Federal Housing Administration (FHA) Multifamily Rental Project Closing Documents: Notice Announcing Approval of Revised Documents, 40131-40132 [2014-16315]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 79, Number 133 (Friday, July 11, 2014)]
[Notices]
[Pages 40131-40132]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-16315]



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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5740-N-02]


Federal Housing Administration (FHA) Multifamily Rental Project 
Closing Documents: Notice Announcing Approval of Revised Documents

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

ACTION: Notice.

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SUMMARY: This notice announces that HUD has completed the notice and 
comment processes required by the Paperwork Reduction Act of the 1995 
(PRA), and the Office of Management and Budget (OMB) has reviewed and 
approved the FHA-insured multifamily rental closing documents (Closing 
Documents), as revised, under the previously approved control number: 
2502-0598. This notice highlights certain of the revisions to the 
documents that HUD made based on comments submitted in response to the 
April 1, 2014, 30-day Federal Register notice (30-day notice). The 
final versions of the Closing Documents, including redlines against the 
documents currently in use, can be viewed on HUD's Web site at: https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhclosingdocuments. Please note that the documents found at this Web 
site are for informational purposes only; participants must access the 
official version of the Closing Documents for FHA multifamily loan 
closings from HUD's forms resource Web page: https://www.hud.gov/hudclips.

FOR FURTHER INFORMATION CONTACT: Millicent Potts, Associate General 
Counsel for Insured Housing, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street SW., Washington, DC 
20310; telephone number (202) 708-1274. 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 (800) 
877-8339.

I. Background

    On October 29, 2013, and consistent with the Paperwork Reduction 
Act of 1995, HUD published for public comment, for a period of 60 days, 
a notice in the Federal Register advising that HUD was proposing 
technical and substantive revisions to the closing documents used in 
FHA multifamily rental projects based on the experiences of HUD staff 
working with the documents since 2011(60-day notice). (See 78 FR 
64524.) This notice highlighted the proposed changes and advised that 
redline/strike-out and clean versions of the proposed revisions were 
available for review on HUD's Web site. On April 1, 2014, HUD published 
a 30-day notice in the Federal Register in accordance with the public 
comment process required by the PRA. See 79 FR 18305. The 30-day notice 
identified substantive changes that HUD made to the Closing Documents 
based on public comment submitted in response to the 60-day notice, and 
responded to significant issues raised by commenters on the Closing 
Documents. In addition to providing a summary of the changes made, HUD 
posted on its Web site the redline-strikeout versions of the documents 
depicting the changes that HUD initially proposed with the 60-day 
notice as well as clean and redline-strikeout versions with additional 
changes made in response to public comments received on the 60-day 
notice, so that industry participants and interested members of the 
public could see all of the changes that were being proposed to the 
Closing Documents.
    This notice published today announces that HUD has completed the 
notice and comment processes required by the PRA, and that OMB has 
completed its review and approved the Closing Documents, as revised, 
under the previously approved OMB control number 2502-0598.
    In response to the 30-day notice, HUD received comments from four 
(4) commenters. Commenters included the American Bar Association, a law 
firm, a private attorney, and a local municipality's housing and 
community investment department. All comments were carefully considered 
by HUD prior to presentation to OMB for final approval and re-
authorization, pursuant to the PRA. In this notice, HUD is highlighting 
certain of the changes that were made and providing its rationale for 
not accepting certain comments. The final approved documents are 
available for your review in clean and redline-strike-out (against the 
documents currently in use) formats on HUD's Web site at: https://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/mfh/mfhclosingdocuments.

II. Effective Date

    These revised Closing Documents are required for transactions that 
receive a firm commitment on or after the date that is 30 calendar days 
after the date of this notice. As OMB approval for these documents has 
been received, parties may use these documents on a voluntary basis as 
of the date of this publication.

III. Discussion of Public Comments and Subsequent Document Revisions

General Comments

    Section 50 Name Changes: A commenter noted that when a party named 
in section 50 of the Regulatory Agreement is changed, but the borrower 
does not change, the references to the those parties in the Regulatory 
Agreement, Note, and Security Instrument would all need to be revised. 
The commenter asked whether HUD would consider incorporating the 
section 50 parties into the Note and Security Instrument by reference 
to the Regulatory Agreement. HUD agreed with the comment and has made 
the necessary change to the documents.
    Document Submissions: A commenter requested that HUD allow 
electronic submission of draft closing documents and final loan 
documents post-closing on CDs or thumb drives, in lieu of several paper 
binders, in order to reduce the amount of paper as well as reduce the 
storage requirements for HUD. The commenter acknowledged that a single 
paper binder with original signatures could be required, but urged that 
there should be standardized submission requirements, as much as 
possible, in all HUD offices, in order to help standardize the process.
    With respect to electronic copies of documents, the HUD Office of 
Chief Information Officer policy allows submission on CD but does not 
allow submission of materials on thumb drive because of an increased 
threat of corruption and harm to HUD information systems. With respect 
to the number of copies and whether by electronic or paper submission, 
HUD offices will be reevaluating their policy in connection with the 
current reorganization of the Office of Multifamily Housing.
    Identity of Interest: A commenter asked for clarification regarding 
when an identity of interest exists pursuant to program obligations in 
Section 26 of the Lender's Certificate and Section 27 of the Request 
for Endorsement. Specifically, the commenter asked whether a conflict 
of interest exists when a counsel to the borrower has served as counsel 
to a lender in other transactions.
    HUD does not opine on the ABA Model Rules of Professional Conduct. 
HUD notes that counsel may not represent Borrower and Lender on the 
same transaction for a number of reasons, including those which 
commenter has identified. To the extent commenter questions the 
applicability of MAP Guide Sec.  2.6 or other HUD requirements, if 
counsel to a lender or

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borrower has appropriately represented a borrower or lender, 
respectively, on past transactions in accordance with the applicable 
state's rules of professional responsibility, such prior representation 
does not make counsel an employee of lender pursuant to the Map Guide 
or create an identity of interest with borrower or lender.

    Note:  Commenters have identified confusion with section 9(c) of 
the note and HUD has taken this opportunity to clarify this section. 
This section identifies circumstances that shall not be considered 
prepayments and shall not trigger prepayment premiums.

Regulatory Agreement

    A commenter suggested deleting reference to the ``Building Loan 
Agreement'' in Section 8(b) because this section applies to 
refinancings with limited repairs where the Building Loan Agreement 
would be inapplicable. However, certain jurisdictions require the use 
of this document for repairs, so HUD has declined to make this change.
    A commenter requested a change to Section 10(b) with respect to the 
initial deposit to the reserve for replacement, stating that requiring 
a specific amount in the Regulatory Agreement for a one-time deposit 
that occurs at closing is often problematic since the Reserve for 
Replacement amount can change. HUD agrees and has removed the first 
sentence of Section 10(b). The initial deposit to the reserve for 
replacement account should be disclosed, including any applicable 
transfer amounts, in the closing statement and the Request for 
Endorsement.

Opinion of Borrower's Counsel and Instructions

    One commenter asked HUD to reconsider previously submitted comments 
to the Opinion of the Borrower's Counsel. The commenter asserts that 
the comments align with ``customary practice'' and with the practices 
of Fannie Mae and Freddie Mac, who, the commenter asserts negotiate 
their model opinion forms. Although HUD looks occasionally to the 
example of Fannie Mae and Freddie Mac, FHA's role in the housing 
market, its obligations as the Federal Government and its congressional 
mandate are distinct. HUD has determined that the requested changes 
would increase the cost, time and administrative burdens associated 
with transactions and conflict with HUD's interests in maintaining a 
uniform practice nationwide and protecting the Federal Government's 
interests. Thus, HUD declines to make commenter's requested changes.

Escrow Agreement for Working Capital

    A commenter noted that the Escrow Agreement for Working Capital 
improperly references the firm commitment when providing for the 
allocation of escrow funds for new construction because the MAP Guide 
sets forth this policy. HUD has determined, however, that the firm 
commitment does set forth provisions regarding the working capital 
amount and should be reviewed in connection with the Escrow Agreement 
for Working Capital. There should not be discrepancies between the firm 
commitment and other HUD requirements; if participants notice 
discrepancies in their transactions, they should notify HUD's Office of 
Housing. HUD has also inserted the word ``equally'' in Section 2 of the 
Escrow Agreement for Working Capital in order to clarify HUD's MAP 
Guide requirement.

Security Instrument

    A commenter noted that the provision in section 7(a)(ii) of the 
Security Instrument setting forth a monthly service charge in the event 
the note is held by HUD needs to be updated to reflect current policy 
and suggested a revision. HUD agrees and has updated the provision but 
has not used the language suggested by the commenter.

    Authority  Section 3507 of the Paperwork Reduction Act of 1995, 
44 U.S.C. Chapter 35.

    Dated: July 8, 2014.
Laura Marin,
Associate General Deputy Assistant Secretary for Housing--Federal 
Housing Commissioner.
[FR Doc. 2014-16315 Filed 7-10-14; 8:45 am]
BILLING CODE 4210-67-P