24 CFR Part 248 — Prepayment of Low Income Housing Mortgages

PART 248—PREPAYMENT OF LOW INCOME HOUSING MORTGAGES Authority: 12 U.S.C. 17151 note, 4101 note, and 4101-4124; 42 U.S.C. 3535(d). Subpart A—General Source: 57 FR 12041, Apr. 8, 1992, unless otherwise noted. § 248.1 Purpose. The purpose of this part is to— (a) Preserve and retain to the maximum extent practicable as housing affordable to low income families or persons those privately owned dwelling units that were produced for such purpose with Federal assistance, without unduly restricting the owners' prepayment rights; (b) Minimize the involuntary displacement of tenants currently residing in such housing; (c) Work in partnership with State and local government and the private sector in the provision and operation of housing that is affordable to very low, low and moderate income families; and (d) Facilitate the sale of housing to residents under a resident homeownership program. § 248.3 Applicability. The requirements of subparts B and C of this part apply to any project that is eligible low income housing, as defined in subparts B and C of this part respectively, on or after November 1, 1987, except that such requirements shall not apply to a project which receives assistance under title IV, subtitle B of the Cranston-Gonzalez National Affordable Housing Act in connection with a homeownership program approved by the Commissioner thereunder. § 248.5 Election to proceed under subpart B or subpart C of this part. (a) Any owner who has not submitted a notice of intent prior to January 1, 1991, pursuant to either § 248.211 or § 248.105, shall proceed under subpart B of this part. (b) Any owner who has filed a plan of action with the Commissioner on or before October 11, 1990 pursuant to subpart C of this part, regardless of whether or not the Commissioner has approved such plan of action or whether the owner has received incentives thereunder, may proceed under subpart B of this part by submitting a notice of intent to the Commissioner in accordance with § 248.105 within 30 days after publication of revised Appraisal Guidelines or within thirty days after the Commissioner notifies the owner of HUD's final approval of the plan of action, whichever is later. The notice of intent shall state that the owner is exercising its conversion right pursuant to this section. If the owner fails to file a notice of intent within that period, the owner forfeits its right of conversion. In awarding incentives to an owner who elects to proceed under subpart B of this part in accordance with this section, the Commissioner shall take into consideration any incentives which the owner has already received under subpart C of this part. (c) Any owner of housing that becomes eligible low income housing, as defined in subpart B of this part, before January 1, 1991, and who before such date, filed a notice of intent under § 248.211 of subpart C of this part, may, unless a plan of action was submitted after October 11, 1990, elect to proceed under subpart B or under subpart C of this part. An owner must indicate its election by submitting to the Commissioner, within 30 days of the effective date of this part, a notice of election to proceed indicating whether it wishes to proceed under subpart B or subpart C of this part, or proceed under subpart B of this part until completion of the appraisals and then elect either subpart B or subpart C of this part. An owner who chooses to retain its option until after the completion of the appraisals under § 248.111 must submit a new notice of intent to the Commissioner within 30 days after receipt of the information provided by the Commissioner under § 248.131. The notice of intent shall be submitted in accordance with either § 248.105 (for owners electing to proceed under subpart B of this part) or § 248.211 (for owners electing to proceed under subpart C of this part). Any owner who fails to file a notice of intent within the 30-day period may not proceed under subpart C of this part, but may proceed under subpart B of this part by filing a new notice of intent thereafter. If an owner who has filed a notice of intent before January 1, 1991 elects under this paragraph to proceed under subpart C of this part, it may change its election within 30 days after receipt of the information provided by the Commissioner under § 248.131 by filing a new notice of intent under § 248.211. For purposes of calculating any time periods or deadlines under this part for actions following the filing of the notice of intent, the date on which the owner submits the new notice of intent under this paragraph shall be deemed the date of the filing of the notice of intent. Any owner who, exercising its option under paragraph (c) of this section, submits a notice of intent under § 248.211 after the Commissioner has incurred the cost of having an appraisal, or appraisals, performed pursuant to § 248.111 of subpart A of this part, shall reimburse the Commissioner for these expenses within 30 days of receipt of a bill covering these expenses. (d) For an owner who has elected under paragraph (c) of this section to proceed under subpart C of this part, the Commissioner shall provide sufficient assistance to enable a nonprofit organization that has purchased, or will purchase, eligible low income housing to meet project oversight costs, as that term is defined in § 248.201. (e) The Commissioner shall not refuse to offer incentives under § 248.231 to any owner who filed a notice of intent under § 248.211 before October 15, 1991, based solely on the date of filing of the plan action. (f) An owner who has filed a plan of action after October 11, 1990, pursuant to § 248.213, may not elect to proceed under subpart B of this part. [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 37814, July 13, 1993] Subpart B—Prepayments and Plans of Action Under the Low Income Housing Preservation and Resident Homeownership Act of 1990 Source: 57 FR 12041, Apr. 8, 1992, unless otherwise noted. § 248.101 Definitions. Acquisition Loan. Adjusted Income. Aggregate Preservation Rent. Annual Authorized Return. Bona Fide Offer. Capital Improvement Loan. Community-Based Nonprofit Organization. (1) Is organized under State or local laws; (2) Has no part of its net earnings inuring to the benefit of any member, founder, contributor, or individual; (3) Is neither controlled by, nor under the direction of, individuals or entities seeking to derive profit or gain from the organization. (4) Has applied for, or has a tax exemption ruling from the Internal Revenue Service under section 501(c) of the Internal Revenue Code of 1986; (5) Does not include a public body (including the participating jurisdiction) or an instrumentality of a public body. An organization that is State or locally chartered may qualify as a community-based nonprofit organization; however, the State or local government may not have the right to appoint more than one-third of the membership of the organization's governing body and no more than one-third of the board members can be public officials; (6) Has standards of financial accountability that conform to 2 CFR 200.302 and 200.303; (7) Has among its purposes the provision of decent housing that is affordable to low-income and moderate-income persons, as evidenced in its charter, articles of incorporation, resolutions or by-laws; (8) Maintains accountability to low income community residents by— (i) Maintaining at least one-third of its governing board's membership for low-income neighborhood residents, other low-income community residents, or elected representatives of low-income neighborhood organizations. For urban areas, “community” may be a neighborhood or neighborhoods, city, county, or metropolitan area; for rural areas, “community” may be a neighborhood or neighborhoods, town, village, county, or multi-county area (but not the entire State); and (ii) Providing a formal process for low-income, program beneficiaries to advise the organization on its decisions regarding the acquisition, rehabilitation and management of affordable housing. Default. Eligible Low Income Housing. (1) That is— (i) Insured or held by the Commissioner under section 221(d)(3) of the National Housing Act and assisted under part 886, subpart A of this title because of a conversion from assistance under 215 of this chapter; (ii) Insured or held by the Commissioner under part 221 of this chapter and bearing a below market interest rate as provided under § 221.518(b) of this chapter; (iii) Insured, assisted, or held by the Commissioner or a State or State agency under part 236 of this chapter; or (iv) A purchase money mortgage held by the Commissioner with respect to a project which, immediately prior to HUD's acquisition, would have been classified under paragraphs (1)(i), (ii), or (iii) of this definition; and (2) That, under regulation or contract in effect before February 5, 1988, is or will within 24 months become eligible for prepayment without prior approval of the Commissioner. Equity Loan. Extension Preservation Equity. (1) The extension preservation value of the project determined under § 248.111; less (2) The outstanding balance of any debt secured by the property. Extension Preservation Rent. (1) The annual authorized return; (2) Debt service on any rehabilitation loan for the project; (3) Debt service on the federally-assisted mortgage(s) for the project; (4) Project operating expenses; and (5) Adequate reserves. Extension Preservation Value. Fair market rent. Federal Cost Limit. Federally-assisted Mortgage. Good Cause. HOME Investment Trust Fund. Homeownership Program. Interest Reduction Payments. Limited Equity Cooperative. Low Income Affordability Restrictions. Low Income Families. Low Vacancy Area. Moderate Income Families. Mortgage. Nonprofit Organization. (1) Is incorporated under State or local law; (2) Has no part of its net earnings inuring to the benefit of any member, founder, contributor, or individual; (3) Complies with standards of financial accountability acceptable to the Commissioner; and (4) Has among its principal purposes significant activities related to the provision of decent housing that is affordable to very low, low, and moderate income families. Notice of Intent. Owner. Participating Jurisdiction. Plan of Action. Prepayment. Preservation Equity. Preservation Value. Priority Purchaser. (1) A resident council organized to acquire the project in accordance with a resident homeownership program that meets the requirements of subpart B of this part; or (2) Any nonprofit organization or State or local agency that agrees to maintain low income affordability restrictions for the remaining useful life of the project. A nonprofit organization or State or local agency that is affiliated with a for-profit entity for purposes of purchasing a project under subpart B of this part shall not be considered a priority purchaser. Project oversight costs. (1) Ensuring adequate and responsible participation by the board of directors and the membership of the priority purchaser in ownership decisions, including ensuring resident input in these decisions; (2) Facilitating long-range planning by the board of directors to ensure the physical, financial and social viability of the project for the entire time the project is maintained as low income housing; and (3) Assisting the ownership in complying with regulatory, use, loan and grant agreements. Proprietary information. Public Housing Agency. Qualified Purchaser. Regulatory Agreement. Related Party. (1) Only a loan, and not a grant, is provided; (2) The financing is provided for the acquisition of the project, the rehabilitation of the project, or both; (3) In the case of financing for the acquisition of the project, the sum of the principal amount of the loan, plus the amount of the acquisition loan under section 241(f) of the National Housing Act (12 U.S.C. 1715z-6(f)), and any Federal grant to cover acquisition of the project, does not exceed the sum of the sales price and the expenses associated with the acquisition, loan closing and implementation of the plan of action; and in the case of financing for the rehabilitation of the project, the principal amount of the loan does not exceed the equity requirements applicable to the rehabilitation loan or capital improvement loan obtained by the purchaser under part 241 or part 219 of this chapter; (4) The loan is not a condition of accepting a bona fide offer or entering into a sales contract; (5) The seller has no input in the continued operation of the project as a result of the loan; and (6) In the case of a loan provided by a management company that is affiliated with the seller, the execution of a management contract between the purchaser and the management company is not a condition of the loan. This rule does not bar an owner, or former owner, from membership on a nonprofit organization's board of directors, as long as the owner, or former owner, participates only in his or her personal capacity, without compensation, and holds a nonvoting membership. The purchaser and the owner shall not be deemed related parties solely by reason of the purchaser's retention of a property management entity of a company that is owned or controlled by the owner or a principal thereof, if retention of the management company is neither a condition of sale nor part of consideration paid for the project and the property management contract is negotiated by the qualified purchaser on an arm's length basis. Relevant Local Market. Relocation Expenses. (1) Advisory services, including timely information, counseling (including the provision of information on a resident's rights under the Fair Housing Act (42 U.S.C. 3601-3619)), and referrals to suitable, affordable, decent, safe and sanitary alternative housing; and (2) Payment for actual, reasonable moving expenses. Remaining Useful Life. Reserve for Replacements. Resident Council. (1) Is representative of the residents of the project; (2) Adopts written procedures providing for the election of officers on a regular basis; and (3) Has a democratically elected governing board, elected by the residents of the project. Residual Receipt Fund. Return on Investment. Section 8 Assistance. Special Needs Tenants. State assisted or subsidized mortgage. Tenant Representative. Termination of Low Income Affordability Restrictions. Transfer Preservation Equity. (1) The transfer preservation value of the project determined under § 248.111; less (2) The outstanding balance of the federally-assisted mortgage(s) for the project. Transfer Preservation Rent. (1) Debt service on the loan for acquisition of the project; (2) Debt service on any rehabilitation loan for the project; (3) Debt service on the federally-assisted mortgage(s) for the housing; (4) Project operating expenses; and (5) Adequate reserves. Transfer Preservation Value. Very Low Income Families. Voluntary Termination of Mortgage Insurance. [57 FR 12041, Apr. 8, 1992, as amended at 57 FR 57314, Dec. 3, 1992; 58 FR 37814, July 13, 1993; 59 FR 14369, Mar. 28, 1994; 64 FR 26639, May 14, 1999; 80 FR 75936, Dec. 7, 2015] § 248.103 General prepayment limitation. (a) Prepayment. (b) Termination. (c) Foreclosure. (d) Effect of unauthorized prepayment. (e) Remedies for unauthorized prepayment. § 248.105 Notice of intent. (a) Eligibility for filing. (1) Continued in default or fell into default on or after the November 28, 1990, and the mortgage has been assigned to the Commissioner as a result of such default; (2) Continued in default or fell into default on or after November 28, 1990, while the mortgage was held by the Commissioner; (3) Fell into default prior to November 28, 1990, if the owner entered into a workout agreement prior to that date, and on or after that date, the owner has defaulted under the workout agreement (and, if the agreement was with an insured mortgagee, the mortgage has been assigned to the Commissioner as a result of the default under the workout agreement); or (4) Fell into default prior to November 28, 1990, but has been current since that date and the owner has not agreed to recompense the appropriate insurance fund for losses sustained by the fund as a result of any work-out or other arrangement agreed to by the Commissioner and the owner with respect to the defaulted mortgage. (b) Filing with the Commissioner. (c) Filing with the State or local government and tenants. § 248.111 Appraisal and preservation value of eligible low income housing. (a) Appraisal. (b) Notice. (1) The need for, and the rules and guidelines governing, an appraisal of the project; (2) The filing deadline for submission of the appraisal; (3) The need for an appraiser retained by the Commissioner to inspect the project and the project's financial records; and (4) Any delegation to an appropriate State agency, if any, by the Commissioner of responsibilities regarding the performance of an appraisal pursuant to this section. (c) Appraisers. (1) Neither be an employee of the Federal Government nor an employee or officer of any entity that is affiliated with the owner or the mortgagee of record; (2) Be certified by the appropriate State agency under the standards established by the Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989 (12 U.S.C. 1451-1459); and (3) Have six years of experience in the appraisal profession and at least three years experience in the practice of appraising multifamily residential properties; (4) Is not the subject of a charge issued following a reasonable cause determination under the Fair Housing Act (42 U.S.C. 3601-3619). (d) Guidelines. (e) Operating expenses. (f) Preservation values. (g) Highest and best use as residential property. (h) Highest and best use. (i) Submission of appraisal. (1) The owner shall submit to the HUD Field Office in whose jurisdiction the project is located, the appraisal made by the owner's selected appraiser; and (2) The Commissioner's selected appraiser shall conduct and submit an appraisal to the Commissioner. (j) Joint determination of preservation values. (k) Timeliness of appraisals. [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 4871, Jan. 15, 1993] § 248.121 Annual authorized return and aggregate preservation rents. (a) Annual authorized return. (b) Aggregate preservation rents. (c) Extension preservation rent. (1) The annual authorized return determined under paragraph (a) of this section; (2) Debt service on any rehabilitation loan for the project, assuming a market rate of interest and customary terms; (3) Debt service on the federally-assisted mortgage(s) for the project; (4) Project operating expenses as determined by the Commissioner; and (5) Adequate reserves. (d) Transfer preservation rent. (1) Debt service on the loan for acquisition of the project; (2) Debt service on any rehabilitation loan for the project, assuming a market rate of interest and customary terms; (3) Debt service on the federally-assisted mortgage(s) for the project; (4) Project operating expenses as determined by the Commissioner; and (5) Adequate reserves. (e) Adequate reserves and operating expenses. (1) Adequate reserves are the amount of funds which, when added to existing reserves, are sufficient to maintain the project, including needed deferred maintenance, at a level that meets the standards set forth in § 248.147; and (2) Project operating expenses shall be based on operating expenses for the preceding 3 years, adjusted for reasonable reductions in operating costs due to rehabilitation and energy improvements. For purposes of comparison to the gross rents used in determining the Federal cost limit, project operating expenses shall include the cost of utilities paid by the residents. (f) Debt service. § 248.123 Determination of Federal cost limit. (a) Initial determination. (b) Relevant local markets. (c) Effect. § 248.127 Limitations on action pursuant to Federal cost limit. (a) Retention of the project. (b) Transfer of the project. (1) If the transfer preservation rent does not exceed the Federal cost limit, or if the transfer preservation rent exceeds the Federal cost limit and the owner is willing to transfer the project at a price which will result in project rents that, on an aggregate level, do not exceed the Federal cost limit, the owner may file a second notice of intent indicating an intention to transfer the project under § 248.157; or (2) If the transfer preservation rent exceeds the Federal cost limit, the owner may file a second notice of intent to transfer the project under § 248.161 or, if no bona fide offers are received, to prepay the mortgage or terminate the mortgage insurance. § 248.131 Information from the Commissioner. (a) Information to owners terminating affordability restrictions. (b) Information to owners extending affordability restrictions. (1) A statement of the preservation values of the project as determined under § 248.111; (2) A statement of the aggregate preservation rents for the project as calculated under § 248.121; (3) A statement of the applicable Federal cost limit for the market area (or relevant local market, if applicable) in which the project is located, and an explanation of the limitations under § 248.127 on the amount of assistance the Commissioner may provide based on such cost limits; (4) A statement of whether either of the aggregate preservation rents exceeds the Federal cost limit; and (5) A direction to file a plan of action and the information necessary to file a plan of action; or (6) A direction to submit a second notice of intent under § 248.133. (c) Information to tenants and State or local governments. (1) The potential opportunity of the tenants to become priority purchasers under §§ 248.157 and 248.161; and (2) The potential opportunity of resident homeownership under §§ 248.173 or 248.175. § 248.133 Second notice of intent. (a) Filing. (b) Timeliness. (c) Filing with the State or local government and tenants. § 248.135 Plans of action. (a) Submission. (b) Joint Submission. (c) Filing with the State or local government and tenants. (d) Termination of affordability restrictions. (1) A description of any proposed changes in the status or terms of the mortgage or regulatory agreement; (2) A description of any proposed changes in the low income affordability restrictions; (3) A description of any change in ownership that is related to prepayment or voluntary termination; (4) An assessment of the effect of the proposed changes on existing tenants; (5) An analysis of the effect of the proposed changes on the supply of housing affordable to low and very low income families or persons in the community within which the project is located and in the area that the housing could reasonably be expected to serve; (6) A list of any waivers requested by the owner pursuant to § 248.7; and (7) Any other information that the Commissioner determines is necessary to achieve the purposes of subpart B of this part. (e) Extension of affordability restrictions. (1) A description of any proposed changes in the status or terms of the mortgage or regulatory agreement; (2) A description of the Federal incentives requested, including cash flow projections and analyses of how the owner will address any physical or financial deficiencies and maintain the low income affordability restrictions of the project; (3) A description of any assistance from State or local government agencies, including low income housing tax credits that have been offered to the owner or purchaser or for which the owner or purchaser has applied or intends to apply; (4) A description of any transfer of the property, including the identity of the transferee and a copy of any documents of sale; (5) An income profile of the tenants as of the date of submission of the plan of action and as of January 1, 1987 (based on the area median income limits established by the Commissioner in February 1987), or if the January 1, 1987 profile is unavailable, a certification from the owner stating its unavailability and a profile as of January 1, 1988, or, if that is also unavailable, a profile as of January 1, 1989; (6) A transfer of physical assets package, if a transfer is proposed; (7) A list of any waivers requested by the owner pursuant to § 248.7; and (8) Any other information that the Commissioner determines is necessary to achieve the purposes of subpart B of this part. (f) Revisions. (g) Failure to Submit. (h) Comment Period for tenants and State or local governments. (i) Notification to tenants and the State or local government of plan of action approval. [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 37814, July 13, 1993] § 248.141 Criteria for approval of a plan of action involving prepayment and voluntary termination. (a) Approval. (1) Implementation of the plan of action will not— (i) Materially increase economic hardship for current tenants, and will not in any event result in a monthly rental payment by any current tenant that exceeds 30 percent of the monthly adjusted income of the tenant or an increase in the monthly rental payment in any year that exceeds 10 percent (whichever is lower); or in the case of a current tenant who already pays more than such percentage, an increase in the monthly rental payment in any year that exceeds the increase in the Consumer Price Index or 10 percent (whichever is lower); or (ii) Involuntarily displace current tenants (except for good cause) where comparable and affordable housing is not readily available, determined without regard to the availability of Federal housing assistance that would address any such hardship or involuntary displacement; and (2) The supply of vacant, comparable housing is sufficient to ensure that such prepayment will not materially affect— (i) The availability of decent, safe, and sanitary housing affordable to low income and very low income families or persons in the area that the housing could reasonably be expected to serve; (ii) The ability of low income and very low income families or persons to find affordable, decent, safe, and sanitary housing near employment opportunities; or (iii) The housing opportunities of minorities in the community within which the housing is located. (3) There are no open audit findings, open findings of noncompliance with title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d); the Fair Housing Act (42 U.S.C. 3601-3619); Executive Order 11063 (3 CFR 1959-1963 comp., p. 652); the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107); section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794); and all regulations promulgated under such statutes and authorities (including, but not limited to 24 CFR part 100), or outstanding violations of the regulatory agreement. (b) For purposes of approving a plan of action under this section, the Commissioner shall find that the requirements of paragraph (a)(1) of this section have been met if the owner agrees to execute a use agreement which provides that rents for all tenants residing at the project at the time of plan of action approval will not exceed the limit established in paragraph (a)(1)(i) of this section and that no tenant residing in the project at the time of plan of action approval will be involuntarily displaced without good cause. (c) For purposes of approving a plan of action under this section, the Commissioner shall find that the requirements of paragraph (a)(2) of this section have been met if the project is located in a housing market area which has been determined to have an adequate supply of decent, safe and sanitary rental housing; and it has been determined, based on the specific characteristics of the project, that the prepayment would not materially affect the housing opportunities of low and very-low income families. (1) For purposes of this section, a “housing market area” is defined as an area where rental housing units of similar characteristics are in relative competition with each other. If a project is in a non-metropolitan area, the housing market area is the county in which the project is located. If the project is located in a metropolitan area the housing market area is the primary metropolitan statistical area (PMSA), or in the case of very large metropolitan areas, the housing market area may be a portion of the PMSA. (2) For purposes of this section, a housing market area may be determined to have an adequate supply of decent, safe, and sanitary rental housing if the housing market area has a soft rental market. A soft rental market is a housing market area in which the supply of vacant available rental housing significantly exceeds the demand. A soft rental market exists if: (i) There is currently a surplus of rental housing such that the current excess supply of vacant available housing, plus units currently under construction, is expected to exceed demand for at least the next 24 months; or (ii) Within the next 12 months, based on the housing production (units currently under construction or with firm planning commitments), in combination with the current supply of available vacant units, supply is expected to exceed demand for at least 24 months. (3) In order to determine whether the housing market area has a soft rental market, the Commissioner shall consider data from the 1990 Decennial Census and the most recent available local data concerning changes in population, households, employment, the housing inventory, residential construction activity, and the current and anticipated supply/demand conditions within the overall rental market, as well as the occupancy and vacancy situation in assisted housing projects in the area, including information on waiting lists and the experience of voucher holders in finding units. (4) A determination must also be made on whether the prepayment would materially affect the housing opportunities of low and very-low income families in the area, based on the specific characteristics of the project including unit sizes, the type of tenants, e.g., elderly, handicapped, large families, minorities, the location of the project with respect to its proximity to employment opportunities; and the availability of other assisted housing within the immediate area. The prepayment would be determined to materially affect housing opportunities if: (i) The project is needed to assist in preserving low income housing in a neighborhood which is being revitalized; (ii) The project represents a rare source or the only source of low-and moderate-income rental housing in the immediate area; (iii) There is a shortage of the particular type of rental housing provided by the project such as units suitable for the disabled, single room occupancy, or units for large families; (iv) The preservation of the housing would be necessary to avoid adversely affecting the housing opportunities of low and very-low income families to find housing near employment opportunities; or (v) The preservation of the housing would be necessary to avoid adversely affecting the housing opportunities of minorities in the community within which the housing is located. (d) Once the Commissioner has compiled the necessary data and conducted the analysis under paragraph (c) of this section the Commissioner shall issue a written finding to the owner stating whether the plan of action to terminate the low income affordability restrictions is approved or disapproved. The written finding shall contain a specific determination of whether the market area is a soft rental market and prepayment would materially affect housing opportunities. The written finding shall include: (1) A statement as to whether the owner has agreed to execute a use agreement to protect current tenants, in accordance with paragraph (b) of this section; (2) A description of the geographic boundaries of the housing market area in which the project is located; (3) An analysis of current and anticipated supply/demand conditions in both the overall rental market and the assisted housing inventory; and (4) A discussion of whether the prepayment would materially affect the housing opportunities, given the specific characteristics of the project. (e) Disapproval. [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 37815, July 13, 1993; 64 FR 26639, May 14, 1999] § 248.145 Criteria for approval of a plan of action involving incentives. (a) Approval. (1) Due diligence has been given to ensuring that the package of incentives set forth in the plan of action is, for the Federal Government, the least costly alternative that is consistent with the full achievement of the purposes of this subpart. (2) The project will be retained as housing affordable for very low, low and moderate income families and persons, as determined under paragraph (a)(8) of this section, for the remaining useful life of the project; (3) Throughout the remaining useful life of the project, adequate expenditures will be made for maintenance and operation of the project and the project meets the housing standards established in § 248.147 as determined by inspections conducted by the Commissioner; (4) Current tenants will not be involuntarily displaced, except for good cause; (5) Any increase in rent contributions for current tenants will be to a level that does not exceed 30 percent of the adjusted income of the tenant or the fair market rent, whichever is lower. However, the rent contributions of any tenants occupying the project at the time of any increase may not be reduced by reason of this paragraph, except with respect to tenants receiving section 8 assistance in accordance with paragraph (a)(7) of this section; (6) Any resulting increase in rents for current tenants (except for increases made necessary by increased operating costs) shall be phased in as follows: (i) If such increase is 30 percent or more, the increase shall be phased in equally over a period of not less than three years, with the first increase occurring upon the effective date of the plan of action, and the subsequent two increases occurring annually thereafter; (ii) If such increase is more than 10 percent but less than 30 percent, it shall be limited to not more than 10 percent per year; (7) Section 8 assistance shall be provided, to the extent appropriations are available, if necessary to mitigate any adverse effect on current very low and low income tenants; (8) Rents for units becoming available to new tenants shall be at levels approved by the Commissioner, taking into account any incentives provided under subpart B of this part, that will ensure, to the extent practicable, that the units will be available and affordable to the same proportions of very low, low and moderate income families and persons, including families and persons whose incomes are 95 percent or more of area median income, as based on the area median income limits established by the Commissioner in February 1987, as resided in the project as of the date of the tenant income profile submitted under § 248.135(e)(5), or the date the plan of action is approved, whichever date results in the highest proportion of very low income families. This limitation shall not prohibit a higher proportion of very low income families and persons from occupying the project; (9) Future rent adjustments shall be— (i) Made by applying an annual factor, to be determined by the Commissioner, to the portion of rent attributable to operating expenses for the project, and, where the owner is a priority purchaser, to the portion of rent attributable to project oversight costs, as that term is defined in § 248.101; and (ii) Subject to a procedure, established by the Commissioner, for owners to apply for rent increases not adequately compensated by annual adjustment under paragraph (a)(9)(i) of this section, under which the Commissioner may increase rents in excess of the amount determined under paragraph (a)(9)(i) of this section only if the Commissioner determines such increases are necessary to reflect extraordinary necessary expenses of owning and maintaining the project; (10) Any savings from reductions in operating expenses due to management efficiencies shall be deposited in project reserves for replacement and the owner shall have periodic access to such reserves, to the extent the Commissioner determines that the level of the reserves is adequate and that the project is maintained in accordance with the standards established in § 248.147; (11) The mortgage on the project is current; and (12) There are no open audit findings, open findings of noncompliance with title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d); the Fair Housing Act (42 U.S.C. 3601-3619); Executive Order 11063 (3 CFR 1959-1963 comp., p. 652); the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107); section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794); and all regulations promulgated under such statutes and authorities (including, but not limited to, 24 CFR part 100), or outstanding violations of the regulatory agreement. (b) Compliance with housing standards. (c) Implementation. (d) Determination of remaining useful life. (e) In the case of any plans of action involving incentives the owner must agree to comply with title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d); the Fair Housing Act (42 U.S.C. 3601-3619); Executive Order 11063 (3 CFR 1959-1963 comp., p. 652); the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107); section 504 of the Rehabilitiation Act of 1973 (29 U.S.C. 794) (including the Department's Accessibility Guidelines (24 CFR chapter I, subchapter A, appendix II) and all regulations issued pursuant to these authorities. [57 FR 12041, Apr. 8, 1992, as amended at 57 FR 57314, Dec. 3, 1992; 58 FR 37815, July 13, 1993] § 248.147 Housing standards. (a) Standards. (b) Annual inspections. (c) Sanctions for noncompliance. (1) Directing the mortgagee, with respect to an equity take-out loan provided under part 241 of this chapter, to withhold the disbursement to the owner of any escrowed loan proceeds and requiring that such proceeds be used for repair of the project; and (2) Reduce the amount of the allowable distributions to 4 percent of extension preservation equity or (in the case of a purchaser 4 percent of cash invested, as appropriate, for the period ending upon a determination by the Commissioner that the project is in compliance with the standards and requiring that such amounts be used for repair. (d) Continued compliance. (e) Sanctions for continuous noncompliance. (1) Subject to the availability of appropriations, provide assistance, other than project-based assistance attached to the project, under part 982 of this title for any tenant eligible for such assistance who desires to terminate occupancy in the project. For each unit in the project vacated pursuant to the provision of assistance under this paragraph, the Commissioner may, notwithstanding any other law or contract for assistance, cancel the provision of project-based assistance attached to the project for one dwelling unit, if the project is receiving such assistance, or convert the project-based assistance allocation for that unit to assistance under part 982 of this title; (2) In the case of projects for which an equity take-out loan has been made under part 241 of this chapter, direct the mortgagee to declare such a loan to be in default and accelerate the maturity date of the loan; (3) Declare, or direct the insured mortgagee to declare, any rehabilitation loan insured or provided by the Commissioner with respect to the project, including loans provided under part 219 of this chapter, to be in default and accelerate the maturity date of the loan; and (4) Suspend payments under or terminate any contract for project-based rental assistance under section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437f). (f) Sanctions not exclusive. [57 FR 12041, Apr. 8, 1992, as amended at 64 FR 26639, May 14, 1999] § 248.149 Timetable for approval of a plan of action. (a) Notification of deficiencies. (b) Notification of approval. (1) The reasons for withholding approval; and (2) Suggestions to the owner for meeting the criteria for approval. (c) Opportunity to revise. (d) Delayed approval. § 248.153 Incentives to extend low income use. (a) Agreements by the Commissioner. (1) Receive the annual authorized return for the project as determined under § 248.121 for each year after the approval of the plan of action; (2) Pay debt service on the federally-assisted mortgage(s) covering the project; (3) Pay debt service on any loan for rehabilitation of the project; (4) Meet project operating expenses; and (5) Establish adequate reserves. (b) Permissible incentives. (1) Increased access to residual receipts accounts as necessary to enable the owner to realize the annual authorized return; (2) An increase in the rents permitted under an existing project-based section 8 contract; (3) Additional project-based section 8 assistance or an extension of any project-based assistance attached to the housing; (4) An increase in the rents on non-section 8 units occupied by current tenants up to the maximum allowable rents; (5) Financing of capital improvements under part 219 of this chapter; (6) Financing of rehabilitation through provision of insurance for a second mortgage under part 241 of this chapter; (7) Redirection of the Interest Reduction Payment subsidies to a second mortgage for projects which are insured, assisted, or held by the Commissioner or a State or State agency under part 236 of this chapter; (8) Access by the owner to a portion of the preservation equity in the project through provision of insurance for an acquisition or equity loan insured under part 241, subpart E of this chapter or through a non-insured mortgage loan approved by the Commissioner and the mortgagee; (9) An increase in the amount of allowable distributions up to the annual authorized return; and (10) Other incentives authorized in law. (c) Limitation on the provision of permissible incentives. (2) The debt service on the loan obtained by the owner under paragraph (b)(8) of this section, when added to the allowable distributions under paragraph (b)(9) of this section, shall not exceed the annual authorized return. (d) Rent phase-in period. (1) Access to residual receipts accounts; (2) Deferred remittance of excess rent payments; and (3) Increases in rents, as permitted under an existing Section 8 contract. These incentives shall be provided to owners in the order listed. An owner will not be eligible to receive these additional incentives unless it can demonstrate that it is not receiving the annual authorized return. Once an owner has adequately demonstrated that it is not receiving the annual authorized return, the Commissioner will provide the owner with each incentive in turn during the rent phase-in period, until it has been determined that the owner is receiving the annual authorized return. (e) Interest reduction subsidies. (f) Recalculation of section 236 basic rent and market rent. [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 37815, July 13, 1993] § 248.157 Voluntary sale of housing not in excess of Federal cost limit. (a) Offer to sell. (b) Notification of qualified purchasers. (1) Mailing notices to non-profit organizations; (2) Placing notices in the major local newspaper(s) in the jurisdiction in which the project is located; (3) Mailing notices to clearinghouse networks; and (4) Using any other means of notification which the Commissioner determines would be effective to notify potential qualified purchasers of the sale of the project. (c) Right of first offer to priority purchasers. (i) A resident council intending to purchase the project under §§ 248.173 or 248.175, which has met the requirements for tenant support, pursuant to those sections; (ii) A resident council intending to purchase the project and retain it as rental housing, which has the support of a majority of the tenants; or (iii) A community-based nonprofit organization which has the support of a majority of the tenants. (2) If no bona fide offer to purchase the project is made and accepted during or at the end of the 6-month period specified in paragraph (c)(1) of this section, the owner may offer to sell the project during the next 6 months to any priority purchasers. (3) If no bona fide offer to purchase the project is made and accepted during or at the end of the 6-month period specified in paragraph (c)(2) of this section, the owner may offer to sell the project during the 3 months immediately following that period only to qualified purchasers. (d) Purchase price. (e) Expression of interest. (1) A statement identifying the priority purchaser as a State or local government agency, a nonprofit organization, or a resident council; (2) A copy of its articles of incorporation, charter and list of officers and directors, if the purchaser is a nonprofit organization or a resident council and in the case of a nonprofit organization, proof that the organization is, or has applied to be, a tax exempt organization in accordance with 26 U.S.C. 501(c); and (3) A statement as to whether the purchaser is affiliated with any other entity for purposes of purchasing the project and whether any Low Income Housing Tax Credits may be awarded in connection with the purchase of the project. (f) Information from the Commissioner. (1) A list of all possible assistance available from the Federal Government to facilitate a transfer of the project; (2) The appraisal reports for the project as submitted under § 248.111; (3) The Commissioner's determination as to the priority status of the purchaser and as to whether the purchaser qualifies as a resident council, community-based nonprofit organization or State or local government entity; (4) A worksheet indicating the level of the earnest money deposit required upon the submission of a bona fide offer; (5) An acknowledgment of the purchaser's right to inspect the project; and (6) Any other relevant financial information that the Commissioner possesses concerning the project, including the information determined under § 248.121. Within the same 30-day period, the Commissioner shall also notify the owner of the purchaser's expression of interest and instruct the owner to provide to the purchaser any information concerning the project that the Commissioner deems relevant to the transfer of the project. (g) Bona fide offer. (1) A bona fide offer must include the following: (i) A contract of sale signed by the purchaser, which states that acceptance of the contract is contingent upon approval by the Commissioner; (ii) An earnest money deposit from every qualified purchaser equal to the lesser of one percent of the transfer preservation value, $50,000 or $500 per unit, unless the purchaser is a resident council purchasing the project under a resident homeownership plan under § 248.173 or § 248.175, in which case the earnest money deposit shall be equal to $200 per unit from 75% of the occupied units; and (iii) If the purchaser is a resident council intending to purchase the project pursuant to a resident homeownership plan, the information required under § 248.173(b); or (iv) If the purchaser is a resident council intending to retain the project as rental housing, or a community-based nonprofit and the offer is submitted within the marketing period established in paragraph (c)(1) of this section, a resolution of the resident council, or a petition signed by tenants representing a majority of the units indicating their support of the offer. (2) An owner may waive the requirement of an earnest money deposit or agree to accept a smaller deposit for all qualified purchasers, except resident councils who intend to purchase the project pursuant to a resident homeownership plan under § 248.173 or § 248.175. In order to be effective: (i) The waiver must be indicated in the second notice of intent submitted under § 248.133 and the waiver must apply equally to all qualified purchasers, except resident councils who intend to purchase the project pursuant to a resident homeownership plan under § 248.173 or § 248.175; or (ii) If the second notice of intent has already been submitted, the owner must submit to the Commissioner, in writing, its decision to waive the earnest money deposit. The Commissioner shall notify all qualified purchasers who have submitted an expression of interest under paragraph (e) of this section that the owner has waived the earnest money deposit requirement. (h) Retention and acceptance of offers. (i) Submission of offer to HUD. (j) Submission of plan of action. (k) Requirements for plan of action approval. (l) Failure to consummate sales transaction. (i) Immediately notify the Commissioner that the sale has fallen through; (ii) Notify any other purchaser that had submitted an offer to purchase the project; and (iii) Resume holding the project open for sale for the remainder of the time periods specified in paragraph (c) of this section. (2) If the owner accepts an offer from a purchaser, and during the 3-month period specified in paragraph (c) of this section, or thereafter, the sales transaction either falls through or does not close within 90 days after the Commissioner's approval of the plan of action, the owner shall take the following steps: (i) Immediately notify the Commissioner that the sale has fallen through; (ii) Contact any other purchaser that had submitted an offer to purchase the project and give such purchaser and any other qualified purchaser 60 days from the date of notification to the Commissioner in which to resubmit an offer to purchase the project. (3) At any time during the 60-day period the owner may accept an offer submitted under paragraph (l)(2) of this section. (4) If an offer submitted during the 60-day period specified in paragraph (l)(2) of this section is made and accepted, but the sale is not consummated within 90 days of the Commissioner's approval of the plan of action for reasons not attributable in whole or in part to the owner, the owner may terminate the low-income affordability restrictions through prepayment or voluntary termination, subject to compliance with the provisions of § 248.165. (m) Assistance. (1) Acquire the eligible low income housing project from the current owner for a purchase price not greater than the transfer preservation value of the project; (2) Pay the debt service on the federally-assisted mortgage(s) covering the project; (3) Pay the debt service on any loan for the rehabilitation of the project; (4) Meet project operating expenses and establish adequate reserves for the housing, and in the case of a priority purchaser, meet project oversight costs; (5) Receive a distribution equal to an 8 percent annual return on any actual cash investment made to acquire or rehabilitate the project; (6) In the case of a priority purchaser, receive reimbursement for all reasonable transaction expenses associated with the acquisition, loan closing and implementation of an approved plan of action; and (7) In the case of an approved resident homeownership program, cover the costs of training for the resident council, homeownership counseling and training, the fees for the nonprofit entity or public agency working with the resident council, if such entity or agency is approved by the Commissioner, and costs related to relocation of tenants who elect to move. Assistance for such costs, exclusive of relocation expenses, shall not exceed $500 per unit or $200,000 for the project, whichever is less. (n) Incentives. (o) Grants to priority purchasers. (p) Reimbursement of assistance. (q) Seller financing. [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 37816, July 13, 1993] § 248.161 Mandatory sale of housing in excess of the Federal cost limit. (a) In general. (b) Applicability of voluntary sale provisions. (c) Section 8 assistance. (d) Grants to qualified purchasers. (e) Securing State and local funding. § 248.165 Assistance for displaced tenants. (a) Section 8 assistance. (b) Notification of Commissioner. (1) The names and addresses of all of the tenants in the project who will be displaced; (2) The size of the unit in which each of the displaced tenants is currently dwelling; and (3) The names of all of the displaced tenants who are special needs tenants, as that term is defined in § 248.101, as well as a statement as to the nature of their special need. The owner shall provide the Commissioner with this information within 30 days of identifying such tenants for displacement, but in no event less than 30 days prior to the date when the tenants must vacate the premises. (c) Relocation of displaced tenants. (d) Relocation expenses. (e) Continued occupancy. (f) Replacement unit. (g) Applicability. (1) All tenants in eligible low income housing projects located in a low-vacancy area; and (2) Special needs tenants. (h) Low Vacancy Areas. (i) Required acceptance of section 8 assistance. (j) Regional pools. (k) This section shall only apply to prepayments and terminations occurring pursuant to §§ 248.157(l) and 248.169. [57 FR 12041, Apr. 8, 1992, as amended at 64 FR 26639, May 14, 1999] § 248.169 Permissible prepayment or voluntary termination and modification of commitments. (a) In general. (1) The Commissioner approves a plan of action under § 248.153(a), but does not provide the assistance approved in such plan and contained in an executed use agreement between the Commissioner and the owner, including section 8 assistance or a loan provided under part 219 of this chapter, but not including insurance of a rehabilitation or equity take-out loan under part 241 of this chapter, during the 15-month period beginning on the date of final approval of the plan of action; (2) After the date that the project would have been eligible for prepayment pursuant to the terms of the mortgage, notwithstanding this part, the Commissioner approves a plan of action under § 248.157 or § 248.161, but does not provide the assistance approved in such plan, including section 8 assistance, a loan provided under part 219 of this chapter, a grant provided under § 248.157(o), or a grant under § 248.161(d), before the earlier of: (i) The expiration of the 2-month period beginning on the commencement of the first fiscal year beginning after such final approval; or (ii) The expiration of the 6-month period beginning on the date of final approval. (3) The Commissioner approves a plan of action under §§ 248.157 or 248.161 for any eligible low income housing not covered by paragraph (a)(2) of this section, but does not provide the assistance approved in such plan before the earlier of: (i) The expiration of the 2-month period beginning on the commencement of the first fiscal year beginning after such final approval; or (ii) The expiration of the 9-month period beginning on the date of final approval. (4) An owner who intended to transfer the project to a qualified purchaser under § 248.157 or § 248.161, and fully complied with the provisions of such section, (i) Did not receive any bona fide offers from any qualified purchasers within the applicable time periods; or (ii) Received and accepted a bona fide offer from a qualified purchaser, but the sales transaction fell through for reasons not attributable in whole or in part to the owner, and the owner then complied with the requirements of § 248.157(l) and did not receive another bona fide offer from any qualified purchasers. (b) Section 8 assistance. (1) Modify the binding commitments made pursuant to § 248.145(a)(2)-(10) that are dependent upon such rental assistance; or (2) If the Commissioner determines that such modification is infeasible, permit the owner to prepay the mortgage and terminate the plan of action and any implementing use agreements or restrictions, but only if the owner agrees in writing to comply with the provisions of § 248.165. (c) Failure to provide section 8 assistance. § 248.173 Resident homeownership program. (a) Formation of resident council. (b) Submission of expression of interest. (c) Bona fide offer. (d) Submission of a homeownership program. (i) The amount of grant funds requested from the Commissioner, and the expected amounts and sources of other funding; (ii) The proposed use of the grant funds to be received from HUD and of all other funds, including proceeds from the sale of units to initial purchasers, consistent with paragraph (h) of this section; (iii) A summary of major rehabilitation activities to be carried out, including repairs, replacements and improvements; (iv) The price at which the resident council intends to transfer ownership interests in, or shares representing, units in the project, broken down by unit size and/or type; the factors that will influence the establishment of such price, including, but not limited to, the resident council's acquisition cost, estimated rehabilitation costs, capitalization of reserves and organizational costs; how the price arrived at by the resident council compares to the estimated appraised value of the ownership interests or shares; and the underwriting standard that the resident council plans to use, or reasonably expects a public or private lender to use, for potential tenant purchasers, consistent with paragraph (g)(2) of this section; (v) The expected number of very low, low and moderate income tenants that will be initial owners under the program, consistent with paragraph (g)(1) of this section; (vi) A pro forma analysis which demonstrates the financial feasibility and viability of the homeownership program, based on the required conditions specified in paragraph (g) of this section; (vii) The financing arrangements that the tenants are expected to pursue or to be provided, including financing available through the resident council or a State or local governmental entity, and criteria for acceptability of conventional financing; (viii) A description of the estimated costs expected to be paid by the homeowner at closing; (ix) The type of homeownership contemplated, consistent with paragraph (f) of this section; (x) How the marketing of currently vacant units and units occupied by nonpurchasing tenants that become vacant will affect the sales price and occupancy charges to purchasers; (xi) A workable schedule of sale, subject to the limitations of paragraph (o) of this section, based on estimated tenant incomes; (xii) Any restrictions on resale by homeowners over and above those specified in paragraph (i) of this section, and any restrictions on homeowners' equity, over and above those specified in paragraph (k) of this section; (xiii) The qualifications of the resident council or the proposed management entity to manage the project, in compliance with paragraph (n) of this section; (xiv) The expected number of non-purchasing tenants and their eligibility for section 8 rental assistance under paragraph (m)(2) of this section; (xv) Expected scope and expenses of relocation activities, both for any temporary relocation due to rehabilitation as well as relocation assistance for nonpurchasing tenants, consistent with paragraph (m)(4) of this section; (xvi) Expected scope and costs of technical assistance, training and counseling for the resident council, purchasers and non-purchasing tenants; and (xvii) A certification that the resident council shall comply with the provisions of the Fair Housing Act (42 U.S.C. 3601-3619); title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d); Executive Order 11063 (3 CFR 1959-1963 comp., p. 652); section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794); the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107); and all regulations issued pursuant to these statutes and authorities. (2) The Commissioner shall give the resident council a reasonable opportunity to revise the homeownership program if approval is denied. (e) Approval of a homeownership program; assistance provided. (2) In connection with an approved homeownership program the Commissioner shall provide assistance sufficient to pay the following costs: (i) The debt service on the federally-assisted mortgage(s) covering the project, when such mortgage is assumed by the resident council; (ii) The purchase price, which shall not exceed the transfer preservation value; (iii) Transaction costs, as provided in § 248.157(m)(6); (iv) Other costs, as provided in § 248.157(m)(7); (v) The costs of rehabilitation; (vi) The establishment of an adequate reserve for replacements; and (vii) If necessary, the establishment of operating reserve escrows including contingencies against unexpected increases in expenses or shortfalls in homeowners' payments. (3) Upon approval of the homeownership program, the Commissioner and the resident council shall enter into an agreement, which shall include, among other matters, procedures governing the drawdown of funds and remedies for noncompliance with the requirements of this section. (f) Method of conversion. (g) Required conditions. (1) To the extent practicable, the number of initial owners that are very low, low, and moderate income persons at initial occupancy are of the same proportion of very low, low, and moderate income tenants (including families and persons whose incomes are 95 percent or more of area median income) as resided in the project on January 1, 1987 (or if the January 1, 1987 profile is unavailable, a certification from the owner stating its unavailability and a profile as of January 1, 1988, or, if that is also unavailable, a profile as of January 1, 1989) or as of the date of approval of the plan of action, whichever date results in the higher proportion of very low income families, except that the resident council may, at its option, increase the proportions of very low income and low income initial owners, however, no current tenant may be denied homeownership as a result of this paragraph; (2) Projected debt service payments, occupancy charges and utilities payable by the owners shall not exceed 35 percent of the monthly adjusted gross income of the owners; (3) The aggregate incomes of initial owners and other sources of funds for the project are sufficient to permit occupancy charges to cover the full operating costs of the project and any debt service; and (4) Each initial owner occupies the unit it acquires for at least the initial 15 years of ownership, unless the resident council determines that the initial owner is required to move outside the market area due to a change in employment or an emergency situation. (5) All units which remain as rental units, from the date of approval of the resident homeownership program, until they are purchased by an initial owner under the resident homeownership program, shall be maintained in accordance with § 248.145 (a)(5), (a)(6), (a)(7), (a)(8), and (a)(9). (h) Use of proceeds from sales to eligible families. (i) Restrictions on resale by homeowners. (1) Transfer permitted. (2) Right to purchase. (3) Promissory note required. (i) With respect to a sale by an initial homeowner, the note shall require payment upon sale by the initial homeowner, to the extent proceeds of the sale remain after paying off other outstanding debt incurred in connection with the purchase of the property, paying any other amounts due in connection with the sale, including closing costs and transfer taxes, and paying the family the amount of its equity in the property, computed in accordance with paragraph (k) of this section. (ii) With respect to a sale by an initial homeowner during the first six years after acquisition, the family may retain only the amount computed under paragraph (k) of this section. Any excess is distributed as provided in paragraph (1) of this section. (iii) With respect to a sale by an initial homeowner six to twenty years after acquisition, the amount payable under the note shall be reduced by 1/168th of the original principal amount of the note for each full month of ownership by the family after the end of the sixth year. The homeowner may retain all other proceeds of the sale. (j) Execution of promissory note by subsequent purchaser. (k) Homeowners' equity. (1) The contribution to equity paid by the family, if any, including any down payment and any amount paid towards principal on a mortgage loan during the period of ownership; (2) The value of any improvements installed at the expense of the family during the family's tenure as owner, as determined by the resident council based on evidence of amounts spent on the improvements, including the cost of material and labor; and (3) The appreciated value, determined by applying the Consumer Price Index (urban consumers) against the contribution to equity under paragraphs (k) (1) and (2) of this section, excluding the value of any sweat equity or volunteer labor used to make improvements to the unit. The resident council may, at the time of initial sale, enter into an agreement with the family to set a maximum amount which this appreciation may not exceed. (l) Use of recaptured funds. (m) Protection of nonpurchasing families. (1) Eviction. (2) Section 8 assistance. (3) Rent increases for ineligible tenants. (4) Relocation assistance. (n) Qualified management. (o) Timely homeownership. (p) Housing standards; inspections. (2) The Commissioner shall inspect the project at least annually in order to determine compliance with paragraph (p)(1) of this section. (q) Audits. The Commissioner or his or her duly authorized representative shall have access for the purpose of audit and examination to any books, documents, papers, and records of the resident council that are pertinent to assistance received under subpart B of this part. The Comptroller General of the United States, or any of the duly authorized representatives of the Comptroller General, shall also have access, for the purpose of audit and examination, to any books, documents, papers, and records of the resident council that are pertinent to assistance received under subpart B of this part. (r) Reports. (s) Assumption of the federally assisted mortgage(s). [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 37816, July 13, 1993; 64 FR 26639, May 14, 1999; 80 FR 75936, Dec. 7, 2015] § 248.175 Resident homeownership program—limited equity cooperative. (a) Tenants may carry out a resident homeownership program through the purchase of eligible low income housing by a limited equity cooperative and the operation of the project as a limited equity cooperative. (b) The purchase of a project by a limited equity cooperative and the operation of the project by the limited equity cooperative shall be carried out in accordance with the provisions of § 248.173 (a), (b), (c), (d), (except that paragraph (d)(1)(i) of this section shall include a statement of the amount and type of incentives requested, rather than only the amount of grant funds requested), (e), (g)(3), (i) (except paragraphs (i)(1) and (3)), (m) and (n). (c) The purchase and operation of eligible low income housing by a limited equity cooperative under this section shall be carried out in accordance with all provisions of subpart B of this part otherwise, applicable to the transfer and operation of a project with continued low income affordability restrictions, except as provided in this section. [57 FR 12041, Apr. 8, 1992, as amended at 58 FR 37816, July 13, 1993] § 248.177 Delegated responsibility to State agencies. (a) In general. (b) Approval. (1) An inventory of low income housing located within the State that is or will be eligible low income housing under subpart B of this part within five years; (2) A description of the agency's experience in the area of multifamily financing and restructuring; (3) A description of the administrative resources that the agency will commit to the processing of plans of action in accordance with subpart B of this part; (4) A description of the administrative resources that the agency will commit to the monitoring of approved plans of action in accordance with subpart B of this part; (5) An independent analysis of the performance of the multifamily housing inventory financed or otherwise monitored by the agency; (6) A certification by the public official responsible for submitting the consolidated plan under 24 CFR part 91 that the proposed activities are consistent with the approved consolidated plan of the State within which the eligible low income housing is located; and (7) Such other certifications or information that the Commissioner determines to be necessary to implement an approved State preservation plan, which may include incentives that are authorized under other provisions of subpart B of this part. (c) Implementation agreements. (d) Fees. (1) An owner paying for its appraisal or share of a joint appraisal under the provisions of § 248.111; or (2) A State agency from collecting fees normally associated with providing and processing financing insured under part 241 of this chapter. [57 FR 12041, Apr. 8, 1994, as amended at 60 FR 16379, Mar. 30, 1995] § 248.179 Consultation with other interested parties. The Commissioner shall confer with any appropriate State or local government agency to confirm any State or local assistance that is available to achieve the purposes of subpart B of this part and shall give consideration to the views of any such agency when making determinations under subpart B of this part. The Commissioner shall also confer with appropriate interested parties that the Commissioner believes could assist in the development of a plan of action that best achieves the purposes of subpart B of this part. § 248.181 Notice to tenants. Except as provided in §§ 248.105 and 248.133, with respect to the first and second notices of intent, with regard to all provisions of subpart B of this part which mandate that information or material be given to the tenants, by the Commissioner, the owner, or a qualified purchaser, or other party, this requirement shall be satisfied where the notifying entity: (a) Posts a copy of the information or material in readily accessible locations within each affected building, or posts notices in each location describing the information or material and specifying a location, as convenient to the tenants as is reasonably practical, where a copy may be examined and copied during reasonable hours; and (b) Supplies a copy of the information or material to a tenant representative, if any. § 248.183 Preemption of State and local laws. (a) In general. (1) Restricts or inhibits the prepayment of any mortgage described in § 248.101 or the voluntary termination of any insurance contract pursuant to § 207.253 of this chapter on eligible low income housing projects; (2) Restricts or inhibits an owner of such projects from receiving the authorized annual return provided under § 248.121; (3) Is inconsistent with any provision of subpart B of this part, including any law, regulation, or other restriction that limits or impairs the ability of any owner of eligible low income housing to receive incentives authorized under subpart B of this part, including authorization to increase rental rates, transfer the project, obtain secondary financing, or use the proceeds of any such incentives; or (4) In its applicability to low income housing is limited only to eligible low income housing for which the owner has prepaid the mortgage or terminated the insurance contract. (b) Effect. (c) Laws of general applicability: contractual restrictions. [57 FR 12041, Apr. 8, 1992, as amended at 57 FR 57314, Dec. 3, 1992] Subpart C—Prepayment and Plans of Action Under the Emergency Low Income Preservation Act of 1987 Source: 55 FR 38952, Sept. 21, 1990, unless otherwise noted. Redesignated at 57 FR 12041, Apr. 8, 1992. § 248.201 Definitions. The terms Fair Market Rent (FMR) Section 8 Adjusted Income. Adjusted Income Allowable Distributions. Capital Improvement Loan. Eligible Low Income Housing. (a) That is— (1) Insured or held by the Commissioner under section 221(d)(3) of the National Housing Act and assisted under part 886, subpart A of this title because of a conversion from assistance under part 215 of this chapter; (2) Insured or held by the Commissioner under part 221 of this chapter and bearing a below market interest rate as provided under § 221.518(b) of this chapter; (3) Insured, assisted, or held by the Commissioner or a State or State agency under part 236 of this chapter; or (4) A purchase money mortgage held by the Commissioner with respect to a project which, immediately prior to HUD's acquisition, would have been classified under paragraph (a) (1), (2), or (3) of this definition; and (b) That, under regulation or contract in effect before November 1, 1987, is, or within one year from the date of the notice of intent would become, eligible for prepayment without the prior approval of the Commissioner. Equity. Equity Loan. Flexible Subsidy Assistance. Good Cause. Limited Equity Cooperative. Low Income Affordability Restrictions. Low-Income Families. Moderate Income Families. Mortgage. Notice of Intent. Owner. Plan of Action. Prepayment. Project oversight costs. (1) Ensuring adequate and responsible participation by the board of directors and the membership of the nonprofit purchaser in ownership decisions, including ensuring resident input in these decisions; (2) Facilitating long-range planning by the board of directors to ensure the physical, financial and social viability of the project for the entire time the project is maintained as low income housing; and (3) Assisting the ownership in complying with regulatory, use, loan and grant agreements. Regulatory Agreement. Reserve for Replacements. Residual Receipt Fund. Return on Investment. Termination of Low Income Affordability Restrictions. Use Agreement. Very Low Income Families. [55 FR 38952, Sept. 21, 1990. Redesignated at 57 FR 12041, Apr. 8, 1992, and amended at 57 FR 57314, Dec. 3, 1992; 58 FR 37816, July 13, 1993; 61 FR 5207, Feb. 9, 1996; 64 FR 26639, May 14, 1999] § 248.203 General prepayment limitation. (a) An owner of eligible low income housing may prepay, and a mortgagee may accept prepayment of, a mortgage on such housing only in accordance with a plan of action approved by the Commissioner. (b) A mortgage insurance contract with respect to eligible low income housing may be terminated pursuant to section 229 of the National Housing Act only in accordance with a plan of action approved by the Commissioner. (c) A mortgagee's acceptance of a prepayment in violation of paragraph (a) or termination of a mortgage insurance contract in violation of paragraph (b) of this section is grounds for administrative action under parts 24 and 25 of this title, in addition to any other remedies available by law, including rescission of the prepayment or reinstatement on the insurance contract. § 248.211 Notice of intent to prepay. (a) An owner of eligible low-income housing seeking to prepay its mortgage or to negotiate changes in the terms of the mortgage or regulatory agreement in accordance with this part, including termination of the insurance contract pursuant to section 229 of the National Housing Act, shall file a notice of intent with the HUD field office in whose jurisdiction the project is located, and shall file a duplicate copy with the HUD Headquarters Office of Multifamily Housing Management, 451-7th Street, SW., Washington, DC 20410. The notice of intent shall identify the project by name, project number and location, briefly describe the owner's plans for the project, including any timetables or deadlines for actions to be taken, and the reason the owner seeks to prepay the mortgage or change the terms of the mortgage or regulatory agreement, and briefly describe any contacts that the owner has made or is making with other governmental agencies or other interested parties in connection with the notice of intent. (b) An owner simultaneously shall file the notice of intent with: (1) The chief executive officer of the appropriate State or local government in which the project is located, or any officer designated by executive order or State or local law to receive such information; (2) Each tenant in the project; and (3) The mortgagee. In addition, the owner shall post a copy of the notice of intent in each occupied building in the project. (c) Upon receipt of a notice of intent, the Commissioner will provide the owner with information that the owner needs to prepare a plan of action. This information shall include information regarding the Commissioner's standards under § 248.221 of this part regarding the approval of a plan of action involving termination of low income affordability restrictions, and any relevant market area and demographic information that the Secretary has custody of and that the owner may use in preparing the plan of action; in addition, it shall include at a minimum a list of the Federal incentives authorized under § 248.231 of this part for those projects for which a plan of action involving termination of low income affordability restrictions would not be approvable. (d) Filing a notice of intent with the Commissioner will lead to one of the following results: (1) Where the project meets the requirements of § 248.221 of this part— (i) The Commissioner will approve the prepayment or the termination of mortgage insurance pursuant to § 248.221 of this part, and all low income affordability restrictions will be terminated with respect to some or all of the units; however, the owner would be responsible for ensuring that displaced current tenants are relocated to affordable housing, if necessary. (ii) The Commissioner will approve the prepayment or termination of mortgage insurance pursuant to § 248.221 of this part, and all low income affordability restrictions will be terminated, except (where necessary because the project is located in a housing market where there is insufficient comparable, decent, safe and sanitary affordable housing to meet the needs of all current tenants) with regard to protection of current very low income, low income and moderate income tenants; (2) Where the plan of action would not be approvable under § 248.221 of this part— (i) The Commissioner will approve prepayment or the termination of mortgage insurance, but the owner will receive assistance under a State, local or other Federal government housing program, and will receive incentives pursuant to § 248.231 of this part from the Federal government in return for agreeing to conditions related to the continued use of the project as low income housing in accordance with § 248.233 of this part. (ii) The Commissioner will not approve prepayment or the termination of mortgage insurance, but will provide incentives to the owner pursuant to § 248.231 of this part in accordance with a plan of action meeting the standards of § 248.233 of this part; (iii) The Commissioner will not approve prepayment or the termination of mortgage insurance, but, after failing to reach agreement on a negotiated plan of action, the owner and the Commissioner will agree to a package of incentives and restrictions prescribed by § 248.241 of this part; or (iv) The Commissioner will not approve prepayment or the termination of mortgage insurance, and will not offer incentives of any kind. (Approved by the Office of Management and Budget under control number 2502-0378) [55 FR 38952, Sept. 21, 1990. Redesignated at 57 FR 12041, Apr. 8, 1992, and amended at 58 FR 37816, July 13, 1993] § 248.213 Plan of action. (a) Preparation and submission. (b) Contents. (1) A description of any proposed changes in the status or terms of the mortgage or regulatory agreement, which may include a request for incentives to extend the low income use of the housing, as authorized under § 248.231 of this part; or may include a request to terminate the insurance contract. (2) A description of any assistance that could be provided by State or local government agencies, as determined by prior consultation between the owner and the agencies; (3) A description of any proposed changes in the low income affordability restrictions; (4) A description of any proposed changes in ownership related to the plan of action, prepayment or termination of mortgage insurance; (5) An assessment of the effect of the proposed changes on existing tenants. (6) In the case of a plan of action involving incentives, an appraisal using the residential income approach; (7) In the case of a plan of action involving the termination of low income affordability restrictions, a statement of the effect, if any, of the proposed changes on the supply of housing affordable to low and very low income families in the community within which the housing is located and in the area that the housing could reasonably be expected to serve; and (8) A market study which demonstrates that the project is located in a market area that would enable the Commissioner to make the findings set forth at § 248.221(b)(1); and (9) A list of any waivers requested by the owner pursuant to § 248.7 of this part; and (10) Any other information which the owner may choose to submit which would enable the owner to meet the criteria for approval of the proposed plan of action. (Approved by the Office of Management and Budget under control number 2502-0378) [55 FR 38952, Sept. 21, 1990. Redesignated and amended at 57 FR 12041, 12060, Apr. 8, 1992; 58 FR 37816, July 13, 1993] § 248.215 Notification of deficiencies. Not later than 60 days after receipt of a plan of action, the Commissioner will notify the owner in writing of any deficiencies that prevent the plan of action from being approved. If deficiencies are found, the notice shall describe ways, if any, in which the plan of action could be revised to meet the criteria for approval. § 248.217 Revisions to plan of action. The owner may from time to time revise the plan of action before its approval as may be necessary to obtain the commissioner's approval thereof. An owner shall submit any revision to the Commissioner, and provide a copy of the revision and all documentation supporting the revision except for that documentation deemed “proprietary information” under § 248.101, to the parties, and in the manner, specified in § 248.213(a). [58 FR 37817, July 13, 1993] § 248.218 Tenant notice and opportunity to comment. When the owner and the Commissioner have reached preliminary agreement on the terms of a plan of action, the Commissioner shall prepare a summary of such terms and the anticipated impact of the plan of action on the current tenants. The owner shall send a copy of the summary to each tenant in the project, and shall post a copy of the summary in each occupied building in the project. The summary shall notify tenants that they have sixty calendar days in which to submit any comments to the Commissioner, who shall take any such comments into account before giving final approval to the plan of action. (Approved by the Office of Management and Budget under control number 2502-0378) § 248.219 Notification of approval. (a) Not later than 180 days after initial receipt of a plan of action, or within such longer period as the owner requests, the Commissioner shall notify the owner in writing whether the plan of action, including any revisions, is approved. (b) If approval is withheld, the notice will— (1) Describe the reasons for withholding approval, including prolonged delay by the owner in submitting a revised plan of action; (2) Describe the actions that could be taken to meet the criteria for approval; and (3) Afford the owner a reasonable opportunity to revise the plan of action and seek approval. § 248.221 Approval of a plan of action that involves termination of low income affordability restrictions. The Commissioner may approve a plan of action that involves termination of the low income affordability restrictions only upon a written finding that— (a) Implementation of the plan of action will not materially increase economic hardship for current tenants (and will not in any event result in: (1) A monthly rental payment by a current tenant that exceeds 30 percent of the monthly adjusted income of the tenant or an increase in the monthly rental payment in any year that exceeds 10 percent, whichever is lower, or (2) in the case of a current tenant who already pays more than such percentage, an increase in the monthly rental payment in any year that exceeds the increase in the Consumer Price Index or 10 percent, whichever is lower) or involuntarily displace current tenants (except for good cause) where comparable and affordable housing is not readily available, determined without regard to the availability of Federal housing assistance that would address any such hardship or involuntary displacement. Notwithstanding this limitation, the Commissioner may provide housing assistance to tenants if such assistance is not essential to the Commissioner's determination that the requirements of this paragraph have been met. The owner will agree to execute and allow the recordation of use agreements, where such agreements are necessary to safeguard current tenants against such adverse effects. Such use agreements will include a requirement that the owner comply with those provisions of part 247 of this chapter which relate to evictions; and (b)(1) The supply of vacant, comparable housing is sufficient to ensure that the prepayment will not materially affect— (i) The availability of decent, safe and sanitary housing affordable to low-income and very low income families in the area that the housing could reasonably be expected to serve; (ii) The ability of low-income and very low income families to find decent, safe and sanitary housing near employment opportunities; or (iii) The housing opportunities of minorities in the community within which the housing is located; or (2) The plan of action has been approved by the appropriate State agency and any appropriate local government agency for the jurisdiction in which the housing is located as being in accordance with a State strategy approved by the Commissioner under § 248.223 of this part. (c) There are no open audit findings, open findings of noncompliance with title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d); the Fair Housing Act (42 U.S.C. 3601-3619); Executive Order 11063 (3 CFR 1959-1963 comp., p. 652); the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107); section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794); and all regulations promulgated under such statutes and authorities (including, but not limited to, 24 CFR part 100), or outstanding violations of the regulatory agreement. (d) Any plan of action approved under this section shall specify actions that the Commissioner and the owner shall take to ensure that tenants displaced as a result of the termination of low income affordability restrictions are relocated to affordable housing. [55 FR 38952, Sept. 21, 1990. Redesignated and amended at 57 FR 12041, 12060, Apr. 8, 1992] § 248.223 Alternative State strategy. (a) The Commissioner may approve a State strategy providing for State approval of plans of action that involve termination of low income affordability restrictions only upon finding that it is a practicable statewide strategy that ensures at a minimum that— (1) Current tenants will not be involuntarily displaced (except for good cause); (2) Housing opportunities for minorities will not be adversely affected in the communities in which the housing is located; (3) Any increase in rent for current tenants will be to a level that does not exceed 30 percent of the adjusted income of the tenants or fair market rent, whichever is lower, and any increase not necessitated by increased operating costs shall be phased in equally over not less than 3 years if the increase exceeds 10 percent; (4) Housing approved under the State strategy will remain affordable to very low income, low income and moderate income families for not less than the remaining term of the mortgage, if the housing is to be made available for rental use, or for not less than 40 years, if the housing is to be made available for homeownership; (5)(i) Not less than 80 percent of all units in eligible low income housing approved under the State strategy will be retained as affordable to families or persons meeting the income eligibility standards for initial occupancy that applied to housing on January 1, 1987; and (ii) Not less than 60 percent of the units in any one project will remain available to and affordable by such families or persons, within which not less than 20 percent of the units will remain available to and affordable by very low income families; (6) Expenditures for rehabilitation, maintenance and operation will be at a level necessary to maintain the housing as decent, safe and sanitary and for the period specified in paragraph (a)(4) of this section; (7) Not less than 25 percent of new assistance required to maintain the housing as available to and affordable by low income families in accordance with this section shall be provided through State and local actions, such as tax exempt financing, low income tax credits, State or local tax concessions, the provision of funds from housing finance agency reserves or housing trust funds, taxable bonds, and other incentives provided by the State or local governments; and (8) For each unit of eligible low income housing approved under the State strategy that is not retained as affordable housing to families or persons meeting the income eligibility standards for initial occupancy on January 1, 1987, the State will provide, with State funds, one additional unit of comparable housing in the same market area that is available to and affordable by such families and persons. Such units will be provided by conversion of existing units or construction of new units. These units or funds will be made available before the Commissioner approves the State strategy. (b) Additional requirements. (2) Each State strategy shall include any other provision that the Commissioner determines to be necessary to implement the approved State strategy. § 248.231 Incentives to extend low income use. The Commissioner may agree to provide one or more of the following incentives to induce the project owner to extend the low income use of the project, if the Commissioner determines that such incentives are warranted under the standards in § 248.233 of this part: (a) An increase in the allowable distribution, or other measures to increase the rate of return; (b) Revisions to the method of calculating equity; (c) Increased access to residual receipts funds or excess reserve for replacements funds; (d) Provision of insurance for an equity loan; (e) An increase in the rents permitted under an existing section 8 contract, within statutory and regulatory limits otherwise applicable, or (subject to the availability of amounts provided in appropriations Acts) additional assistance under section 8 or an extension of any project-based assistance attached to the housing; (f) Provision of a capital improvement loan; (g) Other actions to facilitate a transfer or sale of the housing to a qualified nonprofit organization, limited equity tenant cooperative, public agency, or other entity acceptable to the Commissioner, such as expedited review of a request for approval of a transfer of physical assets; (h) Provision of flexible subsidy assistance; (i) Termination of HUD's limitations on distributions, and release of residual receipts and reserve for replacements funds, through prepayment of the mortgage; and (j) Any other incentives for which the owner is eligible. § 248.233 Approval of a plan of action that includes incentives. The Commissioner may approve a plan of action that includes incentives, whether or not the plan of action allows for the prepayment of the mortgage, only upon a finding that— (a) After taking into account local market conditions, the incentives are necessary to achieve the purposes of this part; (b) The incentives are necessary to provide a fair rate of return to the owner. Incentives will only be provided in cases where the project's current use does not represent its highest and best use; (c) The incentives are the least costly alternative for the Federal government to achieve the purposes of this part with respect to the housing; (d) Binding commitments have been made to ensure that— (1) The housing will be retained as housing affordable for very low income families, low-income families, and moderate income families for the remaining term of the mortgage; (2) Throughout the remaining term of the mortgage, adequate expenditures will be made for the proper maintenance and operation of the housing; (3) Current tenants will not be involuntarily displaced (except for good cause); (4) Any increase in rent contributions for current tenants will be to a level that does not exceed 30 percent of the adjusted income of the tenant or the fair market rent, whichever is lower; (5) Any resulting increase in rents for current tenants (except for increases made necessary by increased operating costs) will be phased in equally over a period of not less than 3 years, if the increase is 30 percent or more, and will be limited to not more than 10 percent per year, if the increase is more than 10 percent but less than 30 percent; (6) Subject to the availability of funds, the Commissioner shall provide, and the owner shall accept, assistance under section 8 if the Commissioner determines that such assistance is necessary to mitigate any adverse effect of the rent increases on current tenants eligible for section 8 assistance; and (7) Rents for units becoming available to new tenants will be at levels approved by the Commissioner that will ensure, to the extent practicable, that the units will be available to and affordable, with 30 percent of adjusted income, by the same proportion of very low income families, low-income families, and moderate income families as resided in the housing as of January 1, 1987 (based on the area median income limits established by the Commissioner in February 1987), or the date the plan of action is approved, whichever date results in the highest proportion of very low income families. (i) For purposes of paragraph (d)(7) of this section— (A) The percentage of moderate income families in occupancy as of January 1, 1987 shall include families who were admitted to the project as very low income, low income, or moderate income families but whose incomes had increased beyond the limit for moderate income families by January 1, 1987; and (B) The proportions established shall not prohibit a higher proportion of very low income families from occupying the housing. (ii) In approving rents under paragraph (d)(7) of this section, the Commissioner will take into account any additional incentives provided under this part and will make provision for annual rent adjustments necessary as a result of future reasonable increases in operating costs. (e) In cases where the owner agrees to maintain only a portion of the project as low income housing, the incentives provided under § 248.231 of this part and the standards imposed under this section shall be adjusted accordingly. (f) The Commissioner shall not approve a plan of action under this section if there are open findings of noncompliance with title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d); the Fair Housing Act (42 U.S.C. 3601-3619); Executive Order 11063 (3 CFR 1959-1963 comp., p. 652); the Age Discrimination Act of 1975 (42 U.S.C. 6101-6107); section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794); and all regulations promulgated under such statutes and authorities, or if there are open audit findings with respect to violations of the regulatory agreement. [55 FR 38952, Sept. 21, 1990. Redesignated and amended at 57 FR 12041, 12060, Apr. 8, 1992] § 248.234 Section 8 rental assistance. (a) When providing rental assistance under section 8, the Commissioner may enter into a contract with an owner, contingent upon the future availability of appropriations for the purpose of renewing expiring contracts for rental assistance as provided in appropriations Acts, to extend the term of such rental assistance for such additional period or periods as is necessary to carry out an approved plan of action. (b) The contract and the approved plan of action shall provide that, if the Commissioner is unable to develop a revised package of incentives providing benefits to the owner comparable to those received under the original approved plan of action, the Commissioner, upon the request of the owner, shall take the following actions (subject to the limitations under the following paragraphs): (1) Modification of the binding commitments made pursuant to § 248.233(d) that are dependent on such rental assistance. (2) If action under paragraph (b)(1) is not feasible, release of an owner from the binding commitments made pursuant to § 248.233(d) that are dependent on such rental assistance. (3) If actions under paragraphs (b)(1) and (2) would, in the determination of the Commissioner, result in the default of the insured loan, approval of the revised plan of action, notwithstanding § 248.221, that involves the termination of low-income affordability restrictions. (c) The approved plan of action shall specify actions that the Commissioner and the owner shall take to ensure that any tenants displaced as a result of actions taken under paragraph (b) of this section are relocated to affordable housing. (d) At least 30 days prior to making a request under the preceding sentence, an owner shall notify the Commissioner of the owner's intention to submit the request. The Commissioner shall have a period of 90 days following receipt of such notice to take action to extend the rental assistance contract and to continue the binding commitments under paragraph (b). [55 FR 38952, Sept. 21, 1990. Redesignated and amended at 57 FR 12041, 12060, Apr. 8, 1992] § 248.241 Modification of existing regulatory agreements. (a) If a plan of action is not approved within 300 days after initial submission, the Commissioner may, upon request of the owner and upon making a determination that the project's current use does not represent its highest and best use, modify existing regulatory agreements to— (1) Prevent involuntary displacement of current tenants (except for good cause); (2) Ensure that adequate expenditures will be made for maintenance and operation of the housing; (3) Extend (subject to the availability of funds) any expiring project-based assistance on the housing for the term of the agreement; (4) Permit an increase in the allowable distribution that could be accommodated by an increase in the rents on occupied units to a level no higher than 30 percent of the adjusted income of the tenants, as determined by the Commissioner, except that rents shall not exceed the fair market rent, and any resulting increase in rents for current tenants shall be phased in equally over a period of no less than 3 years, unless such increase is less than 10 percent; and (5) Ensure that units becoming vacant during the term of the agreement are made available in accordance with § 248.233(d)(7) of this part. (b) Expiration. § 248.251 Consultation with other interested parties. The Commissioner will confer with any appropriate State or local government agency to confirm any State or local assistance that is available to achieve the purposes of this part and will give consideration to the views of the State or local agency when making the determinations under §§ 248.221 and 248.233 of this part. The Commissioner also will confer with other interested parties that the Commissioner believes could assist in the development of a plan of action that best achieves the purposes of this part. § 248.261 Agreements implementing plans of action and State strategies. The Commissioner is authorized to enter into agreements, including those for the provision of incentives, necessary to implement any plan of action or State strategy approved by the Commissioner under this part. Subpart D—State Preservation Project Assistance Source: 57 FR 12060, Apr. 8, 1992, unless otherwise noted. § 248.300 General. Upon application by a State agency or a local public housing agency, the Commissioner may make available assistance for use in preventing the loss of housing affordable for low and moderate income families that is assisted under a State program under the terms of which the owner may prepay a State assisted or subsidized mortgage on such housing. § 248.301 Initial application. A State agency shall make an initial application to the Commissioner which: (a) Describes the manner by which the State housing program provides mortgage assistance or subsidy to private mortgagors to provide housing opportunities for low and moderate income families; (b) Includes copies of the authorizing legislation, any implementing regulations and any administrative guidance provided to owners; (c) Includes a comprehensive description of the terms and conditions under which a private owner may prepay the assisted or subsidized mortgage without the prior consent of the State agency; (d) Includes a complete set of pro forma mortgage and/or regulatory documents which evidence an owner's ability to prepay the assisted or subsidized mortgage without the consent of the State agency; (e) Includes a list of all properties assisted under the State or local housing program whose owners are eligible to prepay the assisted or subsidized mortgages without the consent of the State agency. § 248.303 Approval of a State agency's initial application. (a) The Commissioner will evaluate the State agency's application and will notify the State agency within 90 days of receipt that the program and properties qualify under subpart D of this part or that the program and properties do not qualify under subpart D of this part. (b) If the Commissioner determines that the program and projects do not qualify under subpart D of this part, it will state the reasons why the program and properties do not qualify and will give the State agency an opportunity to provide additional information, as the Commissioner determines, which would assist the Commissioner in qualifying the program and properties. § 248.305 Applicability of subpart B of this part. The provisions of subpart B of this part shall be applicable to any application of a State agency or local housing authority for assistance under subpart D of this part, except the following provisions: Sec. 248.103 General prepayment limitation. 248.105 Notice of intent. 248.131 Information from the Commissioner: Only paragraph (a). 248.141 Criteria for approval of a plan of action involving prepayment and voluntary termination. 248.153 Incentives to extend low income use: Only paragraphs (a)(7), (d) and (e). 248.165 Assistance for displaced tenants. 248.169 Permissible prepayment or voluntary termination and modification of commitments. 248.173 Resident homeownership program: Only paragraph (s). 248.177 Delegated responsibility to State agencies. § 248.307 Authority to process and approve notices of intent and plans of action. (a) Delegation of authority. (b) Designation of processing agency. § 248.311 Notice of intent. (a) Eligibility for filing. (b) Filing with the State agency. (c) Filing with HUD, mortgagee and tenants. § 248.315 Preservation agreements. (a) Agreements required. (b) Term of agreement. § 248.319 Application for assistance. (a) Application for assistance. (1) A copy of the approved plan of action, including all applicable notices of intent; (2) A copy of any worksheet or other document which demonstrates the extension and transfer preservation values of the project, the Federal cost limits (including the determination of relevant local market rents if applicable), and the preservation rents; (3) A request for each incentive required as part of the approved plan of action and the amount thereof; (4) A demonstration and certification by the Executive Director of the State agency or local housing authority that the assistance and incentives requested as part of the approved plan of action do not exceed the level of incentives required for a similarly situated project which is eligible low income housing as defined in subpart B of this part; (5) Copies of proposed agreements, contracts and mortgage modifications proposed pursuant to § 248.315. (b) Notification of approval. (c) Funding. (d) Agreements. (e) Section 8 contract administration. Subpart E—Technical Assistance and Capacity Building Source: 58 FR 37817, July 13, 1993, unless otherwise noted. § 248.401 Purposes. The purposes of this subpart are: (a) To promote the ability of residents of eligible low income housing to participate meaningfully in the preservation process established by this part and affect decisions about the future of their housing; (b) To promote the ability of community-based nonprofit organizations and resident councils to acquire, rehabilitate, and competently own and manage eligible housing as rental or cooperative housing for low and moderate income people; and (c) To assist the Commissioner in discharging the obligation under § 248.157(b) to notify potential qualified purchasers of the availability of projects for sale and to otherwise facilitate the coordination and oversight of the preservation program established under this part. § 248.405 Grants for building resident capacity and funding predevelopment costs. (a) General. Federal Register (b) Allocation. (c) Limitation on grant amounts. (d) Resident Capacity grants Use. (2) Eligible housing. (e) Predevelopment grants Use. (2) Eligible housing. (3) Phase-in of grant payments. (f) Grant applications. (g) Appeal. § 248.410 Grants for other purposes. The Commissioner may provide grants under this subpart E: (a) To resident-controlled or community-based nonprofit organizations with experience in resident education and organizing for the purpose of conducting community, city or countywide outreach and training programs to identify and organize residents of eligible low income housing; and (b) To State and local government agencies and nonprofit intermediaries for the purpose of carrying out such activities as the Commissioner deems appropriate to further the purposes of this part. § 248.415 Delivery of assistance through intermediaries. (a) General. (b) Selection of eligible intermediaries In General. Federal Register. (2) Priority. (3) Criteria. (i) Not assign any preference or priority to applications from eligible intermediaries based on their previous participation in administering or receiving Federal grants or loans (but may exclude applicants who have failed to perform under prior contracts of a similar nature); (ii) Require an applicant to prepare a proposal that demonstrates adequate staffing, qualifications, prior experience, and a plan for participation; and (iii) Permit an applicant to serve as the administrator of assistance made available under § 248.405(d) and (e), based on the applicant's suitability and interest. (4) Geographic coverage. (5) National nonprofit intermediaries. (6) Preference. (c) Conflicts of interest. (1) Establish appropriate procedures for grant administration and fiscal management, pursuant to standards established by the Commissioner; and (2) Receive a reasonable administrative fee, except that they may not provide other services to grant recipients with respect to projects that are the subject of the grant application and may not receive payment, directly or indirectly, from the proceeds of grants they have approved. § 248.420 Definitions. Community-based nonprofit housing developer (1) Has been classified by the Internal Revenue Service as an exempt organization under section 501(c)(3) of the Internal Revenue Code of 1986; (2) Has been in existence for at least two years prior to the date of the grant application; (3) Has a record of service to low and moderate income people in the community in which the project is located; (4) Is organized at the neighborhood, city, county, or multi-county level; and (5) In the case of a corporation acquiring eligible low income housing under subpart B of this part, agrees to form a purchaser entity that conforms to the definition of a community-based nonprofit organization under such subpart and agrees to use its best efforts to secure majority tenant consent to the acquisition of the project for which grant assistance is requested. Eligible intermediaries. (1) Has as a central purpose the preservation of existing affordable housing and the prevention of displacement; (2) Does not receive direct Federal appropriations for operating support; (3) In the case of a national nonprofit organization, has been in existence for at least five years prior to the date of application and has been classified by the Internal Revenue Service as an exempt organization under section 501(c)(3) of the Internal Revenue Code of 1986; (4) In the case of a regional or State nonprofit organization, has been in existence for at least three years prior to the date of application and has been classified by the Internal Revenue Service as an exempt organization under section 501(c)(3) of the Internal Revenue Code of 1986 or is otherwise a tax-exempt entity; (5) Has a record of service to low income individuals or community-based nonprofit housing development in multiple communities and, with respect to intermediaries administering assistance under § 248.405, has experience with the allocation or administration of grant or loan funds; and (6) Meets standards of fiscal responsibility established by the Commissioner.

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• 50 CFR Part 648 — Fisheries of the Northeastern United States#512151
• 50 CFR Part 660 — Fisheries off West Coast States#512152