30-Day Notice of Proposed Information Collection: Project Approval for Single-Family Condominiums; OMB Control Number: 2502-0610, 46154-46162 [2020-16588]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 85, Number 148 (Friday, July 31, 2020)]
[Notices]
[Pages 46154-46162]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16588]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-7024-N-30]


30-Day Notice of Proposed Information Collection: Project 
Approval for Single-Family Condominiums; OMB Control Number: 2502-0610

AGENCY: Office of the Chief Information Officer, HUD.

ACTION: Notice.

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SUMMARY: HUD is seeking approval from the Office of Management and 
Budget (OMB) for the information collection described below. In 
accordance with the Paperwork Reduction Act, HUD is requesting comment 
from all interested parties on the proposed collection of information. 
The purpose of this notice is to allow for 30 days of public comment.

DATES: Comments Due Date: August 31, 2020.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposal. Comments should refer to the proposal by name and/or OMB 
Control Number and should be sent to: Colette Pollard, Reports 
Management Officer, QDAM, Department of Housing and Urban Development, 
451 7th Street SW, Room 4176, Washington, DC 20410-5000; telephone 202-
402-3400 (this is not a toll-free number) or email at 
[email protected] for a copy of the proposed forms or other 
available information. Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal Relay 
Service at (800) 877-8339.

FOR FURTHER INFORMATION CONTACT: Colette Pollard, US Department of

[[Page 46155]]

Housing and Urban Development, 451 7th Street SW, Room 4176, 
Washington, DC 20410-5000; telephone (202) 402-3400 (this is not a 
toll-free number) or email at [email protected]. Persons with 
hearing or speech impairments may access this number through TTY by 
calling the toll-free Federal Relay Service at (800) 877-8339. Copies 
of available documents submitted to OMB may be obtained from Ms. 
Pollard.

SUPPLEMENTARY INFORMATION: This notice informs the public that HUD is 
seeking approval from OMB for the information collection described in 
Section A. Stakeholders may view the proposed changes to Form HUD-9991, 
FHA Condominium Loan Level/Single-Unit Approval Questionnaire and Form 
HUD-9992, FHA Condominium Project Approval Questionnaire at: https://www.hud.gov/program_offices/housing/sfh/SFH_policy_drafts.

A. Overview of Information Collection

    Title of Information Collection: Project Approval for Single-Family 
Condominiums.
    OMB Approval Number: 2502-0610.
    Type of Request Revision of currently approved collection.
    Form Number: HUD-9991, FHA Condominium Loan Level/Single-Unit 
Approval Questionnaire and Instructions; HUD-9992, FHA Condominium 
Project Approval Questionnaire and Instructions; HUD-92544, Warranty of 
Completion of Construction; HUD-92541, Builder's Certification of 
Plans, Specifications, and Site; HUD-96029, Condominium Rider.
    Description of the need for the information and proposed use: This 
collection package seeks to renew and revise two collection forms, Form 
HUD-9992, FHA Condominium Project Approval Questionnaire used to 
process condominium project approval applications and Form HUD-9991 FHA 
Condominium Loan Level/Single-Unit Approval Questionnaire used to 
process single-unit approvals. These forms are needed to determine if a 
condominium project is eligible for FHA project approval and if a Unit 
in an approved or unapproved condominium project is eligible for FHA-
insured financing. The Form HUD-9992, FHA Condominium Project Approval 
Questionnaire and the Form HUD-9991, FHA Condominium Loan Level/Single-
Unit Approval Questionnaire have been revised to address comments on 
the 60-Day Notice. The HUD-92544, Warranty of Completion of 
Construction and HUD-96029, Condominium Rider were updated to comply 
with the burden statement requirements.
    Respondents (i.e., affected public): Business or other for-profit 
(lenders and condominium associations).
    Estimated Number of Respondents: 180,000.
    Estimated Number of Responses: 180,000.
    Frequency of Response: One-time for each condominium project 
approval or recertification, and one-time for loan level approval and 
Single-Unit Approval.
    Average Hours per Response: .51250 hours (varies by form and 
approval type: Project, loan level approval and Single-Unit Approval).
    Total Estimated Burdens: 92,250.

B. Solicitation of Public Comment

    This notice is soliciting comments from members of the public and 
affected parties concerning the collection of information described in 
Section A 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 
the 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.
    HUD encourages interested parties to submit comment in response to 
these questions.

C. Authority

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

D. Summary of Public Comments and HUD Responses

    The 60-day Notice was published in the Federal Register on January 
31, 2020 Volume 85, No. 21, Pages 5686 -5687, and the public comment 
period closed on March 31, 2020. HUD received 140 comments from 13 
commenters by the close of the public comment period. Commenters 
included individuals, mortgage companies, banks, trade associations, 
and mortgage brokers. The following is a summary of the issues raised 
in the public comments. The comments that pertain to Forms HUD-9991 and 
HUD-9992 are addressed. Then, the comments specific to each form 
follow.

Comments on Forms HUD-9991 and HUD-9992

    Comment: All the commenters requested changes to make it easier to 
use the forms and to reduce the amount of time required for completion. 
Suggestions for improvement included wording clarifications, 
consolidation of similar questions, and the elimination of questions to 
make the forms shorter and easier to understand. Several commenters 
noted that most condominium associations are not familiar with FHA 
requirements and requested additional guidance be provided. In 
addition, several commenters requested that the form be converted into 
a PDF fillable document with check boxes that can be changed.
    HUD Response: HUD appreciates the feedback and used a combination 
of the suggestions to revise and restructure the forms. HUD agrees that 
the condominium associations and other non-mortgagee participants may 
not be familiar with FHA requirements. The forms do not specify 
percentage benchmarks to make them adaptable to future policy changes. 
HUD developed instructions to explain how questions should be answered 
and included Handbook 4000.1 section references. Once the content of 
the forms has been finalized, the forms will be formatted and converted 
to a PDF fillable format that will allow corrections.
    Comment: Many commenters indicated that requiring the condominium 
association to complete the form and sign the certification caused 
significant delays in obtaining information and increased costs. 
Commenters reported that condominium associations were not always able 
to answer all the questions. Condominium associations have expressed 
concern about the certification and the potential penalties, often 
refusing to sign the form. Commenters also noted increases in the cost 
to obtain the information. Some commenters suggested making the 
mortgagee or Submitter solely responsible for the completion and 
certification of the form.
    HUD Response: HUD agrees that most condominium associations are not 
familiar with FHA requirements and understands from the comments that 
this often leads to delays in receiving the information and/or 
additional costs to process the forms. HUD has removed the requirement 
that the condominium association must complete the form and sign the 
certification for loan-level approvals and Single-Unit Approvals.

[[Page 46156]]

Mortgagees using the Form HUD-9991 to determine the eligibility of a 
Unit for FHA-insured financing will be responsible for obtaining and 
certifying that the information provided is accurate and meets FHA 
requirements. For Condominium Project Approval, a Submitter is an 
Eligible Submission Source (Handbook 4000.1, section II.C. for Eligible 
Submission Sources) that prepares and submits a Condominium Project 
Approval application package. Submitters are responsible for completing 
the Form HUD-9992 and certifying that the FHA Condominium Project 
Approval requirements have been met. HUD also has removed the 
requirement that the condominium association must complete the form and 
sign the certification for Condominium Project Approval unless the 
condominium association is the Submitter. Mortgagees and Submitters 
must use information obtained from verifiable sources including the 
condominium association, public records, or other data sources. HUD 
revised the forms and developed instructions to explain how the 
questions should be answered.
    Comment: Commenters suggested HUD consider extending the life of 
data collected to reduce the number of times information must be 
requested from a condominium association. A commenter noted that most 
of the data on the questionnaire could be reused for up to a year.
    HUD Response: HUD agrees that the data collected should have a 
period of applicability. HUD will allow data collected on the 
questionnaire to be no more than 90 days old prior to the questionnaire 
being signed. This 90-day period will permit the previously collected 
information to be used again and create more efficiency for the 
condominium association staff, mortgagees and Submitters.
    Comment: Most of the commenters stated that the burden hour 
estimates for Forms HUD-9991 and HUD-9992 did not reflect the amount of 
time it took to collect the documentation and fill out the forms.
    HUD Response: HUD agrees that an overall increase in the burden 
hour estimates is warranted for both Forms HUD-9991 and HUD-9992. In 
response to the public comments, HUD revised both forms to reduce the 
length, streamlined the information collection process and developed 
instructions. The burden hour estimate for OMB No. 2502-0610 assumes 
that many of the sources of information are typically used to operate a 
condominium project and are accessible to mortgagees and Submitters. In 
addition, the Paperwork Reduction Act (PRA) burden hour estimates for 
Single-Unit Approval and Condominium Project Approval allocate time for 
the package preparation and collection of the documents, in addition, 
to the estimate for completion of the forms.
    Comment: Many commenters noted that condominium associations are 
reluctant to provide their organization's Tax Identification Number and 
often refuse to provide it. A commenter requested that the field 
requiring the association tax identification number be marked as 
optional.
    HUD Response: Many Condominium Projects have similar names and are 
often incorrectly entered into FHA's system. The condominium 
association tax identification number is required to establish a unique 
identifier number. Collection of this information provides a way to 
eliminate duplication and will help ensure the FHA concentration for 
each condominium project is correctly calculated. While HUD understands 
that the tax identification number may not be available in all 
situations, FHA would like to research the situations in which a tax 
identification number would not exist.
    Comment: Several commenters indicated that it is difficult to 
determine how many units are owned by a single entity or related 
parties for individual owner concentration. Condominium associations do 
not track how individual Unit owners are related and cannot provide 
reliable information to verify if ``an individual related to the Unit 
owner by blood, marriage or operation of law.'' A commenter suggested 
collecting only information on units owned by a single owner and 
removing the ``Related Parties'' requirement.
    HUD Response: HUD concurs that it is difficult for condominium 
associations to provide this information and is considering updates to 
the policy that will remove the ``Related Parties'' requirement. It is 
important to know if there is one or several owners of multiple units 
that could have an impact on the financial stability of the project if 
one or more of the owners were unable to pay their association dues.
    Comment: Many commenters stated that the condominium associations 
are not able to accurately measure Owner Occupancy and that the data is 
difficult to obtain. One commenter noted that the reliability and 
accuracy of owner occupancy data reduces its usefulness in assessing 
the financial and operational viability of a condominium project.
    HUD Response: HUD has revised the Owner Occupancy section on both 
forms and developed instructions to explain how the questions should be 
answered. Owner Occupancy plays a vital part in the successful 
operation of a condominium association. Maintaining occupancy records 
is something most condominium associations currently do to successfully 
manage their properties. HUD also understands lenders exercise their 
options to gather and verify this information. HUD finds the 
information requested and received to be effective and useful in the 
analysis of the condominium project's viability
    Comment: Many commenters requested that third party industry 
questionnaires be allowed as a substitute for the Form HUD-9991 or Form 
HUD-9992. The commenters discussed the amount of condominium project 
information contained in these questionnaires and the wide-spread 
industry acceptance.
    HUD Response: HUD agrees that these forms seem to provide useful 
information about the Condominium Project and condominium association. 
The Handbook 4000.1 lists the Form HUD-9991 and Form HUD-9992 as 
required documentation for many requirements. The Form HUD-9991 and 
HUD-9992 are official HUD forms and contain HUD's required 
certification for mortgagees and Submitters. Mortgagees and Submitters 
are not prohibited from using these pre-generated forms as a source of 
information to complete the HUD-9991 or HUD-9992 but they cannot be 
submitted as a replacement. HUD needs to further research the third-
party providers to understand the information collection and validation 
methods before it can determine the role of industry questionnaires.
    Comment: Several commenters requested the HUD consider automating 
the collection of information and approval for Single-Unit Approval and 
Condominium Project Approval.
    HUD Response: HUD concurs that electronic submission would be 
advantageous and cost-effective for our stakeholders. Automating where 
possible directly impacts HUD stakeholders and will make navigating the 
condominium approval process much easier. HUD will review potential 
options for future development and plans to address in the technology 
plan. Once funding is available, HUD will automate as appropriate.
Form HUD-9991 Comments and HUD Responses
    The following comments and HUD responses pertain to Form HUD-9991.

[[Page 46157]]

As previously noted, many of the commenters requested changes to Form 
HUD-9991 to simplify the process of completing the form to make it more 
user-friendly and less burdensome to complete. Suggestions included 
revising, eliminating, and consolidating questions to shorten the 
questionnaire. HUD appreciated the suggestions and used many of them to 
restructure the questionnaire.
    Comment: HUD-9991, Section 2.a, Condominium Project, includes a 
field requesting the FHA Condo-ID Number. A commenter suggested adding 
a parenthetical ``(if applicable)'' since the form is used for units in 
condominium projects that are not approved and may not have an FHA 
Condo ID.
    HUD Response: HUD has revised the Form HUD-9991 and developed 
instructions to explain how the questions should be answered. The FHA 
Condo ID number was moved to the Mortgagee Section. For Single-Unit 
Approval, an FHA case number may be requested without the submission of 
this form. It is the lender's responsibility to enter the FHA Condo ID 
number prior to submitting the form in the FHA case binder. If the Unit 
is in a Condominium Project that is not currently approved but has an 
FHA Condo ID, the lender will have to provide the FHA Condo ID when the 
FHA case number is requested.
    Comment: A commenter noted that the Form HUD-9991 was not listed in 
the required documentation.
    HUD Response: On October 24, 2019, Handbook 4000.1, Section 
II.A.8.p was updated to require Form HUD-9991 as required 
documentation. Mortgagees were permitted to use the Form HUD-9991 on 
the original effective date of October 15, 2019 and required to use it 
for case numbers assigned on or after January 2, 2020.
    Comment: Commenters noted various questions in Sections 3 and 4 
that condominium associations would not be able to answer because they 
did not understand FHA requirements.
    HUD Response: HUD has reviewed the comments and revised Sections 3 
and 4 of Form HUD-9991. The instructions provide additional guidance 
and explain how the questions should be answered. To accommodate future 
policy changes, the Form HUD-9991 does not cite specific percentage 
requirements. The mortgagee must refer to Handbook 4000.1 for the FHA 
requirements. The mortgagee is required to complete the form using 
information obtained from verifiable sources including the condominium 
association, public records, or other data sources, and certify it 
meets FHA requirements.
    Comment: Several commenters requested using a simpler form on a 
loan level basis when a condominium project has been approved by FHA.
    HUD Response: HUD restructured Form HUD-9991 and simplified the 
process of completing the form. Sections 1 through 3 must be completed 
for both Loan Level (Units in an approved Condominium Project) and 
Single-Unit Approval (Units in a Condominium Project that is not 
approved). Sections 1 through 4 must be completed for a Unit located in 
a Condominium Project that has not been approved. Form HUD-9991 is 
required documentation and must be included in the case binder along 
with all other required documentation as outlined in HUD Handbook 
4000.1, FHA Single Family Housing Policy Handbook (Handbook 4000.1). 
Completion of this form is not required for the case number assignment 
process.
    Comment: One commenter noted obtaining a new single unit approval 
takes the same level of effort as obtaining Condominium Project 
Approval. The commenter also noted that ``it creates an additional 
hurdle for the homeowner to financially qualify.''
    HUD Response: The Single Unit Approval program is not a replacement 
for full Condominium Project approval. HUD has developed this program 
to provide increased access to FHA-insured financing for the borrowers 
and limit risk to the FHA Insurance Fund. Form-9991 is substantially 
shorter than Form-9992 (required for Full Approval) and requires much 
less documentation. HUD is hopeful that the commenters will be pleased 
with the recent changes made based on comments received. The Form HUD-
9991 has been reduced by an additional two pages, has instructions, and 
only requires the mortgagee to complete now.
    Comment: Commenter requested that FHA should highlight the 
circumstances in which recorded documents are not required.
    HUD Response: HUD has revised the Form HUD-9991 and developed 
instructions to explain how the questions should be answered. The 
instructions identify when recorded governing documents would not be 
required.
    Comment: One commenter recommended including a reference to the 
October 21, 2019, Memorandum of Understanding Between the Department of 
Housing and Urban Development and the Department of Justice concerning 
False Claims Act civil actions to convey the actual extent of False 
Claims Act liability incurred by form certification. The commenter 
noted that the information ``should meet plain English requirements for 
clarity and be understandable by community association professionals 
outside of the legal profession.''
    HUD Response: HUD does not think the inclusion of a reference to 
the Memorandum is necessary. HUD has revised the Form HUD-9991 and 
developed instructions to explain how the questions should be answered. 
The certification language is consistent with other OMB HUD approved 
forms. The requirement for the condominium association to certify has 
been removed, and Form HUD-9991 must be completed by the Mortgagee. HUD 
expects the mortgagee to collect the information from reliable and 
verifiable sources.
    Comment: One commenter recommended changing the Litigation question 
to include ``pending'' in the question to add more clarity.
    HUD Response: HUD concurs and has amended Section 4.e.1 in the 
questionnaire to include ``pending'' in the question.
    Comment: Several commenters indicated the question regarding 
adverse determination for the condominium project is confusing to 
condominium associations.
    HUD Response: HUD agrees that the current phrasing may be confusing 
to the respondent and removed the question.
    Comment: Many commenters noted that the estimated burden for the 
HUD-9991 was too low and identified the requirement for the condominium 
association to complete the form and certify; the lack of instructions; 
and questions needing clarification.
    HUD Response: HUD increased the estimated burden hours for the Form 
HUD-9991 by 15 minutes. The Form HUD-9991 revisions included: 
Streamlining the form; developing instructions to explain how the 
questions should be answered; removing the requirement for the 
condominium association to complete the form and certify; and making 
the mortgagee solely responsible for completion of the form. HUD 
assumes that many of the sources of information are typically used in 
the operation of a condominium project and are accessible to 
mortgagees. The amount of time to complete the Form HUD-9991 for a Unit 
in an approved condominium project is significantly less than the 
amount of time it takes to complete the form for a Unit in a non-FHA-
approved project (Single-Unit Approval). FHA will allow data collected 
on the questionnaire to be no more than 90 days old prior to the 
questionnaire being signed. This 90 day

[[Page 46158]]

period will permit information previously collected to be used again, 
and allow for a more efficient use of time, both for the staff of the 
condominium association and mortgagee by reducing burden hours. HUD 
expects the mortgagee to collect the information from reliable and 
verifiable sources.
HUD-9992 Comments and HUD Responses
    HUD has made significant changes and streamlined Form HUD-9992 in 
response to the public comments received on the 60-Day Notice. To 
reduce duplication, Section 3: Project Eligibility and Section 4: 
Eligibility Worksheet for Condominium Project Approval have been 
consolidated. The project eligibility questions have been structured 
and, in some cases, removed to reduce the information collected. The 
first question of each section has been revised to determine if 
additional information is required or to direct the respondent to the 
next section. An N/A box also has been added where applicable. HUD also 
developed instructions to explain how questions should be answered with 
a Handbook 4000.1 reference. The form does not specify percentage 
benchmarks to make it adaptable to future policy changes.
    HUD concurs that the condominium associations may not understand 
questions that do not specify the requirement. HUD removed the Form 
HUD-9992 completion and certification requirements for the condominium 
association unless the condominium association is the Submitter. The 
Submitter will be responsible for determining if the Condominium 
Project complies with Condominium Project Approval eligibility 
requirements and must use information obtained from reliable and 
verifiable sources including the Condominium Association, public 
records, or other data sources. Data that has been obtained within the 
past 90 days of the signature on the HUD-9992 for an approved 
condominium project can be used again. The Form HUD-9991 is designed to 
confirm continued eligibility of the Unit and Condominium Project with 
FHA requirements and this reduces the burden of completing the Form 
HUD-9991 for Units in FHA-approved condominium projects.
    Comment: Several commenters requested clarification on how to 
complete Section 1: Mortgagee/Submitter and offered suggestions on the 
Mortgagee/Submitter information that should be collected.
    HUD Response: HUD restructured Section 1: Mortgagee/Submitter 
Information and consolidated 1.b. Mortgagee Information and 1.c 
Submitter Information. In the updated form, 1.b. Submitter Information 
allows a variety of respondents to complete the form. The HUD-9992 
instructions explain how the questions should be answered and contain 
Handbook 4000.1 references.
    Comment: A commenter noted that the form should clarify if the 
submitter is not a mortgagee using the DELRAP process, then the 
submitter is not obligated to fill out Section 1.b. Right now, it is 
not clear whether a submitter using the HRAP process is supposed to 
leave Section 1.b blank. This confusion would be eliminated if there 
were separate forms for the DELRAP and HRAP processes.
    HUD Response: HUD revised Section 1: Mortgagee/Submitter of the 
Form HUD-9992 and developed instructions to explain how the 
organizational information should be provided. Section 1.b Mortgagee 
was deleted and replaced with 1.b. Submitter. The Submitter preparing 
the approval package should complete the Form HUD-9992. According to 
Handbook 4000.1, Section II.C.2.c.i. i. Form HUD-9992, FHA Condominium 
Project Approval Questionnaire, the ``Form HUD-9992 must be completed, 
signed, and dated by an Eligible Submission Source or a DELRAP 
Mortgagee''). The same requirements apply to Condominium Projects 
seeking approval under HRAP and DELRAP and the Form HUD-9992 is listed 
as required documentation for many FHA Condominium Project Approval 
requirements. At this time, HUD has no plans to create separate forms 
for HRAP and DELRAP submissions but will take this into consideration 
for the future.
    Comment: In Section 2: Condominium Project Information, a commenter 
suggested adding ``(if applicable)'' to the FHA Condo-ID Number in 
Section 2.a since, the HUD-9992 is used with both approved condominium 
projects and projects seeking approval.
    HUD Response: HUD agrees that not all condominium projects will 
have FHA Condominium Project Approval. The phrase ``(if applicable)'' 
was not added to the Form HUD-9992 because the instructions note that 
the FHA Condo-ID Number should be provided if one exists.
    Comment: There were many comments on how to make the questions in 
Section 3.a Project Eligibility more user-friendly. One commenter noted 
that a third column for ``unknown,'' should be added and suggested 
removing 3.a.3. because the condominium associations did not understand 
mandatory rental pooling agreements. A commenter indicated the question 
3.a.9 regarding adverse determination for the condominium project is 
confusing to condominium associations and should be deleted.
    HUD Response: HUD agrees that some of the FHA requirements may be 
difficult to understand without the Handbook 4000.1 guidance. HUD 
removed the project eligibility questions 3.a.1.-3.a.9. from the HUD-
9992 to streamline the form and because it is the responsibility of the 
Submitter to determine if a condominium project complies with all the 
FHA condominium project eligibility and approval requirements. The 
Submitter must use information obtained from verifiable sources 
including the condominium association, public records, or other data 
sources to complete the HUD-9992 and to confirm compliance with the 
requirements.
    Comment: Questions 3.c.3 through 3.c.9 request information about 
the status of the Legal Phases. A commenter noted that Section 3.c.3 
through 3.c.9 should include an additional response column labeled 
``Unknown.'' Another commenter suggested that 3.c.6 and 3.c.9 should be 
combined because the information requested is redundant.
    HUD Response: HUD consolidated the Legal Phasing Sections 3.c. and 
4.a and restructured how the information is collected. HUD needs to 
know the number of phases and related units that have been submitted 
for condominium project approval. HUD added an N/A check box the Legal 
Phasing section and structured the first question to determine if the 
respondent should provide more information or move to the next section. 
HUD also developed instructions to explain how the questions should be 
answered and to provide a reference to Handbook 4000.1.
    Comment: A commenter noted that Sections 3.c and 4.a. ``pertain to 
proof of legal phasing and the request that the submitter provide a 
certificate of occupancy (CO) or ``their equivalent.'' The commenter 
also noted that ``FHA does not provide guidance on what documentation 
is an acceptable ``equivalent.'' The commenter noted they typically 
submit the recorded amendment to the condominium instruments adding 
phases and that a certificate of occupancy requirement is better suited 
for newly constructed projects only. Another commenter suggested that 
the recorded declarations be added to the list of required 
documentation.
    HUD Response: Questions 3.c. and 4.a collect information to 
determine if the Condominium Project and its Legal

[[Page 46159]]

Phases comply with FHA requirements, which are written to apply to a 
broad array of laws throughout the United States and U.S. territories. 
The purpose of the ``Certificate of Occupancy'' or its ``equivalent'' 
is to demonstrate that all the units within the phase are built out and 
are ready for occupancy. HUD is open to other types of documentation 
that demonstrate the condominium project and legal phase(s) comply with 
FHA requirements. HUD will consider adding the recorded amendment 
annexing a phase to the required documentation in future updates.
    Comment: Question 4.a.5 asks about the independently sustainability 
of Legal Phases. A commenter recommended that the Condominium 
Association answer this question instead of the Submitter.
    HUD Response: HUD expects the Submitter to be able to determine if 
the completed Legal Phases are independently sustainable without future 
planned Legal Phases, as demonstrated by the budget and financial 
documentation, such that the submitted Legal Phases of the Condominium 
Project will not be jeopardized by the failure to complete additional 
Legal Phases. While the Condominium Association can provide its 
perspective, the Submitter should make the determination. The Submitter 
is responsible for determining if the Condominium Project complies with 
FHA eligibility Condominium Project Approval requirements and must use 
information obtained from verifiable sources including the Condominium 
Association, public records, or other data sources to complete the HUD-
9992.
    Comment: Several commenters noted similar questions in Section 3: 
Project Eligibility and Section 4: Eligibility Worksheet for 
Condominium Project Approval should be consolidated to make the form 
more user-friendly and to reduce the possibility of errors. A commenter 
noted that Sections 3.e and 4.e. relate to the individual owner 
concentration and should be consolidated. Another commenter noted that 
Sections 3.d.2. and 4.c.1 pertain to the project's owner-occupancy rate 
and should be consolidated. A final commenter noted that Section 3.j.1 
should be amended to include information asked in Section 4.l.5, 
``could legal action impact the future solvency of the Condominium 
Association?''
    HUD Response: HUD agrees and combined Sections 3 and 4 to 
streamline the Form HUD-9992. The data collection and eligibility 
determination for individual owner concentration, owner occupancy and 
litigation have been consolidated into the same section. HUD developed 
instructions to explain how the questions should be answered.
    Comment: Signature Pages. The Draft Form HUD-9992 requires the 
submitter to sign and date the form in 2 places, on pages 6 and 10. 
This seems unnecessary. The form should be consolidated so that the 
submitter only has sign in one place, as was the case the prior 2-page 
FHA Condominium Certification Checklist.
    HUD Response: HUD has revised the Form HUD-9992 and only the 
Submitter's signature is required.
    Comment: A commenter noted that Question 3.d.3.a.ii New 
Construction, Non-owner occupied Units in the HUD-9992 published with 
the 60-Day Notice should be eliminated because it is not possible to 
know if future transactions will be owner-occupied or not.
    HUD Response: This question is asking for the number of owner-
occupied units at a particular point in time and the non-owner-occupied 
units are equal to the difference between the total units and owner-
occupied units. HUD based the categories of owner-occupancy in the 
Final Condominium Rule upon the Housing Opportunity Through 
Modernization Act of 2016 (HOTMA) requirements as directed by Congress. 
The question cannot be eliminated.
    Comment: A commenter requested clarification regarding an owner 
concentration that is between 35% and 50% where a project meets the 10% 
delinquency requirement as to whether the submitter must also provide 3 
years' worth of financial data and demonstrate 20% reserve funding, as 
provided for under Mortgagee Letter 2016-15, or if these requirements 
are now eliminated.
    HUD Response: HUD thinks the reference to the FHA Single-Family 
Handbook 4000.1 is the comprehensive source of FHA condominium policy 
and Mortgagee Letter 2016-15 was superseded by Handbook 4000.1 
published on August 14, 2019. For Condominium Project Approval, a 
Condominium Project with an owner occupancy percentage between 35% and 
50% must meet the requirements in Handbook 4000.1, Section 
II.C.2.c.iv(c) Existing Construction Condominium Projects that are 
greater than 12 months old.
    Comment: A commenter requested guidance on determining the reserve 
account balance for Question 3.f.1 in Section 3.f. Financial Stability. 
The commenter wanted to know if the balance sheet or another document 
should be used.
    HUD Response: The Handbook 4000.1 lists the required financial 
documentation. The Submitter is responsible for determining the reserve 
account balance meets FHA requirements and is being funded in 
accordance with FHA requirements.
    Comment: A commenter noted that many of the questions assume that 
the Homeowners Associations (HOA's) know HUD's guidelines. As an 
example, the commenter referenced Question 3.f.2 ``Is the reserve 
account funded as required by FHA?'' The commenter noted that not 
understanding FHA requirements makes the HOAs leery about answering 
many of the questions.
    HUD Response: HUD concurs that the condominium associations may not 
understand questions that do not specify the requirement. HUD has 
revised the Form HUD-9992 and developed instructions, which explain how 
the questions should be answered and include Handbook 4000.1 
references. The form does not specify percentage benchmarks to make it 
adaptable to future policy changes. HUD removed the Form HUD-9992 
completion and certification requirements for condominium associations, 
which should make them feel more comfortable providing information to 
the Submitter. HUD expects the Submitter to know the requirements and 
to determine if the condominium project complies with FHA requirements.
    Comment: A commenter asked if ``old'' delinquencies associated with 
prior owners should be included in the Unit in Arrears calculation in 
Question 3.f.5.
    HUD Response: The Handbook 4000.1 guidance for Units in Arrears 
pertains to the current owners. If there are outstanding delinquencies 
from prior unit owners, they should be noted in the financial 
documentation if they pose a financial threat to the condominium 
project.
    Comment: A commenter noted that Question 3.f.6. on the draft Form 
does not accommodate condominium projects that have units with 
different assessment amounts based on the unit size or common element 
interest of the units.
    HUD Response: HUD agrees that the HUD-9992 structure does not allow 
for entry of a range of assessments. The form requests the annual 
amount of condominium assessments. If it will have a bearing on the 
condominium project's performance, the Submitter should address it in 
the condominium project approval package.
    Comment: A commenter noted that Section 3.l. Subsections 3.h 
through 3.k are unclear as to whether any box needs to be checked off 
if these sections do not apply. In general, it is unclear which

[[Page 46160]]

boxes needed to be checked off if the subsection is inapplicable.
    HUD Response: HUD revised the Form HUD-9992 and developed 
instructions to explain how the questions should be answered. To 
minimize the number of questions a respondent must answer the first 
question to determine if more information is required or to indicate 
the next required response. An N/A check box has been added to many of 
the sections including the Commercial, Live/Work and Leasehold sections 
referenced by the commenter.
    Comment: For question 4.d.1., the commenter requested clarification 
that the specific documentation being reviewed to verify the 
requirement and on how to demonstrate that the project has had a stable 
income over the past two years with decreases that do not exceed FHA's 
percentage of 15%. The commenter noted that if the budget income from 
the previous year to the current year, the regulations need to be 
updated to request previous year's budget. Currently, only the current 
year budget is requested.
    HUD Response: HUD will consider updates to the Handbook 4000.1 that 
will require the financial documentation for the past two years. Both 
the income and expense statement and the budget can be used to provide 
information on a Condominium Project's financial condition and the 
stability. The reviewer can also use the year-to-date to develop income 
projections for comparison with last year's statements to determine 
that the income did not decrease more than 15%.
    Comment: A commenter also requested clarification on the 
requirements in Section 4.d.1 for new construction and asked for 
confirmation that if the operating income has not been in place for two 
years, a demonstration that the Project has not shown any decrease in 
income would suffice.''
    HUD Response: HUD agrees with the approach and is considering 
updated guidance in the Handbook 4000.1 that will link the required 
financial condition documentation to the length of time the Condominium 
Project has been operating.
    Comment: Questions 4.d.3 through 4.d.6 relate to the reserve 
account funding. A commenter noted that Questions 4.d.3 and 4.d.4. 
appear to be asking the same question. The commenter recommended 
revising Question 4.d.3 to read ``Does the Condominium budget 
demonstrate that at least 10% of the total annual assessment is being 
allocated toward reserve funding as required by FHA? If the answer is 
``No'', answer questions 4.d.5 and 4.d.6.''
    HUD: HUD concurs and revised the Financial Stability and Controls 
section in response to several comments received. The Submitter needs 
to confirm that the balance in the reserve account meets the FHA 
requirement and demonstrate that the reserve fund that is being funded 
consistently.
    Comment: Section 4.d.5 also pertains to reserve funding. The 
commenter suggested rewording the question to make it clear when a 
reserve study must be reviewed to demonstrate the reserve account is 
funded as required. The commenter also requested guidance on the 
financial documentation that should be evaluated in conjunction with 
the reserve study.
    HUD Response: In response to comments, HUD streamlined Form HUD-
9992 and revised the reserve account balance questions to make it clear 
that if the reserve account balance is less than FHA's requirement and/
or the reserve account is not being funded in accordance with FHA 
requirements, an acceptable reserve study is required. The funding and/
or expenditures must be consistent with the reserve study 
recommendations for approval.
    Comment: The commenter noted that Question 4.k.3. seems to inquire 
about whether the management contract can be terminated upon no more 
than 90 days' notice only if the management contract was entered into 
during the developer control period. However, Single Family Housing 
Policy Handbook 4000.1 states that the management contract, regardless 
of when it was entered into, must be terminable upon no more than 90 
days' written notice. The commenter noted that there is no place on 
Form HUD-9992 to provide this information for a current management 
contract that was not entered into during the developer control period. 
The commenter also indicated that Handbook 4000.1 is not clear on 
whether a project is ineligible solely because the management contract 
is not terminable upon no more than 90 days' notice. The commenter 
indicated that the public could also use clarity on whether the 
management contract termination provision must be with or without cause 
and whether an early termination penalty is permissible or not.
    HUD Response: In response to the comments, HUD streamlined and 
revised the Form HUD-9992. HUD concurs that grouping the management 
contract with the other contracts on the HUD-9992 could be confusing to 
the respondent. If there is a management company, Handbook 4000.1 
requires the management agreement to have a provision giving the 
Condominium Association the right to terminate the Management Agreement 
with no more than 90 Days' notice. Handbook 4000.1 also requires that a 
current management agreement must be submitted. It is the Condominium 
Association's responsibility to determine if the termination provision 
should be ``with or without cause.'' FHA requirements must be met for a 
condominium project to be eligible for approval.
    Comment: The commenter noted that in their practice, some 
condominium associations have cross-easements for shared recreational 
facility use.
    HUD Comment: This comment seems to be a request for a policy 
interpretation regarding cross-easements for a shared recreational 
facility. If there is a specific case, HUD will review it. HUD will 
research to determine if additional guidance should be considered for 
future policy updates.
    Comment: The commenter noted that Sections 4.k.4 through 6. inquire 
as to whether there are any recreational easements or leases. The 
commenter also noted that ``Under Single Family Housing Policy Handbook 
4000.1, a project with recreational easements or leases is eligible for 
approval if either the lease or easement holder is a nonprofit entity 
under the control of the condominium association or if each unit owner 
has the right to cancel the membership with no more than 90 days' 
notice and without penalty. However, these sections are written as if 
the project has to satisfy both prongs in order to be eligible. The 
commenter asked for clarification on the requirements that must be 
satisfied to be eligible.
    HUD Response: The leasehold questions in Form HUD-9992 have been 
reworded. The commenter's interpretation of the Handbook 4000.1 
guidance is correct. It must be a nonprofit or any entity that gives 
the unit owners the right to cancel the membership with no more than 90 
days' notice and without penalty. Handbook 4000.1 always takes 
precedence.
    Comment: Section 4.l.5 asks about the impact of any legal action on 
the solvency of the condominium association. The commenter noted that 
the question is too broad and should be removed.
    HUD Response: The Form HUD-9992 has been revised in response to 
comments. The questions pertaining to litigation have been consolidated 
and restructured. Understanding whether a current legal action could 
affect the financial stability of the project and if the Condominium 
Project or

[[Page 46161]]

Condominium Association is facing any other type of litigation risk is 
important. Question 4.l.5 has been revised. If the litigation is at a 
point, where a settlement has been determined, it is important to 
understand if the funds allocated for any required repairs are 
sufficient to cover the costs. If there is a gap, and how the 
condominium association plans to finish the repairs.
    Comment: A commenter noted that Section 4.l. Subsections 8 through 
10 seem to only apply if the litigation has to do with structural 
issues and requested clarification on how to note litigation related 
for something else. Another commenter noted that Section 4.l.9 and 
Section 4.l.10, which pertain to whether repairs have started should be 
properly indented for clarity.
    HUD Response: The Form HUD-9992 has been revised in response to 
comments and the questions pertaining to litigation have been 
consolidated. HUD thinks the questions are broad enough to capture all 
types of pending and/or current litigation. Submitters are asked to 
indicate if the Condominium Project or Condominium Association is 
subject to any pending Litigation and to provide a signed and dated 
explanation if yes. The Submitter should respond no to the questions 
that do not apply. The questions have been revised and the dependent 
questions are noted in the preceding question(s) and the Instructions.
    Comment: The commenter noted Section 4.l.11 is too broad and should 
be removed. Section 4.l.11 asks if the Condominium Project or 
Condominium Association are subject to any other Litigation risk not 
covered by insurance or that exceeds the amount of insurance coverage 
relating to the potential losses for that matter.
    HUD Response: The Form HUD-9992 has been revised in response to 
comments and the questions pertaining to litigation have been 
consolidated. Understanding whether the Condominium Project or 
Condominium Association are facing any other type of litigation risk is 
important. If the litigation is at a point, where a settlement has been 
determined, it is important to understand if the funds allocated for 
any required repairs are sufficient to cover the costs. If there is a 
gap or potential gap understanding if there is a plan to address any 
anticipated shortfall is important.
    Comment: The estimated reporting burden to complete HUD Form-9992 
is 60 minutes per respondent. During the estimated 60 minutes, a 
respondent is expected to read and comprehend form instructions, 
conduct research to gather and document required information, complete 
the form, and review the form for submission accuracy. The estimated 
reporting burden for HUD Form-9991 for these same activities is 45 
minutes
    HUD Response: HUD increased the burden hours for the Form HUD-9992 
to account for changes to the form and the addition of instructions. 
The Form HUD-9992 has been shortened from 13 to 8 pages and the 
requirement for the condominium association to complete a portion of 
the questionnaire has been removed. The burden estimate for condominium 
project approval included 1 hour for condominium package preparation 
and 1 hour to complete Form HUD-9992. The new burden estimate for the 
Form HUD-9992 is 1.5 hours. HUD recognizes that many condominium 
associations are not familiar with the FHA Condominium Project Approval 
guidelines and terminology. The Submitter is responsible for collecting 
information from verifiable sources and confirming the Condominium 
Project complies with FHA Condominium Project Approval requirements. 
The burden hour estimate assumes that most of the information required 
to complete the form is used while operating the condominium project. 
HUD understands from the comments that the certification has an impact 
on the cost and completion time for condominium associations. To reduce 
the number of questions that must be answered, the first question of 
each section has structured to determine if more information is needed 
and to direct the respondent to the next question to answer. In 
addition, ``Not Applicable'' (N/A) checkboxes have been added 
throughout the Form HUD-9992 where appropriate.
    Comment: The commenter indicated that requiring the HUD-9991 to be 
submitted on each individual loan in an FHA-approved condominium 
project after going through the condominium project approval process 
and completing the HUD-9992 is not efficient.
    HUD response: HUD has eliminated the required documents sections 
from form 9991 to streamline completion on the form. While the 
``required documents'' section is no longer part of the form, the 
mortgagee will still be responsible for submission of the required docs 
as applicable. Form HUD-9991 is now 4 pages, includes instructions, and 
is now only required to be completed by the mortgagee. Streamlining 
this form should reduce the burden of completing the form. The Form 
HUD-9992 is part of the FHA Condominium Project Approval package, which 
is used to determine the Condominium Project's compliance with FHA 
requirements for project approval. The Form HUD-9991 is used to 
determine the continued eligibility of a Unit for FHA-insured 
financing. HUD has reduced the information collected on both the Form 
HUD-9992 and the Form HUD-9991. In addition, HUD extended the period 
that data collected is valid to 90 days and removed the requirement 
that the condominium association complete the form. A mortgagee can 
submit both forms using the same data.
    Comment: Several commenters noted the recertification requirements 
seemed as burdensome as initial certification. A commenter noted that 
requiring the use of one form to apply for project approval and project 
recertification imposes an equal burden for condominium project 
approval and project recertification. Several commenters requested the 
short form questionnaire or checklist be developed for recertification. 
A commenter noted that it is very time-consuming to complete the Form 
HUD-9992 when many of the sections do not apply. Another commenter 
asked for clarification on the recertification requirements for 
recorded legal documents.
    HUD Response: HUD has streamlined the information collection 
process for Condominium Project Approval certification and 
recertification. The extension of certification from two to three years 
reduces the frequency of the recertification. HUD expects the 
additional revisions to the form and to the structure of the questions 
to lower the number of responses required for most Condominium Projects 
seeking recertification. Form HUD-9992 collects critical information 
about the financial and operating status of the Condominium Project. 
For each section of the Form HUD-9992, the Submitter will answer the 
question to determine if additional information is required or move to 
the next question. In addition, N/A boxes have been incorporated 
throughout Form HUD-9992, which allow the respondent to bypass sections 
that do not apply. Condominium Projects are not required to submit the 
governing and legal documents for recertification unless there have 
been amendments. To assist respondents, a question has been added to 
the form to determine if the legal documents have been amended since 
the last FHA approval. Some projects will be able to complete 
recertification easily, while condominium projects with more features 
or recently completed Legal Phases will take more effort. The Form HUD-
9992 is required. At this time, HUD does not have plans to create a 
separate form for recertification but will take this into consideration 
in the

[[Page 46162]]

future. HUD is developing a checklist that shows the required 
documentation for Full Approval, Recertification and Legal Phasing. In 
addition, the instructions address recertification and include a 
reference to the Recertification Review in Handbook 4000.1, Section 
II.C.3.

    Dated: July 20, 2020.
Anna Guido,
Department Reports Management Officer, Office of the Chief Information 
Officer.
[FR Doc. 2020-16588 Filed 7-30-20; 8:45 am]
BILLING CODE 4210-67-P