Disposition of HUD-Acquired Single Family Property; Officer Next Door Sales Program

SUMMARY: This interim rule amends HUD's regulations that address the

disposition of HUD-acquired single family properties to codify the

policies and procedures concerning the Officer Next Door Sales Program

(OND Sales Program). The OND Sales Program has been operating since

August 11, 1997 as a temporary program. This interim rule establishes

the OND Sales Program as a permanent part of HUD's single family

property disposition program. Through the OND Sales Program, HUD makes

HUD-acquired single family homes available to law enforcement officers

for purchase at a discount from the list price. A home purchased

through the OND Sales Program must be located in a HUD-designated

Revitalization Area or HUD-approved exception area, and the law

enforcement officer must agree to own and live in the home as his or

her sole residence for a specified period of time. Governmental

entities and private nonprofit organizations may also purchase homes

through the OND Sales Program, if they intend to resell these homes

directly to law enforcement officers under the terms and conditions of

the OND Sales Program.

DATES: Effective Date: August 2, 1999.

Comments Due Date: August 31, 1999.

ADDRESSES: Interested persons are invited to submit comments regarding

this interim rule to the Rules Docket Clerk, Office of the General

Counsel, Room 10276, U.S. Department of Housing and Urban Development,

451 Seventh Street, SW, Washington, DC 20410-0500. Comments should

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

submitted will be available for public inspection and copying between

7:30 am and 5:30 pm weekdays at the above address. Facsimile (FAX)

comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: Joe McCloskey, Director, Single Family

Asset Management Division, Office of Insured Single Family Housing,

Room 9286, U.S. Department of Housing and Urban Development, 451

Seventh Street, SW, Washington, DC 20410-8000; telephone (202) 708-1672

(this is not a toll-free number). Hearing-or speech-impaired

individuals may access this number via TTY by calling the toll-free

Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

One of HUD's major goals is to use its resources in a manner that

enhances the general well-being of American communities. A critical

component of the Nation's housing policy is promoting safe

neighborhoods. One means of furthering this policy is to create

homeownership opportunities for law enforcement officers, charged with

the responsibility of ensuring the safety and well-being of residents,

in the communities they serve. A second means is to help promote safe

neighborhoods by furthering the community policing efforts being made

by numerous cities. In order to support these efforts, HUD developed

the Officer Next Door Sales Program (OND Sales Program).

HUD initiated the OND Sales Program on August 11, 1997, through the

issuance of HUD Notice H-97-51. On December 31, 1997, HUD issued Notice

H-97-73, which expanded the definition of law enforcement officer in

order to increase the number of law enforcement officers eligible to

participate in the OND Sales Program. On January 12, 1998 (63 FR 1886)

a notice was published in the Federal Register that described the OND

Sales Program policies and procedures contained in HUD Notices H-97-51

and H-97-53.

Since 1997, the OND Sales Program has been operated as a temporary

program under HUD's authority to make single family properties

available under 24 CFR part 291 (entitled ``Disposition of HUD-Acquired

Single Family Property'') and through a series of regulatory waivers

authorized by the Assistant Secretary for Housing-Federal Housing

Commissioner. Section 7(q) of the Department of Housing and Urban

Development Act, as amended by section 106 of the Department of Housing

and Urban Development Reform Act (42 U.S.C. 3535(q)), requires that HUD

publish quarterly Federal Register notices of all regulatory waivers it

has approved. The latest regulatory waiver issued by HUD regarding the

OND Sales program was published on March 12, 1999 (64 FR 12676, 12678).

II. The OND Sales Program

Through the OND Sales Program, HUD makes HUD-acquired single family

homes, located in HUD-designated Revitalization Areas or HUD-approved

exception areas, available to law enforcement officers for purchase at

a substantial discount from the list price. Currently the discount rate

for the OND Sales Program is 50% off the list price.

In addition, by allowing selected homes to be purchased with

mortgages insured by the Federal Housing Administration (FHA), HUD

makes it possible for a law enforcement officer to purchase a home with

a very low down payment. In order to qualify for this low down payment,

a selected home must be eligible for FHA financing. Currently, law

enforcement officers may purchase an FHA eligible home with an FHA-

insured mortgage, through the OND Sales Program, with a downpayment of

$100.

A law enforcement officer is defined, under the OND Sales Program,

as (1) an individual who is employed full-time by a Federal, state,

county, or municipal government and in carrying out such full-time

employment is (2) sworn to uphold, and make arrests for violations of,

Federal, state, county, or municipal law. A law enforcement officer,

participating in the OND Sales program, must agree to own and live in

the home as his or her sole residence for a set period of time. This

period of time is called the owner-occupancy term. Currently, the

owner-occupancy term is 3 years. The law enforcement officer must also

agree to certify initially and once annually, for each year of the

owner-occupancy term, that (1) he or she owns and lives in the home as

his or her sole residence and that (2) he or she does not own any other

residential real property other than the home purchased through the OND

Sales Program.

In addition, law enforcement officers will have to agree to execute

a second mortgage and note on the home. Under the second mortgage, the

law enforcement officer will not be required to make any monthly

payments, nor will any interest accrue. This second mortgage will have

the same term as the owner-occupancy term. The amount of the second

mortgage will be the difference between the list price of the home and

the discounted selling price. The amount owed on the second mortgage

will be reduced, according to a schedule established by HUD,

periodically over the owner-occupancy term. At the end of the owner-

occupancy term, the amount of the second mortgage will be zero. If a

law

[[Page 36211]]

enforcement officer fails to meet any of the continuing obligations of

the OND Sales Program, he or she will owe HUD the amount due on the

second mortgage. In addition, HUD may take one or more actions,

including but not limited to: (1) issuance of a limited denial of

participation for FHA programs, (2) referral to the HUD Inspector

General for investigation, and (3) reporting to the law enforcement

officer's employing agency.

Governmental entities and private nonprofit organizations may also

purchase homes through the OND Sales Program, if they intend to resell

these homes directly to law enforcement officers under the terms and

conditions of the OND Sales Program. Governmental entities and private

nonprofit organizations may participate in the OND Sales Program by

either (1) assigning the sales contract to a qualified law enforcement

officer before or at the time of closing or (2) participating in a

three party closing with the qualified law enforcement officer.

III. For More Information About the OND Sales Program

Law enforcement officers, governmental entities, private nonprofit

organizations, and other interested persons can receive more

information about the OND Sales Program by calling (800) 217-6970 or by

visiting HUD's Web site at http://www.hud.gov.

IV. Changes From the January 12, 1998 Federal Register Notice

This interim rule reflects the following changes to the OND Sales

Program as it was described in the January 12, 1998 Federal Register

notice:

A. Second Mortgage

To qualify to purchase a home through the OND Sales Program, a law

enforcement officer must agree to execute a second mortgage and note.

Previously, the OND Sales Program only required the inclusion of a

covenant in the deed. If a law enforcement officer fails to meet the

continuing obligations of the OND Sales Program, the amount of the

second mortgage will be due and payable. The amount of the second

mortgage will be reduced, according to a schedule established by HUD,

periodically over the owner-occupancy term.

B. Initial and Annual Certification

In order to continue to be eligible for the OND Sales Program, a

law enforcement officer must certify initially and once annually, for

each year of the owner-occupancy term, that he or she continues to own

and live in the home as his or her sole residence, and that the law

enforcement officer does not own any other residential real property.

C. Multiple Homes

During the entire duration of the owner-occupation term, a law

enforcement officer may not own any other residential real property

other than the home purchased through the OND Sales Program.

D. Single-Unit Homes

Only single-unit homes are eligible for purchase through the OND

Sales Program.

V. This Interim Rule

This interim rule establishes the OND Sales Program as a permanent

part of HUD's single family property disposition program. Specifically,

the interim rule creates a new subpart F in 24 CFR part 291 that

codifies the policies and procedures concerning the OND Sales Program.

VI. Justification for Interim Rulemaking

HUD generally publishes a rule for public comment before issuing a

rule for effect, in accordance with its own regulations on rulemaking

at 24 CFR part 10. Part 10 provides for exceptions to the general rule

if the agency finds good cause to omit advance notice and public

participation. The good cause requirement is satisfied when prior

public procedure is ``impracticable, unnecessary, or contrary to the

public interest'' (24 CFR 10.1). For the following reasons, HUD finds

that good cause exists to publish this rule for effect without first

soliciting public comment.

The OND Sales Program has been operating as a temporary program

since August 11, 1997, using HUD's existing authority under the single

family property disposition program regulations at 24 CFR part 291 and

through the issuance of a series of waivers. In addition, HUD published

the January 12, 1998 Federal Register notice publicizing the details of

the OND Sales Program.

While this interim rule makes certain revisions to the OND Sales

Program, the basic structure of the program remains principally

unchanged from that published in the January 12, 1998 Federal Register

notice. The primary purpose of this interim rule is to change the

status of the OND Sales Program from a temporary program to a permanent

part of HUD's single family property disposition program. The interim

rule codifies the current policies and procedures concerning the OND

Sales Program in a new subpart F in 24 CFR part 291. Accordingly, HUD

has determined that it is unnecessary to solicit prior notice and

comment before issuing this rule for effect.

Although HUD is issuing this rule for effect, it welcomes public

comment on the amendments made by the rule. HUD has, therefore, issued

these regulations on an interim basis and has provided the public with

a 60-day comment period. All public comments will be addressed in the

final rule.

VII. Findings and Certifications

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.

1531-1538)(UMRA) requires Federal agencies to assess the effects of

their regulatory actions on State, local, and tribal governments and on

the private sector. This interim rule does not impose any Federal

mandates on any State, local, or, tribal governments, or on the private

sector, within the meaning of UMRA.

Environmental Impact

A Finding of No Significant Impact with respect to the environment

has been made in accordance with the HUD regulations at 24 CFR part 50

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

Act of 1969 (Pub. L. 91-190, 83 Stat. 852, 853, codified as amended at

42 U.S.C. 4332). The Finding of No Significant Impact is available for

public inspection and copying during regular business hours (7:30 a.m.

to 5:30 p.m.) in the Office of the Rules Docket Clerk, Room 10276, U.S.

Department of Housing and Urban Development, 451 Seventh Street, SW,

Washington, DC 20410-0500.

Impact on Small Entities

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

U.S.C. 605(b)), has reviewed and approved this interim rule and in so

doing certifies that this interim rule would not have a significant

economic impact on a substantial number of small entities.

This interim rule promotes safe neighborhoods by enabling law

enforcement officers to purchase HUD-acquired single family homes at a

significant discount. The interim rule places restrictions on the use

of a home purchased through the Officer Next Door Sales Program, which

affects the individual purchasing the home. The interim rule, however,

does not place restrictions on any small entities involved in any

transactions related to the Officer Next Door Sales Program.

While we have determined that this rule would not have a

significant

[[Page 36212]]

economic impact on a substantial number of small entities, we welcome

any comments regarding alternatives to this rule that would meet our

objectives, as described in this preamble, and would be less burdensome

to small entities.

Federalism Impact

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

of Executive Order 12612 (entitled ``Federalism'') has determined that

the policies contained in this interim rule do not have substantial

direct effects on States or their political subdivisions, on the

relationship between the Federal government and the States, or on the

distribution of power and responsibilities among the various levels of

government. This interim rule codifies the procedures governing the OND

Sales Program in a new subpart in HUD's single family property

disposition program regulations. Through the OND Sales Program, HUD

makes HUD-acquired single family homes available to law enforcement

officers for purchase at a significant discount. As a result, this

interim rule is not subject to review under the Order.

List of Subjects in 24 CFR Part 291

Community facilities, Conflict of interests, Homeless, Lead

poisoning, Low and moderate income housing, Mortgages, Reporting and

recordkeeping requirements, Surplus government property.

Accordingly, for the reasons stated in the preamble, 24 CFR part

291 is amended as follows:

PART 291--DISPOSITION OF HUD-ACQUIRED SINGLE FAMILY PROPERTY

1. The authority citation for 24 CFR part 291 continues to read as

follows:

Authority: 12 U.S.C. 1701 et seq.; 42 U.S.C. 1441, 1441a, 1551a,

and 3535(d).

2. Subpart F is added to read as follows:

Subpart F--Officer Next Door Sales Program

Sec.

291.500 What is the purpose of the Officer Next Door Sales Program?

291.510 How does the Officer Next Door Sales Program work?

291.520 How do I qualify to purchase a home through the Officer

Next Door Sales Program?

291.530 Who qualifies as a law enforcement officer?

291.540 What is the owner-occupancy term?

291.550 What is the second mortgage?

291.560 May I purchase a multi-unit property through the Officer

Next Door Sales Program if I plan to live in one of the units as my

sole residence?

291.570 What continuing obligations apply to me if I purchase a

home through the Officer Next Door Sales Program?

291.580 May governmental entities and private nonprofit

organizations purchase homes through the Officer Next Door Sales

Program?

291.590 How are the terms governmental entities and private

nonprofit organization defined?

Subpart F--Officer Next Door Sales Program

Sec. 291.500 What is the purpose of the Officer Next Door Sales

Program?

The purpose of the Officer Next Door Sales Program is to promote

safe neighborhoods by encouraging law enforcement officers to purchase,

and live in as their sole residence, homes located in economically

distressed neighborhoods.

Sec. 291.510 How does the Officer Next Door Sales Program work?

(a) The Officer Next Door Sales Program enables a full-time law

enforcement officer to purchase a HUD-acquired home located in a HUD-

designated Revitalization Area or HUD-approved exception area:

(1) At a discount from the list price; and

(2) With a reduced downpayment, if:

(i) The home is eligible for an FHA-insured mortgage; and

(ii) The law enforcement officer chooses to finance the home

through an FHA-insured mortgage, and is qualified to obtain such a

mortgage.

(b) Under the Officer Next Door sales Program, all properties

acquired by HUD (both those that are eligible for FHA mortgage

insurance and those that are not eligible) located in HUD-designated

Revitalization Areas are made available to interested law enforcement

officers, government entities, and nonprofit organizations prior to

listing the properties for sale to the general public. Purchasers must

notify HUD of their geographic area of interest and will be given five

(5) days to indicate their preliminary interest in a specific property

as more fully explained in Sec. 291.210(a).

Sec. 291.520 How do I qualify to purchase a home through the Officer

Next Door Sales Program?

To qualify to purchase a home through the Officer Next Door Sales

Program you must:

(a) Be a full-time law enforcement officer as described in

Sec. 291.530;

(b) Agree to own, and live in as your sole residence, the home for

the entire duration of the owner-occupancy term;

(c) Agree to execute a second mortgage and note on the home as

described in Sec. 291.550 for the difference between the list price and

the discounted selling price;

(d) Agree that you will not own any residential real property,

other than the home you purchase through the Officer Next Door Sales

Program, during the owner-occupancy period.

Sec. 291.530 Who qualifies as a law enforcement officer?

You qualify as a law enforcement officer, for the purposes of the

Officer Next Door Sales Program, if you are:

(a) Employed full-time by a Federal, state, county, or municipal

government; and

(b) In carrying out such full-time employment, you are sworn to

uphold, and make arrests for violations of, Federal, state, county, or

municipal law.

Sec. 291.540 What is the owner-occupancy term?

The owner-occupancy term is the number of years a participant in

the Officer Next Door Sales Program must agree to own, and live in as

their sole residence, a home purchased through the Officer Next Door

Sales Program. The owner-occupancy term is determined by HUD.

Sec. 291.550 What is the second mortgage?

The second mortgage is a mortgage and note on the home you purchase

through the Officer Next Door Sales Program. The amount of the second

mortgage is the difference between the list price of the home and the

discounted selling price. The second mortgage will have the same term

as the owner-occupancy term. The amount of the second mortgage will be

reduced, according to a schedule established by HUD, periodically over

the owner-occupancy term. If you fail to meet any of the continuing

obligations of the OND Sales Program, you will owe HUD the amount due

on the second mortgage. At the end of the owner-occupancy term, the

amount of the second mortgage will be zero.

Sec. 291.560 May I purchase a multi-unit property through the Officer

Next Door Sales Program if I plan to live in one of the units as my

sole residence?

No, only single-unit properties are eligible for the Officer Next

Door Sales Program.

[[Page 36213]]

Sec. 291.570 What continuing obligations apply to me if I purchase a

home through the Officer Next Door Sales Program?

To remain a participant in the Officer Next Door Sales Program you

must, for the entire duration of the owner-occupancy term:

(a) Continue to own, and live in as your sole residence, the home

you purchased through the Officer Next Door Sales Program;

(b) Not own any other residential real property other than the home

you purchased through the Officer Next Door Sales Program; and

(c) Certify initially and once annually that paragraphs (a) and (b)

of this section continue to be true.

Sec. 291.580 May governmental entities and private nonprofit

organizations purchase homes through the Officer Next Door Sales

Program?

Yes, governmental entities and private nonprofit organizations may

purchase homes through the Officer Next Door Sales Program, if they

intend to resell these homes directly to law enforcement officers under

the terms and conditions of the Officer Next Door Sales Program. In

order to participate, governmental entities and private nonprofit

organizations must either:

(a) Assign the sales contract to a qualified law enforcement

officer before, or at the time of, closing; or

(b) Participate in a three party closing with the qualified law

enforcement officer.

Sec. 291.590 How are the terms governmental entities and private

nonprofit organization defined?

The terms Governmental entities and Private nonprofit organization

are defined in Sec. 291.5 of this part.

Dated: June 8, 1999.

William C. Apgar,

Assistant Secretary for Housing--Federal Housing Commissioner.

[FR Doc. 99-16847 Filed 7-1-99; 8:45 am]

BILLING CODE 4210-27-P