30-Day Notice of Proposed Information Collection for Public Comment Under the Paperwork Reduction Act-Rental Assistance Demonstration (RAD) Documents, 66672-66688 [2016-23438]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 81, Number 188 (Wednesday, September 28, 2016)]
[Notices]
[Pages 66672-66688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-23438]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5909-N-69]


30-Day Notice of Proposed Information Collection for Public 
Comment Under the Paperwork Reduction Act--Rental Assistance 
Demonstration (RAD) Documents

AGENCY: Office of the Chief Information Officer, HUD.

ACTION: Notice.

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SUMMARY: HUD has submitted the proposed information collection 
requirement described below to the Office of Management and Budget 
(OMB) for review in accordance with the Paperwork Reduction Act of 1995 
(PRA). The information collection described below will be submitted to 
OMB for review. By notice published on March 17, 2016, HUD solicited 
public comment on the proposed information collection for a period of 
60 days. The purpose of this notice is to solicit public comment for an 
additional 30 days.

DATES: Comment Due Date: October 28, 2016.

ADDRESSES: Interested persons are invited to submit comments regarding 
this notice to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
10276, Washington, DC 20410-0500. Communications must refer to the 
above docket number and title. There are two methods for submitting 
public comments. All submissions must refer to the above docket number 
and title.
    1. Submission of Comments by Mail. Comments may be submitted by 
mail to the Regulations Division, Office of General Counsel, Department 
of Housing and Urban Development, 451 7th Street SW., Room 10276, 
Washington, DC 20410-0500.
    2. Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make public comments immediately 
available to the public. Comments submitted electronically through the 
www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    Note: To receive consideration as public comments, comments must be 
submitted through one of the two methods specified above. Again, all 
submissions must refer to the docket number and title of the notice.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable.

FOR FURTHER INFORMATION CONTACT: Marilyn M. Edge, Senior Advisor, 
Multifamily Housing Office of Recapitalization, Office of Housing, U.S. 
Department of Housing and Urban Development, 451 7th Street SW., 
Washington, DC 20410; telephone 202-708-3730, (this is not a toll-free 
number). Persons with hearing or speech impairments may access this 
number via TTY by calling the Federal Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The Rental Assistance Demonstration allows Public Housing, Moderate 
Rehabilitation (Mod Rehab), Rent Supplement (Rent Supp), and Rental 
Assistance Payment (RAP) properties to convert to long-term project-
based Section 8 rental assistance contracts. The documents that are the 
subject of this notice are those used to process and complete the 
conversion process for Public Housing, Mod Rehab, Rent Supp, and RAP 
properties.
    On March 17, 2016, at 81 FR 14473, HUD published a notice in the 
Federal Register soliciting public comment on

[[Page 66673]]

the RAD documents for a period of 60 days (60-Day Notice) in accordance 
with the PRA.

II. Overview of Significant Changes Made to the RAD Closing Documents

    In response to public comments from 8 commenters including groups 
of commenters received on the 60-day notice, HUD made changes to the 
RAD Closing Documents to incorporate the substantial majority of 
comments, reduce public burden, clarify the meaning of the documents 
and make the conversions process smoother:

III. Public Comments on 60-Day Notice and HUD Responses

    In response to the solicitation of comments, HUD received 6 public 
comments. The comments can be found on the www.regulations.gov Web site 
at https://www.regulations.gov/#!docketBrowser;rpp=25;so=ASC;sb=docId;po=0;dct=PS;D=HUD-2016-0021.

General Comments

    A commenter commended HUD's Office of Recapitalization on its 
efforts to update the RAD closing documents and, stated that, as a 
whole, the current package is a great improvement and successfully 
consolidates many of the various riders, addendums and other areas 
where the industry has provided feedback into a more manageable and 
efficient set of documents. The commenter stated that in the spirit of 
creating even greater transactional efficiency HUD should take 
additional steps across the board. The commenter stated that there are 
a number of forms and templates used by HUD throughout the RAD closing 
process, including some exhibits and attachments, are formatted as 
difficult/impossible to edit or reformat Portable Document Files 
(PDFs). The commenter stated that this can make it difficult to make 
updates and edits (particularly for budget related documents) or 
reformat when needed. The commenter also stated that this can be 
particularly onerous if documents are not formatted to meet local 
jurisdictions recording format requirements, because in many 
jurisdictions, HUD's forms do not meet font and margin requirements, 
leading to delays and even the inability to properly record documents.
    The commenter recommended that, in addition to the closing 
documents currently provided on the RAD Web site, HUD provide ``blank 
and editable'' MS Word and MS Excel templates of all RAD related 
documents on its Web site. The commenter also suggested that HUD 
reconsider which, if any, RAD documents it requires to be recorded and 
on what time frame. The commenter stated that, in addition to the 
formatting issues identified above, it may be difficult to provide 
evidence of recording in a timely fashion, particularly if the 
jurisdiction does not electronically record documents.
    The commenter recommended that HUD permit developers to self-
certify that documents have been submitted for recording or even waive 
the requirement entirely, or alternatively, that Transaction Managers 
should be empowered to waive document recording requirements at their 
discretion. The commenter further recommended that for transfers of 
assistance under a new construction agreement, if HUD continues to 
expect the Use Agreement to be recorded, it would be helpful for HUD to 
issue a rider that describes the process and also commits HUD to 
release the Use Agreement if no HAP is ultimately signed. The commenter 
stated that the rider should allow for the term to run 15/20 years from 
HAP signing, or explain why an alternative term is used appropriately.
    HUD Response: HUD thanks the many commenters for their attention to 
RAD and advice. HUD will consider publishing the final versions of 
these documents in blank and edible pdf and Word formats to simplify 
HUD's review with redlines based on comparisons. HUD requires the RAD 
Use Agreement as well as the Releases of Declaration of Trust and 
Declarations of Restrictive Covenants to be recorded and will specify 
the recording order in its closing instructions to the PHA and its 
counsel. For transfers of assistance under a new construction 
agreement, HUD will authorize release of the Use Agreement if no HAP 
Contract is ultimately signed. HUD has elected to not prescribe a 
separate Rider to cover this situation. HUD will also set the term of 
the HAP Contract at the signing of the HAP Contract.

RAD Conversion Commitment (RCC)

    A commenter expressed appreciation for HUD's efforts to streamline 
and improve the RCC, stating that it will be a more useful document 
going forward, but provided the following general comments: The 
commenter asked that HUD consider providing a definition of PIC (PIH 
Information Center), and that the HAP Contract--generally defined as 
``HAP'', ``Contract'', or ``HAP Contract'' should be referred to 
consistently as the ``HAP Contract.'' The commenter also suggested that 
HUD consider adding a box for the approved escalation factor, or 
scheme, for the Reserve Fund for Replacements. The commenter stated 
that many investors or lenders will set this factor, or require that 
the reserve deposits be resized after a set period of time based on a 
new physical needs assessment. The commenter stated that setting an 
approved escalation in the RCC will minimize confusion over the HUD 
requirement and help avoid conflicting requirements between HUD, FHA, 
and other investors and lenders.
    HUD Response: HUD has accepted all of these comments, except the 
comment relating to the escalation factor. The minimum escalation 
factor is governed by regulation, as set forth in the HAP Contract, but 
HUD has revised this section to clarify that other project parties may 
require additional deposits.
    One commenter stated that while it generally believes the addition 
of the table on the first page of the RCC will lead to ease of use and 
clarity for the parties, the box entitled ``Key Features of Covered 
Project,'' with its list of items and blanket requirement to describe 
various elements of the transaction, seems to be very broad and 
open[hyphen]ended. The commenter stated that it is conceivable that a 
project could meet many, if not nearly all, of the Key Features which 
would lead to an extensive narrative that would overtake the first 
pages of the RCC and defeat the purpose of the streamlined table 
design. The commenter encouraged HUD to either break out some of these 
items into separate boxes or move this description and feature to an 
exhibit. The commenter also encouraged HUD to add more definition to 
the required description to promote consistency in what is included or 
required by this section of the RCC.
    HUD Response: HUD has accepted all of these comments.
    A commenter commended HUD on its revamped RCC, stating that the new 
document will help PHAs, developers and HUD to successfully flag 
potential issues related to the closing much earlier in the process. 
The commenter stated that one of the primary issues that it sees 
arising with the RCC is related to the process in which the RCC is 
issued. The commenter stated that there are often resolvable problems 
and/or errors in the RCC when it is issued to the PHA that can result 
in substantive delays, particularly with debt and equity providers. The 
commenter recommended that to mitigate delays, HUD amend its RCC 
process to issue a draft RCC to the PHA prior to the final RCC. The 
commenter stated that this will allow the PHA and its development team 
to flag errors and make updates that would otherwise delay the closing 
process, and it would also make the closing process itself more 
efficient as it would mitigate the need for as many

[[Page 66674]]

amendments. The commenter stated that under this scenario, HUD could 
require PHAs to respond within a fixed period of time (say two weeks) 
or assume the PHA has given its implied consent to the RCC. 
Alternatively, HUD could also establish a process to easily amend the 
RCC at closing.
    HUD Response: HUD appreciates the commenter's insight and is 
considering further processing directions to support the revised RCC 
form.

Relocation and Civil Rights Concerns

    A commenter stated that the RAD Form Documents are a critical part 
of ensuring the long-term affordability and tenant protections that are 
required by the RAD program. The commenter stated that these documents 
also have the potential to provide the necessary transparency 
surrounding the terms of the RAD conversion, which is currently lacking 
in many RAD jurisdictions nationwide. The commenter stated that members 
of its organization and their tenant clients have experienced 
significant challenges in obtaining basic information about their local 
RAD conversion, and often have to resort to filing local public records 
act requests (which, in some cases, have still not obtained important 
information about the proposed conversion). The commenter stated that 
it believes that the lack of transparency and collaboration undermines 
the requirements of the RAD program and slows down a time-sensitive 
conversion process. The commenter stated that its comments are directed 
to striving to ensure that the RAD Form Documents include the strongest 
long-term affordability protections, are used as key tools for tenant 
education and participation, and are publicly accessible for 
enforcement and transparency purposes. In this regard, the commenter 
strongly encouraged HUD to expand the FHEO Accessibility and Relocation 
Checklist (the Checklist) to include other fair housing issues beyond 
accessibility and relocation. The commenter stated that including civil 
rights areas beyond fair housing and accessibility help to provide a 
more accurate picture of the potential fair housing concerns triggered 
by the RAD conversion, which would assist in FHEO's RAD fair housing 
review. The commenter stated that as part of this review, HUD should 
also inquire about what efforts the PHA has made to determine existing 
residents' preferences about new construction on the existing site or 
at new sites.
    The commenter also encouraged HUD to require a written relocation 
plan and involve tenants in the drafting process as part of this 
Checklist. The commenter stated that requiring a written relocation 
plan would create the opportunity for increased transparency and tenant 
participation in a critical part of the RAD conversion that directly 
affects tenants' living environment and quality of life. The commenter 
stated, that at the very least, Section III of the Checklist should 
require PHAs to explain how they have educated and will continue to 
educate and involve tenants in the relocation planning process, 
including attaching any materials that were distributed to tenants 
during the relocation planning process. The commenter stated that 
Section III of the Checklist should also inquire about what efforts the 
PHA and/or RAD property owners took to minimize the need for temporary 
tenant relocation, why temporary relocation is necessary with the 
proposed level of property rehabilitation, and how the PHA will keep 
track of residents during relocation. The commenter further suggested 
that PHAs should be required to provide relocated residents with 
quarterly updates during relocation so that they have some sense about 
when they will return to the property.
    With respect to relocation plans, the commenter stated that written 
relocation plans should also identify the anticipated maximum number of 
vacancies that are required to carry out rehabilitation of the property 
and the time period for which units will be kept vacant. The commenter 
stated that some PHAs create vacancies in as many as 20 percent of the 
units in a property as far out as two years before RAD conversion, and 
that PHAs continue to receive subsidies for these units despite fewer 
people are housed at a property that is still a PHA unit. The commenter 
further stated that, in describing the likely housing markets and 
communities where tenants will relocate through HCV assistance, Section 
III of the Checklist should require PHAs to provide the current voucher 
success rates in the local community, including whether there is a 
local or state source of income law that includes HCVs as a protected 
source of income.
    Another commenter commented on the RAD FHEO Accessibility Report 
(Signature Certification). The statement regarding HUD's accessibility 
requirements (2% and 5%) should be removed based on an inaccurate 
reference to the section 504 regulations.
    HUD Response: HUD will consider these comments further, consistent 
with fair housing and civil rights legal requirements. HUD anticipates 
that it will publish, consistent with the Paperwork Reduction Act 
requirements, a further revised Checklist.

Financing Plan

    A commenter strongly urged HUD to take steps to require evidence of 
tenant participation in the RAD conversion process as part of the 
Financing Plan submission, including the educational materials that 
were provided to tenants prior to and since the Commitment to enter 
into a Housing Assistance Payment Contract (CHAP) was issued. The 
commenter proposed adding ``Evidence of Tenant Participation'' as a 
separate requirement and section (#22) in the Financing Plan. The 
commenter stated that this section should require PHAs to show evidence 
of tenant education and participation, that has occurred until this 
point, as well as future plans for tenant education and involvement, 
including but not limited to tenant involvement in: Planning 
discussions about any proposed demolition or reduction of units, 
changes in unit configuration, the scope of work and timeline for 
proposed rehabilitation or new construction, temporary relocation 
planning, transfers of assistance, changes in ownership, changes in 
rent levels, proposed changes to waiting list setup and procedures, and 
any programmatic or regulatory waivers that the PHA is seeking or has 
received from HUD or any state or local entity. The commenter stated 
that tenant participation and education is critical to a successful and 
enduring RAD conversion, especially as part of broader conversations 
around the community's aspirations for community development. The 
commenter stated that PHAs should be held accountable for adequate and 
effective tenant education and participation during the RAD conversion 
process.
    HUD Response: HUD appreciates this comment, and suggests that the 
appropriate vehicle for this is the required tenant meetings, as well 
as the PHA's PHA/MTW Plan or Significant Amendment to the PHA/MTW Plan. 
Documentation of the first two resident meetings is required with the 
RAD application and the third meeting is required before closing, so 
submission of documentation with the Financing Plan would not be 
consistent with the RAD Notice. The Financing Plan has been amended to 
require a summary of a resident's comments received between CHAP and 
Financing Plan.
    A commenter encouraged HUD to make the following changes to 
existing text in the Financing Plan:
     PHAs should be required to explain why there is any 
difference in the number of units under the ACC versus

[[Page 66675]]

the number of units converting to RAD. Will those units be demolished 
and not replaced under the de minimis exception (greater of 5 percent 
of the number of units under ACC immediately prior to conversion or 5 
units), have those units been vacant for more than 24 months at the 
time of RAD application, or will those units not convert to RAD because 
of a Section 18 demolition or disposition?
     PHAs should be required to provide the scope of work and 
expected costs (total and average per unit), including a narrative of 
the major rehabilitation or construction work that is expected to be 
done.
     If a PHA is seeking Section 18 approval, the PHA should be 
required to explain whether they are seeking demolition or disposition 
approval and how such approval would further the goals of the RAD 
program.
    HUD Response: HUD has revised the Financing Plan form to more fully 
address these concerns.
    A commenter suggested that HUD should also require the PHA to 
indicate how and for how long it intends to preserve its interest in 
the property, preferably via ground lease, and that HUD should require 
PHAs to seek input from and make this form available to tenants and 
local tenant advocates prior to submission and at any time thereafter 
upon informal request.
    HUD Response: If there is a ground lease, its term will be 
considered along with the RAD HAP Contract term during the evidentiary 
review of documents provided after RCC. The RAD statute (Consolidated 
and Further Continuing Appropriations Act or 2012 (Pub. L. 112-55, 
enacted November 18, 2011), as amended, and as implemented by the RAD 
Notice (PIH 2012-32 (HA) REV-2) permits interests other than ground 
leases to preserve the affordable housing property. This information 
will be discussed with the tenants and community as part of the PHA's 
PHA Plan or MTW Plan process.
    Another commenter stated that with respect to the Development 
Budget, page 5 of the RAD Financing Plan, in the sources of funds 
section, the ``Prior Year Public Housing Capital Funds'' should be 
changed to ``Public Housing Capital Funds'' and ``Take Back Financing'' 
should be changed to ``Seller Take Back Financing (Acquisition)''.
    HUD Response: HUD agrees and has made this change.
    The commenter also stated that in the operating pro forma section, 
the maintenance line item and operations should be separated, and that 
the term ``maintenance'' is misspelled.
    HUD Response: HUD has corrected the spelling but believes that 
maintenance and operations should be considered together.
    Another commenter stated that the revised Financing Plan delays 
Fair Housing review (Upfront Civil Rights review, and Site and 
Neighborhood Standards review) to coincide with the Financing Plan 
review, but that given that the Fair Housing review often can cause 
significant delays in the processing of a transaction, the commenter 
stated that it believes that the Fair Housing review could and should 
begin prior to the Financing Plan submission. The commenter stated that 
PHAs are consistently encouraged to submit Fair Housing documentation 
for review as early as possible. The commenters stated that the current 
Financing Plan reads as though PHAs should be submitting the Fair 
Housing review with the Financing Plan and not before. The commenter 
stated that it believes this is confusing and counter to HUD's previous 
guidance.
    HUD Response: The Financing Plan requires evidence of approval of 
most upfront civil rights reviews for the items that require longer 
lead times. HUD anticipates issuing for comment a revised Checklist, as 
well as a RAD Notice on Fair Housing, Civil Rights and Relocation with 
improved guidance on the timing of these submissions and reviews.
    Another commenter suggested that, in the Financing Type box in 
Section 1, HUD consider adding ``FHA Insured Mortgage'' to ``Financing 
Type''. The commenter also suggested that, in Paragraph 3 of Section 1, 
HUD include instruction to the applicant on the expectation regarding 
the timing of the release of the Declaration(s) of Trust. The commenter 
noted that while the RAD Notice only requires a legal opinion when a 
PILOT will continue, they have experienced similar requests when a 
property tax exemption, generally, will continue post-closing. The 
commenter requested clarification on the extent of the requirement. 
Further, they proposed the following revision to Section 9's third 
sentence: ``If PILOT will continue after conversion, upload a draft 
legal opinion based on state and local law of continuation of PILOT 
after conversion that will be execute at the time of closing.'' The 
commenter also suggested that in Paragraph 8 of Section 12 HUD insert 
``will'' after ``PHA'' in ``whether the PHA still be.''
    HUD Response: HUD has incorporated the four recommendations 
suggested by this commenter.
    A commenter also noted a lack of detail regarding the supporting 
documentation that is required for the release of the Declaration(s) of 
Trust at closing in Section 17. They requested illustrative examples of 
supporting documentation that would support releasing the DOT at 
closing and when such supporting documents must be submitted to HUD.
    HUD Response: HUD has given some guidance on this in the RAD 
Notice, but prefers to consider this type of request on a case-by-case 
basis with specific factual information provided by the PHA.
    The commenter proposed moving Section 18 to the end of the 
Financing Plan to be clear that the certification applies to the entire 
Financing Plan. Lastly, the commenter suggested that HUD replace 
``Appendix C'' in Paragraph 3 of Section 19 with ``Appendix III'' in 
order to remain consistent with that RAD Notice.
    HUD Response: HUD agrees and has made these changes.

RAD Conversion Commitment (RCC) (First Component)

    A commenter stated that because the issuance of the RCC indicates 
HUD's approval of the Financing Plan and occurs approximately 30-90 
days before closing, PHAs should be required to provide evidence of 
tenant education and participation that has occurred until that point, 
as well as future plans for tenant education and involvement, including 
but not limited to: Tenant involvement in planning discussions about 
any proposed demolition or reduction of units, changes in unit 
configuration, the scope of work and timeline for proposed 
rehabilitation or new construction, temporary relocation planning, 
transfer of assistance, changes in ownership, changes in rent levels, 
proposed changes to waiting list setup and procedures, any programmatic 
or regulatory waivers that the PHA is seeking or has received from HUD 
or any state or local entity, and financial support logistics for 
legitimate tenant organizations moving forward.
    The commenter stated that tenant participation and education is 
critical to a successful and enduring RAD conversion, especially as 
part of broader conversations around the community's aspirations for 
community development. The commenter stated that PHAs should be held 
accountable for adequate and effective tenant education and 
participation during the RAD conversion process, and that the RCC 
should indicate that (1) if an MTW agency chooses to convert assistance 
to PBRA under RAD, the converting RAD

[[Page 66676]]

project(s) will no longer be included as part of the PHA's MTW program, 
and (2) if an MTW agency chooses to convert assistance to PBV under 
RAD, the converting RAD project(s) will continue to be included in the 
PHA's MTW program, subject to the observance of RAD requirements as set 
forth in applicable statutes, regulations, and policies. The commenter 
concluded its comment on this matter stating that HUD should require 
PHAs to seek input from and make this document available to tenants and 
local tenant advocates prior to conversion and at any time thereafter 
upon informal request. The commenter stated that since the RAD program 
was enacted, tenants and their advocates have faced significant 
challenges, including a lack of good faith cooperation and transparency 
by PHAs, when trying to learn and become involved in the proposed RAD 
conversion, and HUD should take affirmative steps to advance the 
transparency and tenant participation goals of the RAD program.
    HUD Response: HUD appreciates this comment, and suggests that the 
appropriate vehicle for much of this discussion with tenants are the 
required tenant meetings, as well as the public comment period 
regarding the preparation of or amendment of the PHA's PHA Plan or MTW 
Plan. HUD has determined that other elements of this comment (such as 
the implications of participation on MTW agencies) are adequately 
addressed in the RAD Notice. HUD will consider whether additional 
guidance on these topics is appropriate outside the context of the 
Financing Plan template. In support of this comment, the Financing Plan 
template has been amended to require Evidence of Approval of Amendment 
to the PHA or MTW Plan if not contained within the Plan.
    Another commenter requested that HUD's Office of General Counsel 
should review and confirm the non-dwelling assets of the project 
proposed for conversion and provide information to the PHA prior to the 
issuance of the RCC. The commenter also stated that the PHA should 
provide a courtesy (un-signed) copy of the RCC or the approved 
Financing plan committee term sheet prior to the issuance of the RCC.
    HUD Response: HUD's Office of Public Housing has instituted a 
process for the review and confirmation of the treatment of non-
dwelling assets and works with the PHA on this information prior to the 
issuance of the RCC. HUD will consider the commenter's suggestion of 
providing draft RCCs as it develops further processing directions to 
support these new forms.
    Another commenter suggested that HUD consider revising the box 
titled ``Unit Mix of Converting Project'' on page 1 to include the 
Covered Project. The commenter also suggested in the ``Identify amount 
and source of any other reserves or other funds that will be 
transferred to Project Owner upon Closing for uses other than to 
capitalize reserves'' box in the table on page 2, if such funds refer 
only to PHA funds to be used for such purposes, insert ``from the PHA'' 
prior to ``to Project Owner.'' The commenter also suggested that HUD 
replace ``initial repairs'' in the ``RAD Rehab Assistance Payments'' 
box in the table on page 2 with ``Work'' to be consistent with the term 
defined in Section 19. The commenter also suggested that in the ``Green 
practices'' box in the table on page 2, HUD delete ``so-called'' and 
reference Section 1.4.A.2 of the RAD Notice, which describes industry-
recognized green building certifications. The commenter suggested that 
in the first sentence of the opening paragraph on page 3 HUD replace 
``property'' with ``assistance from the Converting Project to support 
the Covered Project'' to clarify the definition of Project. The 
Commenter suggested HUD replace ``transferring'' with ``conveying,'' in 
the last sentence of the opening paragraph, to make clear such 
applicability is separate from any transfer of assistance that may or 
may not take place as part of the conversion. The commenter also noted 
that if the PHA is not conveying the Project, all references to Project 
Owner in the RCC should mean the PHA.
    HUD Response: HUD has incorporated all of these comments except for 
the green practices box which has been deleted because it is no longer 
a ranking factor in the RAD application.

RCC--Applicable HUD Regulations and Requirements

    A commenter suggested that the first sentence of Section 1 could be 
revised by removing ``PHA and'' consistent with the change noted in the 
opening paragraph regarding when the PHA will be referenced in the RCC 
as the Project Owner. They additionally suggested replacing 
``Agreement'' with ``Commitment'' in the second sentence to be 
consistent with how the RCC is defined. With regard to the conflict 
provisions in the section, the commenter recommended that any conflicts 
between the RCC and any other HUD requirements should be identified and 
resolved, therefore allowing this provision to be removed and providing 
greater certainty to RAD program participants.
    HUD Response: HUD has revised the terminology as suggested. 
However, it has maintained its discretion in resolving any conflicts 
whenever they may arise.

RCC--Acceptance of Commitment (Section 2)

    A commenter submitted a comment on the Acceptance of Commitment/
Expiration at page 3. The commenter stated that the Commitment should 
terminate 60 days from the date of the RCC issuance instead of 30 days. 
The commenter stated that if the transactions contemplated by this 
commitment are not closed to HUD's satisfaction within 180 days from 
RCC, this commitment will expire at 90 days. The commenter stated that 
PHAs need more time to close the transaction than 90 days, especially 
if the reviews from HUD take longer than expected or if the changes in 
the RCC approval are inconsistent with the financing.
    Another commenter stated that Section 2(c) permits HUD to declare 
the RCC ``null and void'' without notice or an opportunity to cure, 
``if the PHA or Project Owner fails to take any action, or deliver any 
information, called for under the agreement within the time frames 
contemplated . . .'' The commenter stated that this is unnecessary and 
overreaching. The commenter stated that if the PHA and Project Owner 
fail to meet HUD's criteria to close, the RCC expires after 90 days 
(unless HUD extends it), and, in particular, failure to complete an 
activity should not nullify the RCC unless it means the HUD closing 
criteria cannot be met. In addition, notice and cure should be 
available under the failure to take action provision.
    Another commenter suggested that in Sections 2(a), 2(b), and 10(c) 
``the date hereof'' is replaced with ``the date this Commitment is 
executed by HUD'' since the RCC is not dated.
    HUD Response: HUD has made some adjustments to the acceptance and 
expiration of the Commitment to clarify the timing and process for 
extension or termination of an RCC.

RCC--(Section 3)

    A commenter stated that Section 3 indicates that the Closing 
Checklist will list all documents to be submitted to and approved by 
HUD. The commenter stated that Section 6(e) of the RCC indicates that 
all documents required by lenders for the transaction must be 
acceptable to HUD in HUD's sole discretion, and Section 21 states that 
closing is conditioned on the legal review and approval of the Closing 
Documents. The commenter asked that

[[Page 66677]]

HUD clarify what documents must be submitted to HUD for review and 
approval, as there is a growing misunderstanding on this point 
throughout the industry and inconsistencies depending on which HUD 
Field Office is reviewing the RAD closing package. The commenter 
suggested looking to HUD's mixed-finance requirements for guidance on 
this point and focusing on the RAD specific documents with HUD having 
the right to request and review additional documents as needed. The 
commenter stated that specifically identifying in advance what 
documents are required to be submitted to HUD for review will allow 
parties to the transaction to make adjustments to meet deadlines for 
submissions in a timely fashion, as well as provide consistent 
expectations for all HUD Field Offices and all RAD program 
participants.
    HUD Response: Exhibit E to the RCC provides the Closing Checklist 
of the required documents.

RCC--Public Housing Requirements (Section 4)

    This section has added language that states that the Converting 
Project remains subject to all applicable public housing requirements 
until the effective date of the HAP Contract. The commenter stated that 
this sentence sets up several regulatory conflicts because, according 
to the commenter, there can be as much as a month between the closing 
of the RAD transaction and the effective date of the HAP Contract. The 
commenter stated that it believes that this requirement unfairly puts 
PHAs in the crosshairs of compliance, as it is unclear how to comply 
with the RAD closing documents while simultaneously complying with 
public housing requirements until the effective date of the HAP 
Contract. The commenter stated that given the enumeration of 
requirements in (a)-(c) it is not sure that this additional sentence is 
necessary, but to the extent HUD believes that it is, the commenter 
stated that the ``Closing'' is the more appropriate reference here. The 
commenter encouraged HUD to re[hyphen]examine this requirement and 
issue additional guidance to assist PHAs with compliance.
    Another commenter stated that Section 4 should be revised to 
include the Project Owner's acknowledgement that the Converting Project 
remains subject to applicable public housing requirements until the 
effective date of the HAP since the Project Owner will take title to 
the Project at closing. The commenter stated that, in addition, ``all 
applicable public housing requirements'' should be clearly defined and 
the defined term should be incorporated throughout the enumerated 
assurances. The commenter also suggested that the Consolidated Owner 
Certification should be revised at Section 1 to mirror the final 
changes to Section 4 of the RCC.
    HUD Response: HUD has clarified section 4 and the description and 
scope of applicable HUD requirements.

RCC--Public Housing Requirements (Section 4) (Form HUD-52624)

    A commenter made several comments regarding Form HUD-52624. The 
commenter stated that it believes the reformatting of the RCC to place 
important information in the initial table will be beneficial to all 
parties in the transaction. The commenter stated that it wanted to 
confirm that in instances where assistance is not being transferred, 
the Covered Project and the Converted Project information will still be 
completed with duplicate information. The commenter stated that 
completing the table in this manner is necessary to ensure that the 
defined terms ``Covered Project'' and ``Converted Project'' are 
accurate throughout the form. The commenter also stated that while the 
revised formatting will likely provide for more efficient processing of 
the transaction, providing a draft RCC for review prior to HUD 
execution would be helpful to avoid inadvertent mistakes that can lead 
to unnecessary amendments. The commenter offered specific wording 
changes to this form.
    HUD Response: As suggested, HUD has made significant changes in 
response to this comment and revised the initial table and information 
to be checked or explained in the new key features section.

RCC--HUD Review of Project Ownership (Section 5)

    A commenter stated that it believes HUD should allow for 
flexibility in this section by adding ``unless approved by HUD'' at the 
end. The commenter stated that some conversions have required a limited 
or early transfer of land to demonstrate site control for purposes of 
meeting tax credit requirements.
    Another commenter suggested that an exception to the prohibition on 
transfer of ownership interests in the Project prior to closing should 
be added to allow for site control commitments that may be required as 
a condition of participation in the Low Income Housing Tax Credit 
program. The commenter provided the following language: ``PHA shall not 
transfer any ownership interest in the Converting Project prior to the 
Closing except for site control commitments that may be required as a 
condition of participation in the Low Income Housing Tax Credit 
program.''
    HUD Response: HUD is maintaining the current language in Section 5. 
HUD does not believe that standard practice or typical LIHTC 
transactions should require transfer prior to Closing.

RCC--Closing Documents (Section 6)

    A commenter stated that Section 6(c) which defines closing 
documents to be provided to HUD, including ``any documents required by 
lenders or other parties to the transaction, which must be acceptable 
to HUD in HUD's sole discretion.'' Because the number and type of non-
RAD documents to be submitted may change over time, we recommend more 
flexible language as shown in the markup that the commenter advises it 
has provided. The commenter also stated that HUD's review should relate 
to compliance with program requirements, and that the commenter had 
previously noted to HUD its concern that the list of documents 
collected and reviewed is overbroad for HUD's purposes and requires an 
investment of time by HUD that may not be necessary to ensure that RAD 
program requirements are met. The commenter stated that its suggested 
revisions to this section are aimed at giving HUD the flexibility to 
determine what needs to be submitted as a Closing document as 
transactions, and the program, evolve.
    Another commenter stated that in Section 6, the definition of 
Closing Documents should be consistent with the documents required to 
be submitted to HUD pursuant to Section 3. The commenter stated that 
internal consistency cannot currently be confirmed without a sample 
Closing Checklist to review. The commenter asked HUD to consider adding 
the Consolidated Owner Certification in the list of Closing Documents. 
The commenter stated that not all of the documents listed in (a) 
through (d) are HUD form documents and that Section 6 should be revised 
to reflect this.
    This same commenter stated that in Section 6(d), no changes have 
been proposed to the Certification and Assurances, and HUD should 
consider revising the Certification and Assurances to clearly permit 
post-closing certification of changes. The commenter stated that such 
clarification could be achieved by removing Paragraph 2 from the 
Certification and Assurances and instead requiring a post-closing 
certification similar to the Certification of No Changes used in

[[Page 66678]]

mixed-finance transactions be submitted with the final RAD transaction 
docket to HUD. The commenter also stated that in Section 6(e), 
including any document required by ``other parties'' as a Closing 
Document is confusing and exceptionally broad. The commenter stated 
that a more clearly defined list of documents should be provided. The 
commenter stated that, as currently stated, Section 6(e) would require 
HUD acceptance of development documents, zoning applications, plans and 
specifications, and construction contracts. The commenter offered 
revisions to section 6(e).
    HUD Response: HUD has revised this section in accordance with these 
comments.

RCC--Use Agreement Priority (Section 7)

    A commenter stated that the requirements of Section 7 for use 
agreement recording priorities have been uneven. The commenter stated 
that HUD has approved recording the RAD Use Agreement after recording a 
deed or ground lease in some circumstances but not others, and this has 
significant implications for the ability to raise sufficient LIHTC 
equity in situations where an existing project is being sold to a new 
partnership and the acquisition credits are generated by the sale. The 
commenter stated that for practical purposes, when the PHA ground lease 
is subordinate to the RAD Use Agreement it could significantly diminish 
the appraised value of the property and thus the amount of acquisition 
LIHTCs. The commenter stated that for all intents and purposes, the 
property remains public housing throughout the process whether or not 
the RAD Use Agreement is recorded prior to or after recording of the 
ground-lease (or deed)--the only practical result of this inconsistent 
application is diminishing the amount of potential subsidy flowing to 
the property. The commenter recommended that HUD issue written guidance 
to transaction managers explicitly directing them to approve 
recordation of the ground lease (or deed) prior to the RAD Use 
Agreement when leveraging LIHTCs generated through the acquisition of 
an existing project.
    Another commenter stated that it sought clarification of what HUD 
requires regarding subordination to the RAD Use Agreement of existing 
documents recorded prior to the RAD Use Agreement. The commenter stated 
that Section 7 of the RCC requires ``any and all liens and/or 
encumbrances against the Covered Project'' be subordinated to the RAD 
Use Agreement. The commenter stated that the Definitions Section of the 
RAD Notice indicates that the RAD Use Agreement ``must be recorded in a 
superior position to any new or existing financing or other 
encumbrances on the Covered Project.'' Section 1.4.B.1.i of the RAD 
Notice requires that the RAD Use Agreement must ``be recorded in a 
superior position to all liens on the property.'' The commenter further 
stated that Sections 1.6.B.4.i and 1.7.A.4.i of the RAD Notice require 
that ``[a]ll loans made that are secured by Covered Projects must be 
subordinate to a RAD Use Agreement.'' This same commenter further 
stated that based on these references and other guidance provided by 
HUD, it seems the essential requirement is that the RAD Use Agreement 
controls the operation of the RAD units and survive foreclosure of any 
other liens. The commenter stated that, however, not all encumbrances 
include foreclosure rights or other remedies that would jeopardize the 
RAD Use Agreement. The commenter stated that it believes further policy 
and guidance on this issue is needed rather than a blanket requirement 
that ``all liens and/or encumbrances'' against the property be 
subordinated to the RAD Use Agreement. The commenter stated that such a 
requirement dictates those utility easements, subdivision plats and 
other documents that do not create any third-party foreclosure rights 
and are arguably benign to the enforcement of and compliance with the 
RAD Use Agreement must be subordinated to the RAD Use Agreement prior 
to closing. The commenter stated that if a document of record does not 
impact the continued effectiveness of the RAD Use Agreement nor affect 
HUD's enforcement of and the Owner's compliance with the RAD Use 
Agreement, then subordination is overly burdensome and unnecessary.
    The same commenter stated that, in Section 7, HUD should consider 
clarifying the title documentation to be provided for the Converting 
Project and the Covered Project. The commenter stated that a title 
report alone is likely acceptable for the Converting Project in 
instances of transfers of assistance, but that a title commitment or an 
owner's pro forma title policy may be more appropriate for the Covered 
Project in conversions involving the addition of financing to be 
secured by the Covered Project in order to show all documents that will 
be recorded at closing. The commenter asked HUD to consider the 
following revisions to Section 7 to address the above comments
    HUD Response: HUD appreciates these concerns and the circumstances 
which have dictated different recording order. HUD has further 
clarified this section and inserted some of the commenter's suggested 
language; however, unless otherwise approved by HUD, the RAD Use 
Agreement shall be superior to any and all liens and/or encumbrances 
against the Covered Project and HUD has provided examples of such liens 
and encumbrances. HUD will require the Project Owner to obtain such 
consents or subordination agreements and have such documents executed 
as HUD may determine necessary to establish priority.

RCC--Tax Financial and Legal Consequences (Section 9)

    A commenter stated that Section 9 includes a statement that 
``parties to the transaction are represented by competent counsel'' and 
the commenter asked that HUD delete this language. The commenter stated 
that the representation is not a ``consequence'' and the topic is 
already addressed more appropriately in Section 21.
    Another commenter stated that in Section 9, the second sentence 
should be deleted since legal representation is covered by Section 21, 
and that if not deleted, HUD should replace ``Parties to the 
transaction'' with ``PHA and Project Owner'' since there are numerous 
parties involved in the transaction beyond the PHA and Project Owner.
    HUD Response: HUD has deleted this language as requested.

RCC--Owner Certifications (Section 10)

    A commenter stated that Section 10(a) as revised can be interpreted 
to extend beyond notices required by RAD, and that ``Program'' is not 
defined in the RCC or the RAD Notice.
    A commenter stated that, in Section 10(c), add ``unless otherwise 
approved by HUD'' to the end of the sentence. The commenter stated that 
consideration should also be given to how anticipated changes to the 
relocation notice will impact this certification.
    Another commenter stated that it believes the representation in 
Section 10(c), is problematic since the standards and guidance on 
relocation continues to evolve. The commenter stated that currently HUD 
may approve relocation prior to the issuance of the RCC and may conduct 
transfers in accordance with its ACOP and requested that HUD consider 
their suggested language.
    A commenter stated that Section 10(d) is overly broad and 
burdensome and should be limited to debarment, suspension, or proposed 
debarment of the Project Owner. The commenter stated that audits and 
investigations could presumably prevent a PHA from closing a RAD 
conversion when such

[[Page 66679]]

actions may not be material or related to the conversion. The commenter 
stated that the Section 10(d) certification should be revised and that 
the self-effectuating re-certification of the statements included in 
Section 10 by executing the transaction documents should be removed and 
the certifications should be added to the Consolidated Owner 
Certification.
    Another commenter similarly stated that Section 10(d) is overly 
broad and would prohibit parties with closed OIG audits, routine 
financial audits, or Voluntary Compliance Agreements from 
participating. The commenter stated that this language needs to be 
revised, and that it is unclear why the breadth of this representation 
is required, and HUD could protect its interests with narrowed 
language.
    Another commenter stated that while it understands the motivation 
behind the Section 10(d) certification and concurs that the language in 
this section itself is so broad that is both unreasonable and 
incredibly burdensome, it is an unfortunate nature of the business that 
any portfolio owner or PHA of a certain size is likely to have an open 
administrative proceeding, audit or investigation. The commenter stated 
that these are often times random, curable or a result of a frivolous 
complaint. The commenter stated that the language in the RCC is so 
broad and undefined that many private developers would be unwilling to 
sign the RCC without amendments. The commenter recommended that, at a 
minimum, HUD should update this provision to provide an explicit and 
detailed list of open covered events or actions that truly warrant the 
HUD's ongoing concern and reporting. The commenter stated that 
disclosure of minor items outside the scope of the ``bad acts'' list 
should not be required, and further recommended Section D be eliminated 
entirely from the RCC as it is duplicative of numerous other due 
diligence procedures.
    HUD Response: HUD has adopted many of these comments and their 
suggested language.

RCC--Changes to the Commitment (Section 13)

    The commenter stated that it is concerned that HUD's ability to 
declare the RCC null and void is not necessary to achieve HUD's goals 
and opens the door to potentially arbitrary actions. The commenter 
stated that if the PHA and Project Owner meet HUD's closing 
requirements they close, and if they don't, the RCC expires after 90 
days. The commenter requested that HUD please see suggested edits in 
the document provided by the commenter.
    A commenter stated that in Sections 13 and 14, the level of change 
warranting amendment to the RCC should be the same. The commenter 
stated that currently the standard is ``substantial'' changes to the 
Financing Plan and ``material'' changes to the Sources and Uses. The 
commenter stated that, in addition, a clearer understanding of the 
definition of substantial or material would be beneficial to all 
parties involved in the transaction.
    HUD Response: HUD has replaced ``substantial'' with ``material'' 
for the standard in determining whether HUD may require an amendment to 
the RCC and has removed the sentence regarding when the RCC would be 
voided for economic, feasibility, or other reasons.

RCC--Sources of Funds (Section 14)

    A commenter stated that this section is a little hard to follow and 
confusing as written, and suggested adding subsection labels and other 
clarifications. The commenter stated that some liens, such as 
preexisting utility liens, will generally stay superior to the RAD Use 
Agreement, however, this has not been problematic in the eyes of field 
counsel in transactions closed to date.
    Another commenter stated that in Section 14, HUD should consider 
deleting the second sentence, ``Any and all encumbrances on title must 
be subordinate to the RAD Use Agreement'', which is duplicative of the 
requirements of Section 7. This same commenter suggested that in the 
sixth and seventh sentences of Section 14 HUD should insert ``public 
housing'' prior to ``funds''. The commenter stated that Section 14 
requires public housing funds advanced from the PHA to be deposited 
into an account covered by a General Depository Agreement (GDA), but 
that Section 1.13.B.3 of the RAD Notice states that a GDA is required 
when no new debt will be utilized in the transaction and that the funds 
can be held by the lender in instances when new debt is involved in the 
transaction. The commenter stated that Section 14 should be clarified 
accordingly.
    HUD Response: HUD has significantly rewritten this section in 
response to these comments and to reflect current fund processing.

RCC--Planned Construction and Rehabilitation (Section 19)

    A commenter stated that unnumbered paragraph 2 requires the PHA and 
Owner to ``represent, warrant and certify to HUD that the sources of 
funds are sufficient to pay for the construction and/or rehabilitation 
outlined on Exhibit D.'' The commenter stated that this seems like a 
guaranty, and should be softened, or alternatively allow the parties to 
state that they have no knowledge that funding is not sufficient.
    The commenter stated that with respect to Section 19(a), as 
written, this section could be read to apply the requirements of these 
cross[hyphen]cutting requirements, without regard to whether or not the 
regulations would be triggered by their terms. The commenter stated 
that adding ``as applicable'' in a few places will help minimize 
confusion. The commenter stated that subsection (vii) cites to Section 
3 for definitions of ``construction'' and ``rehabilitation,'' but the 
commenter stated that it could not find the definitions in the Section 
3 regulations in 24 CFR part 135.
    Another commenter recommended that throughout Section 19, HUD 
should delete references to ``PHA''. The commenter stated that the PHA 
should not have to certify to matters related to construction and 
rehabilitation since in most conversions the Project Owner controls the 
decisions and process regarding the Work. The commenter stated that 
with the change noted in the opening paragraph in instances where the 
PHA is the Project Owner, this certification as revised remains 
applicable. The commenter asked that HUD replace ``construction and/or 
rehabilitation outlined on Exhibit D'' with ``Work.'' This same 
commenter stated that in Section 19(a)(v), the leading quotation mark 
around ``alterations'' should be moved to include ``other alterations'' 
consistent with the cited regulation, and that in Section 19(c), HUD 
should replace ``earn or receive any cash flow distributions'' with 
``withdraw or take any Distributions'' to be consistent with the 
definition of Distribution as provided in the RAD Notice.
    A commenter stated that Section 19(c) prohibits the Owner from 
earning or receiving cash flow until ``written HUD acceptance of the 
completed work.'' The commenter stated that except for 
FHA[hyphen]insured projects, the commenter knows of no such procedures 
or requirements for HUD to accept the work. The commenter stated that, 
for example, in PBV the PHA as contract administrator reviews and 
accepts completed work. The commenter asked that HUD delete and issue 
additional guidance once HUD has developed a process or procedure to 
accept the finished work.
    This same commenter stated that the additional language in Section 
19(d) regarding a completion guaranty is not necessary and the language 
should be

[[Page 66680]]

deleted. The commenter stated that the first part of the requirement--
which requires a guarantor to complete construction if the contractor 
fails to do so--is redundant with the requirement to have a payment and 
performance bond and/or letter of credit in the previous sentence. The 
commenter stated that the second part of the requirement--to pay for 
costs that are above budget--also seems to be unnecessary as the budget 
and the scope of work have already been fixed in Exhibits B and D of 
the RCC. The commenter stated that the HAP Contract also requires that 
initial repairs be completed, and HUD's remedy should not be enforced 
through a completion guaranty, but rather through termination of the 
RCC or the HAP Contract in the event the initial repairs are not 
completed. The commenter stated that for additional protection, HUD's 
interest here may be better served by requiring that the construction 
contract be a guaranteed maximum price or stipulated sum contract to 
ensure that the work will be completed on budget. The commenter stated 
that requiring a guaranty to HUD will likely chill participation by 
developer partners and does not seem necessary in light of the other 
remedies available to HUD.
    HUD Response: HUD appreciates these comments and has made 
clarifying adjustments to Exhibit D with complementary changes 
suggested in part to Sections 19 a, c and d.

RCC--Reserve for Replacements (Section 20)

    A commenter suggested the following language for Section 20: ``PHA 
and/or Project Owner shall establish upon closing a Reserve for 
Replacements. The Initial Deposit (IDRR) and the monthly deposits into 
the Reserve for Replacements will be made in the amount as established 
by the approved final physical needs capital assessment report and as 
set forth in the HAP Contract and adjusted annually in accordance with 
the HAP Contract and Program Requirements.''
    Another commenter suggested the removal of ``PHA and/or'' 
consistent with the change they suggested in the opening paragraph 
regarding when the PHA will be referenced in the RCC as the Project 
Owner.
    HUD Response: Within minor wording changes and taking into 
consideration changes made to the first page of the RCC, HUD has 
incorporated these comments.

RCC--Counsel (Section 21)

    A commenter stated that the language requiring the PHA and the 
Project Owner to each select counsel should be deleted, as in many 
cases where the PHA controls the Project Owner separate counsel is not 
necessary. The commenter stated the new language in Section 21(d) 
expands the opinion to cover all pending or threatened litigation. The 
commenter stated that the opinion should be limited to litigation that 
might affect the project, rather than casting a wide net to any 
litigation the entity is involved in, such as landlord/tenant disputes 
in a Section 8 or non-RAD PHA project. The commenter stated that, in 
addition, requiring HUD consent is overbroad and would require 
additional review by HUD of completely unrelated litigation, such as 
the aforementioned landlord/tenant disputes. The commenter stated that, 
with respect to Section 21(e), this opinion should be able to be based 
on a title policy or search, as is currently allowed by the model form 
RAD opinion and should also include a carve-out for items approved by 
HUD.
    Another commenter stated that Section 21 requires PHA and Project 
Owner to have independent counsel, and that such considerations should 
be left to PHA and Project Owner to be decided within the context of 
state ethics law considerations. The commenter stated that Section 
21(a)-(f) should align with and track the RAD Model Form Opinion of 
Counsel (the ``Model Opinion''), and highlighted the differences 
between the two. The commenter stated that the opinion required at 
Section 21(e), raises the question of whether law firms are to provide 
opinions regarding lien priority has been something that has been 
considered extensively within the legal profession. The commenter 
stated that the American Bar Association, for example, has done an 
exhaustive review of opinion practices and on the point of lien 
priority has held that it is outside the purview of a law firm to give 
an opinion in this regard. The commenter stated that law firms do not 
undertake the title searches and do not undertake the process of 
recording documents, nor does a title policy run to the benefit of the 
law firm, negating the effect of a law firm's reliance on a title 
policy to give a lien priority opinion. The commenter stated that to 
give such an opinion arguably negates the effect of a firm's insurance 
policy. The commenter asked that HUD consider the alternative opinion 
offered by the commenter, and one that has been accepted by HUD 
previously.
    HUD Response: HUD has made adjustments to this section and has 
adopted in part suggested language from the commenters especially 
noting changes to the opinion on title, recording order and superiority 
of the RAD Use Agreement.

RCC--Last Public Housing Unit

    A commenter requested additional guidance to clarify how HUD will 
withhold HAP payments owed to the Project Owner for the PHA's failure 
to comply HUD instruction.
    HUD Response: HUD is preparing to release a PIH Notice on close-out 
requirements for PHAs that are converting or have converted all of 
their public housing assistance. HAP Contracts specify remedies for 
breach.

RCC--Post Closing Responsibilities (Section 26)

    A commenter stated it believes the timeframes added to this Section 
are not reasonable, and it is not in HUD's interest to impose such 
rigid timeframes. The commenter stated that depending on the 
jurisdiction adherence to these timeframes may not be possible and 
would set up a needless default.
    Another commenter stated that post-closing timeframes contained in 
Section 26 are not realistic considering recording logistics and 
processes in many jurisdictions and should provide for a minimum of 3 
business days for the initial submission of evidence of recording and 
60 calendar days for the submission of the final RAD docket.
    HUD Response: As suggested, HUD has lengthened the time for initial 
submission of evidence of recording and submission of the final RAD 
docket.

RCC--Counterpart (Section 28)

    A commenter asked that HUD consider changing ``Counterpart'' to 
``Counterparts'' throughout. With respect to the signature lines, the 
commenter suggested deleting the Owner signature block and directing 
the document drafter to obtain a signature block from the PHA or Owner. 
The commenter stated that the model is a corporate signature Block, and 
that, if the owner is a limited partnership, limited liability company, 
or other entity, the signature block is in an alternative form. The 
commenter stated it found that use of the signature block is a common 
error in RCCs. The commenter also commented on Exhibit B, and stated 
that HUD should consider not including a mandatory format or line items 
for the uses in Exhibit B. The commenter stated often there is needless 
time and energy invested in realigning the ``uses'' line items from a 
tax credit or other project budget to match with the preset categories. 
The commenter stated that this can lead to a few line items listed at 
large amounts and others

[[Page 66681]]

zeroed out entirely which is not as descriptive as may be needed. The 
commenter stated that HUD should trust its transaction managers and 
closing coordinators to work with the PHA and Project Owner to insert a 
list of uses that balances with the list of sources that accurately 
reflect the subject project.
    HUD Response: HUD has revised the section on Counterparts and 
improved the signature page to be consistent with the revised 
terminology in the RCC. HUD has also improved various aspects of the 
Exhibits to the RCC as suggested by the commenters.

RAD Use Agreement--Preamble and Section 17

    A commenter stated that the new structure of the parties to the Use 
Agreement--an ``Owner'' and a ``Lessee'' is not consistent with the 
language in the RCC and with the way in which these projects will be 
operated. We suggest that the Use Agreement mirror the structure 
reflected in the RCC and place the obligations on the Project Owner 
with the PHA added as needed to reflect that the PHA will be obligated 
under the Use Agreement in the event the Ground Lease is terminated. 
The commenter stated that the Project Owner under the Lease is the 
entity that will own and operate the project and should be the entity 
that is primarily obligated under the Use Agreement. The commenter 
stated that, as written, the Use Agreement primarily imposes 
responsibility on a party that does not have the capacity to enforce 
such obligations. The commenter strongly suggested that HUD rethink the 
structure of this Agreement, and requested that HUD look at the markup 
of this document the commenter provided.
    HUD Response: HUD agrees with this comment and has revised the 
structure of the Use Agreement to make the primary signatory the 
Project Owner, consistent with the terminology and structure of the 
RCC. HUD has further revised the document to provide for the PHA, or 
other owner of the fee estate, to bind the fee interest in the case of 
a ground lease.

RAD Use Agreement--Section 3

    A commenter stated that the language HUD added to Section 3 gives 
the impression that the tenants must be under 80 percent of area median 
income (AMI) for the remainder of the term. The commenter provided a 
markup of this section, which the commenter suggested provided greater 
clarity.
    HUD Response: HUD is not changing the requirements as to tenant 
income. HUD notes that the tenant income requirements are consistent 
with the tenant income requirements of both the public housing and 
section 8 programs.

RAD Use Agreement--Sections 5 and 6

    A commenter remarked on sections 5 and 6 (Responsibilities of 
Owners versus Owners' Agents) of the RAD Use Agreement and stated that 
it strongly agrees that Fair Housing, Civil Rights and Federal 
Accessibility Compliance are important priorities, but stated the these 
are the sole responsibility of the owner not its agents. The commenter 
recommended striking ``and its agents'' from paragraph's 5 and 6 of the 
Use Agreement.
    HUD Response: Under law, agents are also responsible, but HUD 
agrees that the language was ambiguous and has revised this language to 
read that the project owner and its agents, where applicable, shall 
ensure that the project complies with the applicable laws.

RAD Use Agreement--Section 7

    A commenter stated that the language in Section 7, Restrictions on 
Transfer, does not reference the owner's right to notice and right to 
cure, and that this should also be referenced explicitly in the HAP 
Contract. Another commenter stated that it found the insertion of the 
last sentence regarding 2 CFR part 200 problematic and too vague. The 
commenter stated that it is unclear what HUD is trying to impose by the 
addition of this sentence. The commenter asked if HUD is trying to 
impose all procurement requirements, or the audit requirements. The 
commenter stated that neither the RAD Statute nor the RAD Notice make 
any mention of 2 CFR part 200, nor its predecessor part 85. The 
commenter stated that moreover, it does not believe that part 200 
applies to Section 8 contracts generally and therefore it should not be 
implicated in the RAD Use Agreement. The commenter stated that HUD 
should either delete this section or specify which requirements are 
applicable to the RAD Projects.
    Another commenter stated that in Section 7, references to 
``Project'' without reference to Property should be replaced with 
``Property'' or ``Property and/or Project''. The commenter stated that 
in the third sentence, insert ``on the Property'' after ``Any lien''. 
Considering revising the fourth sentence as noted below, and that in 
the fifth sentence, the last reference to ``Property and/or Project'' 
should not be capitalized since the stated property and/or project are 
not part of the defined terms. The commenter also requested guidance on 
who should receive the original RAD Use Agreement after recording.
    HUD Response: HUD has deleted the specific reference to 2 CFR part 
200 and will provide more guidance on Part 200 in addition to the 
guidance found in the current RAD Notice. Changes were also adopted as 
to the references to Property and/or Project in Section 7. HUD is 
developing revised closing letter guidance to address issues such as 
distribution of original and copies of closing documents.

RAD Use Agreement--Section 8

    A commenter suggested reinserting the ability to release the Use 
Agreement in the event of dedication of streets or public utilities. 
The commenter stated that this language and ability has been included 
in Declarations of Trust and helps to ensure a timely release of 
Declarations when necessary to provide utility or street access to the 
residents of the project. The commenter stated that since there is no 
formal process for disposition or release RAD Use Agreements, including 
this language will help these releases move forward until HUD can 
develop a more comprehensive policy and procedure regarding release. 
The commenter stated that HUD does not generally record the releases, 
but rather requires the Project Owner to ensure recordation. The 
commenter requested that HUD see its markup of this section of the 
document.
    HUD Response: HUD has substantially revised the restrictions on 
transfer to cover the points noted by the commenter.

RAD Use Agreement--HAP Contract Termination

    A commenter stated that HUD or the Contract Administrator has the 
discretion to terminate the HAP Contract for owner breach, and after 
termination, and that HUD may release owners from the Use Agreement, 
and strongly urged HUD to develop guidelines about when and how it will 
release owners from the Use Agreement, in order to ensure the long-term 
affordability of RAD properties. The commenter stated that the absence 
of guidelines governing HUD's discretion to approve exceptions to the 
automatic renewal of Use Agreement terms, as HAP Contracts are 
extended, raises risks to the long-term affordability of a development. 
The commenter strongly urged HUD to develop guidelines about when and 
how it will exercise this discretion, in order to ensure the long-term 
affordability of RAD properties.
    HUD Response: HUD will further consider this request for more 
guidelines.

[[Page 66682]]

RAD Use Agreement--Affordability of Rents at Termination

    A commenter urged HUD to require deeper affordability for rents for 
assisted units if the HAP Contract is terminated. The commenter stated 
that currently, where the HAP Contract is terminated by HUD or an 
administrator for breach, the Use Agreement only requires that new 
tenants have incomes at or below 80 percent of Area Median Income at 
admission and rents must not exceed 30 percent of 80 percent of AMI for 
an appropriate-sized unit. This weak restriction contrasts sharply with 
the 30 percent of actual tenant income standard applicable to public 
housing and Section 8, is virtually meaningless because rents do not 
generally reach that level in most rental housing markets, and is 
waivable. The commenter stated that this means that the Use Agreement 
currently depends primarily upon the existence of the HAP Contract for 
its vitality, and that in case of HAP Contract termination deeper 
affordability restrictions should be incorporated into the Use 
Agreement in order to truly ensure long-term affordability. The 
commenter also stated that, if the project owner fails to rent a 
sufficient percentage of assisted units to low-income or very low-
income tenants, HUD should not, in its sole discretion, reduce the 
number of units covered by the HAP Contract. The commenter stated that 
this action by HUD would fail to preserve the vital, long-term 
affordability of the property and would not properly sanction the 
property owner for failing to abide by the HAP Contract. The commenter 
concluded its comment on this subject by stating that HUD should 
require PHAs to seek input from and make this document available to 
tenants and local tenant advocates prior to conversion and at any time 
thereafter upon informal request.
    HUD Response: HUD appreciates the commenters concerns. In setting 
requirements, HUD must balance several interests in order to provide 
for long term affordability. HUD believes the current provisions strike 
the appropriate balance.

Project-Based Rental Assistance (PBRA) Housing Assistance Payments 
Contract Part I and Part II (First Component)

    Section 1.2(d): The commenter noted that Section 1.7.A.10 of the 
RAD Notice provides the owner the right to terminate the HAP if HUD 
determines that a statutory change affecting the rents will threaten 
the physical viability of the property. The commenter then noted that 
the changes to Section 1.2(d) of the HAP provide both the Contract 
Administrator and the Owner the ability to terminate the HAP, 
individually. The commenter indicated that owners, lenders, and LIHTC 
investors have expressed concern over this unilateral decision making 
authority of the Contract Administrator, especially if the only issue 
is the inability to comply with Section 2.8 of the HAP (the required 
OCAF requirements). The commenter also noted that the revised HAP 
language does not capture the levels of impact regarding the statutory 
change in the RAD Notice. The commenter indicated that the RAD Notice 
provides that HUD will determine whether the statutory change will 
threaten the physical viability of the project, while the proposed HAP 
language merely states that the statutory change is inconsistent with 
Section 2.5(a)(1) and 2.8 of the HAP. To be consistent with the RAD 
Notice, the commenter provided revised language.
    HUD Response: The language in this section of the HAP contract 
mirrors the language used for other HAP contracts in use in accordance 
with the Multifamily Assisted Housing Reform and Affordability Act of 
1997 (MAHRA). The language does not give HUD an unfettered ability to 
terminate the HAP contract. The language states that, should HUD 
determine that a statutory change prohibits the Contract Administrator 
from being able to comply with the funding provisions of section 
2.5(a)(1) or 2.8 of the HAP Contract, then HUD may terminate the 
contract. Therefore, the provision gives HUD the ability to terminate 
the contract only in those instances where a statutory change prohibits 
the Contract Administrator from complying with the funding provisions 
of the contract. HUD has maintained the consistency between this 
contract and the MAHRA contracts.
    Section 1.3(b)(1): The commenter requested clarification as to what 
the phrase ``[a]t the end of the calendar year, HUD will provide the 
Owner written notification of the amount of such funding'' means. The 
commenter indicated that it is unclear to which funding this language 
is referring to. The commenter noted that if this language is referring 
to ``any additional public housing amounts that HUD obligates,'' then 
HUD would also have to deposit those funds with the PHA and direct the 
PHA to pay them to the Owner in addition to the funds identified 
through the Initial Year Funding Tool. The commenter requested 
additional clarification regarding the calendar year at the end of 
which HUD will provide written notification--at either the calendar 
year prior to or after closing. The commenter notes that if the intent 
is to do a reconciliation with the Owner at the end of the initial 
year, then such intent should be more clearly stated and instruction 
provided by the PHA and Owner.
    HUD Response: HUD agrees with the commenter that this provision was 
confusing and has revised the language to clarify the intent. The 
language refers to the fact that during the year of conversion, a 
project is funded only from obligated public housing funds, which may 
not equal the amount of the amount of contract rents, adjusted with an 
operating cost adjustment factor that the owner will receive in later 
years of the contract. The language relating to public housing amounts 
obligated later in the calendar year refers to the fact that depending 
on the month a conversion occurs HUD may have obligated only part of 
the public housing funds due to the property for that fiscal year. HUD 
makes its public housing obligations pursuant to formula. If HUD were 
to obligate such additional funds and a PHA were to receive such 
additional funds, the funds received corresponding to the converting 
project would be used with the originally obligated funds for funding 
the converted project for the remainder of the calendar year.
    Section 1.3(b)(2): A commenter stated that this paragraph is very 
confusing and difficult to follow, and suggested that HUD look at 
adding clarity to this language, perhaps by inserting the terms ``Year 
of Conversion'' and ``First Full Year''.
    HUD Response: HUD has revised the language to reflect the funding 
documents.
    Section 1.4(d): A commenter stated that HUD may consider adding the 
initial repairs as an exhibit to the HAP Contract for consistency.
    HUD Response: Exhibit F to the RCC, which is a legally binding 
contract between the owner and HUD, already contains this information.
    Section 2.5: A commenter stated that clarification is needed that 
the Year of Conversion funding can be comprised of three different 
types of payments--HAP Payments, RAD Rehab Assistance Payments and 
Vacancy Payments. The commenter stated that the added language in these 
sections does not indicate that the amount of funding in the Year of 
Conversion will equal each of these, but rather the three items 
combined should not exceed the amount of funding available during the 
Year of Conversion. The commenter requested that HUD review its markup 
of this section. The commenter also stated that, with respect to the 
RAD

[[Page 66683]]

Rehab Assistance Payment, it is the commenter's understanding that 
units are eligible for that payment in the Year of Conversion; however, 
the new language indicates that no RAD Rehab Assistance Payments will 
be paid until the First Full Year. The commenter stated that it 
believed that this is not what HUD intended and asked HUD to look at 
its markup of this section.
    HUD Response: HUD has considered these suggestions and made 
revisions concerning the amount of funding in the Year of Conversion 
and RAD Rehab Assistance Payment.
    Section 2.5(b): A commenter requested that HUD reconsider requiring 
a date certain by which the RAD Rehab Assistance Payments must end and 
instead suggested they be tied to the completion of the Initial 
Repairs. The commenter also suggested that HUD consider eliminating the 
RAD Rehab Assistance Payment as a separate line item and instead allow 
this subsidy to be paid as a vacancy payment. The commenter stated that 
it believed that this would simplify budgeting and accounting for both 
HUD and owners. Another commenter provided two technical changes to 
this section.
    HUD Response: With regard to allowing RAD Rehab Assistance Payments 
to be paid as a vacancy payment, HUD rejects this comment on the basis 
that Rehab Assistance Payments do not meet the legal requirements 
established in section 2.5(b) and (c) of the contract and in 24 CFR 
880.611 for the receipt of vacancy payments. Whether to leave the 
provision intact in section 2.5(b) of the contract imposing a date 
certain on which Rehab Assistance Payments will cease, or instead to 
link their cessation to the completion of the initial repairs as the 
commenter urges, is a policy matter. Regarding both comments, these 
requirements are tied to the RAD Notice so, regardless, HUD will not 
change them. HUD accepts the two technical changes to the first 
sentence.
    Section 2.7(c)--Replacement Reserve: A commenter suggested several 
changes to this section to better align it with the other RAD 
requirements and industry practice. The commenter stated that the 
current provisions do not match up with the requirements being imposed 
upon non-RAD HAP Contracts and in some instances directly conflict with 
the RAD Notice. The commenter urged HUD to issue additional guidance on 
this topic and ensure that its requirements are consistent.
    The commenter commented on section 2.7(c)(1), stating that the 
deposit to the replacement reserve is not addressed in any of the 
applicable regulations, but rather is set in the RCC. The commenter 
suggested a change for clarity.
    The commenter commented on 2.7(c)(1)(i), stating that this section 
addresses the escalation factor for the replacement reserve and 
references an automatic adjustment factor (AAF) and 24 CFR part 888. 
The commenter suggested that HUD revise this paragraph to align with 
the requirements of the RAD Notice and current practice with respect to 
escalations. The commenter stated that most deals have a replacement 
reserve escalator that is required by an investor or a lender. The 
commenter stated that moreover, the current practice for most PBCAs is 
to require that the replacement reserve be adjusted by OCAF, not the 
AAF. The commenter stated that none of the other RAD Guidance applies 
an AAF or part 888 to the RAD Program and the part 880 regulations as 
amended to apply to the RAD program similarly do not reference an AAF 
or part 888. The commenter therefore recommended that an approved 
escalation factor be included in the RCC and referenced in the HAP 
Contract, or at least a general ``approved by HUD'' reference added.
    The commenter also commented on section 2.7(c)(1)(v), stating that 
it is not aware of any HUD procedures with respect to obtaining HUD 
approval for use of the replacement reserve. The commenter stated that 
it does not seem to be required by the RAD Notice or RCC and the 
commenter suggested deleting this requirement, or alternatively 
publishing guidance as to how and when these approvals can be obtained.
    The commenter also commented on section 2.7(c)(2) stating that this 
directly contradicts the RAD Notice, which says that the FHA Regulatory 
Agreement shall apply. The commenter requested that HUD revise for 
consistency.
    HUD Response: HUD agrees with the commenter in part and has revised 
section 2.7(c) to clarify requirements.
    Section 2.9 Marketing and Leasing of Units: A commenter suggested 
several changes in a markup intended to achieve conformance with the 
RAD Notice and underlying regulations.
    HUD Response: HUD accepts the proposed revision to section 
2.9(c)(3) of the contract as it provides useful clarification. The 
proposed change to section 2.9(c)(5)(ii) is rejected on the basis that 
the phrase the commenter urges HUD to replace, ``total housing 
expense,'' even though it is not a defined term, is used historically 
in project-based section 8 HAP Contracts.
    Section 2.11 Reduction of Number of Units for Failure To Lease to 
Eligible Families: A commenter stated that if the project owner fails 
for a continuous period of 6 months to have at least 90 percent of the 
assisted units leased or available for leasing by eligible families, 
HUD should not reduce the number of units covered by the HAP Contract 
(Part II, page 7). The commenter stated that such action by HUD would 
fail to preserve the vital, long-term affordability of the property and 
does not properly sanction the property owner for failing to abide by 
the HAP Contract. The commenter urged HUD to amend the PBRA model 
lease, and require its use at all RAD properties nationwide, to include 
the key tenant protections under the RAD program (i.e., the right to 
remain/return, no rescreening upon conversion, lease renewals, phase-in 
of tenant rent increases, relocation assistance, tenant participation, 
tenant grievance procedures, and choice mobility). The commenter stated 
that this would help to eliminate the wide variety of terms and formats 
of RAD property owner leases (Part II, page 6). The commenter also 
stated that any reports that are required by HUD or the PHA should also 
be required to be made available upon request and notification to 
current tenants (Part II, page 9), and that the HAP Contract should 
also require an investigation by HUD or the Contract Administrator if 
more than 20 percent of the current tenants, or the tenant 
organization, submit a request for such an investigation to the 
property owner, PHA, or HUD regarding issues relating to tenant 
participation or their living environment.
    HUD Response: HUD's authority under section 2.11(b) is 
discretionary, not mandatory, and has regulatory backing in 24 CFR 
880.504(b)(ii). On this basis, HUD rejects this comment. Whether to 
amend the model lease to include the key tenant protections of 
Component 1 is a policy matter. However, section 1.7.B.6. of the RAD 
Notice already requires that the majority of tenant protections to 
which the commenter refers be included in the House Rules, which must 
be attached to the model lease; therefore, no revisions to the HAP 
Contract have been made. Tenant's interests in participation in 
multifamily housing projects are adequately protected in 24 CFR part 
245, which does not require that any reports that are subject to 
section 2.16 of the contract be made available to them. On this basis, 
HUD rejects these comments and further notes that 24 CFR part 245 does 
not require that tenants be afforded a right to request an 
investigation.

[[Page 66684]]

    Section 2.12(b): A commenter stated that this paragraph is overly 
broad and vague and HUD's underlying concern is adequately addressed in 
other sections. The commenter stated that the owner is required to 
comply with both the Fair Housing Act as well as Title VI and so is 
already prohibited from unlawful discrimination. The commenter stated 
that while this paragraph was included in the original PBRA HAP 
Contracts, the landscape of civil rights has changed dramatically in 
the past 35 years, and that leaving such terms undefined in today's 
fair housing and non-discrimination landscape is very concerning. The 
commenter stated that a strict reading of this could put the Owner in 
violation of the HAP Contract for excluding high-income persons from 
participation under the HAP Contract, since under the broad undefined 
meaning of the word ``class,'' high-income individuals could qualify. 
The commenter stated that while this example is certainly absurd given 
the purpose of the document there are other examples that are just as 
problematic when a charged term such as ``class'' is left open-ended. 
The commenter stated that HUD should, and should allow owners to, rely 
upon the existing laws, regulations and other guidance that exists with 
respect to non-discrimination in federally subsidized housing to define 
protected classes and set forth the obligations on nondiscrimination.
    HUD Response: The comment urging the deletion of section 2.12(b) is 
accepted.
    Section 2.14: A commenter stated that it agrees that restoration 
should be required; however, the commenter stated that additional 
language regarding feasibility of restoration, beyond simply ``to the 
extent proceeds permit'' is advisable. The commenter stated that most 
lenders have a process or procedure for determining feasibility that 
will likely conflict with this sentence. The commenter recommended that 
HUD look to the Mixed Finance ACC Amendment currently in use for the 
public housing program as a model.
    HUD Response: HUD has amended this section informed by the comment.
    Section 2.20--Assignment, Sale, Foreclosure, or Deed in Lieu of 
Foreclosure: A commenter stated that the provisions of this section do 
not line up with current HUD requirements in Chapter 13 of Handbook 
4350.1, which discusses when HUD consent is required for a transfer. 
The commenter stated that these requirements should be consistent and 
more importantly should facilitate transfers that are customary of 
limited partner interests in tax credit projects. The commenter stated 
that the 2530 previous participation process also recognizes that it 
does not need to give clearance to limited investor partners or 
members, but rather allows such entities to file limited liability 
corporate investor certifications (LLCI). The commenter stated that it 
believes that this section should be updated to reference the LLC 
corporate form which many RAD owners take. The commenter stated that 
this section should note the exceptions that are now contained in 
Sections 2.24 and 2.25 (which were previously the Lender and Investor 
riders to the HAP Contract).
    HUD Response: HUD has clarified the requirements in this section.
    Section 2.24(a): The commenter suggested HUD replace ``against the 
project'' with ``encumbering the property on which the project is 
located.'' The commenter also suggested that subsections be added to 
Section 2.24 to provide the holder of any HUD-approved mortgage with 
the same notice and cure rights that are provided the Equity Investor 
in Sections 2.25(a) and (b).
    HUD Response: HUD accepts these technical revisions.
    Section 2.25(c) and (d): The commenter noted that the HUD required 
language for partnership agreements states that no transfer in the 
general partner is permitted without the prior written consent of HUD. 
They suggested that HUD revise the required language to be included in 
partnership agreements to be consistent with Section 2.25(c) and (d). 
The commenter also requested that the HUD required language for 
partnership agreements be posted online.
    HUD Response: HUD agrees with the comment pertaining to the 
interplay between section 2.25 and the HUD required provisions relating 
to ownership and control that are inserted into limited partnership 
agreements (LPAs) and operating agreements. HUD will be updating these 
HUD-required provisions.
    Third party beneficiary concerns: The commenter stated that HUD 
should remove the exclusion of third party beneficiary rights from the 
HAP Contract, and instead provide that a family that is eligible for 
housing assistance under the HAP Contract should be a third party 
beneficiary of the HAP Contract. The commenter stated that this change 
would drastically improve enforcement, and reduce HUD's administrative 
burdens, in enforcing the terms of the contract, and that making this 
change would also closely align with the RAD Use Agreement, which 
allows any eligible tenant or applicant for occupancy within the 
project, in addition to the HUD Secretary or his or her successors or 
delegates, to institute proper legal action to enforce performance of 
its provisions. The commenter stated that it is critical that tenants 
have a tool to access justice in order to preserve their tenancy and 
ensure the long-term affordability of their property after RAD 
conversion.
    HUD Response: HUD rejects the comment suggesting that assisted 
families be made third-party beneficiaries to the contract.
    A commenter encouraged HUD to revise all references to Notice PIH 
2012-32 (HA) to reference Notice PIH 2012-32 (HA) (REV-2) and all 
subsequent revisions to the RAD program through applicable statutes, 
regulations, and policies.
    HUD Response: HUD agrees and has made changes to section 1.2(c).
    A commenter suggested that the HAP Contract should specify that RAD 
projects are also subject to the fair housing laws and definitions of 
protected classes under state and local law.
    HUD Response: The contract has been revised to require compliance 
with all applicable civil rights laws, including fair housing laws. 
However, HUD has no legal duty or authority to enforce state or local 
laws.
    A commenter stated that HUD should require PHAs to seek input from 
and make this document available to tenants and local tenant advocates 
prior to conversion and at any time thereafter upon informal request.
    HUD Response: This contract is a form document minimally tailored 
to the specific situation. Further, it is a contract between HUD and 
the owner. Neither tenants nor tenant advocacy groups are parties to or 
third-party beneficiaries of the contract. HUD rejects the comment, but 
emphasizes that PHAs must provide sufficient detail about proposed RAD 
projects in their PHA or MTW plans, including information about tenant 
contributions to rent and tenant protections.

Project-Based Voucher (PBV) Rider to PBV HAP Contract (First Component)

    First Component: A commenter noted that most references are to 
``HAP Contract,'' but some places only use ``Contract,'' and that the 
document should be consistent throughout. The commenter suggested using 
``HAP Contract'' throughout.
    HUD Response: HUD has changed all references to ``HAP Contract''.
    Section 3(g)--Revising Section 4--Funding of HAP Contract: A 
commenter

[[Page 66685]]

stated that it believes that HUD could further clarify this section 
using the new terms. They indicated this in an attached markup. The 
commenter stated that the section numbering is very confusing, 
particularly the insertion of a new Section 4(a) and 4(b) via Section 
3(g)--but without identifying or otherwise signifying that Section 4 is 
part of Section 3. The commenter asked HUD to revisit the formatting.
    HUD Response: HUD accepts these changes and made appropriate 
amendments to the funding language and numbering.
    Section 3(j)(3): A commenter stated that the last sentence should 
read ``. . . successor provisions whether or not explicitly stated.''
    HUD Response: HUD accepts this suggested change.
    Section 3(r): A commenter stated that this section duplicates the 
updated PBV Regulations, and asked that HUD remove this section.
    HUD Response: HUD rejects the suggested change. The Rider language 
is essential because the underlying PBV HAP Contract has yet to 
incorporate the regulatory change. Therefore, the Rider needs to 
reflect the current requirement, which protects tenants by preventing 
non-renewal of a lease unless the owner has a good cause.
    Section 3(s): A commenter asked that HUD revise Section 10.4.b (PHA 
owned units) to cover only inspections. The commenter stated that PHA 
owned units are any units in which a PHA is in the ownership structure 
(even if only as a special limited partner). The commenter stated that 
the Rider requires PHA-owned units to follow 24 CFR 983.59, but that 
the section states that rents for PHA owned units must be determined by 
an independent third party approved by HUD. The commenter stated that 
in RAD, HUD sets the initial rents and inflates by OCAF, and an 
independent third party adds an expense and administrative burden to 
the project while having no power to override HUD's own calculations.
    HUD Response: HUD rejects this comment. The RAD Notice requires a 
rent reasonableness review, which would have to be done by an 
independent entity.
    Section 3(v)--Revising Subsection 21.a.2: A commenter stated that 
this section should be limited to new liens on the property.
    HUD Response: HUD accepts this suggestion.
    Section 4(a): A commenter stated that clarity is needed with 
respect to the new language added to this section. The commenter stated 
that its understanding is that in the Year of Conversion that the 
funding may be made up of three sources--HAP payments, vacancy 
payments, and Rehab Assistance Payments. The commenter stated that the 
sum of these sources cannot exceed the public housing funds previously 
obligated to the project, but the language as written indicates that no 
Rehab Assistance Payments will be made in the Year of Conversion. The 
commenter stated that this is not how the deals have been underwritten 
so far and this should be clarified. The commenter also suggested that 
HUD consider eliminating the RAD Rehab Assistance Payment as a separate 
item and instead make it a vacancy payment.
    Another commenter noted that, assuming the language will mirror 
Section 2.5(b) of the PBRA HAP, HUD should replace ``has not received'' 
with ``is not otherwise receiving.''
    HUD Response: HUD has clarified this section in response to these 
comments. With regard to eliminating the RAD Rehab Assistance Payment 
as a separate item, and instead make it a vacancy payment, HUD rejects 
this suggestion. The Rehab Assistance Payment is not a vacancy payment. 
HUD agrees with commenter's technical comment and made the change to 
``is not otherwise receiving.''
    Section 4(b): A commenter asked that HUD delete this requirement to 
have the PHA board approve the PBV operating budget. The commenter 
stated that this is not required for regular PBV, PHA Owned PBRA 
projects, or any non-public housing projects and should not be required 
in this context. The commenter stated that this is not a function that 
the board normally performs and is more appropriately delegated to the 
staff hired to run the operations of the PHA. The commenter stated that 
this requirement is burdensome to the PHA boards and requires the 
directors, who may not have any particular expertise in operations, to 
insert themselves in an inappropriate and unhelpful way.
    HUD Response: This is a specific requirement in Section 1.6.D.2 of 
the RAD Notice. The Rider simply reflects the RAD Notice.
    Section 4(c): A commenter suggested that additional language 
regarding feasibility of restoration, beyond simply ``to the extent 
proceeds permit'' be added. The commenter stated that most lenders have 
a process or procedure for determining feasibility that will likely 
conflict with this sentence. The commenter recommended that HUD look to 
the Mixed Finance ACC Amendment currently in use for the public housing 
program as a model.
    HUD Response: HUD has amended this section informed by the comment.
    Section 4(e): A commenter stated that the citation to 1.B.2.B is 
confusing and asked HUD to consider revising to 1.B.2.B.
    HUD Response: HUD accepts this suggestion.
    Section 4(g): A commenter stated the language in this section is 
far too general, and the language should describe specific 
requirements, cite to the regulatory source of requirements, or cross-
reference to the RCC.
    HUD Response: HUD accepts this suggestion, and has cross-referenced 
the RCC.
    Transfer of a contract or project: A commenter urged HUD to require 
the RAD property owner to receive express written approval from HUD in 
order to transfer the contract or the project, which is required under 
the RAD PBRA HAP Contract, because such fundamental alterations should 
be part of HUD's important nationwide oversight role. The commenter 
stated that currently, the PBV HAP Contract only requires approval in 
``accordance with HUD requirements.'' The commenter stated that HUD 
should have stronger protections for transfers of member interests in 
ownership entities utilizing Low Income Housing Tax Credits. Transfer 
of investor members/partners is not considered a default under the HAP 
Contract or Use Agreement if HUD receives both prior written notice and 
copies of documents regarding transfer. The commenter stated that 
instead, HUD should have a requirement for prior written approval from 
HUD before owners can transfer these interests, which is currently 
required under the RAD PBRA HAP Contract.
    HUD Response: The underlying PBV HAP Contract (Form 525030A (Part 
1) and Form 525030B (Part 2)) requires in Section 21 that the owner 
receive ``written consent'' of the PHA prior to transferring the HAP 
Contract or property. Section 4(t) of the Rider specifically adds a 
requirement for HUD consent respect to Section 21. In other words, just 
as the commenter suggests, HUD's written consent is required. With 
respect to the provisions relating to transfers of interests in the 
ownership entities, HUD has reviewed and revised these provisions in 
response to this and similar comments.
    A commenter stated that for RAD PBRA properties, the HAP Contract 
continues in existence in the event of any disposition of the project 
or foreclosure, unless HUD uses its discretion to approve otherwise. 
The commenter stated that it greatly

[[Page 66686]]

supports this strong protection of long-term affordability of RAD 
properties, and urged HUD to require the same for RAD PBV properties, 
or at the very least, develop guidelines about when and how it will 
exercise this discretion, in order to ensure the long-term 
affordability of RAD properties.
    HUD Response: HUD agrees and has added modified language from 
section 2.20(f) of the PBRA HAP Contract to the PBV Rider (which adds a 
new section 38 to the HAP Contract).
    A commenter urged HUD to clarify how tenants will be protected in 
the event of foreclosure, bankruptcy, transfer of assistance, or 
substantial default. The commenter questioned whether the HAP Contract 
and subsidy could be quickly transferred to another owner or to another 
building, and that, if necessary, would current tenants receive tenant 
protection vouchers and relocation assistance? The commenter further 
stated that PBRA HAP Contract provisions are more explicit and 
protective of tenants than the PBV HAP Contract regarding the provision 
of replacement housing assistance, and urged HUD to include similar 
strong tenant protections in the PBV HAP Contract as well. The 
commenter concluded its comment on this issue by stating that HUD 
should require PHAs to seek input from and make this document available 
to tenants and local tenant advocates prior to conversion and at any 
time thereafter upon informal request.
    HUD Response: As discussed above, HUD has decided to add language 
regarding continuation of the HAP Contract in a new section 38. With 
respect to transfer policy and tenant protections, these policies are 
properly addressed through RAD Notices and guidance, not contractual 
language. The suggestion regarding tenant input and the availability of 
documents is also not relevant to contractual modifications. These 
issues will be addressed in RAD Notices and guidance. Regardless, the 
Rider would not be modified by tenant input. It is a HUD form that must 
be used verbatim. Any changes to the form must be approved by HUD.
    Sections 6 and 7: A commenter suggested that subsections be added 
to Section 6 to provide the holder of any HUD-approved mortgage with 
the same notice and cure rights that are provided the Equity Investor 
in Sections 7(a) and (b). The commenter suggested that prior to these 
two sections, language should be added similar to that found in 
throughout Section 4 to clarify that new sections are being added to 
the HAP. Additionally, the commenter suggested that ``Owner'' be 
capitalized throughout the two sections.
    HUD Response: HUD has declined to make the change to provide notice 
to the mortgage holder because unlike the equity investor, the mortgage 
holder is not participating in the organizational structure of the 
ownership entity. HUD believes the added lender provisions are adequate 
to address lender concerns. Regarding the technical revision, HUD has 
revised the document accordingly.
    Section 29--Contract Administrator Board of Approval: A commenter 
commented on Section 29, Contract Administrator (CA) Board of Approval. 
The commenter stated that the requirement that the contract 
administrator's board must approve the operating budget for the covered 
project is onerous and not in line with other HUD Programs. The 
commenter stated that this is not required by HUD in other similar 
contexts including PBV, PBRA or Mixed-Finance and simply adds an 
additional layer of process and expense. The commenter stated that a 
PHA can set up its own internal policies to have its board review the 
operating budget if it so wishes, but this should be on a voluntary 
basis, and therefore HUD should eliminate Section 29.
    HUD Response: This is a specific requirement in Section 1.6.D.2 of 
the RAD Notice. The Rider simply reflects the RAD Notice.
    Extraneous Administrative Procedures: A commenter commented on what 
it referred to as extraneous administrative procedures in the PBV 
Contract Rider. The commenter stated that the PBV Contract Rider should 
take additional steps to remove unnecessary PBV administrative 
procedures that are not relevant for RAD, and provided, as an example, 
that the rider should explicitly exempt RAD properties from annual rent 
confirmation studies. The commenter stated that since rents are set by 
formula this is not relevant and simply adds additional expense and 
administrative procedure. The commenter recommended that HUD eliminate 
annual rent confirmation study requirement for RAD.
    HUD Response: The RAD Notice at Section 1.6.B.6 specifically 
requires that rent reasonableness continue to be performed. This is a 
distinct requirement, apart from any OCAF adjustment.

PBRA Housing Assistance Payments Contract Part I and Part II (Second 
Component--Mod Rehab, Rent Supp, and RAP Properties)

    The commenter stated that HUD should take steps to reevaluate the 
length of the owner's commitment under Second Component conversions to 
align with the mandatory HAP Contract renewal requirements of the First 
Component. The commenter stated that, for example, as stated in the 
PBRA Housing Assistance Payments Contract for the RAD First Component 
conversions: ``The Owner acknowledges and agrees that upon expiration 
of the initial term of the Contract, and upon expiration of each 
renewal term of the Contract, the Owner shall accept each offer to 
renew the Contract, subject to the terms and conditions applicable at 
the time of each offer, and further subject to the availability of 
appropriations for each year of each such renewal.'' The commenter 
stated that the current PBRA HAP Contract for the RAD Second Component 
conversions only mentions each renewal term in accordance with the HAP 
Contract, RAD Notice, all statutory requirements, and all HUD 
regulations and other requirements. The commenter further stated that 
in order to ensure clarity and long-term affordability of the converted 
RAD Second Component property, HUD should explicitly state the language 
quoted above.
    HUD Response: HUD rejects the comment that suggests HUD take steps 
to reevaluate the length of the owner's commitment under Second 
Component conversions on the basis that owners of section 8 projects 
converted under Component Two have a right under section 8(c)(8)(A) of 
the United States Housing Act of 1937 to opt out of the section 8 
program at the end of the initial term or of any renewal term.
    Two commenters made the same suggestions for Component 2 as they 
did for Component 1 regarding amendments to the PBRA model lease, 
availability of reports that are required by HUD or by the PHA, and 
investigations by HUD or the Contract Administrator.
    HUD Response: HUD's takes the same position on these Component 2 
comments as it did for identical comments to Components 1 described 
above.
    Section 2.1(d): A commenter suggested that HUD replace ``the 
preceding sentence'' with ``Section 2.1(c).''
    HUD Response: This technical correction, which HUD accepts and has 
made, concerns only the PBRA HAP Contract for Conversions of Moderate 
Rehabilitation.

Project-Based Voucher (PBV) Rider to Existing PBV HAP Contract (Second 
Component)

    A commenter stated that similar to the language that is on page 6 
of the PBV Rider for RAD First Component

[[Page 66687]]

properties, the commenter urges HUD to incorporate tenant participation 
rights into this Second Component rider that protects tenants' right to 
participate and receive funding for legitimate resident organizations. 
The commenter stated that this language should reflect the language and 
rights discussed in Attachment 1B of the RAD Notice. The commenter 
stated that although the RAD Notice does not explicitly discuss RAD 
Component 2 tenants' participation rights, these rights are independent 
rights that exist in the PBV program including and beyond RAD 
conversions. The commenter further stated that, for RAD PBRA 
properties, the HAP Contract continues in existence in the event of any 
disposition of the project or foreclosure, unless HUD uses its 
discretion to approve otherwise. The commenter added that it greatly 
supports this strong protection of long-term affordability of RAD 
properties, and urged HUD to require the same for RAD PBV properties, 
or at the very least, develop guidelines about when and how it will 
exercise this discretion, in order to ensure the long-term 
affordability of RAD properties. The commenter concluded its statement 
on this subject by stating that HUD should require PHAs to seek input 
from and make this document available to tenants and local advocates 
prior to conversion and at any time thereafter upon informal request.
    HUD Response: The comment regarding tenant participation rights is 
inaccurate. The PBV program does not provide for funding for tenant 
organizations. The RAD Notice limits the requirement to Component 1 and 
this requirement is imposed pursuant to the statutory language 
governing Component 1. HUD rejects the second comment requiring the HAP 
Contract in RAD PBV properties to continue in the existence in the 
event of any disposition of the project or foreclosure. There are 
special considerations in Component 1 that are not present in Component 
2. Component 2 is generally designed to follow the regular PBV program. 
Consistent with the special considerations under Component 1 the Rider 
imposes many provisions that differ from regular PBV. It is important 
to note that PHAs, not HUD, make most of the major policy 
determinations regarding PBV under both the regular PBV program and 
Component 2. HUD will consider this issue prospectively. The suggestion 
regarding tenant input and the availability of documents is also not 
relevant to contractual modifications. These issues will be addressed 
in RAD Notices and guidance. Regardless, the Rider would not be 
modified by tenant input. It is a HUD form that must be used verbatim. 
Any changes to the form must be approved by HUD.
    Income Mixing: A commenter stated that, the RAD Component 2 PBV 
rider, section 4F, regarding income mixing, provides ``the excepted 
unit provisions in the PBV regulations generally apply to RAD 
projects'' and then mentions the supportive services exceptions. The 
commenter asked whether this language is referring to the RAD Notice 
statement that ``an owner may still project-base 100 percent of the 
units provided at least 50 percent of the units at the project qualify 
for the exceptions for elderly, disabled, or families eligible to 
receive supportive services, or are within single-family properties,'' 
and, if so, it would be helpful to the reader if the section includes a 
description of the exception.
    HUD Response: The Rider provision in question refers to both the 
statutory and regulatory provision on income mixing. Those provisions 
clearly state the income mixing requirements. The purpose of the Rider 
provision is to simply state the modifications to these requirements, 
as detailed in Sections 2.5.C. and 3.5.C. of the RAD Notice. The 
suggestion is rejected.

Suggested Edits to RAD Closing Documents

    The following commenters, 0021-0005, 0021-0006, and 0021-0007, 
offered specific language to the RAD closing documents.
    HUD Response: HUD greatly appreciates all of these drafting 
suggestions and has incorporated many of them as described in this 
notice.

IV. Evaluation of Proposed Information Collection

A. Overview of Information Collection

    Title of Information Collection: Rental Assistance Demonstration 
(RAD) Documents.
    OMB Approval Number: 2502-0612.
    Type of Request: Revision of a currently approved collection.
    Form Number: N/A.
    Description of the need for the information and proposed use: 
Rental Assistance Demonstration (RAD) allows Public Housing, Moderate 
Rehabilitation (MR), Rent Supplement (RS), and Rental Assistance 
Payment (RAP) properties to convert to long-term project-based Section 
8 rental assistance contracts. Participation in the demonstration is 
voluntary.
    Participating Public Housing Agencies (PHAs) and Multifamily Owners 
are required to submit documentation for the purpose of processing and 
completing the conversion. Through these documents (collectively, the 
RAD documents), HUD evaluates whether the PHA or owner has met all of 
the requirements necessary to complete conversion as outlined in the 
RAD Notice.
    The RAD processing request is made through a Web-based portal. 
Overall, the RAD documents and information requested through such 
documents allow HUD to determine which applicants continue to meet the 
eligibility and conversion requirements. Finally, all applicants will 
be required to sign the appropriate contractual documents to complete 
conversion and bind both the applicant and HUD, as well as set forth 
the rights and duties of the applicant and HUD, with respect to the 
converted project and any payments under that project.
    Respondents: State, Local or Tribal Government entities, Public 
Housing Agencies and multifamily owners.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Number of      Annual         Total     Burden hours  Total burden   Salary (per  Total burden
                Information collection                   respondents    responses     responses   per response      hours         hour)         cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
PBV HAP Contract Rider--Public Housing Conversions....           250             1           250             1           250           $41    $10,250.00
PBRA HAP Contract--Public Housing Conversions Parts I            250             1           250             1           250            41     10,250.00
 + II.................................................
RAD Use Agreement.....................................           500             1           500             1           500            41     20,500.00
RCC...................................................           500             1           500             1           500            41     20,500.00
Financing Plan (including Accessibility and Relocation           500             1           500            10          5000            41    205,000.00
 Plan Checklist)......................................
PBRA HAP Contract--Mod Rehab Conversions Parts I & II.            35             1            35             1            35            41      1,435.00
PBRA HAP Contract--Rent Supp and RAP Conversions Parts            35             1            35             1            35            41      1,435.00
 I & II...............................................

[[Page 66688]]

 
PBV Existing Housing HAP Contract Rider--Mod Rehab,               70             1            70             1            70            41      2,870.00
 Rent Supp, RAP (second component rider)..............
                                                       -------------------------------------------------------------------------------------------------
    Totals............................................         2,140  ............         2,140  ............      6,640.00  ............    272,240.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

B. Solicitation of Comment

    HUD will submit the proposed information collection to OMB for 
review, as required by the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35, as amended). This notice is soliciting comments from 
members of the public and affected agencies concerning the proposed 
collection of information on the following:
    (1) Whether the proposed collection of information is necessary for 
the proper performance of the functions of the agency, including 
whether the information will have practical utility;
    (2) The accuracy of the agency's estimate of the burden of the 
proposed collection of information;
    (3) Ways to enhance the quality, utility and clarity of information 
to be collected; and,
    (4) Ways to minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated collection techniques or other forms of information 
technology; e.g. permitting electronic submission of responses.

    Authority: Section 3506 of the Paperwork Reduction Act of 1995, 
44 U.S.C. Chapter 35, as amended.

    The documents that currently comprise the RAD documents can be 
viewed at the RAD Web site: www.hud.gov/rad/. These documents are those 
that are currently used for RAD processing.

    Dated: September 23, 2016.
Inez C. Downs,
Departmental Reports Management Officer, Office of the Chief 
Information Officer.
[FR Doc. 2016-23438 Filed 9-27-16; 8:45 am]
 BILLING CODE 4210-67-P