Fiscal Year 1999 Notice of Funding Availability; Secondary Market for Non-Conforming Loans to Low-Wealth Borrowers Demonstration Program

SUMMARY: This NOFA announces the availability of $10,000,000 in funding

for grants to qualified nonprofit organizations to demonstrate methods

of expanding the secondary market for non-conforming home mortgage

loans to low-wealth borrowers. The NOFA is issued under the HOME

Investment Partnership Program.

Purpose. To enhance homeownership opportunities for low-wealth

borrowers by enabling nonprofit intermediaries (including Community

Development Financial Institutions) to purchase non-conforming home

loans from conventional lenders, document the performance of these

pools of affordable mortgages, and thereby encourage the secondary

market and institutional investors to expand purchases of, or

investments in, loans made to low-income home buyers. The goal of the

demonstration is to expand the secondary market by ensuring that non-

conforming loans have a receptive and dependable outlet.

Available Funding. $10,000,000.

APPLICATION DUE DATE: Requests for funding must be physically received

by 4:30 p.m. Eastern Time on May 10, 1999. It is NOT sufficient for a

request to bear a postmark within the deadline. Requests for funding

sent by facsimile (FAX) will not be accepted. The deadline is firm as

to date and hour, and HUD will treat as ineligible for consideration

requests for funding received after the deadline. Respondents should

take this policy into account and consider early submission to avoid

any risk of loss of eligibility brought about by any unanticipated or

delivery-related problems.

ADDRESS FOR SUBMITTING REQUESTS FOR FUNDING: One original and two

copies of the request for funding must be submitted to HUD

Headquarters, Office of Insured Single Family Housing, Room 9266, 451

Seventh Street, SW, Washington, DC 20410, ATTN: Secondary Market

Demonstration Program.

FOR FURTHER INFORMATION CONTACT: Vance T. Morris, Director, Home

Mortgage Insurance Division, Department of Housing and Urban

Development, Room 9266, 451 Seventh Street, SW, Washington, DC 20410;

telephone (202) 708-2700, ext. 2204. (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 1-800-

877-8339.

SUPPLEMENTARY INFORMATION:

I. Background--Building on the Advance Notice of Demonstration

Program

On August 4, 1998 (63 FR 41703), HUD published an Advance Notice of

Demonstration in the Federal Register. In this notice, HUD advised the

public of its intent to establish a program that would demonstrate

methods of expanding homeownership opportunities for low-income

borrowers by expanding the secondary market for non-conforming home

mortgage loans to low-wealth borrowers. In this notice, HUD also

presented questions to solicit public comment on several issues. Public

comments were received from seven entities. HUD's questions and a

summary of the comments received are set forth below.

Question 1: What should be the desired and expected outcomes of the

demonstration program?

Responses:

(a) The program should be developed to ensure that new/additional

loans are made to low-wealth borrowers rather than just providing for

additional liquidity for lenders.

(b) Other goals include increasing the number of:

(i) Lenders engaged in non-conforming lending; and

(ii) Non-conforming loans made by private lenders and purchased by

secondary market providers.

Question 2: How should HUD define a ``low-wealth'' borrower for

this demonstration program?

Responses:

(a) Use an asset test.

(b) Require that borrowers have liquid assets of less than 80% of

the national median net worth.

(c) Define a low-wealth borrower to be a borrower who:

(i) Is a first-time homebuyer;

(ii) Has a loan-to value ratio of 95% or more; and

(iii) Has income at or below 80% of area median income.

(d) Limit using demo funds for borrowers under 80% of area median

income families, but strongly recommended studying borrowers at or

below 115% of area median income.

(e) Pay particular attention to families with incomes under $20,000

a year.

Question 3: What would be the characteristics of an effective

strategy?

Responses:

(a) Commenters listed the following characteristics:

(i) Obtains a great deal of data;

(ii) Leverages demonstration funds;

(iii) Results in a significant level of additional loans to low-

wealth borrowers;

(iv) Provides thorough documentation of loan performance;

(v) Provides pre-purchase and post-purchase housing counseling.

(b) Should involve current secondary mortgage makers whose

recordkeeping and administrative systems would lend credibility to the

results.

Question 4: What are the best measures to assess a strategy's

potential impact on the future availability of private credit to low-

wealth borrowers?

Responses: Long term, it (the program) should be able to measure

and account for the results in a predictable manner. Shorter term, it

should measure the number of additional non-conforming loans made by

participating lenders that would not otherwise have been made.

Question 5: What factors might HUD consider in defining

``experience working with lenders'' for this demonstration program?

What factors might be more (or less) relevant in an applicant's

experience working with lenders?

Responses:

(a) Commenters indicated that relevant legal agreements, such as

loan sale and loan servicing agreements, could be indicators of

experience.

(b) Other factors include:

(i) Number of years the secondary market provider has worked with

private lenders;

(ii) Total number of non-conforming loans purchased and the extent

to which a participating private lender's underwriting criteria is

influenced by the secondary market provider's purchase requirements.

Question 6: A ``non-conforming loan'' is generally defined as a

loan that does not meet Fannie Mae and Freddie Mac underwriting

criteria. Should other definitions be considered?

Responses:

(a) For a demonstration, the definition should be as expansive as

possible. It should be any loan that is so classified by the

originating lender at time of origination and which they would

otherwise hold in portfolio.

[[Page 12041]]

(b) The demonstration should not include a loan which at time of

purchase has a poor payment record.

(c) The following loans are inappropriate for the demonstration:

(i) Unseasoned loan;

(ii) A loan that may require a second mortgage loan committee

review; or

(iii) A loan that does not meet conventional appraisal standards.

(d) Should include lack of mortgage insurance because the existing

secondary market does not buy loans without mortgage insurance.

Question 7: How should HUD assess the applicant's experience in

expanding the secondary market for such loans for this demonstration

program?

Responses:

(a) Assessment should be based on experience in expanding the

secondary market for non-conforming loans based on originating,

purchasing and selling non-conforming loans. Applicant should have

experience with 3 of the following:

(i) Fannie Mae;

(ii) Freddie Mac;

(iii) The capital markets; and

(iv) Private mortgage insurance companies.

(b) Should include direct experience in operating a secondary

market by factors such as:

(i) Volume of loans purchased;

(ii) Geographic diversity; and

(iii) Performance of portfolio.

(c) Should include current experience evidenced by special loan

products offered by the secondary market.

(d) Should include experience of applicant or its affiliates in

originating non-conforming loans by factors such as:

(i) Volume;

(ii) Loan performance record; and

(iii) Geographic diversity, including urban and rural mix.

Question 8: The House Report indicates that the demonstration

portfolios should consist of loans that are non-conforming due to high

loan-to-value ratio, missed payments, credit blemishes, or a lack of

credit. Are these factors adequate, or are there other factors that HUD

should evaluate?

Responses:

(a) Should not include missed payments on the loan involved. Should

maintain a distinction between ``nonperforming'' loans and ``non-

conforming'' loans. HUD should consider front and back debt ratios,

amount of down payment and the property location.

(b) Other factors could include loans for properties that the

secondary market might regard as obsolete, loans in neighborhoods that

may be regarded as high-risk, or loans to borrowers with low credit

scores.

(c) The entire list of common reasons that Fannie Mae, Freddie Mac,

and private mortgage insurance companies decline loans should be

candidates for evaluation.

Question 9: Are there any compensating characteristics among such

borrowers that are not criteria recognized in conventional or standard

underwriting guidelines?

Responses: The demonstration could consider macro compensating

characteristics such as:

(a) Lower default rates among low-income homebuyers as compared to

middle-and high-income families; and

(b) Benefits of pre-and post-purchase homeownership counseling and

early foreclosure prevention intervention.

Question 10: How should HUD determine ``demonstrated success'' for

this program?

Responses:

(a) By evidence of actual receipt of non-Federal grants and actual

loan closing on concessionary terms to support secondary market-related

activities during a two-year period;

(b) By documenting performance and loss characteristics on loans

made or facilitated; and

(c) By examining working relationships with lenders who make non-

conforming loans to low-income borrowers.

Question 11: For purposes of the demonstration program, is there a

preferred use of the funds? Should the efficiency of leverage in the

use of the funds be a requirement?

Responses:

(a) There should be a 10:1 leverage ratio with the preferred use of

funds being as capital reserves. Demonstration funds should not be used

solely to originate or purchase loans. Using these funds for capital

reserves, loan guarantees, and loan loss reserves would generate more

funding through leveraging.

(b) The preferred use of funds should not be established at the

application stage.

Question 12: The FY 1998 Appropriations Act also requires that the

selected applicant must ``have demonstrated the ability to provide data

on the performance of such loans sufficient to allow for future

analysis of the investment risk of such loans.'' What information does

HUD need to collect?

Responses:

(a) Recommended that awardees collect the following information:

(i) Demographics of borrower;

(ii) Reasons why loan is classified as non-conforming;

(iii) Front-end and back-end debt ratios;

(iv) Age of loan at time of purchase;

(v) Whether borrower received pre-purchase counseling;

(vi) Who provided the counseling and the type/extent of counseling;

(vii) Delinquencies (number of loans and percentage of portfolio at

30, 60, and 90 days);

(viii) For loans at least 60 days delinquent, actions taken or

planned to address loan delinquency;

(ix) Number of loans and percentage of portfolio in default (more

than 90 days delinquent);

(x) Actions taken to correct default;

(xi) Number and percentage of loans restructured;

(xii) For each loan restructured, the specific terms of the

restructuring; and

(xiii) For each loan in default an indication whether the borrower

received post-purchase counseling.

(b) Information to be tracked should be predefined and ultimately

uniform, but HUD should let the awardees develop the content and

specific format.

(c) The information used should be standard data used by the

secondary market.

Question 13: How frequently and for how long a duration of time

should this information be reported?

Responses:

(a) The information should be reported annually in an aggregated

manner.

(b) The information should be maintained and collected for at least

8 years.

(c) Awardees should be able to use a modest portion of the grant to

defray additional administrative costs during the reporting period.

Question 14: In order to maximize the credibility and impact of the

demonstration, the conferees expect HUD to give priority to applicants

that have ``sophisticated existing data collection capabilities,

including adequate loan portfolio monitoring and analysis.'' How might

HUD assess data collection capability?

Responses:

(a) HUD can assess the capability through a narrative section of

the application which would include:

(i) A statement of whether the applicant or affiliate has a

designated data collection unit where data collection and analysis

rests;

(ii) The number of staff directly responsible for these task and

their percentage of time;

(iii) The qualifications of data collection and analysis managers

and staff; and

(iv) A detailed statement of the types of data currently collected,

the

[[Page 12042]]

frequency of collection, and an explanation of how the data are

collected, maintained and used.

(b) HUD may consider a statement from the applicant which includes:

(i) The applicant's hardware and software capabilities;

(ii) The number of loans in the applicant's system;

(iii) The current data collection mechanisms;

(iv) The staff capacity for data collection responsibilities;

(v) The applicant's experience with formal reporting on lending

activities; and

(vi) The ability to provide a longitudinal analysis that is based

upon years of lending experience.

Question 15: The conferees expect the Secretary to give priority to

organizations that have statewide or multi-state service areas, and

have a mix of urban and rural loans. How important is a diversified

portfolio in assessing investment risk for purposes of the criterion

described above?

Responses: Two commenters stressed geographic diversity and urban,

suburban and rural representation. One commenter recommended that at

least 80 percent of a portfolio be from inner cities and rural areas.

Question 16: Should automated mortgage finance tools, such as

credit or mortgage scoring, be evaluated in this demonstration? Are

there other tools that should be examined?

Responses: Commenters gave both answers: No, because the scale of

the program is too small and the length of the program is too short to

reach any conclusion on credit or mortgage scoring. Yes, because the

objective should be to determine the degree to which the average scores

and mortgage scores on approved loans in a study differ from those on a

similar category of approved loans by the secondary market providers.

II. The Demonstration Program for Secondary Market for Non-

Conforming Loans to Low-Wealth Borrowers--Purpose and Substantive

Description

(A) Authority. The Departments of Veterans Affairs and Housing and

Urban Development, and Independent Agencies Appropriations Act, 1998

(Pub.L. 105-65, 111 Stat. 1344, 1359, approved October 27, 1997) (the

``FY 1998 Appropriations Act'') set aside $10 million from the HOME

Investment Partnerships program for grants for up to three

organizations (including Community Development Financial Institutions)

that are exempt from Federal taxation under section 501(a) pursuant to

section 501 (c)(3) of the Internal Revenue Code of 1986, selected on a

competitive basis, to demonstrate methods of expanding homeownership

opportunities for low-wealth borrowers through expanding the secondary

market for non-conforming home mortgage loans. No separate implementing

regulations will be issued.

(B) Purpose of the Demonstration Program and Requirements. As noted

earlier, the Secondary Market Demonstration Program is intended to

demonstrate methods of expanding homeownership opportunities for low-

income borrowers through expanding the secondary market for non-

conforming home mortgage loans made to low-wealth borrowers. The

applicant is required to go beyond addressing the immediate credit

needs of lower-income borrowers to one of developing a strategy for

expanding the secondary market for affordable home mortgage loans. The

use of loan loss pools to support the purchase, holding and subsequent

sale of non-conforming loans from lenders is highly desirable. The goal

is for the lenders involved in this demonstration to use the proceeds

from such sales to make additional non-conforming loans to low-wealth

borrowers. Because of the demonstration nature of this project,

successful grantees must be able to show the ability to adequately

collect data on the underwriting and performance of the loans

purchased.

(C) Applicable Definitions for Purposes of this Demonstration.

Low Wealth means a borrower who:

(1) Is a first-time homebuyer;

(2) Has a loan-to-value ratio of 95% or more;

(3) Has income at or below 80% of area median income; and

(4) Has insufficient funds required for downpayment and closing

costs associated with the mortgage transaction.

Non-conforming mortgages are defined to include loans which are

classified by the originating lender at the time of origination as non-

conforming and which the lender would otherwise plan to hold in

portfolio because there is not a predictable secondary market outlet

for it. Examples of non-conforming loans include, but are not limited

to, loans in neighborhoods that may be regarded as high-risk, a

unseasoned loan, or loans to borrowers with low credit scores. It does

not include loans that have, at the time of purchase, missed payments

on that particular loan.

(D) Eligibility Criteria. In selecting the grantees for this

demonstration program, the FY 1998 Appropriations Act provides the

criteria for participating in this demonstration program. The applicant

must address each in its proposal:

(1) Verification that the applicant is exempt from Federal Taxation

under section 501(a) pursuant to 501(c)(3) of the Internal Revenue Code

of 1986;

(2) Experience working with lenders who make non-conforming loans

to low-wealth borrowers;

(3) Experience in expanding the secondary market for such loans (to

low-wealth borrowers);

(4) Demonstrated success in carrying out such activities, including

raising non-Federal grants and capital on concessionary terms for the

purpose of expanding the secondary market for loans in the previous two

years in amounts equal or exceeding the amount awarded; and

(5) Demonstrated ability to collect and provide data on the

performance of such loans purchased, and sufficient enough in size to

allow for future analysis of the investment risk of such loans.

(E) Threshold Requirements. Applicants must provide proof/

certification of:

(1) Exempt from Federal Taxation. The applicant must submit proof

that it is exempt from Federal Taxation under section 501 (a) pursuant

to section 501 (c)(3) of the Internal Revenue Code of 1986.

(2) Compliance with Fair Housing and Civil Rights Laws. Applicants

must comply with all fair housing and civil rights laws, statutes,

regulations, and executive orders as enumerated in 24 CFR 5.105(a). If

an applicant: (a) has been charged with a systemic violation of the

Fair Housing Act by the Secretary alleging ongoing discrimination; (b)

is the defendant in a Fair Housing Act lawsuit filed by the Department

of Justice alleging an ongoing pattern or practice of discrimination;

or (c) has received a letter of noncompliance findings under Title VI

of the Civil Rights Act, section 504 of the Rehabilitation Act of 1973,

or section 109 of the Housing and Community Development Act, the

application will not be evaluated under this NOFA if, prior to the

application deadline, the charge, lawsuit, or letter of findings has

not been resolved to the satisfaction of the Department. HUD's decision

regarding whether a charge, lawsuit, or a letter of findings has been

satisfactorily resolved will be based upon whether appropriate actions

have been taken necessary to address allegations of ongoing

discrimination in the policies or practices involved in the charge,

lawsuit, or letter of findings.

[[Page 12043]]

(3) Additional Nondiscrimination Requirements. Applicants also must

comply with the Americans with Disabilities Act, and Title IX of the

Education Amendments Act of 1972, as applicable.

(4) Affirmatively Furthering Fair Housing. Successful applicants

have a duty to affirmatively further fair housing. Applicants should

include in their work plans the specific steps that they will take to

promote fair housing rights and fair housing choice.

(5) Forms, Certifications and Assurances. Applicants are required

to submit signed copies of the standard forms, certifications, and

assurances that are included as attachments to this NOFA.

(6) OMB Circulars. The policies, guidance, and requirements of OMB

Circular No. A-122 (Cost Principles for Nonprofit Organizations) and

OMB Circular No. A-133 (Audits of States, Local Governments, and Non-

Profit Organizations), and the requirements of 24 CFR part 84 (Grants

and Agreements with Institutions of Higher Education, Hospitals, and

other Non-Profit Organizations) apply to the award, acceptance and use

of assistance under this NOFA, and to the remedies for noncompliance,

except when inconsistent with the provisions of the FY 1998 HUD

Appropriations Act, other Federal statutes or the provisions of this

NOFA. Copies of the OMB Circulars may be obtained from EOP

Publications, Room 2200, New Executive Office Building, Washington, DC

10503, telephone (202) 395-7332 (this is not a toll free number).

(7) Coastal Barriers and Flood Insurance. Pursuant to the Coastal

Barriers Resources Act (16 U.S.C. 3501), recipients may not use funds

provided under this NOFA to purchase mortgages on properties located

within the Coastal Barriers Resource System.

Pursuant to the Flood Disaster Protection Act of 1973 (42 U.S.C.

4001-4128), recipients may not use funds provided under this NOFA to

purchase mortgages on properties located in special flood hazard areas

designated by the Federal Emergency Management Agency (FEMA) unless:

(1) The community in which the property is located is participating

in the National Flood Insurance Program, or less than one year has

passed since FEMA notification regarding such hazards; and

(2) Where the community is participating in the National Flood

Insurance Program, flood insurance covering the building or mobile home

and any personal property has been obtained and is a condition of the

mortgage.

Review of Eligibility Criteria and Threshold Requirements. HUD will

review each application to determine whether the application meets all

of the eligibility criteria and threshold requirements listed in

Sections II.D and E of this NOFA and will conduct a review of the

required certifications and information listed in this section. HUD may

check to independently verify information contained in the request for

funding or request additional information from the respondent. HUD may

contact the applicant, however, to clarify an item in the application

or to correct technical deficiencies. HUD may not seek clarification of

items or responses that improve the substantive quality of the

applicant's response to any eligibility or selection factors. Examples

of curable (correctable) technical deficiencies include the failure to

submit the proper certifications or the failure to submit an

application that contains an original signature by an authorized

official. In each case, HUD will notify the applicant in writing by

describing the clarification or technical deficiency. HUD will notify

applicants by facsimile or by return receipt requested. Applicants must

submit clarifications or corrections of technical deficiencies in

accordance with the information provided by HUD by no later than 4:30

p.m. (eastern time) on the 14th calendar day after the date of receipt

of the HUD notification. If the deficiency is not corrected within this

time period, HUD will reject the application as incomplete, and it will

not be considered for funding.

(F) Application Selection Process. Applicants that meet the

threshold review described above, will have their proposal reviewed and

scored by HUD Headquarters staff based on selection factors listed in

Section II.H below. Applications will be funded in rank order.

(G) Number of Applicants to be Selected. Up to three applicants

meeting the requirements outlined in this NOFA will be selected for

funding. Funding may not be awarded in equal amounts if more than one

applicant is selected. HUD reserves the right to fund less than the

full amount requested in any application to ensure the fair

distribution of the funds and ensure that the purposes of the

demonstration are met. HUD may choose not to fund portion of the

applications that are ineligible for funding under applicable statutory

requirements or which do not meet the demonstration requirements. If

funds remain after funding the highest ranking applications, HUD may

fund part of the next highest ranking application. If the applicant

turns down the award offer, HUD will make the same determination for

the next highest ranking application.

(H) Rating and Ranking Factors.

Rating factor 1: Experience of the Applicant as determined by HUD

(25 points).

Applicants will be rated on the narrative and supporting materials

which document the experience level of the applicant.

(1) The applicant should provide substantive examples of its

experience working with lenders who make non-conforming loans to low-

wealth borrowers. Substantive examples means that the applicant

describes previous projects (and outcomes) relevant to this

demonstration. (10 points)

(2) The applicant should describe the demographic data on the

pool(s) of loans purchased or otherwise obtained, including, number of

loans (pool size), target markets and explanations of why purchased

along with characteristics of selected areas (median income, etc.),

Borrower demographics (income, age, sex, race, national origin,

familial status, and persons with disabilities) and collateral

characteristics (property value). (10 points)

(3) The applicant should describe the origination requirements

(required ratios, downpayment requirements, loan-to-value, etc.),

counseling requirements, both pre- and post purchase and servicing

intervention techniques, a provide the default rate on these loans (if

available). (3 points)

(4) The applicant should describe how previous programs have

specifically benefited borrowers. (2 points)

The applicant will receive higher scores for narratives which include

projects with several lenders and include large pools with loans in

statewide or multi-state areas and both urban and rural areas. In

addition, higher scores will be granted for those applicants

demonstrating specific counseling requirements and servicing

intervention techniques.

Rating Factor 2: Data Collection and Analysis Capabilities of the

Applicant as determined by HUD (20 points).

Applicants will be rated on the narrative and supporting materials

which clearly document the data collection and analytical capabilities

of the applicant. The applicant must provide a description of:

(1) The applicant's experience with formal reporting on lending

activities and samples of reports currently used (or a format for the

reports which will

[[Page 12044]]

be submitted to the Department) to capture the information needed for

this demonstration and for reports to Congress. (6 points)

(2) A description of the current data collection capabilities; (6

points)

(3) The professional staff available for data collection and

analysis; (3 points)

(4) The applicant's hardware and software capabilities; (3 points)

(5) The number of loans currently in the applicant's system. (2

points)

Applicants will receive higher scores for demonstrating existing data

collection capabilities including loan portfolio and monitoring/

analysis systems. In addition, the applicant must have professional

staff on hand, adequate computer systems (Pentium or higher processor)

and present samples of reports which indicate that the applicant is

able to efficiently collect and report data on this demonstration.

Rating Factor 3: Adequacy of the activities proposed by the

applicant in response to this NOFA (35 points).

The applicant will be rated on the narrative and supporting

materials which document how the grant funds will be used, if awarded,

to expand the secondary market. The applicant must provide:

(1) The extent to which the funds awarded will be used. A

comprehensive approach is preferable to an approach which simply

provides only for the purchase or origination of loans). A description

of the proposed program and how it will operate, (e.g., how it will be

used to purchase, hold, and/or sell non-conforming loans or how a loan

loss reserve will be used). The materials should provide information on

the following:

(a) Target market to be reached (both the location of borrowers and

their demographic characteristics);

(b) How the proposed program meets a market niche (for example, an

explanation of how the target borrowers are underserved by both

conventional and governmental loan programs);

(c) Origination, servicing, loss mitigation, counseling

requirements; the Department requires the applicant to maintain a

record of credit scores for all loans involved in this demonstration.

The credit score should not be used to qualify borrowers. This

information will be used to determine if there is a correlation between

credit scores and loan performance;

(d) Credit enhancements;

(e) Investor requirements, if applicable and;

(f) A description of the expected characteristics of loans in the

portfolio it will evaluate in its proposal (i.e., those elements that

make the loans non-conforming), and describe how it will determine if

there are compensating factors associated with those mortgages in the

portfolio that are not recognized in traditional or standard

underwriting. (20 points)

(2) How the funds awarded will be matched with non-Federal funds.

(5 points)

(3) How the funds will be leveraged (lender commitments are

expected). (5 points)

(4) A sample of the proposed quarterly report which will be

submitted to the Department and other aspects of the program must be

described including, but not limited to, the administrative structure

and program monitoring and the identification of participating lenders.

The program description must be complete and demonstrate that the

respondent can fulfill programmatic obligations within 24 months.

Reports on the loan performance are required for an additional 60

months. In describing the program, respondents must include a program

schedule and performance benchmarks for the 24 month period of the

grant agreement. Finally, a budget which includes the sources and uses

of all funds, including program income and accrued interest, a

description of the respondent's cash management system and proposed

distribution of funds among participating organizations. (3 points)

(5) Key staff who will be responsible for implementing the program

must be identified along with adequate descriptions of their

qualifications. (2 points)

Applicants will be given higher scores for comprehensive approaches,

lender commitments to participate with the applicant in this program,

and a plan which indicates a specific market niche to be reached and

how the applicant's program meets that market. Applicants will lose

points if they do not indicate that they will collect credit scores for

analytical purposes.

Rating Factor 4: Evidence of success in carrying out activities

such as these including raising non-Federal grants and capital on

concessionary terms for the purpose of expanding the secondary market

for loans in the previous two years in amounts equal to or exceeding

the amount awarded (20 points).

(1) The applicant will be rated on the narrative and supporting

documentation which support at least two years experience in leveraging

non-Federal funds. (10 points)

(2) The applicant must show evidence of the prior financial

commitments (letters and written agreements) that were used to

administer previous programs. These letters and agreements should

indicate the date of award, the amount of funds awarded and information

regarding how these funds were used to expand the secondary market. (10

points)

Applicants will be given higher scores for demonstrating a longer

track record of leveraging public sector funds and a willingness to

match funds awarded under this demonstration with non-Federal funds.

(I) Other Federal Requirements. HUD may reject an application from

further funding consideration if the activities or projects proposed in

the application are not eligible activities and projects, or HUD may

eliminate the ineligible activities from funding consideration and

reduce the grant amount accordingly.

(J) Unused and Recaptured Funds. HUD will recapture undisbursed

amounts from the grantees who fail to substantially fulfill, or

improperly fulfill, these obligations within 24 months. Reports will be

required for 60 additional months. The successful grantees will be paid

according to a draw schedule that will allocate between 25-50% of the

funds at the time of grant award and the remainder following the

receipt and detailed reviews of quarterly reports outlining the

progress of the demonstration. If the grantee fails to fulfill, or

improperly fulfills its obligations, HUD at its discretion may either:

(1) Recapture the funds and use for other purposes (as permitted);

(2) Readvertise availability of funds that have been recaptured; or

(3) Choose to fund alternate applicants that submitted requests for

funding in response to this NOFA in accordance with the selection

process described elsewhere in this document.

III. Request for Funding-Organization of the Proposal Package

Application Submission Requirements. The information submitted to

HUD should be placed in a three ring binder, tabbed appropriately and

appear in the following order:

(1) Evidence of the respondent's nonprofit status, such as a copy

of a current IRS ruling that the respondent is exempt from taxation

under section 501(a) pursuant to section 501(c)(3) of the Internal

Revenue Code of 1986.

(2) Required certifications (listed below):

(a) Evidence of adequate existing financial control procedures,

indicating how it meets 24 CFR 84.21, ``Standards for Financial

Management Systems.'' In

[[Page 12045]]

addition, respondents must provide a copy of their most recent audit.

(b) OMB Standard Form 424, Request for Federal Assistance.

(c) Form HUD-2880, Applicant/Recipient Disclosure Update Report as

required under subpart C of 24 CFR part 4, subpart A, ``Accountability

in the Provision of HUD Assistance.''

(d) Standard Form 424B, Assurances-Non-Construction Programs.

(e) Certification Concerning Use of Federal Funds for Lobbying,

Form SF-LLL.

(f) Form HUD-2992 regarding the employment, engagement of services,

awarding of contracts, subgrants, or funding of any recipients, or

contractors or subcontractors, during any period of debarment,

suspension, or placement in ineligibility status.

(3) Information to address the experience level of the applicant

(Rating Factor 1);

(4) Information to address the data capabilities of the applicant

(Rating Factor 2);

(5) Information to address the adequacy of the proposed activities

of the applicant (Rating Factor 3) and;

(6) Information to address the applicant's success in raising non-

Federal grant and capital on concessionary terms (Rating Factor 4).

IV. Findings and Certifications

Paperwork Reduction Act Statement

The information collection requirements contained in this NOFA have

been reviewed by the Office of Management and Budget in accordance with

the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and 5 CFR

1320.13 and have been assigned OMB control number 2502-0535. In

accordance with the Paperwork Reduction Act, HUD may not conduct or

sponsor, and a person is not required to respond to, a collection

unless the collection displays a valid control number.

Environmental Impact

A Finding of No Significant Impact with respect to the environment

has been made for the program in accordance with HUD regulations at 24

CFR part 50, which implements section 102(2)(C) of the National

Environmental Policy Act of 1969. The Finding is available for public

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

the Rules Docket Clerk, Office of the General Counsel, Department of

Housing and Urban Development, Room 10276, 451 Seventh Street, SW,

Washington, DC 20410.

Conflicts of Interest

If the selection or non-selection of any applicant under this NOFA

affects the individual's financial interests set forth in 18 U.S.C. 208

or involves any party with whom the individual has a covered

relationship under 5 CFR 2635.502, that individual must, prior to

participating in any matter regarding this NOFA, disclose this fact to

the General Counsel or the Ethics Law Division.

Federalism Executive Order

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

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

contained in this NOFA will not have substantial direct effects on

States or their political subdivisions, or on the relationship between

the Federal Government and the States, or on the distribution of power

and responsibilities among the various levels of government.

Specifically, the NOFA solicits applicants to demonstrate methods of

expanding the secondary market for non-conforming home mortgage loans

to low-wealth borrowers, and does not impinge upon the relationships

between the Federal government and State and local governments. As a

result, the NOFA is not subject to review under the Order.

Section 102 of the HUD Reform Act; Documentation and Public Access

Requirements

Section 102 of the Department of Housing and Urban Development

Reform Act of 1989 (42 U.S.C. 3545) (HUD Reform Act) and the

regulations codified in 24 CFR part 4, subpart A, contain a number of

provisions that are designed to ensure greater accountability and

integrity in the provision of certain types of assistance administered

by HUD. On January 14, 1992 (57 FR 1942), HUD published a notice that

also provides information on the implementation of section 102. The

documentation, public access, and disclosure requirements of section

102 apply to assistance awarded under this NOFA as follows:

(1) Documentation and public access requirements. HUD will ensure

that documentation and other information regarding each application

submitted pursuant to this NOFA are sufficient to indicate the basis

upon which assistance was provided or denied. This material, including

any letters of support, will be made available for public inspection

for a 5-year period beginning not less than 30 days after the award of

the assistance. Material will be made available in accordance with the

Freedom of Information Act (5 U.S.C. 552) and HUD's implementing

regulations in 24 CFR part 15.

(2) Disclosures. HUD will make available to the public for 5 years

all applicant disclosure reports (HUD Form 2880) submitted in

connection with this NOFA. Update reports (also Form 2880) will be made

available along with the applicant disclosure reports, but in no case

for a period less than 3 years. All reports--both applicant disclosures

and updates--will be made available in accordance with the Freedom of

Information Act (5 U.S.C. 552) and HUD's implementing regulations at 24

CFR part 5.

Section 103 HUD Reform Act

HUD's regulations implementing section 103 of the Department of

Housing and Urban Development Reform Act of 1989 (42 U.S.C. 3537a),

codified in 24 CFR part 4, apply to this funding competition. The

regulations continue to apply until the announcement of the selection

of successful applicants. HUD employees involved in the review of

applications and in the making of funding decisions are limited by the

regulations from providing advance information to any person (other

than an authorized employee of HUD) concerning funding decisions, or

from otherwise giving any applicant an unfair competitive advantage.

Persons who apply for assistance in this competition must confine their

inquiries to the subject areas permitted under 24 CFR part 4.

Applicants or employees who have ethics related questions should

contact the HUD Ethics Law Division at (202) 708-3815. (This is not a

toll-free number.) For HUD employees who have specific program

questions, the employee should contact the appropriate field office

counsel, or Headquarters counsel for the program to which the question

pertains.

Prohibition Against Lobbying Activities

Applicants for funding under this NOFA are subject to the

provisions of Section 319 of the Department of Interior and Related

Agencies Appropriation Act for Fiscal Year 1991, 31 U.S.C. Section 1352

(the Byrd Amendment) and to the provisions of the Lobbying Disclosure

Act of 1995, P.L. 104-65 (December 19, 1995).

The Byrd Amendment, which is implemented in regulations at 24 CFR

Part 87, prohibits applicants for Federal contracts and grants from

using appropriated funds to attempt to influence Federal Executive or

legislative officers or employees in connection with obtaining such

[[Page 12046]]

assistance, or with its extension, continuation, renewal, amendment or

modification. The Byrd Amendment applies to the funds that are the

subject of this NOFA. Therefore, applicants must file a certification

stating that they have not made and will not make any prohibited

payments and, if any payments or agreement to make payments of

nonappropriated funds for these purposes have been made, a form SF-LLL

disclosing such payments must be submitted. The certification and the

SF-LLL are included in the application package.

The Lobbying Disclosure Act of 1995, P.L. 104-65 (December 19,

1995), which repealed Section 112 of the HUD Reform Act and resulted in

the elimination of the regulations at 24 CFR Part 86, requires all

persons and entities who lobby covered Executive or Legislative Branch

officials to register with the Secretary of the Senate and the Clerk of

the House of Representatives and file reports concerning their lobbying

activities.

Catalog of Federal Domestic Assistance Number

The Catalog of Federal Domestic Assistance number for the

Program is 14.196.

Date: March 3, 1999.

William C. Apgar,

Assistant Secretary for Housing-Federal Housing Commissioner.

BILLING CODE 4210-27-P

[[Page 12047]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.001

[[Page 12048]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.002

[[Page 12049]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.003

[[Page 12050]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.004

[[Page 12051]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.005

[[Page 12052]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.006

[[Page 12053]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.007

[[Page 12054]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.008

[[Page 12055]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.009

[[Page 12056]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.010

[[Page 12057]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.011

[[Page 12058]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.012

[[Page 12059]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.013

[[Page 12060]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.014

[[Page 12061]]

[GRAPHIC] [TIFF OMITTED] TN10MR99.015

[FR Doc. 99-5861 Filed 3-9-99; 8:45 am]

BILLING CODE 4210-27-C