02]
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: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule amends the regulations governing FHA's Section 232
Healthcare Mortgage Insurance program (Section 232 program) by
establishing the criteria and process by which FHA will accept and pay
a partial payment of a claim under the FHA mortgage insurance contract.
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. 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
[[Page 72921]]
entire mortgage to HUD. Partial payment of claim also allows FHA-
insured healthcare projects to continue operating and providing
services.
DATES: Effective Date: January 7, 2013.
FOR FURTHER INFORMATION CONTACT: Kelly Haines, Director, Office of
Residential Care Facilities, Office of Healthcare Programs, Office of
Housing, Department of Housing and Urban Development, 451 7th Street
SW., Room 6264, Washington, DC 20410-8000; telephone number 202-708-
0599 (this is not a toll-free number). Persons with hearing or speech
impairments may access this number through TTY by calling the toll-free
Federal Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
A. 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\
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\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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One process well-established and long used in HUD's multifamily
housing programs is acceptance of partial payment of claims (PPCs). The
regulations implementing the statutory authority to accept PPCs, which
FHA adopted in 1985, and which are codified in 24 CFR 207.258b,
specifically excluded FHA's Section 232 program from the multifamily
PPC process. (See 24 CFR 232.251(a).)
Congress specifically authorized PPCs for the Section 232 program
in 1997. (See 12 U.S.C. 1735 f-19.) However, as 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, HUD proposed revisions
specifically to address PPCs.
B. The Proposed Rule and Public Comments
On July 9, 2012, HUD published a proposed rule at 77 FR 40301, in
which it submitted for public comment a proposed revision to the
Section 232 program regulations to provide, in regulation, the
procedures and criteria for FHA to determine when PPCs should be
considered and paid for healthcare facilities.
The proposed regulations governing PPCs in the Section 232 program
used the current multifamily program regulations governing PPCs,
codified at 24 CFR 207.258b, as a baseline. Those PPC regulations were
modified based on FHA's experience in implementing the PPC process in
its multifamily housing programs, and in utilizing PPCs in the Section
232 program on a periodic and temporary basis.
The proposed rule added a new Sec. 232.882, entitled ``Partial
Payment of Claims,'' to the Section 232 program regulations in 24 CFR
part 232 to provide that if the mortgagee elects to assign a mortgage
to the FHA Commissioner, under certain circumstances the Commissioner
may request the mortgagee to accept a partial payment of the claim.
That proposed PPC regulation for the Section 232 program differed from
the regulations establishing the PPC process for the multifamily
programs primarily because the focus of the Section 232 program is on
healthcare facilities.
As stated in the proposed rule preamble and emphasized here in this
preamble to the final rule, 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.
By establishing a standard process and criteria for acceptance and
payment of PPCs in the Section 232 program, partial payment of claims
can 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.
The public comment period for the July 9, 2012, proposed rule
closed on September 7, 2012, and HUD received one public comment
through the www.regulations.gov Web site. The commenter, an association
of healthcare finance bankers and healthcare consultants, expressed
strong support for the proposed PPC change, as it would make the
Section 232 program stronger by allowing appropriate use of the
partial-payment-of-claim option and provide another tool to help
struggling projects. The commenter offered no suggested changes, and
urged HUD to implement the final rule as quickly as possible.
C. This Final Rule
In this final rule, HUD adopts the proposed rule without
substantive change, but makes an organizational change and makes
certain citation revisions as a result of the organizational change. In
this final rule, HUD is adding the PPC provisions to subpart B,
entitled Contract Rights and Obligations. In the proposed rule, these
changes were proposed to be added to subpart D, which is also titled
Contract Rights and Obligations, but subpart D follows subpart C,
Supplemental Loans to Finance Purchase and Install Fire Safety
Equipment, and focuses on payments and claims related to loans to
finance the purchase and installation of fire safety equipment.
Relocating the PPC provisions to part 232 subpart B, which addresses
contract rights and obligations generally under the Section 232
program, was determined to be a more appropriate fit. Further, HUD has
made several minor revisions in the final rule stage to conform the
references in this rule to the relevant sections describing the claims
process to reflect the change from subpart D.
Findings and Certifications
Executive Order 13563, Regulatory Review
The President's Executive Order (EO) 13563, entitled ``Improving
Regulation and Regulatory Review,'' was signed by the President on
January 18, 2011, and published on January 21, 2011, at 76 FR 3821.
This EO requires executive agencies to analyze regulations that are
``outmoded, ineffective, insufficient, or excessively burdensome, and
to modify, streamline, expand, or repeal them in accordance with what
has been learned.'' Section 4 of the EO, entitled ``Flexible
Approaches,'' provides, in relevant part, that where relevant,
feasible, and consistent with regulatory objectives, and to the extent
permitted by law, each agency shall identify and
[[Page 72922]]
consider regulatory approaches that reduce burdens and maintain
flexibility and freedom of choice for the public. As this rule will
include guidance for PPCs in the Code of Federal Regulations, HUD
submits that the changes by this rule to the Section 232 regulations
are consistent with the EO's directions. The existing Section 232
regulations provide insufficient guidance to the public on PPCs for the
Section 232 program. These changes will 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, as an alternative to the lender assigning
the entire mortgage to HUD. It therefore strengthens the Section 232
program, and helps to ensure that healthcare facilities remain
financially viable.
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. As noted under the
discussion of EO 13563, 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. Additionally, by clarifying and
codifying existing requirements, the rule makes it easier for borrowers
and operators to comply with their legal obligations. Accordingly, the
undersigned certifies that this rule will not have a significant
economic impact on a substantial number of small entities.
Information Collection Requirements
The information collection requirements contained in this rule were
reviewed by the Office of Management and Budget (OMB) under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), and assigned OMB
Control Numbers 2502-0418.
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 docket file is available for public inspection.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
for this rule was made at the proposed rule stage 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 of No Significant Impact remains applicable to this final
rule and 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 Seventh
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). Individuals with
speech or hearing impairments may access this number via TTY by calling
the Federal Relay Service at 800-877-8339.
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 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 amends 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
0
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).
0
2. Add Sec. 232.256 to subpart B to read as follows:
Sec. 232.256 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. 207.258, the Commissioner may request
the lender, in lieu of assignment, to accept a partial payment of the
claim under the mortgage insurance contract and 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 that 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.
207.255, 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
[[Page 72923]]
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 types of 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, 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: December 3, 2012.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2012-29545 Filed 12-6-12; 8:45 am]
BILLING CODE 4210-67-P
