Fair Housing Initiatives Program; Proposed Rule DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUMMARY: This proposed rule would amend the Fair Housing Initiatives

Program (FHIP) regulation to provide for the implementation of

statutory amendments pertaining to private enforcement initiatives; the

funding of fair housing organizations; and the implementation of

national (including national fair housing month), regional and local,

and community-based education and outreach programs.

DATES: Comment due date: October 28, 1994.

ADDRESSES: Interested persons are invited to submit comments regarding

this proposed rulemaking to the Rules Docket Clerk, Office of General

Counsel, Room 10278, Department of Housing and Urban Development, 451

Seventh Street, S.W., Washington, D.C. 20410. Communications should

refer to the above docket number and title. A copy of each

communication submitted will be available for public inspection and

copying between 7:30 a.m. and 5:30 p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: Jacquelyn J. Shelton, Director, Office

of Fair Housing Assistance and Voluntary Programs, Room 5234, 451

Seventh Street, S.W., Washington, D.C. 20410-2000. Telephone number

(202) 708-0800. A telecommunications device (TDD) for hearing and

speech impaired persons is available at (202) 708-0455. (These are not

toll-free numbers.)

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act Statement

The information collection requirements contained in this rule have

been approved by the Office of Management and Budget, under section

3504(h) of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520),

and assigned OMB control number 2529-0033.

II. Background

A. Program Authority and Description

The Fair Housing Act--Title VIII of the Civil Rights Act of 1968,

as amended, 42 U.S.C. 3601-19--charges the Secretary of Housing and

Urban Development with responsibility to accept and investigate

complaints alleging discrimination based on race, color, religion, sex,

handicap, familial status or national origin in the sale, rental, or

financing of most housing, and in other real estate-related

transactions. In addition, the Fair Housing Act directs the Secretary

to coordinate with State and local agencies administering fair housing

laws, and to cooperate with and render technical assistance to public

or private entities carrying out programs to prevent and eliminate

discriminatory housing practices.

Section 561 of the Housing and Community Development Act of 1987

(1987 Act), 42 U.S.C. 3616 note, established the Fair Housing

Initiatives Program (FHIP) to strengthen the Department's enforcement

of the Fair Housing Act and to further fair housing. This program

assists projects and activities designed to enhance compliance with the

Fair Housing Act and substantially equivalent State and local fair

housing laws. Implementing regulations are found at 24 CFR part 125.

Section 905 of the Housing and Community Development Act of 1992

(HCDA 1992) (Pub. L. 102-550, approved October 28, 1992), substantially

amends section 561 of the Housing and Community Development Act of

1987. On April 1, 1993, the Department published an Advance Notice of

Proposed Rulemaking (ANPR) (58 FR 17172) requesting comment on HUD's

implementation of section 905 of the Housing and Community Development

Act of 1992. The Department received three comments in response to the

ANPR, and is taking them into consideration, as discussed in the

relevant contexts below, in this proposed rule to implement the HCDA

1992 amendments in 24 CFR part 125.

B. General Effect of Section 905 on 24 CFR 125

In general, the section 905 amendments do not replace the original

section 561 provisions of the Housing and Community Development Act of

1987 (except for the demonstration period sunset provision of

subsection (h), as discussed below in this preamble), but rather,

supplement those provisions by authorizing additional activities. Thus,

the original section 561(a) provisions that provided the authority to

establish and fund the Administrative and Private Enforcement

Initiatives and the Education and Outreach Initiative are still in

effect. The entities eligible for funding under section 561(a) (State

or local governments or their agencies, public or private nonprofit

organizations or institutions, or other public or private entities that

are formulating or carry out programs to prevent or eliminate

discriminatory housing practices) remain eligible for funding under

these initiatives. The present regulations at 24 CFR 125 that implement

section 561(a) are not superseded and would not be removed by this

rule.

One provision of 24 CFR 125 that would be affected is Sec. 125.405,

entitled, ``Guidelines for private enforcement testing.'' These

guidelines were issued to implement section 561((c)(2) of the 1987 Act,

which required the Department to establish guidelines for testing

activities for use during the authorized demonstration period for FHIP.

As originally promulgated, FHIP was a demonstration program authorized

to expire on September 30, 1992. The passage of section 905 establishes

FHIP as a permanent program, and with the expiration of the

demonstration period, the requirement for testing guidelines is

removed. The Department considered two factors to be significant and

determinative in the decision to eliminate testing guidelines from the

regulation. First, in the original authorizing statute for FHIP,

Congress specifically limited the requirement for testing guidelines to

the demonstration period; and second, Congress did not include this

requirement in its permanent authorization of FHIP by section 905. The

revised Sec. 125.405 proposed here would remove the testing guidelines,

but would still require that testers must not have prior felony

convictions or convictions of crimes involving fraud or perjury, and

that they receive training or be experienced in testing procedures and

techniques. To provide consistency in the regulation, this provision

regarding testers would also be added to the Administrative Enforcement

Initiative at Sec. 125.204, and to the new Fair Housing Organizations

Initiative at Sec. 125.504.

The areas in which section 905 makes additions to the Fair Housing

Initiatives Program are: 1) private enforcement initiatives; 2) funding

of fair housing organizations; and 3) education and outreach

activities.

C. Section By Section Analysis and Implementation of Section 905

Section 905(a) is a statement of Congressional findings, which

provides insight into the considerations behind the statutory revisions

to FHIP. Sections 905(a) (1) through (4) list statutory initiatives

that address the issue of discrimination in housing markets: the Fair

Housing Act; the Home Mortgage Disclosure Act; and the Americans with

Disabilities Act. Sections 905(a) (5) and (6) cite recent evidence of

pervasive discrimination in mortgage lending markets, and against

Hispanic and African American homeseekers in at least half of their

encounters with sales and rental agents. Sections 905(a) (7) through

(9), proceeding within the context of the statutory initiatives and the

recent evidence of discrimination, provide specific direction for FHIP:

it should be revised and expanded to reflect the significant changes in

the areas of fair housing and fair lending that have taken place since

the Program's initial authorization in the Housing and Community

Development Act of 1987; continuing educational efforts by the real

estate industry are a useful way to increase understanding by the

public of their fair housing rights and responsibilities; and the

proven efficacy of private nonprofit fair housing enforcement

organizations and community-based efforts makes support for these

organizations a necessary component of the fair housing enforcement

system.

Section 905(b) makes the substantive amendments to section 561 of

the Housing and Community Development Act of 1987 (42 U.S.C. 3616 note)

that Congress enacted in light of the findings of section 905(a).

Structurally, section 905(b)(1) redesignates subsections (b) through

(e) of section 561 as subsections (e) through (h). Then, section

905(b)(2) inserts new subsections (b) through (d), which list eligible

activities and applicants for FHIP funding. Section 905(b)(3) replaces

the previous authorizations in redesignated subsection (g) of section

561 with new program funding authorization amounts that include

specific set-asides for the newly added activities. Finally, section

905(b)(4) strikes the FHIP demonstration program sunset provision of

redesignated subsection (h) (formerly subsection (e) of section 561),

replaces it with two new definitions, and adds new subsections (i), a

prohibition on the use of FHIP funds, and (j), which enumerates the

requirements for a Congressional report by the Department. The proposed

implementation of these amendments is discussed in detail below.

As mentioned above, two new definitions for purposes of FHIP are

added by section 905. Each defines an eligible applicant for program

funding. The first of these is, ``qualified fair housing enforcement

organization,'' (QFHO) defined in the statute to mean any organization

that--

(1) Is organized as a private, tax-exempt, nonprofit, charitable

organization;

(2) Has at least 2 years experience in complaint intake, complaint

investigation, testing for fair housing violations and enforcement of

meritorious claims; and

(3) Is engaged in all the activities listed in paragraph (2) at the

time of application for FHIP assistance.

In addition, an organization which is not solely engaged in fair

housing enforcement activities may qualify as a qualified fair housing

enforcement organization, provided that the organization is actively

engaged in each of the activities listed in paragraph (2) (that is,

complaint intake, complaint investigation, testing for fair housing

violations and enforcement of meritorious claims). The Department does

not interpret this provision to mean that an organization which is not

solely engaged in fair housing enforcement activities may qualify as a

QFHO just by being actively engaged in the necessary activities. The

threshold of two years experience in the necessary activities must be

met as well. Without such a reading, it would be more difficult for

organizations that exclusively concentrate their efforts on fair

housing enforcement activities to qualify as QFHOs than organizations

that pursue fair housing along with any number of other activities. The

Department believes that this provision was included in the statute to

avoid excluding organizations that should be considered qualified even

though they are engaged in a broader range of activities than are

eligible under FHIP. The proposed rule would clarify this point by

including organizations in the definition of QFHO whether or not they

are solely engaged in fair housing enforcement activities as long as

they meet the other qualifications, including the requirement for two

years of experience.

The second newly defined term is, ``fair housing enforcement

organization,'' (FHO) which, pursuant to the statute, means any

organization that--

(1) Is organized as a private, tax-exempt, nonprofit, charitable

organization;

(2) Is currently engaged in complaint intake, complaint

investigation, testing for fair housing violations and enforcement of

meritorious claims;

(3) Upon the receipt of FHIP funds will continue to be engaged in

all of the activities specified in paragraph (2); and

(4) For purposes of funding under FHIP's Private Enforcement

Initiative, has at least one year of experience in the activities

specified in paragraph (2).

From the above definitions, based on the statutory language, it is

apparent that the only difference between a QFHO and an FHO is the

length of time the organization has been involved in all of the cited

necessary activities, with two years being the threshold for a QFHO and

one year being the threshold for an FHO applying for Private

Enforcement Initiative funding. The statute does not address the issue

of whether the threshold lengths of time must be consecutive, or

whether they may be aggregated over a period of time. Another issue not

addressed by the statute is whether all of the necessary activities

must be performed simultaneously, or whether the threshold period of

time may be individually computed for each activity.

The Department has determined that these definitions were included

to ensure that the applying organizations met a certain level of

experience, but not to exclude experienced organizations on purely

technical grounds. To add clarification to the definitions along these

lines, the proposed rule would add that for the purpose of meeting the

threshold times, it is not necessary that the activities were conducted

simultaneously, so long as each activity meets the threshold period.

The rule would further provide that it is not necessary, for purposes

of satisfying the threshold period, that the activities were conducted

over a consecutive two year period of time. An organization may

aggregate its experience in each activity over the three year period

preceding its application to meet the two year threshold for QFHO

status. Similarly, for purposes of meeting the one year of experience

requirement for FHOs applying for funding under FHIP's Private

Enforcement Initiative, the rule would permit an FHO to aggregate its

experience in each activity over the two year period preceding its

application.

One of the comments on the FHIP ANPR recommended that the term

``meritorious claims,'' which is used in the definitions of both

``qualified fair housing enforcement organization'' and ``fair housing

enforcement organization,'' should itself be defined. The comment

suggested defining ``meritorious claims,'' as enforcement activities,

not more than two years old, that resulted in lawsuits, consent

decrees, legal settlements, HUD conciliations and agency initiated

settlements with the outcome of monetary awards for compensatory and/or

punitive damages to plaintiffs or complaining parties, or affirmative

relief and monitoring. The comment further called for the demonstration

of a continued effort in effective enforcement by an organization

through the continued filing of verified claims of discrimination with

HUD, the Department of Justice, State or local agencies and in federal

or State court.

The Department agrees that defining ``meritorious claims'' would

provide appropriate guidance for identifying QFHOs and FHOs. The

Department would adopt the suggested language, with the following

modifications. The suggested requirements for a demonstration of a

continued effort in effective enforcement, and that the activities be

not more than two years old, would not be included in the definition.

This is because, with regard to QFHOs, limiting meritorious claims to a

two year period would conflict with this rule's provision to permit

organizations to aggregate their experience over a three year period.

With regard to FHOs, limiting activities in the definition of

``meritorious claims'' to those not more than two years old is

redundant and unnecessary, since the rule only permits activities

within two years of applying to be considered for purposes of

qualifying as an FHO.

The comment also recommends that an organization not solely

involved in fair housing enforcement that wishes to qualify as a QFHO

must document its enforcement activity with copies of lawsuits,

settlements, or conciliations in which it has been involved. The

Department agrees in part, with this comment. The Department did not

plan to require such documentation from any organizations claiming to

be QFHOs, FHOs, or from organizations not solely involved in fair

housing enforcement that wish to qualify as QFHOs. Following this

comment, the Department proposes to include in the rule a provision

that the Department may request an organization to supply documentation

to support its claimed status. This approach would be minimally

burdensome, while still permitting further inquiry where it may be

warranted.

These definitions, as discussed above, would be added to the

Definitions section of the FHIP rule at 24 CFR 125.103. In addition,

the requirement for one year of enforcement experience by FHOs that

wish to apply for Private Enforcement Initiatives funding will be

included in Sec. 125.402, which lists eligible applicants for this

Initiative.

Under the new section 561(b), entitled Private Enforcement

Initiatives, as added by HCDA section 905, the Department is required

to make FHIP funds available to conduct, through contracts with private

nonprofit fair housing enforcement organizations, investigations of

violations of the rights granted under the Fair Housing Act, and

appropriate enforcement activities to remedy such violations. The

Department is further authorized to enter into multi-year contracts and

take other appropriate action to enhance the effectiveness of such

investigations and enforcement activities. The statute goes on to

specify that funds made available for Private Enforcement Initiatives

be used to conduct, through contracts with private nonprofit fair

housing enforcement organizations, a range of investigative and

enforcement activities designed to--

(1) Carry out testing and other investigative activities, including

building the capacity for housing investigative activities in unserved

or underserved areas;

(2) Discover and remedy discrimination in the public and private

real estate markets and real estate-related transactions, including,

but not limited to, the making or purchasing of loans or the provision

of other financial assistance in sales and rentals of housing and

housing advertising;

(3) Carry out special projects, including the development of

prototypes to respond to new or sophisticated forms of discrimination

against persons protected under the Fair Housing Act;

(4) Provide technical assistance to local fair housing

organizations, and assist in the formation and development of new fair

housing organizations; and

(5) Provide funds for the costs and expenses of litigation,

including expert witness fees.

Concerning the provision of funds for expert witness fees, the rule

would define ``expert witness'' in a way that recognizes that courts in

different jurisdictions may vary in their qualification requirements

for expert witnesses. The definition would also take into account the

possibility that an expert witness may prepare testimony and bill an

organization for a trial in which a settlement or other resolution is

achieved before a verdict, and before the expert has an opportunity to

testify. ``Expert witness'' would be defined to mean a person who

testifies, or who would have testified but for a resolution of the case

before a verdict is entered, and who qualifies as an expert witness

under the rules of the court where the litigation funded by this part

is brought.

There were a number of comments regarding the Private Enforcement

Initiative submitted in response to the FHIP ANPR. One of the comments

strongly opposed allocating further funds to support the use of testers

under the FHIP Private Enforcement Initiative. The comment argued that

the use of testers provides unreliable information regarding illegal

lending discrimination, and that funding education and training

programs for lenders and borrowers would better effect the purpose of

delivering more housing. The comment recommended that if testers are

funded, procedures should be adopted to ensure that:

(1) Safeguards are implemented to distinguish between an isolated

incident and patterns and practices of unlawful discrimination:

(2) A thorough review of the procedures and results of the May 1992

FHIP Notice of Funding Availability (NOFA) for testing discriminatory

mortgage lending practices is conducted and made public prior to

additional funding;

(3) A public comment period for annual reviews of listed non-profit

organizations eligible for funding is established to provide the public

with the opportunity to comment on the integrity of the organizations

listed prior to any grant agreements; and

(4) Procedures are established to rescind funding awards for

grantees that do not meet specific performance measures determined by

HUD in the grant process.

In response to this comment, the Department first of all wants to

make it clear that testing activities will continue to be funded. Both

Congress and the Department have determined that testing is a valid and

necessary component of fair housing investigative and enforcement

activities. Congress had the choice of permitting FHIP to expire at the

end of its demonstration period, or of establishing it as a permanent

program, and it chose the latter option. In establishing FHIP as a

permanent program with section 905, Congress explicitly cites testing,

and it cites it first, in the listing of Private Enforcement Initiative

activities. Further, the definitions of QFHOs and FHOs added by section

905 require testing as an activity that organizations must be engaged

in to qualify as QFHOs or FHOs. The role of testing as a basic fair

housing investigative and enforcement activity is firmly established.

Having acknowledged the integral status of testing in the Fair

Housing Initiatives Program, the Department makes the following

responses to this comment's four recommendations. First, regarding the

implementation of safeguards to distinguish between an isolated

incident and patterns and practices of unlawful discrimination, this

recommendation appears to miss the point that it is not necessary to

have a pattern of unlawful discrimination to constitute a violation of

the Fair Housing Act. A single instance of unlawful discrimination

would be just that: unlawful and a violation.

The comment's second recommendation, to wait for a thorough review

of the results of the testing funded by the May 1992 NOFA before

funding additional testing, will not be followed, in light of the

central role of testing in the FHIP. The May 1992 funding is limited to

testing of mortgage lending practices, one of many permissible

activities under the FHIP, and is incorrectly characterized by this

comment as a ``pilot-program.'' It provides no basis on which to delay

the funding of additional testing.

The comment's third recommendation, to provide an opportunity for

public comment on the integrity of non-profit organizations eligible

for funding, requests a procedure that is highly inappropriate. Such a

procedure impugns the entire class of applicants, and has nothing to do

with the quality of the applications submitted for funding, the sole

consideration in awarding funds.

The Department agrees with this comment's fourth recommendation,

and believes it is particularly appropriate in the context of multi-

year contracts, where the opportunity is present for an annual

performance review. The rule would make funding of multi-year contracts

not only contingent upon the availability of funds, but also subject to

a performance review of the previous year's activities.

Another of the comments also addressed the Private Enforcement

Initiative changes made by section 905. This comment recognized the two

broad categories of eligible activities under this initiative as

investigative activities and enforcement activities. It suggested that

investigations include, but not be limited to, testing, and that

enforcement activities should also be interpreted broadly to provide

complainants with a range of resolutions for fair housing complaints.

The comment included lists of specific investigative and enforcement

activities that should be eligible for FHIP funding.

As explained below, the Department intends to implement the

statutory requirements of section 905 in this rule, and to provide more

specific guidance within this statutory framework in NOFAs that will be

published as funds are appropriated. This NOFA guidance would include a

listing of specific activities, and to that extent, the Department

agrees with the recommendation of this comment.

The comment also addresses the issues of multi-year funding, and

recommends that this funding be limited to organizations that meet the

definition of a QFHO and that have successfully performed fair housing

enforcement activities for two or more consecutive years immediately

preceding their application. While section 905 does not itself limit

multi-year funding in this way, it does permit the Department to ``take

such other action as is appropriate to enhance the effectiveness of

such investigations and enforcement activities.'' Limiting the class of

eligible organizations, if it enhanced the effectiveness of the

activities, would, therefore, be permissible. However, to allow for

program flexibility, because the Department cannot foresee every

instance in which such a limitation might or might not be appropriate,

this rule would not include the limitation. Such a limitation may

appear in program NOFAs, to the extent determined appropriate to

enhance effectiveness.

The comment then suggests that all of the kinds of activities

listed in the Private Enforcement Initiatives should be eligible for

funding and weighted equally, ``unless a finding is made that the

rental and sales discrimination investigation needs are met.'' The

Department takes this to mean that where rental and sales investigation

activities are already being vigorously pursued, other activities will

be given priority consideration for funding. This is sensible, and the

Department would adopt such an approach, as appropriate, in individual

NOFAs.

The comment later states that, ``Because matching funds for fair

housing are very difficult to come by and many organizations providing

fair housing education and enforcement activities rely upon Community

Development Block Grant funds, [the comment] recommends that HUD state

clearly that no groups eligible for FHIP funds will be penalized or

disqualified because they receive Community Development Block Grants to

perform similar activities in their communities.''

The Department recognizes that the FHIP resources made available to

meet fair housing needs are very limited. Because of this, grant

applicants are encouraged, under the current regulations, to seek other

public and private resources. Section 125.105(d) includes as an

application requirement, ``an estimate of such other public or private

resources as may be available to assist the proposed activities.'' One

of the selection criteria (at Sec. 125.106(a)(2)) is, ``The extent to

which the project utilizes other public or private resources that may

be available.'' The Department's current policy is to favor applicants

who are able to obtain other resources. Under this policy, the receipt

of CDBG funds for fair housing purposes should assist, rather than

penalize or disqualify, an applicant.

However, the Department recognizes that where resources are scarce,

difficult resource allocation decisions must be made. The Department is

considering changing its policy to reserve the right, when choosing

between two otherwise equally deserving applicants, to consider the

resources presently available to each. This approach ties in with the

earlier comment concerning ordering priorities where rental and sales

discrimination investigation needs are being met. That comment

suggested giving priority to other activities where investigation

activities were adequate. Similarly, although fair housing resource

needs may not be adequate for either of two competing applicants, the

Department may decide that an applicant receiving CDBG or other funds

for fair housing activities is in a better, though still inadequate,

position than an equally-qualified applicant that does not receive such

funds. In such an instance, the award of FHIP funds would be made to

the applicant that is most resource-poor. This would not be done to

penalize an applicant that has funds available from sources other than

FHIP, but to distribute scarce resources in the most equitable and

efficient manner. The Department specifically invites comment on this

issue.

To implement the new investigative and enforcement provisions,

subpart D of 24 CFR part 125 , entitled ``Private Enforcement

Initiative'', would be amended. Because the original statutory language

authorizing private enforcement initiatives is not removed but, rather,

is supplemented by HCDA section 905, the present statements of purpose,

eligible applicants, and eligible activities at Secs. 125.401, 125.402,

and 125.403, respectively, would not be replaced. Instead, new language

taken directly from section 905, as discussed above, would be added.

To permit flexibility in the funding of FHIP activities and permit

the Department to allocate resources in response to developments in the

field, the Department intends to provide more specific guidance as to

particular activities and such issues as the availability and terms of

multi-year funding in Notices of Funding Availability (NOFAs) rather

than in the rule. Emphasis in separate NOFAs may be placed on more

standard investigation and enforcement activities, such as testing,

providing or securing private legal representation, and filing

complaints; or on pursuing innovations in such areas as analysis and

mapping of HMDA and census data, appraisal and credit reports,

underwriting standards, and title searches. Similarly, depending on the

Department's identification of significant long term efforts that need

to be undertaken with the resources expected to be available, the NOFAs

would provide information on such multi-year funding issues as

applicants, activities, performance stages, amounts, and duration. The

use of NOFAs in this way is consistent with the current regulations at

Secs. 125.104(d), 125.105(h), and 125.106(b). Each of these sections

provides for more specific information concerning eligible activities,

application requirements, and selection criteria, respectively, to be

included in NOFAs. This proposed rule would provide for additional

flexibility in making FHIP funds available, as follows. Besides adding

the new Fair Housing Organizations Initiative, discussed immediately

below, to the list of FHIP Initiatives at Sec. 125.104(c), a clarifying

change would be made to Sec. 125.104(d) so that requirements related to

eligible applicants are specifically included in the list of items for

which NOFAs will provide guidance. Section 125.104(d) would also be

amended for the purpose of promoting flexibility to provide that the

specific selection criteria for funding will be included in FHIP NOFAs.

The rule would provide that the selection criteria announced in NOFAs

will be designed to permit the Department to respond to and target

areas of concern and will promote the purposes of the Fair Housing

Initiatives Program in an equitable and cost efficient manner. Section

125.106, which in the current rule contains the provisions concerning

selection criteria, would be revised to provide instead for a general

waiver provision, permitting the Department to waive, in a published

NOFA or other Federal Register notice, any program requirement in the

rule that is not required by statute.

Section 905 next establishes the Fair Housing Organizations

Initiative, which has two purposes: continued development of existing

fair housing organizations, and the establishment of new fair housing

organizations. For the purpose of continued development of existing

fair housing organizations, it authorizes the funding of contracts or

cooperative agreements with qualified fair housing enforcement

organizations, other private nonprofit fair housing enforcement

organizations, and nonprofit groups organizing to build their capacity

to provide fair housing enforcement, for the purpose of supporting the

continued development or implementation of initiatives which enforce

the rights granted under the Fair Housing Act. The statute specifies

that these contracts or cooperative agreements may not provide more

than 50 percent of the operating budget of the recipient organization

for any one year.

Funds made available under the Fair Housing Organizations

Initiative are also to be used to help establish, organize, and build

the capacity of fair housing enforcement organizations, particularly in

those areas of the country which are currently underserved by fair

housing enforcement organizations, as well as those areas where large

concentrations of protected classes exist. To meet the objectives of

this ``establishing new organizations'' purpose, the Department is

permitted to enter into contracts or cooperative agreements with

qualified fair housing enforcement organizations.

One comment recommends that this section 905 provision should be

regarded as establishing a ``non-competitive, entitlement category to

provide general operating funds'' for QFHOs, for the continued

development or implementation of initiatives which enforce the rights

granted under the Fair Housing Act. The Department may, in the future,

consider such an approach, depending upon the size of the

appropriations for this purpose, and the number of QFHOs that would

receive assistance. Given the present level of available FHIP funding,

entitlement funding would not seem to be an efficient method of

implementing FHIP. The crucial issue, apart from developing a formula

that would distribute funds equitably and with the flexibility to

respond to new developments and perceptions, is whether such a funding

procedure would provide a meaningful level of support for qualifying

organizations. The Department specifically invites comment on the issue

of distributing FHIP funds according to an allocation formula, and on

what criteria might be used to provide for the fair and equitable

distribution of funds on such a basis. Although the Department will

continue to award FHIP funds on a competitive basis through the

publication of NOFAs, consistent with the current regulation at

Sec. 125.104(b), this section would be amended to permit the Department

to award funds through the publication of a NOFA, or through a contract

or cooperative agreement.

A new subpart E, entitled ``Fair Housing Organizations

Initiative'', would be added to 24 CFR 125 to implement these

provisions. Section 125.501 would state the two-fold purpose, derived

from section 905, of this initiative: 1) to develop or expand the

ability of existing eligible organizations to provide fair housing

enforcement, and 2) to establish new fair housing enforcement

organizations where they are most needed. These two purposes would be,

titled, respectively, ``Continued Development of Existing

Organizations'' and ``Establishing New Organizations.''

Section 125.502 would list the eligible applicants and give the

parameters of the activities for the purpose of Continued Development

of Existing Organizations. Eligible applicants for funding under this

purpose would be: (1) Qualified fair housing enforcement organizations,

(2) other private nonprofit fair housing enforcement organizations, and

(3) nonprofit groups organizing to build their capacity to provide fair

housing enforcement. The third category of applicants would consist of

already existing non-profit organizations that do not presently have

the capacity to perform fair housing enforcement activities, but that

will use FHIP funds to develop that capacity.

The activities for which these organizations would be able to apply

would be any activities listed as eligible at Sec. 125.403 under the

Private Enforcement Initiative. It is significant to note that, but for

the establishment of the Fair Housing Organizations Initiative, non-

profit groups in the third category of eligible applicants listed in

the preceding paragraph would not be eligible for funding to undertake

Private Enforcement Initiative activities. The Fair Housing

Organizations Initiative expands the scope of fair housing enforcement

by giving such groups the opportunity to enter the field. In this way,

the total number of private nonprofit fair housing enforcement

organizations is increased. With respect to private nonprofit fair

housing enforcement organizations, whether or not ``qualified,'' who

are eligible to apply for Private Enforcement Initiative funding, the

Department believes that the Fair Housing Organizations Initiative is

intended to permit them to maintain or increase the magnitude of their

current activities, or to undertake initiatives in new areas.

Section 125.502 would also include the statutory prohibition,

applicable only to the ``Continued Development of Existing

Organizations'' purpose of this Initiative, against providing more than

50 percent of the operating budget of a recipient organization for any

one year. One comment recommended that ``operating budget'' for the

purpose of this provision should be defined to mean: ``Funds spent on

activities reasonably related to fair housing enforcement, including in

kind or pro-bono services such as (but not limited to) volunteer tester

services, board and staff time; pro-bono or reduced rate legal

services; and donation of office space and other overhead expenses.''

This definition appears to include in the total size of the operating

budget not only the actual expenditures of an organization in providing

services, but the value of materials and services donated to the

organization. This would have the effect of enlarging the total size of

the operating budget, and thereby increase the amount an organization

would be eligible to receive, taking into account the statutory 50

percent limitation.

This rule would adopt an even broader definition of ``operating

budget'' than proposed in the comment. The recommendation that only

``funds spent on activities reasonably related to fair housing

enforcement'' be counted would not be followed, because such a

provision would have a disproportionate impact on eligible applicants

in the statutory category of ``nonprofit groups organizing to build

their capacity to provide fair housing enforcement.'' The Department

proposes to define ``operating expenses'' as, ``the applicant's total

planned budget expenditures from all sources, including the value of

in-kind and monetary contributions, in the year for which funding is

sought.'' Comments on this issue are specifically invited.

Section 125.503 would be added to implement the ``Establishing New

Organizations'' purpose of the Fair Housing Organizations Initiative.

The eligible activity under this purpose would be ``to help establish,

organize, and build the capacity of fair housing enforcement

organizations.'' Priority would be given for such efforts ``in those

areas of the country which are currently underserved by fair housing

enforcement organizations, as well as those areas where large

concentrations of protected classes exist.''

The statute states the Department ``may enter into contracts or

cooperative agreements with qualified fair housing enforcement

organizations'' for purposes of meeting the objectives of establishing

new organizations. The Department has inferred that the use of the

permissive term ``may'' rather than the mandatory term ``shall'' (which

is used, for example, in listing the eligible applicants for the

purpose of continued development) in citing qualified fair housing

enforcement organizations as eligible for funding under this purpose

means that QFHOs were not intended to have an exclusive eligibility for

``Establishing New Organizations'' funding. Addressing the national

need for private fair housing enforcement organizations, ``particularly

in those areas of the country which are currently underserved by fair

housing enforcement organizations as well as those areas where large

concentrations of protected classes exist'' as required by section 905,

would best be served by making this category of funding broadly

available. This rule would make funding to establish enforcement

organizations in targeted areas available to any eligible applicant

under any of the other FHIP Initiatives.

The Department proposes to use a comparatively simple process to

determine where the very limited amount of funds available for

establishing new fair housing enforcement organizations will be made

available, consistent with the statutory priority of targeting

underserved areas with large concentrations of protected classes.

Target areas will be identified by the Department on the basis of a

number of factors including, for example, the amount of funds

available; the absence in an area of substantially equivalent State or

local agencies, or private enforcement groups; and the presence of

large concentrations of protected classes. To encourage establishing

organizations where they are needed most, not only underserved, but

also, unserved areas would be identified for funding by the Department.

Addressing both underserved and unserved areas here would be consistent

with the new Private Enforcement Initiative activity, added by section

905, of carrying out testing and other investigative activities,

including building the capacity for housing investigative activities in

unserved or underserved areas. The target areas identified in this way

would be announced in the FHIP Notices of Funding Availability as they

are published in the Federal Register.

Section 905 also makes a number of additions to the Education and

Outreach Initiative of FHIP, addressing national (including national

fair housing month), regional and local, and community-based programs

or activities. As with most of the other section 905 amendments, the

existing subpart C--Education and Outreach Initiative at 24 CFR 125 is

not superseded but augmented with these statutory changes.

All three of the comments received were enthusiastic in their

endorsement of education and outreach activities. One of the comments

included lists of specific activities to be considered as national,

regional and local, or community-based programs. The Department intends

to include the statutory requirements in this rule, and then provide

more specific guidance in the NOFAs published for the Fair Housing

Initiatives Program. This is the approach used under the current FHIP

regulation and that would continue to be used to allow for flexibility

in the administration of the program.

The statutory amendments require that national education and

outreach programs be designed to provide a centralized, coordinated

effort for the development and dissemination of fair housing media

products, including--

(1) public service announcements, both audio and video;

(2) television, radio and print advertisements;

(3) posters; and

(4) pamphlets and brochures.

In addition, a portion of the amounts provided for a national program

would be designated for activities related to the annual national fair

housing month, which would also be made eligible activities in the

proposed rule.

Eligible for national program funding are qualified fair housing

enforcement organizations, other fair housing enforcement

organizations, and other nonprofit organizations representing groups of

persons protected under the Fair Housing Act. Cooperation with real

estate industry organizations in national education and outreach

programs is encouraged by the statute, although they are not

specifically listed as eligible for funding. These organizations would

be eligible for Education and Outreach Initiative funding as ``other

public or private entities that are formulating or carrying out

programs to prevent or eliminate discriminatory housing practices''

under the current FHIP regulation, which generally is not superseded,

but augmented, by the HCDA 1992 section 905 amendments. To implement

the statutory mandate to encourage cooperation, a preference in FHIP

NOFAs of several points would be given to applicants that demonstrate

cooperation with real estate industry organizations.

The statute specifically encourages the dissemination in national

programs of educational information and technical assistance to support

compliance with the housing adaptability and accessibility requirements

contained in the Fair Housing Amendments Act of 1988. This goal would

also be addressed by providing a preference of several points in FHIP

NOFAs to applications that proposed such activities.

With respect to regional and local programs, section 905 cites as

eligible to receive FHIP funds State and local agencies certified by

the Department under section 810(f) of the Fair Housing Act, or other

public or private entities that are formulating or carrying out

programs to prevent or eliminate discriminatory housing practices.

Unlike the case of the national program, section 905 does not

specifically list any eligible activities for regional and local

programs. The rule would make any activities eligible as national

program activities also eligible as regional or local activities. The

rule would define activities that are ``local'' in scope as activities

that are limited to a single unit of general local government, meaning

a city, town, township, county, parish, village, or other general

purpose political subdivision of a State. Activities that are

``regional'' in scope would be defined as activities that cover

adjoining States or two or more units of general local government

within a state.

Finally, section 905 makes FHIP funding eligible to support

community-based education and outreach activities, including school,

church, and community presentations, conferences, and other educational

activities. The rule would make any activities eligible as national

program activities also eligible as community-based activities.

Eligible for community-based program funding are fair housing

organizations and other nonprofit organizations representing groups of

persons protected under the Fair Housing Act, or other public or

private entities that are formulating or carrying out programs to

prevent or eliminate discriminatory housing practices. The rule would

define activities that are ``community-based'' in scope as those which

are primarily focused on a particular geographic area within a unit of

general local government.

To implement these statutory amendments, Sec. 125.302(b) would be

amended to include qualified fair housing enforcement organizations,

other fair housing enforcement organizations, and other nonprofit

organizations representing groups of persons protected under the Fair

Housing Act, to the list of eligible applicants. Section 125.303,

entitled ``Eligible activities'', would be more extensively revised.

The current listings of eligible activities, categorized according to

educational projects and outreach projects, would be combined into a

single category under Sec. 125.303(a) with the paragraph heading, ``In

general.'' This change would recognize that the current regulation has

been augmented and not superseded. It would also recognize that the

distinction between ``education'' activities and ``outreach''

activities is not hard and fast. This rule would consider ``education

and outreach'' as a phrase modifying a single category of activities.

Paragraphs (b) through (d) of Sec. 125.303 would be organized to

cover, respectively, national (including national fair housing month),

regional and local, and community-based programs, as discussed above.

III. Findings and Certifications

Environmental Review

A Finding of No Significant Impact with respect to the environment

has been made in accordance with HUD regulations at 24 CFR Part 50,

which implement section 102(2)(C) of the National Environmental Policy

Act of 1969. The Finding of No Significant Impact is available for

public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the

Office of the Rules Docket Clerk at the above address.

Impact on Small Entities

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this proposed rule before publication and

by approving it certifies that this rule does not have a significant

economic impact on a substantial number of small entities. The purpose

of the rule is to provide funding for fair housing investigation and

enforcement, and education and outreach activities.

Regulatory Agenda

This proposed rule was listed as item number 1666 in the

Department's Semiannual Agenda of Regulations published on April 25,

1994 (59 FR 20424, 20465) pursuant to Executive Order 12291 and the

Regulatory Flexibility Act.

Federalism Impact

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12612, Federalism, has determined that the policies

contained in this rule will not have substantial direct effects on

states or their political subdivisions, or the relationship between the

federal government and the states, or on the distribution of power and

responsibilities among the various levels of government. As a result,

the rule is not subject to review under the order. The rule is limited

to implementing statutorily required revisions to the existing Fair

Housing Initiatives Program Regulation.

Impact on the Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule has potential

for a beneficial, although indirect, impact on family formation,

maintenance, and general well-being. By promoting the values of fair

housing, the rule would benefit families by seeking to end

discrimination as a factor in the availability of housing. Accordingly,

since the impact on the family is beneficial, although indirect, no

further review is considered necessary.

The Catalog of Federal Domestic Assistance Numbers for the Fair

Housing Initiatives Program are 14.408, 14.409, 14.410 and 14.413.

List of Subjects in 24 CFR Part 125

Fair housing, Grant programs--housing and community development,

Reporting and recordkeeping requirements.

Accordingly, the Department proposes to amend part 125 of title 24

of the Code of Federal Regulations as follows:

PART 125--FAIR HOUSING INITIATIVES PROGRAM

1. The authority citation for part 125 would be revised to read as

follows:

Authority: 42 U.S.C. 3616 note; 42 U.S.C. 3535(d).

2. In Sec. 125.103, the paragraph designations (a) through (h)

would be removed, and the definitions of expert witness, fair housing

enforcement organization, meritorious claims, and qualified fair

housing enforcement organization would be added in alphabetical order

to read as follows:

Sec. 125.103 Definitions.

* * * * *

Expert witness means a person who testifies, or who would have

testified but for a resolution of the case before a verdict is entered,

and who qualifies as an expert witness under the rules of the court

where the litigation funded by this part is brought.

* * * * *

Fair housing enforcement organization (FHO) means any organization

that--

(1) Is organized as a private, tax-exempt, nonprofit, charitable

organization;

(2) Is currently engaged in complaint intake, complaint

investigation, testing for fair housing violations and enforcement of

meritorious claims; and

(3) Upon the receipt of FHIP funds will continue to be engaged in

complaint intake, complaint investigation, testing for fair housing

violations and enforcement of meritorious claims.

(4) To be eligible to receive assistance under the Private

Enforcement Initiative, a fair housing enforcement organization must

have at least 1 year of experience in complaint intake, complaint

investigation, testing for fair housing violations and enforcement of

meritorious claims. For the purpose of meeting this 1 year

qualification period, it is not necessary that the activities were

conducted simultaneously, as long as each activity was conducted for 1

year. It is also not necessary for the activities to have been

conducted for a continuous year. An organization may aggregate its

experience in each activity over the 2 year period preceding its

application to meet this 1 year qualification period requirement.

(5) The Department may request an organization to submit

documentation to support its claimed status as an FHO.

* * * * *

Meritorious claims means enforcement activities that resulted in

lawsuits, consent decrees, legal settlements, HUD conciliations and

agency initiated settlements with the outcome of monetary awards for

compensatory and/or punitive damages to plaintiffs or complaining

parties, or affirmative relief and monitoring.

* * * * *

Qualified fair housing enforcement organization (QFHO) means any

organization, whether or not it is solely engaged in fair housing

enforcement activities, that:

(1) Is organized as a private, tax-exempt, nonprofit, charitable

organization:

(2) Has at least 2 years experience in complaint intake, complaint

investigation, testing for fair housing violations and enforcement of

meritorious claims; and

(3) Is engaged in complaint intake, complaint investigation,

testing for fair housing violations and enforcement of meritorious

claims at the time of application for FHIP assistance.

(4) For the purpose of meeting the 2 year qualification period for

the activities included in paragraph (2) of this definition, it is not

necessary that the activities were conducted simultaneously, as long as

each activity was conducted for 2 years. It is also not necessary for

the activities to have been conducted for 2 consecutive or continuous

years. An organization may aggregate its experience in each activity

over the 3 year period preceding its application to meet the 2 year

qualification period requirement.

(5) The Department may request an organization to submit

documentation to support its claimed status as a QFHO.

* * * * *

3. In Sec. 125.104, paragraphs (b), (c)(2), (c)(3), and (d) would

be revised, and paragraph (c)(4) would be added, to read as follows:

Sec. 125.104 Program administration.

* * * * *

(b) Funding in the Fair Housing Initiatives Program will be awarded

through a Notice of Funding Availability under a grant or other funding

instrument.

(c) * * *

(2) The Education and Outreach Initiative (subpart C);

(3) The Private Enforcement Initiative (subpart D); and

(4) The Fair Housing Organizations Initiative (subpart E).

(d) Notices of Funding Availability under this program will be

published periodically in the Federal Register. Such notices will

announce the amount of funds available and the funding available for

any Initiative, and may limit funding to one or more of the Initiatives

or categories of eligible applicants. The Notice of Funding

Availability will include the specific factors for award which will be

used in the selection of recipients to be funded, and will indicate the

relative weight of all selection criteria. The selection criteria

announced in Notices of Funding Availability will be designed to permit

the Department to respond to and target areas of concern, and will

promote the purposes of the Fair Housing Initiatives Program in an

equitable and cost efficient manner.

* * * * *

4. Section 125.106 would be revised to read as follows:

Sec. 125.106 Waivers.

The Department may waive, in a published Notice of Funding

Availability or other Federal Register notice, any requirement in this

part that is not required by statute.

5. Section 125.204 would be added to read as follows:

Sec. 125.204 Testers.

Testers in testing activities funded with Administrative

Enforcement Initiative funds must not have prior felony convictions or

convictions of crimes involving fraud or perjury, and they must receive

training or be experienced in testing procedures and techniques.

6. In Sec. 125.302, paragraph (b) would be revised to read as

follows:

Sec. 125.302 Eligible applicants.

* * * * *

(b) Public or private non-profit organizations or institutions,

including qualified fair housing enforcement organizations, fair

housing enforcement organizations, and other nonprofit organizations

representing groups of persons protected under the Fair Housing Act,

and other public or private entities that are formulating or carrying

out programs to prevent or eliminate discriminatory housing practices.

7. Section 125.303 would be revised to read as follows:

Sec. 125.303 Eligible activities.

(a) In general. Projects that may be funded as national, regional

and local, or community-based programs under the Education and Outreach

Initiative may include (but are not limited to) the following:

(1) Developing informative material on fair housing rights and

responsibilities;

(2) Developing fair housing and affirmative marketing instructional

material for education programs for national, regional and local

housing industry groups;

(3) Providing educational seminars, curricula, and working sessions

for schools, civic associations, community-based organizations, and

other groups;

(4) Developing educational material targeted at persons in need of

specific or additional information on their fair housing rights;

(5) Developing national, regional or local media campaigns

regarding fair housing;

(6) Bringing housing industry and civic or fair housing groups

together to identify illegal real estate practices and to determine how

to correct them;

(7) Designing specialized outreach projects to inform all persons

of the availability of housing opportunities;

(8) Developing and implementing a response to new or more

sophisticated practices that result in discriminatory housing

practices;

(9) Providing housing, mortgage lending, appraisal, and insurance

counseling services; and

(10) Developing mechanisms for the identification of, and quick

response to, housing discrimination cases involving the threat of

physical harm.

(b) National programs. (1) Activities eligible to be funded as

national programs shall be designed to provide a centralized,

coordinated effort for the development and dissemination of fair

housing media products, including:

(i) Public service announcements, both audio and video;

(ii) Television, radio and print advertisements;

(iii) Posters;

(iv) Pamphlets and brochures; and

(v) Activities related to the annual national fair housing month.

(2) National program applications, including those for Fair Housing

Month funding, may be eligible to receive, as provided for in Notices

of Funding Availability published for the Fair Housing Initiatives

Program, a preference consisting of additional points if they:

(i) Demonstrate cooperation with real estate industry

organizations; and/or

(ii) Provide for the dissemination of educational information and

technical assistance to support compliance with the housing

adaptability and accessibility guidelines contained in the Fair Housing

Amendments Act of 1988.

(c) Regional and local programs. (1) Activities eligible to be

funded as regional and local programs include any of the activities, to

be implemented on a regional and/or local basis, listed in paragraphs

(a) and (b)(1) of this section.

(2) Activities that are ``local'' are activities whose

implementation is limited to a single unit of general local government,

meaning a city, town, township, county, parish, village, or other

general purpose political subdivision of a State. Activities that are

``regional'' are activities that are implemented in adjoining States or

two or more units of general local government within a state.

(d) Community-based programs. (1) Activities eligible to be funded

as community-based programs include any of the activities, to be

implemented on a regional or local basis, listed in paragraphs (a) and

(b)(1) of this section, with an emphasis on school, church, and

community presentations, conferences, and other educational activities.

(2) Activities that are ``community-based'' in scope are those

which are primarily focused on a particular geographic area within a

unit of general local government.

(e) Classes of competition. Notices of Funding Availability

published for the Fair Housing Initiatives Program may divide Education

and Outreach Initiative funding into separate competitions for each of

the separate types of programs (i.e., national, regional and/or local,

community-based) eligible under this Initiative.

(f) Coordination of activities. Each non-governmental applicant for

funding which is located within the jurisdiction of a State or local

enforcement agency or agencies administering a fair housing law that

has been certified by the Department under part 115 of this subchapter

as being a substantially equivalent fair housing law must provide with

its application evidence that it has consulted with the agency or

agencies to coordinate activities to be funded under the Education and

Outreach Initiative.

8. Section 125.401 would be revised to read as follows:

Sec. 125.401 Purpose.

The Private Enforcement Initiative of the Fair Housing Initiatives

Program provides funding to non-profit organizations and other private

entities that are formulating or carrying out programs to prevent or

eliminate discriminatory housing practices. The purpose of these awards

is to assist in developing, implementing, carrying out, or coordinating

programs or activities designed to obtain enforcement of the rights

granted by the Fair Housing Act or State or local laws that provide

rights and remedies for alleged discriminatory housing practices that

are substantially equivalent to the rights and remedies provided in the

Fair Housing Act, and to conduct, through funding of private nonprofit

fair housing enforcement organizations on a single- or multi-year basis

(subject to annual appropriations and annual performance reviews upon

which further funding would be contingent), investigations of

violations of the rights granted under the Fair Housing Act, and

appropriate enforcement activities to remedy such violations.

9. Section 125.402 would be revised to read as follows:

Sec. 125.402 Eligible applicants.

Organizations which are eligible to receive assistance under the

Private Enforcement Initiative are:

(a) Qualified fair housing organizations.

(b) Fair housing enforcement organizations with at least 1 year of

experience in complaint intake, complaint investigation, testing for

fair housing violations and enforcement of meritorious claims. For the

purpose of meeting this 1 year qualification period, it is not

necessary that the activities were conducted simultaneously, as long as

each activity was conducted for 1 year. It is also not necessary for

the activities to have been conducted for a continuous year. An

organization may aggregate its experience in each activity over the 2

year period preceding its application to meet this 1 year qualification

period requirement.

(c) Private non-profit organizations and other private entities

that are formulating or carrying out programs to prevent or eliminate

discriminatory housing practices. Organizations which can be eligible

include, for example, private nonprofit fair housing and civil rights

groups.

10. In Sec. 125.403, paragraphs (c) and (d) would be revised, and

new paragraphs (e) through (i) would be added to read as follows:

Sec. 125.403 Eligible activities.

* * * * *

(c) Linking fair housing organizations regionally in enforcement

activities designed to combat broader housing market discriminatory

practices;

(d) Establishing effective means of meeting legal expenses in

support of litigation of fair housing cases;

(e) Testing and other investigative activities, including building

the capacity for fair housing investigative activities in unserved or

underserved areas;

(f) Discovering and providing remedies for discrimination in the

public and private real estate markets and real estate-related

transactions, including, but not limited to, the making or purchasing

of loans or the provision of other financial assistance sales and

rentals of housing and housing advertising;

(g) Carrying out special projects, including the development of

prototypes to respond to new or sophisticated forms of discrimination

against persons protected under the Fair Housing Act;

(h) Providing technical assistance to local fair housing

organizations, and assisting in the formation and development of new

fair housing organizations; and

(i) Providing funds for the costs and expenses of litigation,

including expert witness fees.

10. Section 125.405 would be revised to read as follows:

Sec. 125.405 Testers.

Testers in testing activities funded with Private Enforcement

Initiative funds must not have prior felony convictions or convictions

of crimes involving fraud or perjury, and they must receive training or

be experienced in testing procedures and techniques.

11. A new subpart E, consisting of Secs. 125.501 through 125.504,

entitled Fair Housing Organizations Initiative, would be added to part

125 to read as follows:

Subpart E--Fair Housing Organizations Initiative

Sec.

125.501 Purpose.

125.502 Continued development of existing organizations.

125.503 Establishing new organizations.

125.504 Testers.

Subpart E--Fair Housing Organizations Initiative

Sec. 125.501 Purpose.

The Fair Housing Organizations Initiative of the Fair Housing

Initiatives Program provides funding to develop or expand the ability

of existing eligible organizations to provide fair housing enforcement,

and to establish new fair housing enforcement organizations where they

are most needed.

Sec. 125.502 Continued development of existing organizations.

(a) Eligible applicants. Applicants eligible for funding under this

component of the Fair Housing Organizations Initiative are:

(1) Qualified fair housing enforcement organizations;

(2) Other private nonprofit fair housing enforcement organizations;

and

(3) Nonprofit groups organizing to build their capacity to provide

fair housing enforcement.

(b) Eligible activities. Activities eligible for funding under this

component of the Fair Housing Organizations Initiative are any

activities listed as eligible at Sec. 125.403 under the Private

Enforcement Initiative.

(c) Operating budget limitation. (1) Funding under this component

of the Fair Housing Organizations Initiative may not be used to provide

more than 50 percent of the operating budget of a recipient

organization for any one year.

(2) For purposes of the limitation in this paragraph, operating

budget means the applicant's total planned budget expenditures from all

sources, including the value of in-kind and monetary contributions, in

the year for which funding is sought.

Sec. 125.503 Establishing new organizations.

(a) Eligible applicants. Any applicants eligible under any of the

other FHIP Initiatives are eligible applicants for funding under this

component of the Fair Housing Organizations Initiative.

(b) Eligible activities. Eligible for funding under this component

of the Fair Housing Organizations Initiative are activities that help

establish, organize, and build the capacity of fair housing enforcement

organizations, particularly in those areas of the country which are

currently underserved by fair housing enforcement organizations, as

well as those areas where large concentrations of protected classes

exist.

(c) Targeted areas. FHIP Notices of Funding Availability will

identify those areas of the country targeted for funding under this

component of the Fair Housing Organizations Initiative.

Sec. 125.504 Testers.

Testers in testing activities funded with Fair Housing

Organizations Initiative funds must not have prior felony convictions

or convictions of crimes involving fraud or perjury, and they must

receive training or be experienced in testing procedures and

techniques.

Dated: July 29, 1994.

Roberta Achtenberg,

Assistant Secretary for Fair Housing and Equal Opportunity.

[FR Doc. 94-21260 Filed 8-26-94; 8:45 am]

BILLING CODE 4210-28-P