Changes in Certain Multifamily Mortgage Insurance Premiums and Regulatory Waiver for the 542(c) Risk-Sharing Program, 18473-18480 [2016-07405]

Download as PDF Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations jstallworth on DSK7TPTVN1PROD with RULES FAA has, therefore, determined that this rule is not a ‘‘significant regulatory action’’ as defined in section 3(f) of Executive Order 12866, and is not ‘‘significant’’ as defined in DOT’s Regulatory Policies and Procedures. Regulatory Flexibility Determination The Regulatory Flexibility Act of 1980 (Pub. L. 96–354) (RFA) establishes ‘‘as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation.’’ To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration.’’ The RFA covers a wide-range of small entities, including small businesses, not-forprofit organizations, and small governmental jurisdictions. Agencies must perform a review to determine whether a rule will have a significant economic impact on a substantial number of small entities. If the agency determines that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA. However, if an agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the RFA provides that the head of the agency may so certify and a regulatory flexibility analysis is not required. The certification must include a statement providing the factual basis for this determination, and the reasoning should be clear. This rule is necessary to avoid rerouting current air traffic. The rerouting will increase miles flown, increasing fuel and crew cost. While the rule will likely impact a substantial number of small entities, it will have a minimal economic impact. If an agency determines that a rulemaking will not result in a significant economic impact on a substantial number of small entities, the head of the agency may so certify under section 605(b) of the RFA. Therefore, as provided in section 605(b), the head of the FAA certifies that this rulemaking will not result in a significant economic impact on a substantial number of small entities. International Trade Impact Assessment The Trade Agreements Act of 1979 (Pub. L. 96–39), as amended by the Uruguay Round Agreements Act (Pub. VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 L. 103–465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards. The FAA has assessed the potential effect of this rule and determined that the rule will have the same impact on international and domestic flights and is a safety rule thus is consistent with the Trade Agreements Act. Unfunded Mandates Assessment Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a ‘‘significant regulatory action.’’ The FAA currently uses an inflation-adjusted value of $155 million in lieu of $100 million. This rule does not contain such a mandate; therefore, the requirements of Title II of the Act do not apply. Environmental Review FAA Order 1050.1F identifies FAA actions that are categorically excluded from preparation of an environmental assessment or environmental impact statement under the National Environment Policy Act in the absence of extraordinary circumstances. The FAA has determined this rulemaking action qualifies for the categorical exclusion identified in paragraph 5–6.5a and involves no extraordinary circumstances. How To Obtain Additional Information An electronic copy of a rulemaking document may be obtained by using the Internet— 1. Search the Federal eRulemaking Portal (http://www.regulations.gov); 2. Visit the FAA’s Regulations and Policies Web page at http:// www.faa.gov/regulations_policies/ or PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 18473 3. Access the Government Printing Office’s Web page at http:// www.gpo.gov/fdsys/. Copies may also be obtained by sending a request (identified by notice, amendment, or docket number of this rulemaking) to the Federal Aviation Administration, Office of Rulemaking, ARM–1, 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267–9680. List of Subjects in 14 CFR Part 71 Airspace, Incorporation by reference, Navigation (air). Adoption of the Amendment In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows: PART 71—DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR TRAFFIC SERVICE ROUTES; AND REPORTING POINTS 1. The authority citation for 14 CFR part 71 continues to read as follows: ■ Authority: 49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389. 2. Amend § 71.33 by revising paragraph (a) to read as follows: ■ § 71.33 Class A airspace areas. (a) That airspace of the United States, including that airspace overlying the waters within 12 nautical miles of the coast of the 48 contiguous States, from 18,000 feet MSL to and including FL600 excluding the states of Alaska and Hawaii. * * * * * Issued in Washington, DC, on March 29, 2016. Leslie M. Swann, Acting Manager, Airspace Policy Group. [FR Doc. 2016–07397 Filed 3–29–16; 4:15 pm] BILLING CODE 4910–13–P DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 266 [Docket No. FR–5876–N–03] Changes in Certain Multifamily Mortgage Insurance Premiums and Regulatory Waiver for the 542(c) RiskSharing Program Office of the Assistant Secretary for Housing-Federal Housing Commissioner, HUD. ACTION: Announcement and waiver. AGENCY: On January 28, 2016, HUD published a notice announcing SUMMARY: E:\FR\FM\31MRR1.SGM 31MRR1 jstallworth on DSK7TPTVN1PROD with RULES 18474 Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations proposed changes to the Fiscal Year (FY) 2016 Mortgage Insurance Premiums (MIPs) for certain FHA Multifamily Housing Insurance programs, for commitments issued or reissued beginning April 1, 2016, and solicited public comments on the announced changes. This document announces that the FY 2016 MIP changes for certain FHA Multifamily Housing Insurance programs, including the 542(b) and 542(c) Risk-Sharing programs, proposed on January 28, 2016, are being implemented for commitments issued or reissued beginning April 1, 2016. These new MIP changes reflect the health of the FHA Multifamily portfolio, simplify the rate structure, and demonstrate HUD’s commitment to promote its mission initiatives. The MIP rates for mortgage insurance programs under FHA’s Office of Healthcare Programs, including health care facilities and hospital insurance programs, are not changed. This document also addresses the public comments received in response to the proposed MIP changes. Lastly, this MIP document also provides a regulatory waiver for the 542(c) RiskSharing program to participate in the FY 2016 MIP changes for commitments issued or reissued beginning April 1, 2016, for the remainder of FY 2016 and for FY 2017. DATES: Effective Date: The revised MIP will be effective for any firm commitments issued or reissued on or after April 1, 2016. MIP rates will not be modified for any loans that close or reach initial endorsement prior to or on March 31, 2016. MIP rates will not be modified on FHA-insured loans initially or finally endorsed, in conjunction with interest rate reductions, or in conjunction with loan modifications. MIP rates for the 542(c) Risk-Sharing program will be eligible only through FY 2017. FOR FURTHER INFORMATION CONTACT: Theodore K. Toon, Director, Office of Multifamily Production, Office of Housing, Department of Housing and Urban Development, 451 7th Street SW., Washington, DC 20410–8000; telephone number: 202–402–8386 (this is not a toll-free number). Hearing- or speechimpaired individuals may access these numbers through TTY by calling the Federal Relay Service at 800–877–8339 (this is a toll-free number). SUPPLEMENTARY INFORMATION: I. Background Section 203(c)(1) of the National Housing Act (the Act) authorizes the Secretary to set the premium charge for insurance of mortgages under the VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 various programs in title II of the Act. The range within which the Secretary may set such charges must be between one-fourth of one percent per annum and one percent per annum of the amount of the principal obligation of the mortgage outstanding at any time. (see 12 U.S.C. 1709(c)(1)). HUD’s Multifamily Housing Mortgage Insurance regulation at 24 CFR 207.254 provides that HUD must publish a notice of future premium changes in the Federal Register, and provide a 30-day public comment period for the purpose of accepting comments on whether the proposed changes are appropriate. On October 2, 2015, HUD published a notice in the Federal Register, at 80 FR 59809, announcing that the MIPs for FHA Multifamily, Health Care Facilities, and Hospital mortgage insurance programs that have commitments to be issued or reissued in FY 2016 would be the same as those published for FY 2015. HUD then published a notice on January 28, 2016, at 81 FR 4926, announcing proposed MIP changes for FY 2016 in certain programs authorized under the Act (12 U.S.C. 1709(c)(1)), and certain other multifamily programs. The January 28, 2016, notice was proposed to promote two of HUD’s mission priorities: affordable housing and energy efficiency. HUD sought public comment on the proposed changes, as required by 24 CFR 207.254. II. Public Comments The public comment period on the January 28, 2016, notice closed on February 29, 2016, and HUD received 19 public comments by the close of the public comment period. Comments were submitted by mortgage lenders, organizations representative of the health care industry and of the home building industry, private citizens, and other interested parties. All public comments can be found on www.regulations.gov under the docket number FR–5876–N–01. The following presents the key issues raised by commenters and HUD’s response to these issues. Authority Comment: One commenter stated that HUD had not demonstrated its authority to implement these MIP changes, and another commenter asked if HUD would be issuing additional regulations to confirm the appropriate MIP. HUD Response: We disagree; section 203(c)(1) of the Act authorizes the Secretary to set the premium charge for insurance of mortgages under the various programs in the Act, and 24 CFR 207.254 provides that HUD will implement future multifamily premium PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 changes by publishing a notice in the Federal Register and soliciting public comment for 30 days. HUD has complied with those requirements and no additional regulations must be issued to implement these changes. Comment: One commenter observed that MIPs ‘‘must be determined based on the prudent management of risk to the government of the potential and severity of mortgage losses.’’ In other words, the MIPs should be set at levels that are actuarially sufficient to cover expected credit losses and other costs. HUD Response: HUD agrees; portfolio and actuarial analysis of the new rate structure demonstrated that premium revenues will exceed losses for the foreseeable future. Applicability of New Rates Comment: Commenters urged HUD to extend MIP changes to programs under FHA’s Office of Healthcare Programs, including the health care facilities and hospital insurance programs, in order to further promote these programs. These commenters suggested that by excluding properties financed under Section 232 and Section 242 programs, HUD misses the opportunity to further the Administration’s healthcare objectives. HUD Response: HUD will continue to evaluate MIP rates, but is not at this time extending MIP changes to programs under FHA’s Office of Healthcare Programs, including the health care facilities and hospital insurance programs under sections 232 and 242, respectively. Comment: Commenters asked that the new MIP rates be made available to existing FHA-insured loans on properties that meet or will meet the required standards, to loans undergoing interest rate reductions through HUD’s Multifamily Office of Asset Management and Portfolio Oversight (OAMPO), to loan modifications through OAMPO, to loans initially endorsed (closed) but not finally endorsed, and to loans on recently built housing (within the past 5 years) that have or could obtain Energy Star building certification. HUD Response: New MIP rates cannot be applied retroactively; each of these scenarios represents already-closed loans. Therefore, the MIP new rates will become effective only for FHA firm commitments issued or reissued, and closed, on or after April 1, 2016. Affordability Comment: Commenters asked for a change to the requirements to qualify for the MIP rate for Broadly Affordable housing: Properties must have ‘‘achievable and underwritten tax credit rents at least 10 percent below E:\FR\FM\31MRR1.SGM 31MRR1 Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations jstallworth on DSK7TPTVN1PROD with RULES comparable market rents.’’ Commenters recommended that ‘‘achievable and’’ be deleted because of the confusion it could cause. HUD Response: HUD disagrees. The phrase (‘‘achievable and underwritten tax credit rents at least 10 percent below comparable market rents’’) is necessary in order to differentiate from the maximum or ceiling tax credit rents, and is widely understood in the industry. Comment: Commenters recommended that properties with greater than 90 percent affordable units, but without a 10 percent underwritten market rent advantage necessary to qualify as Broadly Affordable, should qualify for the Affordable mixed-income MIP rate of 35 basis points. HUD Response: HUD agrees, and has made the change in the final notice. Comment: Commenters asked if a property will qualify for the MIP reduction if it has a project-based Section 8 that runs less than 15 years or is not renewed but the owner honors the full 15-year use restriction. HUD Response: HUD will be providing the MIP reduction only to properties that have a Section 8 contract and use restriction that run a minimum of 15 years after final endorsement. Comment: Commenters recommended that the new MIP rates be available in situations where the property owner accepts Section 8 voucher holders for just the affordable units, rather than an unlimited requirement for the entire property, due to potential property owners’ concerns about converting an entire property to Section 8, over time, in what is intended as a mixed- income property. Another commenter stated that in the MIP definition of Affordable there is a requirement that the property owner agree to accept Section 8 voucher holders for the life of the loan, and the commenter requested that this be limited to the 15-year affordability period rather than the life of the loan. HUD Response: HUD disagrees, and continues to require that for a property owner to access the MIP rate under the Affordable rate category the property owner must agree to accept voucher holders as residents for all vacancies and for the life of the regulatory agreement. Lender Fee Restrictions for Certain MIP Rate Categories (Broadly Affordable and Green/Energy Efficient) Comment: Commenters requested that the 5 percent cap on total loan fees be removed, or the threshold significantly increased. The commenters stated that small loans are challenging to originate, underwrite, and service, due to certain VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 fixed lender costs and time requirements, and asked HUD to assess the impact for loans that fall into the $2–5 million range; commenting that the market is familiar with the $5 million small loan limit set by the Federal Housing Finance Agency for the Fannie Mae and Freddie Mac small loan programs. One commenter asked that HUD provide underlying information on the need for such a broad limitation. HUD Response: The intent is to ensure that the benefits of these MIP rates directly benefit the properties and residents. In FHA’s experience, Multifamily Accelerated Processing (MAP) lenders today are generally not charging fees in excess of 5 percent on loans under $5 million, even though they may do so. According to aggregated lender disclosures, just 6 percent of FHA-insured loans under $5 million, originated between FY 2013 and FY 2016, year-to-date, charged fees in excess of 5 percent, and most of these were concentrated in loans under $2 million. Accordingly, HUD does not believe that this limitation will present a burden to MAP lenders. Comment: One commenter said that it may be counterproductive to have a loan fee limit on loans over $2 million at precisely the time HUD is encouraging MAP lenders to participate in its Small Building Risk Share Initiative (SBRS). HUD Response: Loans originated under Risk Share programs, including SBRS, are exempt from the fee limitations. Comment: One commenter asked that loans with firm commitments issued prior to the January 28, 2016, publication of the proposed MIP rates be excluded from the fee limitations. HUD Response: The loan fee limitations only apply to loans with FHA firm commitments issued or reissued on or after April 1, 2016. Firm commitments issued prior to that date are exempt from the loan fee limitation (though still subject to disclosure), unless requesting reissuance or modification to utilize the new rates. Any loan accessing the lower rates will also be subject to the loan fee limitation. Inclusionary Zoning Comment: Commenters wrote that properties subject to inclusionary zoning agreements are only eligible for the reduced MIP rate if the term of the affordability agreement is 30 years or longer, compared to Low Income Housing Tax Credit (LIHTC) or ProjectBased Rental Assistance (PBRA) properties in this same rate category, which have minimum compliance periods of 15 years. They asked that the PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 18475 inclusionary zoning compliance period be reduced from 30 years to 15 years. HUD Response: The affordability requirements under LIHTC or PBRA/ Section 8 are much deeper than those generally required under inclusionary zoning laws. HUD believes, therefore, that the longer affordability requirement (30 years) is reasonable. Comment: One industry association opposed using the FHA multifamily insurance programs ‘‘to incentivize complicated and controversial inclusionary zoning laws at the local level.’’ One commenter stated that some studies have shown inclusionary zoning may not be the most cost effective way to address affordability, and can actually lead to fewer units being delivered. HUD Response: HUD is not incentivizing inclusionary zoning or other set-aside laws through these rates. Rather, the new structure recognizes affordability in its many forms. HUD will study the effects of these rates for future rate considerations. Green/Energy Efficient Comment: A number of commenters pointed out that the requirement for a property owner to report building performance 12 months after new construction/substantial rehabilitation is unreasonable, as the property must be occupied, and operate for a full 12 months, before collecting and reporting the data. Further, the requirement may preclude properties from one or more of the performance-based green building certifications recognized for the green/ energy efficient MIP rate. HUD Response: HUD agrees, and has amended the notice to require reporting of complying building performance ‘‘. . . no more than 15 months after completion of new construction, substantial rehabilitation or renovations, or 15 months after break-even occupancy.’’ Comment: Commenters stated that small properties make up the majority of all apartment buildings and often provide housing affordability. Yet properties under 20 units are excluded from getting a 1–100 EnergyStar score from Portfolio Manager, effectively blocking them from taking advantage of the reduced MIP rate. Commenters asked that HUD consider, for the purpose of accessing the Green/Energy Efficient MIP rate, exempting smaller properties from the requirement of a 75+ score on Portfolio Manager, as long as they are or will be certified by one of the recognized, independent green building standards. HUD Response: HUD agrees, and has modified the notice. Small properties E:\FR\FM\31MRR1.SGM 31MRR1 jstallworth on DSK7TPTVN1PROD with RULES 18476 Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations (under 20 units) must meet one of the recognized independent green building/ energy efficiency standards in order to access the Green/Energy Efficient MIP rate, but are exempt from the 75+ Portfolio Manager score requirement. Comment: One commenter recommended that HUD consider tiered or graduating MIP rates for varying levels of energy efficiency to encourage all property owners to undertake efficiency retrofits to the extent feasible. HUD Response: While HUD agrees with the intent, such a rate structure would be overly complex and challenging to administer. HUD will continue to review rates and opportunities to promote its mission objectives. Comment: Multiple commenters presented alternative green building certification standards for consideration, and/or asked what the process will be for approval of green building certification standards beyond those listed in the notice. HUD Response: In addition to the recognized standards listed in the notice, HUD will accept ‘‘other industry-recognized green building standards in the sole discretion of HUD’s Office of Multifamily Production.’’ Lenders should submit such requests to the Director of Multifamily Production, in HUD headquarters. A committee will review such requests for consideration. In response to the specific requests submitted with public comments, HUD has revised the notice to recognize Passive House certifications, LEED for Existing Buildings: Operations & Maintenance, and Living Building Challenge Certification. Comment: Commenters asked about notice references to Real Estate Assessment Center (REAC) protocols for properties not achieving their proposed green building standard or the 75+ Portfolio Manager score. One commenter stated that the REAC protocol should not be unilaterally changed to incorporate tests on whether properties are eligible for MIP reductions. Others asked what actions HUD would pursue for a property’s failure to achieve green building certification and a score of 75+ in Portfolio Manager (for example, might actions include 2530 flags or MIP changes). HUD Response: HUD is not changing REAC protocols. The intent is not to be punitive, but to ensure compliance with the specified green building certification and efficiency performance standards. Properties that fail to achieve their designated green building standard or the 75+ Portfolio Manager score will be VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 required to submit to HUD a compliance plan and timeline for achieving the required certification and performance, acceptable to HUD. An owner working in good faith and demonstrating progress toward compliance in HUD’s discretion will not be flagged in HUD’s 2530 previous participation system. Comment: Commenters asked that the notice clarify that the person certifying the green building standard be appropriately credentialed, and stated that a Capital Needs Assessment (CNA) provider may or may not be able to provide an energy design certification, unless they are licensed/accredited per the Energy Auditor requirements. HUD Response: HUD agrees, and has struck CNA provider as a qualified certifier of a green building standard or energy design certification. The CNA provider may certify, if appropriately credentialed, in their capacity as architect, engineer, energy auditor, and/ or approved certifier under the specified green building standard. Comment: Commenters recommended that HUD delete the phrase ‘‘and maintain’’ in reference to recognized green building certifications, because the notice requires a property to not only achieve, but to maintain one of the recognized, independent green building certification standards, yet the named green building rating systems are all design and construction standards and do not include provisions for maintaining the certification. HUD Response: HUD agrees, and has modified the notice to strike ‘‘and maintain’’ from the green building certification requirement. Comment: A commenter asked for clarification on the requirement for a property accessing the Green/Energy Efficient MIP rate to achieve and maintain the 75+ Portfolio Manager score. HUD Response: A property accessing the Green/Energy Efficient MIP rate will be required to maintain its efficiency performance. The property owner will submit its 1–100 ENERGY STAR score from EPA’s Portfolio Manager report to HUD, annually. Comment: Commenters stated the notice’s required score of 75+ on EPA’s Portfolio Manager will be a ‘‘moving target’’ as the underlying database of properties recalibrates the scores, and asked how an owner can certify to this target. HUD Response: The Portfolio Manager data set and underlying algorithm, and therefore the resulting scores, will not be changed for the foreseeable future, according to EPA. The objective is to ensure sustained property performance. If, in the future, PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 the 1–100 ENERGY STAR score is recalibrated, properties may demonstrate ongoing compliance by providing a copy of the Portfolio Manager report showing building consumption/performance has been maintained, even if the resulting score under a recalibrated scale is less than 75. Properties applying for the MIP rate will have to comply with the current standard score requirement that is applicable at that time. Comment: One commenter asked why a property that can meet both the Broadly Affordable and the Green/ Energy Efficient requirements is not rewarded through a further rate reduction. HUD Response: The rates offered under those two rate categories are the lowest allowed by statute, so not further reductions can be offered at this time. Comment: One commenter asked whether the reduction in MIP for Green/ Energy Efficient buildings have to be from private investment, or if the energy upgrades can be paid be from a government program such as DOE Weatherization or a similar State program. HUD Response: While it is anticipated that many property owners may utilize the additional mortgage proceeds made possible by the lower MIP to retrofit properties to meet the stringent efficiency standards required, an owner is not required to do so. Energy efficiency retrofits can be paid from any public or private source of funds, subject to limitations on other debt established by the FHA MAP program. General Comment: One commenter asked that HUD’s posted data identify current loans in its portfolio in the new MIP rate categories, to allow a viewer to determine which loans in the portfolio would qualify for which rates. HUD Response: HUD does not have the level of detail in its dataset to allow this identification. All loans originated under the new rate structure will be identified by rate category. Comment: One commenter suggested that the new MIP rate structure would disadvantage market rate properties, disproportionately harming rental properties in secondary and tertiary markets. HUD Response: The largest reduction from current rates to those effective April 1, 2016, is for market rate properties that are, or choose to, retrofit to a recognized green building/energy efficiency standard. This rate category was added specifically to recognize and promote green and energy efficient E:\FR\FM\31MRR1.SGM 31MRR1 jstallworth on DSK7TPTVN1PROD with RULES Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations properties, whether affordable or market rate. Comment: A commenter observed that the negative subsidy rates for MIP since FY 2013 show that the multifamily programs are generating more than enough revenue to cover losses, and requested that HUD review the MIPs for all of its loan programs, and set the levels at the rate necessary to cover losses and costs to the program. HUD Response: HUD has and will continue to review its MIP rates. Comment: Commenters requested clarification with regard to the notice’s reference to the upfront capitalized MIP for construction loans and the absence of a reference to a ‘‘look back’’ after final closing that recalculates MIP at 1 percent of the actual outstanding amount. HUD Response: For New Construction and Substantial Rehabilitation transactions, the upfront capitalized MIP is the applicable annual MIP rate, times the loan amount, times the number of years of construction, rounded up to the nearest full year for partial years. Comment: One commenter stated that there may be an advantage for risk-share lenders compared to MAP lenders, on tax credit projects in markets where tax credit rents are close to market rents (less than 10 percent advantage), and the rate for MAP lender originated loans will be 35 basis points, while risk-share loans qualify as Broadly Affordable at 25 basis points. HUD Response: The risk share program is an affordable lending program by statute, and is therefore categorically qualified for the lowest MIP rate. In the limited cases where the described scenario may apply, we do not believe the 10 basis points differential will be enough to skew the market away from MAP lending. HUD will continue to explore the potential disparity raised by the commenter, and may consider changes to address the issue in a subsequent MIP notice. Comment: One commenter raised concerns about the impact of Executive Order 13690 and the new Federal Flood Risk Management Standard (FFRMS) on housing affordability when implemented and applied to new FHAinsured loans for new construction and substantial rehabilitation, Community Development Block Grants (CDBG), and HOME Investment Partnerships Program funds. HUD Comment: Executive Order 13690 and the new FFRMS are outside the scope of this notice. Any actions implementing the Executive order will be the subject of a separate publication. VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 III. Final Notice This notice adopts the proposed changes in the January 28, 2016 notice. Specifically, HUD is adopting changes to FY 2016 MIPs for FHA-insured loans on properties under specific Multifamily Mortgage Insurance programs effective on April 1, 2016. The new annual multifamily mortgage insurance rates will be structured as four categories, as follows, and as illustrated on the table below. Under this rate structure, portfolio and actuarial analysis demonstrates that premium revenues will exceed losses for the foreseeable future. HUD has made minor changes in response to comments received, as discussed below. A. Market Rate Housing Upfront and annual MIP rates will remain unchanged for all FHA-insured multifamily loan types on market rate properties, except properties that meet the criteria below for green and energy efficient housing. B. Broadly Affordable Housing Annual MIPs will change from the current rates generally between 45 and 50 basis points,1 to 25 basis points for all multifamily FHA-insured loan types that meet the criteria in this section. All loans originated by Housing Finance Agencies under FHA’s Section 542(c) Risk-Sharing program, and by Qualified Participating Entities including Fannie Mae and Freddie Mac under FHA’s Section 542(b) RiskSharing program, will be eligible for this 25 basis points rate, multiplied by the percentage risk assumed by FHA (see table below). For all others to qualify, the property must have Section 8 assistance or another recorded affordability restriction, and/or LowIncome Housing Tax Credits (LIHTC). These projects must either: • Have at least 90 percent of units covered by a Section 8 PBRA contract or other State or Federal rental assistance program contract serving very low income residents, with a remaining term of at least 15 years; or • Have at least 90 percent of its units covered by an affordability use restriction under the LIHTC program or a similar State or locally sponsored program, with achievable and underwritten tax credit rents at least 10 percent below comparable market rents, and with a recorded regulatory agreement in effect for at least 15 years after final endorsement and monitored by a public entity. 1 Except in the case of a 207/223(f) refinance or purchase that has a current upfront capitalized MIP basis points of 100. PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 18477 To ensure that the benefits of these MIP rates directly benefit the affordable housing properties and residents, lenders submitting applications for loans using this MIP rate are limited, in the total loan fees they may charge on any loan greater than $2 million, to no more than 5 percent of the insured loan amount. Loan fees include (a) origination and placement fees as permitted by the Multifamily Accelerated Processing (MAP) Guide; 2 plus (b) trade profit, trade premium or marketing gain earned on the sale of the Government National Mortgage Association (GNMA) security at a value above par, even if the security sale is delayed until after endorsement; minus (c) loan fees applied by the mortgagee to its legal expenses incurred in connection with loan closing. C. Affordable Housing Annual MIPs will change from current rates generally between 45 and 70 basis points,3 to 35 basis points for all multifamily FHA-insured loan types. To qualify, the property must provide a set-aside of affordable units as defined below, and agree to accept voucher holders: • Inclusionary Zoning, Density Bonus Set-asides, and Other Local Affordability Restrictions: Property owners shall submit with the FHA mortgage insurance application evidence of a deed covenant or housing ordinance on ‘‘inclusionary zoning’’ at the subject property to evidence the requirement for affordable unit setasides. A minimum of 10 percent of the units must be affordable to, at most, a family at 80 percent Area Median Income (AMI), with rents sized to be affordable at 30 percent of the income at that level. The affordability set-aside must be on site, be in effect for at least 30 years after final endorsement of the FHA-insured mortgage, be monitored by public authority, and be recorded in a regulatory agreement; • Project has between 10 percent and 90 percent of units covered by a Section 8 PBRA contract or other State or Federal rental assistance program contract serving very low-income residents, with a remaining term of at least 15 years; • Project has between 10 percent and 90 percent of its units covered by an affordability use restriction under the LIHTC program or similar State or locally sponsored program, with rents 2 http://portal.hud.gov/hudportal/HUD?src=/ program_offices/administration/hudclips/ guidebooks/hsg-GB4430. 3 Except in the case of a 207/223(f) refinance or purchase that has a current upfront capitalized MIP basis points of 100. E:\FR\FM\31MRR1.SGM 31MRR1 18478 Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations jstallworth on DSK7TPTVN1PROD with RULES sized at no greater than 30 percent of the income eligible for occupancy under the LIHTC program, with a recorded regulatory agreement in effect for at least 15 years after final endorsement and monitored by a public entity; or • Project has at least 90 percent of its units covered by an affordability use restriction under the LIHTC program or similar State or locally sponsored program, but without the rent advantage required to qualify as Broadly Affordable (achievable and underwritten tax credit rents at least 10 percent below comparable market rents), and with a recorded regulatory agreement in effect for at least 15 years after final endorsement and monitored by a public entity. To qualify for this MIP rate, the project owner must also agree to accept voucher holders under the Section 8 Housing Choice Voucher program or other Federal program voucher holders as residents for vacancies in units not covered by project-based Section 8, and execute a rider to the FHA regulatory agreement, acceptable to HUD, evidencing the owner’s agreement to accept Section 8 vouchers for the life of the regulatory agreement. Change: In response to public comments, HUD added the forth bullet providing an extra class of properties to those that are eligible for this affordable housing MIP rate. D. Green and Energy Efficient Housing Annual MIPs will change from current rates generally between 45 and 70 basis points,4 to 25 basis points for all multifamily FHA-insured loan types. Projects will access this rate to encourage owners to adopt higher standards for construction, rehabilitation, repairs, maintenance, and property operations that are more energy efficient and sustainable than traditional approaches to such activities. The lower rate will incentivize owners to implement measures that result in projects with greater energy and water efficiency, reduced operating costs, improved indoor air quality and resident comfort, and reduced overall impact on the environment. It is anticipated that mortgage proceeds will be used to retrofit properties to meet the stringent efficiency standards required to access this lower MIP premium. For properties that have already achieved a green building standard and that are refinancing with this lower MIP premium, proceeds may be used to complete further efficiency upgrades, 4 Except in the case of a 207/223(f) refinance or purchase that has a current upfront capitalized MIP basis points of 100. VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 and/or to retrofit to the next-level green certification standards. To qualify, upon application for FHA mortgage insurance, the owner must evidence that the project has achieved, or the owner must certify that it will pursue and achieve, an industryrecognized standard for green building. Acceptable, independently verified standards include the Enterprise Green Communities Criteria; U.S. Green Building Council’s LEED–H, LEED–H Midrise, LEED–NC, or LEED for Existing Buildings: Operations & Maintenance; ENERGY STAR certification; EarthCraft House; EarthCraft Multifamily; Earth Advantage New Homes; Greenpoint Rated New Home; Greenpoint Rated Existing Home (Whole House or Whole Building label); the National Green Building Standard (NGBS); Passive Building Certification or EnerPHit Retrofits certification from the Passive House Institute US (PHIUS), International Passive House Association, or the Passive House Institute; and Living Building Challenge Certification from the International Living Future Institute, or other industry-recognized green building standards, in the sole discretion of HUD’s Office of Multifamily Production. Further, the owner must certify that it has achieved, or will pursue, achieve, and maintain a score of 75 or better on the 1–100 ENERGY STAR score, using EPA’s Portfolio Manager. The reasonableness of achieving and maintaining the specified, independent green building standard, and the score of 75 or better in Portfolio Manager, must be verified by the independent conclusion of the qualified assessor preparing the physical condition assessment, and supported by the physical condition assessment report and recommendations, ASHRAE level II energy audit (required for existing structures only), and plans for new construction, or rehabilitation, repairs, and operations and maintenance. The physical condition assessment report submitted with the mortgage insurance application must include a certification from the architect, engineer, or energy auditor that the planned scope of work is reasonably sufficient to achieve and maintain the specified certification. Additionally, the owner must submit to HUD evidence that the specified, independent green building standard has been achieved, and provide a copy of the Portfolio Manager report showing building performance at or above 75, when those standards have been achieved, and no more than 15 months after completion of new construction, substantial rehabilitation or renovations or 15 months after break-even PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 occupancy. If not achieved, HUD may impose protocols to ensure the owner brings the property into compliance, similar to protocols used by REAC for unacceptable property standards. The owner must submit the Portfolio Manager report annually to HUD showing that the property has maintained its efficiency performance. Note that properties of less than 20 units may qualify for this MIP rate by achieving an industry-recognized standard for green building, as described above, but are exempt from the requirement to achieve a score of 75 or better on the 1–100 ENERGY STAR score. To ensure that the benefits of these MIP rates directly benefit the properties and residents, lenders submitting applications for loans using this MIP rate are limited in the total loan fees they may charge on any loan greater than $2 million, to no more than 5 percent of the insured loan amount. Loan fees include (a) origination and placement fees as permitted by the MAP Guide; plus (b) trade profit, trade premium or marketing gain earned on the sale of the GNMA security at a value above par, even if the security sale is delayed until after endorsement; minus (c) loan fees applied by the mortgagee to its legal expenses incurred in connection with loan closing. Change: In response to public comments, HUD makes the following changes: • Deletes the phrase ‘‘and maintain’’ in reference to the owner providing evidence that the project has achieved an industry-recognized standard for green building. • Adds to the list of certifications Passive House certifications, LEED for Existing Buildings: Operations & Maintenance, and Living Building Challenge Certification, and clarifies that other industry-recognized green building standards will be approved at the discretion of HUD’s Office of Multifamily Production. • Clarifies that a CNA provider may only certify a physical condition assessment report, if appropriately credentialed, in their capacity as architect, engineer, energy auditor, and/ or approved certifier under the specified green building standard. • Amends the time frame for providing the report showing compliance with building performance after completion of new construction, substantial rehabilitation, or renovations from no more than 12 months to no more than 15 months. HUD also provides that such report may be provided 15 months after break-even occupancy. E:\FR\FM\31MRR1.SGM 31MRR1 Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations • Requires that owners submit the Portfolio Manager report annually to HUD showing that the property has maintained its efficiency performance. • Provides that while small properties (under 20 units) must meet one of the recognized independent green building/ energy efficiency standards in order to access the Green/Energy Efficient MIP rate, small properties are exempt from the requirement to achieve a score of 75 or better on the 1–100 ENERGY STAR score. IV. MIPs for Certain FHA’s Multifamily Mortgage Insurance Programs for April 1, 2016 The chart below details the MIP rates for each rate category, and each type of 18479 FHA multifamily mortgage insurance covered under this notice. This notice does not change MIP rates for programs under FHA’s Office of Healthcare Programs, including health care facilities and hospital insurance programs. FHA MULTIFAMILY MORTGAGE INSURANCE PREMIUMS BY RATE CATEGORY Current upfront capitalized MIP * basis points jstallworth on DSK7TPTVN1PROD with RULES FHA Multifamily mortgage insurance program MARKET RATE HOUSING ............................................................................. 207 Multifamily New Constr/Sub Rehab w/o LIHTC ..................................... 207 Manufactured Home Parks w/o LIHTC .................................................. 221(d)(4) New Constr/Sub Rehab w/o LIHTC ................................................ 220 Urban Renewal Housing w/o LIHTC ...................................................... 213 Cooperative ............................................................................................ 207/223(f) Refi or Purchase for Apts. w/o LIHTC ........................................... 223(a)(7) Refi of Apts. w/o LIHTC ................................................................... 231 Elderly Housing w/o LIHTC .................................................................... 241(a) Supplemental Loans for Apts. coop w/o LIHTC .................................. BROADLY AFFORDABLE HOUSING ............................................................. 207 New Constr/Sub Rehab w 90 percent+ LIHTC, or 90 percent+ Section 8 ................................................................................................................... 207 Manufactured Home Parks w 90 percent+ LIHTC, or 90 percent+ Section 8 ...................................................................................................... 221(d)(4) New Constr/Sub Rehab w 90 percent+ LIHTC, or 90 percent+ Section 8 ...................................................................................................... 220 Urban Renewal Housing w 90 percent+ LIHTC, or 90 percent+ Section 8 ............................................................................................................ 207/223(f) Refi or Purchase w 90 percent+ LIHTC, or 90 percent+ Section 8 ................................................................................................................... 223(a)(7) Refi w 90 percent+ LIHTC, or 90 percent+ Section 8 ..................... 231 Elderly Housing w 90 percent+ LIHTC, or 90 percent+ Section 8 ........ 241(a) for Apts./coop w 90 percent+ LIHTC, or 90 percent+ Section 8 ......... Section 542(b) Risk-Sharing ** ........................................................................ Section 542(c ) Risk-Sharing ** ....................................................................... AFFORDABLE: INCLUSIONARY VOUCHERS .............................................. 207 New Constr/Sub Rehab w Inclusionary Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ........................................ 207 Manufactured Home Parks w Inclusionary Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ................................... 221(d)(4) New Constr/Sub Rehab w Inclusionary Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ................................... 220 Urban Renewal Housing w Inclusionary Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ........................................ 207/223(f) Refi or Purchase w Inclusionary Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ........................................ 223(a)(7) Refinance of Apts. w Inclusionary Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ........................................ 231 Elderly Housing w Inclusionary Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ................................................ 241(a) Supplementals for Apts./coop w Inclusion Zoning, or 10 percent–90 percent LIHTC, or 10 percent–90 percent Section 8 ................................... GREEN/ENERGY EFFICIENT HOUSING ...................................................... 207 Multifamily New Construction/Sub Rehab w Green ............................... 207 Manufactured Home Parks with Green .................................................. 221(d)(4) New Constr/Sub Rehab w Green .................................................... 220 Urban Renewal Housing w Green ......................................................... 207/223(f) Refi or Purchase for Apts. w Green ............................................... 223(a)(7) Refi of Apts. w Green ...................................................................... 231 Elderly Housing w Green ....................................................................... VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 PO 00000 Frm 00033 Fmt 4700 Apr 1, 2016, upfront capitalized MIP * basis points Current annual MIP basis points Apr 1, 2016, annual MIP basis points ........................ 70 70 65 70 70 100 50 70 95 ........................ Unchanged 70 70 65 70 70 100 50 70 95 25 ........................ 70 70 65 70 70 60 50 70 95 ........................ Unchanged 70 70 65 70 70 60 50 70 95 25 45 25 45 25 45 25 45 25 45 25 45 25 45 25 45 25 100 50 45 45 50 50 ........................ 25 25 25 25 25 25 35 45 45 45 45 50 50 ........................ 25 25 25 25 25 25 35 45–70 35 45–70 35 45–70 35 45–70 35 45–65 35 45–65 35 45–70 35 45–70 35 100 35 45–60 35 50 35 45–50 35 45–70 35 45–70 35 45–95 ........................ 45–70 45–70 45–65 45–70 100 50 45–70 35 25 25 25 25 25 25 25 25 45–95 ........................ 45–70 45–70 45–65 45–70 45–60 45–50 45–70 35 25 25 25 25 25 25 25 25 Sfmt 4700 E:\FR\FM\31MRR1.SGM 31MRR1 18480 Federal Register / Vol. 81, No. 62 / Thursday, March 31, 2016 / Rules and Regulations FHA MULTIFAMILY MORTGAGE INSURANCE PREMIUMS BY RATE CATEGORY—Continued Current upfront capitalized MIP * basis points FHA Multifamily mortgage insurance program 241(a) Supplemental Loans for Apts./coop w Green ...................................... Apr 1, 2016, upfront capitalized MIP * basis points 45–95 Current annual MIP basis points 25 Apr 1, 2016, annual MIP basis points 45–95 25 * Upfront premiums for multifamily refinancing programs are capitalized and based on the first year’s annual MIP for the applicable rate category (except market rate 223(f), where the upfront rate remains at 100 basis points). Upfront premiums for multifamily new construction and substantial rehabilitation programs insuring advances are capitalized and based on the annual MIP for the applicable rate category for the entire construction period, rounded up to the nearest whole year. ** Under the Sections 542(b) and 542(c) Risk-Sharing programs, the MIP collected by HUD is currently, and will continue to be, proportionate to the percentage of risk assumed by FHA, as follows: Program April 1, 2016, upfront capitalized MIP basis points (bps) FHA percent of risk share 542(b) ................................ 542(c) ................................ 50 50 75 90 percent percent percent percent jstallworth on DSK7TPTVN1PROD with RULES V. Regulatory Waiver for the 542(c) Risk-Sharing Program Section 106 of the Department of Housing and Urban Development Reform Act of 1989 (the HUD Reform Act) (42 U.S.C. 3535(q)) requires HUD to publish waivers in the Federal Register. To allow for the FY 2016 MIP changes covered in this notice to apply to the 542(c) Risk-Sharing program, authorized under the Housing and Community Development Act of 1992, HUD must waive §§ 266.600, 266.602, and 266.604, which currently prescribe percentages for calculating the MIP under the 542(c) Risk-Sharing program. HUD believes these set percentages are no longer appropriate for the 542(c) Risk-Sharing program and issued a proposed rule on March 8, 2016, entitled ‘‘Section 542(c) Housing Finance Agencies Risk-Sharing Program: Revisions to Regulations’’ (81 FR 12051), which would permit MIP changes for the Risk-Sharing program to be published through Federal Register notice. All loans originated under the Risk-Sharing programs are for affordable housing purposes with recorded affordability restrictions, and therefore qualify as Broadly Affordable housing. HUD believes that the 542(c) RiskSharing program, like the other identified Multifamily Housing programs, should be eligible for the MIP changes in this notice. Therefore, HUD is issuing this regulatory waiver of §§ 266.600, 266.602, and 266.604 for FY 2016 and FY 2017. Commitments issued or reissued for 542(c) Risk-Sharing program beginning April 1, 2016, through FY 2017 will be eligible for these MIP changes. VerDate Sep<11>2014 15:13 Mar 30, 2016 Jkt 238001 12.5 (25 bps × 50 percent) ................................. 12.5 (25 bps × 50 percent) ................................. 18.75 (25 bps × 75 percent) ............................... 22.5 (25 bps × 90 percent) ................................. VI. Environmental Impact This notice involves the establishment of rate or cost determinations and related external administrative requirements that do not constitute a development decision affecting the physical condition of specific project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), this notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321). Dated: March 28, 2016. Edward L. Golding, Principal Deputy Assistant Secretary for Housing. Dated: March 28, 2016. Nani A. Coloretti, Deputy Secretary. [FR Doc. 2016–07405 Filed 3–30–16; 8:45 am] BILLING CODE 4210–67–P DEPARTMENT OF THE TREASURY Financial Crimes Enforcement Network 31 CFR Part 1010 RIN 1506–AB27 Imposition of Special Measure Against FBME Bank Ltd., Formerly Known as the Federal Bank of the Middle East Ltd., as a Financial Institution of Primary Money Laundering Concern Financial Crimes Enforcement Network (FinCEN), Treasury. ACTION: Final rule. AGENCY: In a Notice of Finding (NOF) published in the Federal Register on SUMMARY: PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 April 1, 2016, annual MIP basis points (bps) 12.5 (25 bps × 50 percent). 12.5 (25 bps × 50 percent). 18.75 (25 bps × 75 percent). 22.5 (25 bps × 90 percent). July 22, 2014, FinCEN found that reasonable grounds exist for concluding that FBME Bank Ltd. (FBME), formerly known as the Federal Bank of the Middle East Ltd., is a financial institution of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act (Section 311). On the same date, FinCEN also published in the Federal Register a Notice of Proposed Rulemaking (NPRM) to propose the imposition of a special measure authorized by Section 311 against FBME and opened a comment period that closed on September 22, 2014. On July 29, 2015, FinCEN published in the Federal Register a final rule imposing the fifth special measure, which the United States District Court for the District of Columbia subsequently enjoined before the rule’s effective date of August 28, 2015. FinCEN is issuing this final rule imposing a prohibition on U.S. financial institutions from opening or maintaining a correspondent account for, or on behalf of, FBME in place of the rule published on July 29, 2015. DATES: This final rule is effective July 29, 2016. FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center at (800) 767– 2825 or regcomments@fincen.gov. SUPPLEMENTARY INFORMATION: I. Background A. Statutory Provisions On October 26, 2001, the President signed into law the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107–56 (the USA PATRIOT E:\FR\FM\31MRR1.SGM 31MRR1

Agencies

[Federal Register Volume 81, Number 62 (Thursday, March 31, 2016)]
[Rules and Regulations]
[Pages 18473-18480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07405]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 266

[Docket No. FR-5876-N-03]


Changes in Certain Multifamily Mortgage Insurance Premiums and 
Regulatory Waiver for the 542(c) Risk-Sharing Program

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

ACTION: Announcement and waiver.

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

SUMMARY: On January 28, 2016, HUD published a notice announcing

[[Page 18474]]

proposed changes to the Fiscal Year (FY) 2016 Mortgage Insurance 
Premiums (MIPs) for certain FHA Multifamily Housing Insurance programs, 
for commitments issued or reissued beginning April 1, 2016, and 
solicited public comments on the announced changes. This document 
announces that the FY 2016 MIP changes for certain FHA Multifamily 
Housing Insurance programs, including the 542(b) and 542(c) Risk-
Sharing programs, proposed on January 28, 2016, are being implemented 
for commitments issued or reissued beginning April 1, 2016. These new 
MIP changes reflect the health of the FHA Multifamily portfolio, 
simplify the rate structure, and demonstrate HUD's commitment to 
promote its mission initiatives. The MIP rates for mortgage insurance 
programs under FHA's Office of Healthcare Programs, including health 
care facilities and hospital insurance programs, are not changed. This 
document also addresses the public comments received in response to the 
proposed MIP changes. Lastly, this MIP document also provides a 
regulatory waiver for the 542(c) Risk-Sharing program to participate in 
the FY 2016 MIP changes for commitments issued or reissued beginning 
April 1, 2016, for the remainder of FY 2016 and for FY 2017.

DATES: Effective Date: The revised MIP will be effective for any firm 
commitments issued or reissued on or after April 1, 2016. MIP rates 
will not be modified for any loans that close or reach initial 
endorsement prior to or on March 31, 2016. MIP rates will not be 
modified on FHA-insured loans initially or finally endorsed, in 
conjunction with interest rate reductions, or in conjunction with loan 
modifications. MIP rates for the 542(c) Risk-Sharing program will be 
eligible only through FY 2017.

FOR FURTHER INFORMATION CONTACT: Theodore K. Toon, Director, Office of 
Multifamily Production, Office of Housing, Department of Housing and 
Urban Development, 451 7th Street SW., Washington, DC 20410-8000; 
telephone number: 202-402-8386 (this is not a toll-free number). 
Hearing- or speech-impaired individuals may access these numbers 
through TTY by calling the Federal Relay Service at 800-877-8339 (this 
is a toll-free number).

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 203(c)(1) of the National Housing Act (the Act) authorizes 
the Secretary to set the premium charge for insurance of mortgages 
under the various programs in title II of the Act. The range within 
which the Secretary may set such charges must be between one-fourth of 
one percent per annum and one percent per annum of the amount of the 
principal obligation of the mortgage outstanding at any time. (see 12 
U.S.C. 1709(c)(1)). HUD's Multifamily Housing Mortgage Insurance 
regulation at 24 CFR 207.254 provides that HUD must publish a notice of 
future premium changes in the Federal Register, and provide a 30-day 
public comment period for the purpose of accepting comments on whether 
the proposed changes are appropriate.
    On October 2, 2015, HUD published a notice in the Federal Register, 
at 80 FR 59809, announcing that the MIPs for FHA Multifamily, Health 
Care Facilities, and Hospital mortgage insurance programs that have 
commitments to be issued or reissued in FY 2016 would be the same as 
those published for FY 2015. HUD then published a notice on January 28, 
2016, at 81 FR 4926, announcing proposed MIP changes for FY 2016 in 
certain programs authorized under the Act (12 U.S.C. 1709(c)(1)), and 
certain other multifamily programs. The January 28, 2016, notice was 
proposed to promote two of HUD's mission priorities: affordable housing 
and energy efficiency. HUD sought public comment on the proposed 
changes, as required by 24 CFR 207.254.

II. Public Comments

    The public comment period on the January 28, 2016, notice closed on 
February 29, 2016, and HUD received 19 public comments by the close of 
the public comment period. Comments were submitted by mortgage lenders, 
organizations representative of the health care industry and of the 
home building industry, private citizens, and other interested parties. 
All public comments can be found on www.regulations.gov under the 
docket number FR-5876-N-01. The following presents the key issues 
raised by commenters and HUD's response to these issues.

Authority

    Comment: One commenter stated that HUD had not demonstrated its 
authority to implement these MIP changes, and another commenter asked 
if HUD would be issuing additional regulations to confirm the 
appropriate MIP.
    HUD Response: We disagree; section 203(c)(1) of the Act authorizes 
the Secretary to set the premium charge for insurance of mortgages 
under the various programs in the Act, and 24 CFR 207.254 provides that 
HUD will implement future multifamily premium changes by publishing a 
notice in the Federal Register and soliciting public comment for 30 
days. HUD has complied with those requirements and no additional 
regulations must be issued to implement these changes.
    Comment: One commenter observed that MIPs ``must be determined 
based on the prudent management of risk to the government of the 
potential and severity of mortgage losses.'' In other words, the MIPs 
should be set at levels that are actuarially sufficient to cover 
expected credit losses and other costs.
    HUD Response: HUD agrees; portfolio and actuarial analysis of the 
new rate structure demonstrated that premium revenues will exceed 
losses for the foreseeable future.

Applicability of New Rates

    Comment: Commenters urged HUD to extend MIP changes to programs 
under FHA's Office of Healthcare Programs, including the health care 
facilities and hospital insurance programs, in order to further promote 
these programs. These commenters suggested that by excluding properties 
financed under Section 232 and Section 242 programs, HUD misses the 
opportunity to further the Administration's healthcare objectives.
    HUD Response: HUD will continue to evaluate MIP rates, but is not 
at this time extending MIP changes to programs under FHA's Office of 
Healthcare Programs, including the health care facilities and hospital 
insurance programs under sections 232 and 242, respectively.
    Comment: Commenters asked that the new MIP rates be made available 
to existing FHA-insured loans on properties that meet or will meet the 
required standards, to loans undergoing interest rate reductions 
through HUD's Multifamily Office of Asset Management and Portfolio 
Oversight (OAMPO), to loan modifications through OAMPO, to loans 
initially endorsed (closed) but not finally endorsed, and to loans on 
recently built housing (within the past 5 years) that have or could 
obtain Energy Star building certification.
    HUD Response: New MIP rates cannot be applied retroactively; each 
of these scenarios represents already-closed loans. Therefore, the MIP 
new rates will become effective only for FHA firm commitments issued or 
reissued, and closed, on or after April 1, 2016.

Affordability

    Comment: Commenters asked for a change to the requirements to 
qualify for the MIP rate for Broadly Affordable housing: Properties 
must have ``achievable and underwritten tax credit rents at least 10 
percent below

[[Page 18475]]

comparable market rents.'' Commenters recommended that ``achievable 
and'' be deleted because of the confusion it could cause.
    HUD Response: HUD disagrees. The phrase (``achievable and 
underwritten tax credit rents at least 10 percent below comparable 
market rents'') is necessary in order to differentiate from the maximum 
or ceiling tax credit rents, and is widely understood in the industry.
    Comment: Commenters recommended that properties with greater than 
90 percent affordable units, but without a 10 percent underwritten 
market rent advantage necessary to qualify as Broadly Affordable, 
should qualify for the Affordable mixed-income MIP rate of 35 basis 
points.
    HUD Response: HUD agrees, and has made the change in the final 
notice.
    Comment: Commenters asked if a property will qualify for the MIP 
reduction if it has a project-based Section 8 that runs less than 15 
years or is not renewed but the owner honors the full 15-year use 
restriction.
    HUD Response: HUD will be providing the MIP reduction only to 
properties that have a Section 8 contract and use restriction that run 
a minimum of 15 years after final endorsement.
    Comment: Commenters recommended that the new MIP rates be available 
in situations where the property owner accepts Section 8 voucher 
holders for just the affordable units, rather than an unlimited 
requirement for the entire property, due to potential property owners' 
concerns about converting an entire property to Section 8, over time, 
in what is intended as a mixed- income property. Another commenter 
stated that in the MIP definition of Affordable there is a requirement 
that the property owner agree to accept Section 8 voucher holders for 
the life of the loan, and the commenter requested that this be limited 
to the 15-year affordability period rather than the life of the loan.
    HUD Response: HUD disagrees, and continues to require that for a 
property owner to access the MIP rate under the Affordable rate 
category the property owner must agree to accept voucher holders as 
residents for all vacancies and for the life of the regulatory 
agreement.

Lender Fee Restrictions for Certain MIP Rate Categories (Broadly 
Affordable and Green/Energy Efficient)

    Comment: Commenters requested that the 5 percent cap on total loan 
fees be removed, or the threshold significantly increased. The 
commenters stated that small loans are challenging to originate, 
underwrite, and service, due to certain fixed lender costs and time 
requirements, and asked HUD to assess the impact for loans that fall 
into the $2-5 million range; commenting that the market is familiar 
with the $5 million small loan limit set by the Federal Housing Finance 
Agency for the Fannie Mae and Freddie Mac small loan programs. One 
commenter asked that HUD provide underlying information on the need for 
such a broad limitation.
    HUD Response: The intent is to ensure that the benefits of these 
MIP rates directly benefit the properties and residents. In FHA's 
experience, Multifamily Accelerated Processing (MAP) lenders today are 
generally not charging fees in excess of 5 percent on loans under $5 
million, even though they may do so. According to aggregated lender 
disclosures, just 6 percent of FHA-insured loans under $5 million, 
originated between FY 2013 and FY 2016, year-to-date, charged fees in 
excess of 5 percent, and most of these were concentrated in loans under 
$2 million. Accordingly, HUD does not believe that this limitation will 
present a burden to MAP lenders.
    Comment: One commenter said that it may be counterproductive to 
have a loan fee limit on loans over $2 million at precisely the time 
HUD is encouraging MAP lenders to participate in its Small Building 
Risk Share Initiative (SBRS).
    HUD Response: Loans originated under Risk Share programs, including 
SBRS, are exempt from the fee limitations.
    Comment: One commenter asked that loans with firm commitments 
issued prior to the January 28, 2016, publication of the proposed MIP 
rates be excluded from the fee limitations.
    HUD Response: The loan fee limitations only apply to loans with FHA 
firm commitments issued or reissued on or after April 1, 2016. Firm 
commitments issued prior to that date are exempt from the loan fee 
limitation (though still subject to disclosure), unless requesting 
reissuance or modification to utilize the new rates. Any loan accessing 
the lower rates will also be subject to the loan fee limitation.

Inclusionary Zoning

    Comment: Commenters wrote that properties subject to inclusionary 
zoning agreements are only eligible for the reduced MIP rate if the 
term of the affordability agreement is 30 years or longer, compared to 
Low Income Housing Tax Credit (LIHTC) or Project-Based Rental 
Assistance (PBRA) properties in this same rate category, which have 
minimum compliance periods of 15 years. They asked that the 
inclusionary zoning compliance period be reduced from 30 years to 15 
years.
    HUD Response: The affordability requirements under LIHTC or PBRA/
Section 8 are much deeper than those generally required under 
inclusionary zoning laws. HUD believes, therefore, that the longer 
affordability requirement (30 years) is reasonable.
    Comment: One industry association opposed using the FHA multifamily 
insurance programs ``to incentivize complicated and controversial 
inclusionary zoning laws at the local level.'' One commenter stated 
that some studies have shown inclusionary zoning may not be the most 
cost effective way to address affordability, and can actually lead to 
fewer units being delivered.
    HUD Response: HUD is not incentivizing inclusionary zoning or other 
set-aside laws through these rates. Rather, the new structure 
recognizes affordability in its many forms. HUD will study the effects 
of these rates for future rate considerations.

Green/Energy Efficient

    Comment: A number of commenters pointed out that the requirement 
for a property owner to report building performance 12 months after new 
construction/substantial rehabilitation is unreasonable, as the 
property must be occupied, and operate for a full 12 months, before 
collecting and reporting the data. Further, the requirement may 
preclude properties from one or more of the performance-based green 
building certifications recognized for the green/energy efficient MIP 
rate.
    HUD Response: HUD agrees, and has amended the notice to require 
reporting of complying building performance ``. . . no more than 15 
months after completion of new construction, substantial rehabilitation 
or renovations, or 15 months after break-even occupancy.''
    Comment: Commenters stated that small properties make up the 
majority of all apartment buildings and often provide housing 
affordability. Yet properties under 20 units are excluded from getting 
a 1-100 EnergyStar score from Portfolio Manager, effectively blocking 
them from taking advantage of the reduced MIP rate. Commenters asked 
that HUD consider, for the purpose of accessing the Green/Energy 
Efficient MIP rate, exempting smaller properties from the requirement 
of a 75+ score on Portfolio Manager, as long as they are or will be 
certified by one of the recognized, independent green building 
standards.
    HUD Response: HUD agrees, and has modified the notice. Small 
properties

[[Page 18476]]

(under 20 units) must meet one of the recognized independent green 
building/energy efficiency standards in order to access the Green/
Energy Efficient MIP rate, but are exempt from the 75+ Portfolio 
Manager score requirement.
    Comment: One commenter recommended that HUD consider tiered or 
graduating MIP rates for varying levels of energy efficiency to 
encourage all property owners to undertake efficiency retrofits to the 
extent feasible.
    HUD Response: While HUD agrees with the intent, such a rate 
structure would be overly complex and challenging to administer. HUD 
will continue to review rates and opportunities to promote its mission 
objectives.
    Comment: Multiple commenters presented alternative green building 
certification standards for consideration, and/or asked what the 
process will be for approval of green building certification standards 
beyond those listed in the notice.
    HUD Response: In addition to the recognized standards listed in the 
notice, HUD will accept ``other industry-recognized green building 
standards in the sole discretion of HUD's Office of Multifamily 
Production.'' Lenders should submit such requests to the Director of 
Multifamily Production, in HUD headquarters. A committee will review 
such requests for consideration. In response to the specific requests 
submitted with public comments, HUD has revised the notice to recognize 
Passive House certifications, LEED for Existing Buildings: Operations & 
Maintenance, and Living Building Challenge Certification.
    Comment: Commenters asked about notice references to Real Estate 
Assessment Center (REAC) protocols for properties not achieving their 
proposed green building standard or the 75+ Portfolio Manager score. 
One commenter stated that the REAC protocol should not be unilaterally 
changed to incorporate tests on whether properties are eligible for MIP 
reductions. Others asked what actions HUD would pursue for a property's 
failure to achieve green building certification and a score of 75+ in 
Portfolio Manager (for example, might actions include 2530 flags or MIP 
changes).
    HUD Response: HUD is not changing REAC protocols. The intent is not 
to be punitive, but to ensure compliance with the specified green 
building certification and efficiency performance standards. Properties 
that fail to achieve their designated green building standard or the 
75+ Portfolio Manager score will be required to submit to HUD a 
compliance plan and timeline for achieving the required certification 
and performance, acceptable to HUD. An owner working in good faith and 
demonstrating progress toward compliance in HUD's discretion will not 
be flagged in HUD's 2530 previous participation system.
    Comment: Commenters asked that the notice clarify that the person 
certifying the green building standard be appropriately credentialed, 
and stated that a Capital Needs Assessment (CNA) provider may or may 
not be able to provide an energy design certification, unless they are 
licensed/accredited per the Energy Auditor requirements.
    HUD Response: HUD agrees, and has struck CNA provider as a 
qualified certifier of a green building standard or energy design 
certification. The CNA provider may certify, if appropriately 
credentialed, in their capacity as architect, engineer, energy auditor, 
and/or approved certifier under the specified green building standard.
    Comment: Commenters recommended that HUD delete the phrase ``and 
maintain'' in reference to recognized green building certifications, 
because the notice requires a property to not only achieve, but to 
maintain one of the recognized, independent green building 
certification standards, yet the named green building rating systems 
are all design and construction standards and do not include provisions 
for maintaining the certification.
    HUD Response: HUD agrees, and has modified the notice to strike 
``and maintain'' from the green building certification requirement.
    Comment: A commenter asked for clarification on the requirement for 
a property accessing the Green/Energy Efficient MIP rate to achieve and 
maintain the 75+ Portfolio Manager score.
    HUD Response: A property accessing the Green/Energy Efficient MIP 
rate will be required to maintain its efficiency performance. The 
property owner will submit its 1-100 ENERGY STAR score from EPA's 
Portfolio Manager report to HUD, annually.
    Comment: Commenters stated the notice's required score of 75+ on 
EPA's Portfolio Manager will be a ``moving target'' as the underlying 
database of properties recalibrates the scores, and asked how an owner 
can certify to this target.
    HUD Response: The Portfolio Manager data set and underlying 
algorithm, and therefore the resulting scores, will not be changed for 
the foreseeable future, according to EPA. The objective is to ensure 
sustained property performance. If, in the future, the 1-100 ENERGY 
STAR score is recalibrated, properties may demonstrate ongoing 
compliance by providing a copy of the Portfolio Manager report showing 
building consumption/performance has been maintained, even if the 
resulting score under a recalibrated scale is less than 75. Properties 
applying for the MIP rate will have to comply with the current standard 
score requirement that is applicable at that time.
    Comment: One commenter asked why a property that can meet both the 
Broadly Affordable and the Green/Energy Efficient requirements is not 
rewarded through a further rate reduction.
    HUD Response: The rates offered under those two rate categories are 
the lowest allowed by statute, so not further reductions can be offered 
at this time.
    Comment: One commenter asked whether the reduction in MIP for 
Green/Energy Efficient buildings have to be from private investment, or 
if the energy upgrades can be paid be from a government program such as 
DOE Weatherization or a similar State program.
    HUD Response: While it is anticipated that many property owners may 
utilize the additional mortgage proceeds made possible by the lower MIP 
to retrofit properties to meet the stringent efficiency standards 
required, an owner is not required to do so. Energy efficiency 
retrofits can be paid from any public or private source of funds, 
subject to limitations on other debt established by the FHA MAP 
program.

General

    Comment: One commenter asked that HUD's posted data identify 
current loans in its portfolio in the new MIP rate categories, to allow 
a viewer to determine which loans in the portfolio would qualify for 
which rates.
    HUD Response: HUD does not have the level of detail in its dataset 
to allow this identification. All loans originated under the new rate 
structure will be identified by rate category.
    Comment: One commenter suggested that the new MIP rate structure 
would disadvantage market rate properties, disproportionately harming 
rental properties in secondary and tertiary markets.
    HUD Response: The largest reduction from current rates to those 
effective April 1, 2016, is for market rate properties that are, or 
choose to, retrofit to a recognized green building/energy efficiency 
standard. This rate category was added specifically to recognize and 
promote green and energy efficient

[[Page 18477]]

properties, whether affordable or market rate.
    Comment: A commenter observed that the negative subsidy rates for 
MIP since FY 2013 show that the multifamily programs are generating 
more than enough revenue to cover losses, and requested that HUD review 
the MIPs for all of its loan programs, and set the levels at the rate 
necessary to cover losses and costs to the program.
    HUD Response: HUD has and will continue to review its MIP rates.
    Comment: Commenters requested clarification with regard to the 
notice's reference to the upfront capitalized MIP for construction 
loans and the absence of a reference to a ``look back'' after final 
closing that recalculates MIP at 1 percent of the actual outstanding 
amount.
    HUD Response: For New Construction and Substantial Rehabilitation 
transactions, the upfront capitalized MIP is the applicable annual MIP 
rate, times the loan amount, times the number of years of construction, 
rounded up to the nearest full year for partial years.
    Comment: One commenter stated that there may be an advantage for 
risk-share lenders compared to MAP lenders, on tax credit projects in 
markets where tax credit rents are close to market rents (less than 10 
percent advantage), and the rate for MAP lender originated loans will 
be 35 basis points, while risk-share loans qualify as Broadly 
Affordable at 25 basis points.
    HUD Response: The risk share program is an affordable lending 
program by statute, and is therefore categorically qualified for the 
lowest MIP rate. In the limited cases where the described scenario may 
apply, we do not believe the 10 basis points differential will be 
enough to skew the market away from MAP lending. HUD will continue to 
explore the potential disparity raised by the commenter, and may 
consider changes to address the issue in a subsequent MIP notice.
    Comment: One commenter raised concerns about the impact of 
Executive Order 13690 and the new Federal Flood Risk Management 
Standard (FFRMS) on housing affordability when implemented and applied 
to new FHA-insured loans for new construction and substantial 
rehabilitation, Community Development Block Grants (CDBG), and HOME 
Investment Partnerships Program funds.
    HUD Comment: Executive Order 13690 and the new FFRMS are outside 
the scope of this notice. Any actions implementing the Executive order 
will be the subject of a separate publication.

III. Final Notice

    This notice adopts the proposed changes in the January 28, 2016 
notice. Specifically, HUD is adopting changes to FY 2016 MIPs for FHA-
insured loans on properties under specific Multifamily Mortgage 
Insurance programs effective on April 1, 2016. The new annual 
multifamily mortgage insurance rates will be structured as four 
categories, as follows, and as illustrated on the table below. Under 
this rate structure, portfolio and actuarial analysis demonstrates that 
premium revenues will exceed losses for the foreseeable future. HUD has 
made minor changes in response to comments received, as discussed 
below.

A. Market Rate Housing

    Upfront and annual MIP rates will remain unchanged for all FHA-
insured multifamily loan types on market rate properties, except 
properties that meet the criteria below for green and energy efficient 
housing.

B. Broadly Affordable Housing

    Annual MIPs will change from the current rates generally between 45 
and 50 basis points,\1\ to 25 basis points for all multifamily FHA-
insured loan types that meet the criteria in this section.
---------------------------------------------------------------------------

    \1\ Except in the case of a 207/223(f) refinance or purchase 
that has a current upfront capitalized MIP basis points of 100.
---------------------------------------------------------------------------

    All loans originated by Housing Finance Agencies under FHA's 
Section 542(c) Risk-Sharing program, and by Qualified Participating 
Entities including Fannie Mae and Freddie Mac under FHA's Section 
542(b) Risk-Sharing program, will be eligible for this 25 basis points 
rate, multiplied by the percentage risk assumed by FHA (see table 
below). For all others to qualify, the property must have Section 8 
assistance or another recorded affordability restriction, and/or Low-
Income Housing Tax Credits (LIHTC).
    These projects must either:
     Have at least 90 percent of units covered by a Section 8 
PBRA contract or other State or Federal rental assistance program 
contract serving very low income residents, with a remaining term of at 
least 15 years; or
     Have at least 90 percent of its units covered by an 
affordability use restriction under the LIHTC program or a similar 
State or locally sponsored program, with achievable and underwritten 
tax credit rents at least 10 percent below comparable market rents, and 
with a recorded regulatory agreement in effect for at least 15 years 
after final endorsement and monitored by a public entity.
    To ensure that the benefits of these MIP rates directly benefit the 
affordable housing properties and residents, lenders submitting 
applications for loans using this MIP rate are limited, in the total 
loan fees they may charge on any loan greater than $2 million, to no 
more than 5 percent of the insured loan amount. Loan fees include (a) 
origination and placement fees as permitted by the Multifamily 
Accelerated Processing (MAP) Guide; \2\ plus (b) trade profit, trade 
premium or marketing gain earned on the sale of the Government National 
Mortgage Association (GNMA) security at a value above par, even if the 
security sale is delayed until after endorsement; minus (c) loan fees 
applied by the mortgagee to its legal expenses incurred in connection 
with loan closing.
---------------------------------------------------------------------------

    \2\ http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/guidebooks/hsg-GB4430.
---------------------------------------------------------------------------

C. Affordable Housing

    Annual MIPs will change from current rates generally between 45 and 
70 basis points,\3\ to 35 basis points for all multifamily FHA-insured 
loan types. To qualify, the property must provide a set-aside of 
affordable units as defined below, and agree to accept voucher holders:
---------------------------------------------------------------------------

    \3\ Except in the case of a 207/223(f) refinance or purchase 
that has a current upfront capitalized MIP basis points of 100.
---------------------------------------------------------------------------

     Inclusionary Zoning, Density Bonus Set-asides, and Other 
Local Affordability Restrictions: Property owners shall submit with the 
FHA mortgage insurance application evidence of a deed covenant or 
housing ordinance on ``inclusionary zoning'' at the subject property to 
evidence the requirement for affordable unit set-asides. A minimum of 
10 percent of the units must be affordable to, at most, a family at 80 
percent Area Median Income (AMI), with rents sized to be affordable at 
30 percent of the income at that level. The affordability set-aside 
must be on site, be in effect for at least 30 years after final 
endorsement of the FHA-insured mortgage, be monitored by public 
authority, and be recorded in a regulatory agreement;
     Project has between 10 percent and 90 percent of units 
covered by a Section 8 PBRA contract or other State or Federal rental 
assistance program contract serving very low-income residents, with a 
remaining term of at least 15 years;
     Project has between 10 percent and 90 percent of its units 
covered by an affordability use restriction under the LIHTC program or 
similar State or locally sponsored program, with rents

[[Page 18478]]

sized at no greater than 30 percent of the income eligible for 
occupancy under the LIHTC program, with a recorded regulatory agreement 
in effect for at least 15 years after final endorsement and monitored 
by a public entity; or
     Project has at least 90 percent of its units covered by an 
affordability use restriction under the LIHTC program or similar State 
or locally sponsored program, but without the rent advantage required 
to qualify as Broadly Affordable (achievable and underwritten tax 
credit rents at least 10 percent below comparable market rents), and 
with a recorded regulatory agreement in effect for at least 15 years 
after final endorsement and monitored by a public entity.
    To qualify for this MIP rate, the project owner must also agree to 
accept voucher holders under the Section 8 Housing Choice Voucher 
program or other Federal program voucher holders as residents for 
vacancies in units not covered by project-based Section 8, and execute 
a rider to the FHA regulatory agreement, acceptable to HUD, evidencing 
the owner's agreement to accept Section 8 vouchers for the life of the 
regulatory agreement.
    Change: In response to public comments, HUD added the forth bullet 
providing an extra class of properties to those that are eligible for 
this affordable housing MIP rate.

D. Green and Energy Efficient Housing

    Annual MIPs will change from current rates generally between 45 and 
70 basis points,\4\ to 25 basis points for all multifamily FHA-insured 
loan types. Projects will access this rate to encourage owners to adopt 
higher standards for construction, rehabilitation, repairs, 
maintenance, and property operations that are more energy efficient and 
sustainable than traditional approaches to such activities. The lower 
rate will incentivize owners to implement measures that result in 
projects with greater energy and water efficiency, reduced operating 
costs, improved indoor air quality and resident comfort, and reduced 
overall impact on the environment. It is anticipated that mortgage 
proceeds will be used to retrofit properties to meet the stringent 
efficiency standards required to access this lower MIP premium. For 
properties that have already achieved a green building standard and 
that are refinancing with this lower MIP premium, proceeds may be used 
to complete further efficiency upgrades, and/or to retrofit to the 
next-level green certification standards.
---------------------------------------------------------------------------

    \4\ Except in the case of a 207/223(f) refinance or purchase 
that has a current upfront capitalized MIP basis points of 100.
---------------------------------------------------------------------------

    To qualify, upon application for FHA mortgage insurance, the owner 
must evidence that the project has achieved, or the owner must certify 
that it will pursue and achieve, an industry-recognized standard for 
green building. Acceptable, independently verified standards include 
the Enterprise Green Communities Criteria; U.S. Green Building 
Council's LEED-H, LEED-H Midrise, LEED-NC, or LEED for Existing 
Buildings: Operations & Maintenance; ENERGY STAR certification; 
EarthCraft House; EarthCraft Multifamily; Earth Advantage New Homes; 
Greenpoint Rated New Home; Greenpoint Rated Existing Home (Whole House 
or Whole Building label); the National Green Building Standard (NGBS); 
Passive Building Certification or EnerPHit Retrofits certification from 
the Passive House Institute US (PHIUS), International Passive House 
Association, or the Passive House Institute; and Living Building 
Challenge Certification from the International Living Future Institute, 
or other industry-recognized green building standards, in the sole 
discretion of HUD's Office of Multifamily Production.
    Further, the owner must certify that it has achieved, or will 
pursue, achieve, and maintain a score of 75 or better on the 1-100 
ENERGY STAR score, using EPA's Portfolio Manager. The reasonableness of 
achieving and maintaining the specified, independent green building 
standard, and the score of 75 or better in Portfolio Manager, must be 
verified by the independent conclusion of the qualified assessor 
preparing the physical condition assessment, and supported by the 
physical condition assessment report and recommendations, ASHRAE level 
II energy audit (required for existing structures only), and plans for 
new construction, or rehabilitation, repairs, and operations and 
maintenance. The physical condition assessment report submitted with 
the mortgage insurance application must include a certification from 
the architect, engineer, or energy auditor that the planned scope of 
work is reasonably sufficient to achieve and maintain the specified 
certification.
    Additionally, the owner must submit to HUD evidence that the 
specified, independent green building standard has been achieved, and 
provide a copy of the Portfolio Manager report showing building 
performance at or above 75, when those standards have been achieved, 
and no more than 15 months after completion of new construction, 
substantial rehabilitation or renovations or 15 months after break-even 
occupancy. If not achieved, HUD may impose protocols to ensure the 
owner brings the property into compliance, similar to protocols used by 
REAC for unacceptable property standards. The owner must submit the 
Portfolio Manager report annually to HUD showing that the property has 
maintained its efficiency performance. Note that properties of less 
than 20 units may qualify for this MIP rate by achieving an industry-
recognized standard for green building, as described above, but are 
exempt from the requirement to achieve a score of 75 or better on the 
1-100 ENERGY STAR score.
    To ensure that the benefits of these MIP rates directly benefit the 
properties and residents, lenders submitting applications for loans 
using this MIP rate are limited in the total loan fees they may charge 
on any loan greater than $2 million, to no more than 5 percent of the 
insured loan amount. Loan fees include (a) origination and placement 
fees as permitted by the MAP Guide; plus (b) trade profit, trade 
premium or marketing gain earned on the sale of the GNMA security at a 
value above par, even if the security sale is delayed until after 
endorsement; minus (c) loan fees applied by the mortgagee to its legal 
expenses incurred in connection with loan closing.
    Change: In response to public comments, HUD makes the following 
changes:
     Deletes the phrase ``and maintain'' in reference to the 
owner providing evidence that the project has achieved an industry-
recognized standard for green building.
     Adds to the list of certifications Passive House 
certifications, LEED for Existing Buildings: Operations & Maintenance, 
and Living Building Challenge Certification, and clarifies that other 
industry-recognized green building standards will be approved at the 
discretion of HUD's Office of Multifamily Production.
     Clarifies that a CNA provider may only certify a physical 
condition assessment report, if appropriately credentialed, in their 
capacity as architect, engineer, energy auditor, and/or approved 
certifier under the specified green building standard.
     Amends the time frame for providing the report showing 
compliance with building performance after completion of new 
construction, substantial rehabilitation, or renovations from no more 
than 12 months to no more than 15 months. HUD also provides that such 
report may be provided 15 months after break-even occupancy.

[[Page 18479]]

     Requires that owners submit the Portfolio Manager report 
annually to HUD showing that the property has maintained its efficiency 
performance.
     Provides that while small properties (under 20 units) must 
meet one of the recognized independent green building/energy efficiency 
standards in order to access the Green/Energy Efficient MIP rate, small 
properties are exempt from the requirement to achieve a score of 75 or 
better on the 1-100 ENERGY STAR score.

IV. MIPs for Certain FHA's Multifamily Mortgage Insurance Programs for 
April 1, 2016

    The chart below details the MIP rates for each rate category, and 
each type of FHA multifamily mortgage insurance covered under this 
notice. This notice does not change MIP rates for programs under FHA's 
Office of Healthcare Programs, including health care facilities and 
hospital insurance programs.

                          FHA Multifamily Mortgage Insurance Premiums By Rate Category
----------------------------------------------------------------------------------------------------------------
                                                      Current      Apr 1, 2016,
                                                      upfront         upfront         Current      Apr 1, 2016,
   FHA Multifamily mortgage insurance program       capitalized     capitalized     annual MIP      annual MIP
                                                   MIP *  basis    MIP *  basis    basis  points   basis points
                                                      points          points
----------------------------------------------------------------------------------------------------------------
MARKET RATE HOUSING.............................  ..............       Unchanged  ..............       Unchanged
207 Multifamily New Constr/Sub Rehab w/o LIHTC..              70              70              70              70
207 Manufactured Home Parks w/o LIHTC...........              70              70              70              70
221(d)(4) New Constr/Sub Rehab w/o LIHTC........              65              65              65              65
220 Urban Renewal Housing w/o LIHTC.............              70              70              70              70
213 Cooperative.................................              70              70              70              70
207/223(f) Refi or Purchase for Apts. w/o LIHTC.             100             100              60              60
223(a)(7) Refi of Apts. w/o LIHTC...............              50              50              50              50
231 Elderly Housing w/o LIHTC...................              70              70              70              70
241(a) Supplemental Loans for Apts. coop w/o                  95              95              95              95
 LIHTC..........................................
BROADLY AFFORDABLE HOUSING......................  ..............              25  ..............              25
207 New Constr/Sub Rehab w 90 percent+ LIHTC, or              45              25              45              25
 90 percent+ Section 8..........................
207 Manufactured Home Parks w 90 percent+ LIHTC,              45              25              45              25
 or 90 percent+ Section 8.......................
221(d)(4) New Constr/Sub Rehab w 90 percent+                  45              25              45              25
 LIHTC, or 90 percent+ Section 8................
220 Urban Renewal Housing w 90 percent+ LIHTC,                45              25              45              25
 or 90 percent+ Section 8.......................
207/223(f) Refi or Purchase w 90 percent+ LIHTC,             100              25              45              25
 or 90 percent+ Section 8.......................
223(a)(7) Refi w 90 percent+ LIHTC, or 90                     50              25              45              25
 percent+ Section 8.............................
231 Elderly Housing w 90 percent+ LIHTC, or 90                45              25              45              25
 percent+ Section 8.............................
241(a) for Apts./coop w 90 percent+ LIHTC, or 90              45              25              45              25
 percent+ Section 8.............................
Section 542(b) Risk-Sharing **..................              50              25              50              25
Section 542(c ) Risk-Sharing **.................              50              25              50              25
AFFORDABLE: INCLUSIONARY VOUCHERS...............  ..............              35  ..............              35
207 New Constr/Sub Rehab w Inclusionary Zoning,            45-70              35           45-70              35
 or 10 percent-90 percent LIHTC, or 10 percent-
 90 percent Section 8...........................
207 Manufactured Home Parks w Inclusionary                 45-70              35           45-70              35
 Zoning, or 10 percent-90 percent LIHTC, or 10
 percent-90 percent Section 8...................
221(d)(4) New Constr/Sub Rehab w Inclusionary              45-65              35           45-65              35
 Zoning, or 10 percent-90 percent LIHTC, or 10
 percent-90 percent Section 8...................
220 Urban Renewal Housing w Inclusionary Zoning,           45-70              35           45-70              35
 or 10 percent-90 percent LIHTC, or 10 percent-
 90 percent Section 8...........................
207/223(f) Refi or Purchase w Inclusionary                   100              35           45-60              35
 Zoning, or 10 percent-90 percent LIHTC, or 10
 percent-90 percent Section 8...................
223(a)(7) Refinance of Apts. w Inclusionary                   50              35           45-50              35
 Zoning, or 10 percent-90 percent LIHTC, or 10
 percent-90 percent Section 8...................
231 Elderly Housing w Inclusionary Zoning, or 10           45-70              35           45-70              35
 percent-90 percent LIHTC, or 10 percent-90
 percent Section 8..............................
241(a) Supplementals for Apts./coop w Inclusion            45-95              35           45-95              35
 Zoning, or 10 percent-90 percent LIHTC, or 10
 percent-90 percent Section 8...................
GREEN/ENERGY EFFICIENT HOUSING..................  ..............              25  ..............              25
207 Multifamily New Construction/Sub Rehab w               45-70              25           45-70              25
 Green..........................................
207 Manufactured Home Parks with Green..........           45-70              25           45-70              25
221(d)(4) New Constr/Sub Rehab w Green..........           45-65              25           45-65              25
220 Urban Renewal Housing w Green...............           45-70              25           45-70              25
207/223(f) Refi or Purchase for Apts. w Green...             100              25           45-60              25
223(a)(7) Refi of Apts. w Green.................              50              25           45-50              25
231 Elderly Housing w Green.....................           45-70              25           45-70              25

[[Page 18480]]

 
241(a) Supplemental Loans for Apts./coop w Green           45-95              25           45-95              25
----------------------------------------------------------------------------------------------------------------
* Upfront premiums for multifamily refinancing programs are capitalized and based on the first year's annual MIP
  for the applicable rate category (except market rate 223(f), where the upfront rate remains at 100 basis
  points). Upfront premiums for multifamily new construction and substantial rehabilitation programs insuring
  advances are capitalized and based on the annual MIP for the applicable rate category for the entire
  construction period, rounded up to the nearest whole year.
** Under the Sections 542(b) and 542(c) Risk-Sharing programs, the MIP collected by HUD is currently, and will
  continue to be, proportionate to the percentage of risk assumed by FHA, as follows:


----------------------------------------------------------------------------------------------------------------
                                                             April 1, 2016,  upfront
                  Program                     FHA percent     capitalized MIP basis      April 1, 2016,  annual
                                             of risk share        points  (bps)         MIP basis points  (bps)
----------------------------------------------------------------------------------------------------------------
542(b)....................................      50 percent  12.5 (25 bps x 50          12.5 (25 bps x 50
                                                             percent).                  percent).
542(c)....................................      50 percent  12.5 (25 bps x 50          12.5 (25 bps x 50
                                                             percent).                  percent).
                                                75 percent  18.75 (25 bps x 75         18.75 (25 bps x 75
                                                             percent).                  percent).
                                                90 percent  22.5 (25 bps x 90          22.5 (25 bps x 90
                                                             percent).                  percent).
----------------------------------------------------------------------------------------------------------------

V. Regulatory Waiver for the 542(c) Risk-Sharing Program

    Section 106 of the Department of Housing and Urban Development 
Reform Act of 1989 (the HUD Reform Act) (42 U.S.C. 3535(q)) requires 
HUD to publish waivers in the Federal Register. To allow for the FY 
2016 MIP changes covered in this notice to apply to the 542(c) Risk-
Sharing program, authorized under the Housing and Community Development 
Act of 1992, HUD must waive Sec. Sec.  [thinsp]266.600, 266.602, and 
266.604, which currently prescribe percentages for calculating the MIP 
under the 542(c) Risk-Sharing program. HUD believes these set 
percentages are no longer appropriate for the 542(c) Risk-Sharing 
program and issued a proposed rule on March 8, 2016, entitled ``Section 
542(c) Housing Finance Agencies Risk-Sharing Program: Revisions to 
Regulations'' (81 FR 12051), which would permit MIP changes for the 
Risk-Sharing program to be published through Federal Register notice. 
All loans originated under the Risk-Sharing programs are for affordable 
housing purposes with recorded affordability restrictions, and 
therefore qualify as Broadly Affordable housing. HUD believes that the 
542(c) Risk-Sharing program, like the other identified Multifamily 
Housing programs, should be eligible for the MIP changes in this 
notice. Therefore, HUD is issuing this regulatory waiver of Sec. Sec.  
[thinsp]266.600, 266.602, and 266.604 for FY 2016 and FY 2017. 
Commitments issued or reissued for 542(c) Risk-Sharing program 
beginning April 1, 2016, through FY 2017 will be eligible for these MIP 
changes.

VI. Environmental Impact

    This notice involves the establishment of rate or cost 
determinations and related external administrative requirements that do 
not constitute a development decision affecting the physical condition 
of specific project areas or building sites. Accordingly, under 24 CFR 
50.19(c)(6), this notice is categorically excluded from environmental 
review under the National Environmental Policy Act of 1969 (42 U.S.C. 
4321).

    Dated: March 28, 2016.
Edward L. Golding,
Principal Deputy Assistant Secretary for Housing.
    Dated: March 28, 2016.
Nani A. Coloretti,
Deputy Secretary.
[FR Doc. 2016-07405 Filed 3-30-16; 8:45 am]
 BILLING CODE 4210-67-P