Amendment of Affordable Housing Program Regulation

FEDERAL HOUSING FINANCE BOARD

12 CFR Part 960

[No. 99-68]

RIN 3069-AA82

Amendment of Affordable Housing Program Regulation

AGENCY: Federal Housing Finance Board.

ACTION: Final rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is adopting

as final, with no changes, the May 5, 1999 Interim Final Rule which

amended its regulation governing the operation of the Affordable

Housing Program (AHP or Program) to make certain technical revisions

clarifying Program requirements and improving the operation of the AHP.

EFFECTIVE DATE: The final rule shall be effective on January 4, 2000.

FOR FURTHER INFORMATION CONTACT: Janet M. Fronckowiak, Acting Deputy

Director, Program Assistance Division, Office of Policy, Research and

Analysis, (202) 408-2575; or Sharon B. Like, Senior Attorney-Advisor,

Office of General Counsel, (202) 408-2930, Federal Housing Finance

Board, 1777 F Street, N.W., Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

Section 10(j)(1) of the Federal Home Loan Bank Act (Bank Act)

requires each Federal Home Loan Bank (Bank) to establish a Program to

subsidize the interest rate on advances to members of the Federal Home

Loan Bank System engaged in lending for long-term, low-and moderate-

income, owner-occupied and affordable rental housing at subsidized

interest rates. See 12 U.S.C. 1430(j)(1) (1994). The Finance Board is

required to promulgate regulations governing the operation of the

Program. See id.

On August 4, 1997, the Finance Board published a final AHP

regulation adopting comprehensive revisions to the Program, see 12 CFR

part 960, which, among other changes, authorized the 12 Banks, rather

than the Finance Board, to approve applications for AHP subsidies

beginning January 1, 1998. See 62 FR 41812 (Aug. 4, 1997). On May 20,

1998, the Finance Board published an Interim Final Rule amending the

regulation to make certain technical revisions clarifying Program

requirements and improving the operation of the AHP. See 63 FR 27668

(May 20, 1998). The Interim Final Rule was adopted as a final rule,

with several changes, and became effective on June 1, 1999.

In the course of implementing the changes to the Program under the

recent revisions to the AHP regulation, the Banks and Finance Board

staff identified a number of additional technical issues whose

resolution would clarify Program requirements and improve the

effectiveness of the Program. Accordingly, on May 5, 1999, the Finance

Board published another Interim Final Rule amending the AHP regulation,

effective June 4, 1999, to address these additional issues. The May 5,

1999 Interim Final Rule provided for a 60-day comment period, which

closed on July 6, 1999.

The Finance Board received one comment letter on the May 5, 1999

Interim Final Rule from a financial institutions trade association,

which generally supported several provisions in the Interim Final Rule

and noted one potential concern which is discussed below.

II. Analysis of the Final Rule

Requirement for Independent Appraisals from State Certified or Licensed

Appraisers for Member Real Estate Owned (REO) Properties and Properties

Upon Which a Member Holds a Mortgage or Lien--Sec. 960.5(b)(2)(ii)(B)

The May 5, 1999 Interim Final Rule amended Sec. 960.5(b)(2)(ii)(B)

of the AHP regulation to require that an independent appraisal of the

AHP property be obtained within six months prior to the date the Bank

disburses AHP subsidy to the project. The Interim

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Final Rule also amended this section to require that the independent

appraisal be completed by a State certified or licensed appraiser, as

defined in 12 CFR 564.2(j) and (k), in order to ensure a more accurate

evaluation of the property value. The commenter generally supported

these amendments, but noted that for projects valued at less than

$250,000, the cost of such an appraisal may be burdensome in some

cases.

The Finance Board believes that the AHP regulatory appraisal

requirement generally would not impose an additional cost on AHP

projects. First, it is likely that most projects, regardless of the

value of the projects, would be required by at least one of their other

funding sources to obtain an appraisal completed by a State certified

or licensed appraiser. Second, the AHP regulation does not require that

the appraisal be in narrative form, which should keep the cost of the

appraisal down. Third, if an appraisal of the project by a State

certified or licensed appraiser was completed prior to the six-month

period preceding AHP funding, only an update or addendum to the

original appraisal need be obtained, which should further limit costs

to the project. Accordingly, no change has been made to the appraisal

requirement in the final rule.

III. Regulatory Flexibility Act

Because no notice of proposed rulemaking is required for this final

rule, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.) do not apply. Moreover, the final rule applies only to the Banks,

which do not come within the meaning of ``small entities,'' as defined

in the Regulatory Flexibility Act. See id. Sec. 601(6).

IV. Paperwork Reduction Act

This final rule does not contain any collections of information

pursuant to the Paperwork Reduction Act of 1995. See 44 U.S.C. 3501 et

seq. Therefore, the Finance Board has not submitted any information to

the Office of Management and Budget for review.

Accordingly, under the authority of 12 U.S.C. 1430(j) (1994), the

Interim Final Rule amending 12 CFR part 960, published at 64 FR 24025

(May 5, 1999), is adopted as final without changes.

Dated: December 20, 1999.

By the Board of Directors of the Federal Housing Finance Board.

Bruce A. Morrison,

Chairman.

[FR Doc. 00-37 Filed 1-3-00; 8:45 am]

BILLING CODE 6725-01-P