![[logo] US EPA](http://www.epa.gov/epafiles/images/logo_epaseal.gif){kind=logo}
Revised Guidelines for Previous Participation Certification
Note: EPA no longer updates this information, but it may be useful as a reference or resource.
[Federal Register: April 13, 2005 (Volume 70, Number 70)]
[Rules and Regulations]
[Page 19659-19663]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap05-24]
[[Page 19660]]
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 200
[Docket No. FR-4870-F-02]
RIN 2502-AI10
Revised Guidelines for Previous Participation Certification
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule revises the regulations to require all
participants in HUD's Multifamily Housing Programs to file their
Previous Participation Certificates by a specified date using the
Active Partner Performance System on HUD's secure Internet site. This
rule follows publication of a proposed rule and takes into
consideration the public comments received on the proposed rule. This
rule makes no substantive change to the proposed rule, but provides for
a six-month delay in the effective date of the electronic submission
requirement.
DATES: Effective Date: May 13, 2005.
FOR FURTHER INFORMATION CONTACT: James E. Collins, Management Analyst,
Housing Policy and Participation Standards Division, Office of the
Deputy Assistant Secretary for Multifamily Housing, Room 6180,
Department of Housing and Urban Development, 451 Seventh Street, SW.,
Washington, DC 20410-8000; telephone 202-708-1320, extension 3279 (this
is not a toll-free number). Hearing- and speech-impaired persons may
access this number through TTY by calling the toll-free Federal
Information Relay Service at 800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
The purpose of the Previous Participation Certification process is
to ensure that prospective participants in HUD's Multifamily Housing
Programs have a history of carrying out their past financial, legal,
and administrative obligations in a satisfactory and timely manner. The
current system requires HUD's business partners that want to
participate in multifamily housing programs to file a paper Previous
Participation Certificate using form HUD-2530 together with a
description of all previous participation in multifamily programs every
time they wish to do business with HUD.
II. The April 19, 2004, Proposed Rule
On April 19, 2004 (69 FR 21036), HUD published a proposed rule that
advised of HUD's intention to amend 24 CFR 200.217(a) to require that
filing, by a specific date, of the Previous Participation Certificate
by participants in HUD's Multifamily Housing programs be done
electronically rather than by completing a paper form (form HUD-2530).
In the proposed rule, HUD advised that the electronic filing would be
accomplished by using a secure Internet-based application developed by
HUD known as the Active Partner Performance System (APPS). The proposed
rule also clarified the types of transactions for which a principal or
participant in HUD multifamily mortgage insurance and project-based
subsidy programs must complete an electronic Previous Participation
Certificate.
The proposed rule stated that APPS will provide participants with a
secure environment within the HUD firewall where participants will
record pertinent information about their specific relationship to any
property. Using the APPS application, participants will be able to
ensure that their individual records are complete, correct, and
accurate at all times. APPS will provide participants with information
about the physical condition of properties with which they are
associated and will highlight any problems that may exist. Further,
APPS will assist HUD in monitoring participants. APPS will allow HUD to
maintain a history of participants, their various roles in property
operations, and properties with which they are or were involved. A
clear benefit of using APPS is that risk assessment of a party's new or
revised participation will occur faster, as paper is not required to be
sent back and forth across the country. Risk information will be shared
automatically with participants, which will make the issues resolution
process more efficient.
III. This Final Rule
This final rule implements the proposed rule without substantive
change, except that HUD has adopted the suggestion that there be a six-
month transition period. Hence, while the rule as a whole is effective
30 days from the date of publication, the effective date of the
provision requiring electronic submission of the Previous Participation
Certificate is 180 days from the date of publication in the Federal
Register. Prior to that date, participants are required to continue to
file form HUD-2530 as a condition prerequisite to new or revised
participation.
IV. Discussion of Public Comments
The public comment period for the proposed rule closed on May 19,
2004. HUD received seven comments in response to the rule: One from a
local residential services association; three from national
associations representing management groups and builders; one from a
government sponsored enterprise; one from a mortgage group; and one
from a national law firm. Each of the seven commenters expressed their
general support for HUD's effort to require electronic filing of
multifamily Previous Participation Certificates. One commenter
supported ``any procedural changes that reduce the paperwork burden.''
One commenter agreed that ``there are clear benefits to an electronic
submission, including faster reviews by HUD staff, which is critical to
the timely approval of FHA mortgage insurance for new projects.''
The following presents the significant issues raised by the
commenters and HUD's response to the comments.
Comment: Alternate Form for Submission: One comment noted a desire
to see a provision in the rule for transmission of participation data
in a form other than through APPS: ``HUD electronic systems are often
less than user friendly. If HUD-2530s could be sent via the Internet to
local offices, the process would be faster and less cumbersome.''
HUD Response: At this time HUD does not plan to provide such
alternatives. HUD has explored other forms of submission, but has so
far found none as effective as APPS. HUD has continued to develop some
alternatives within the system to ease the burden of initial inputs of
organization and participant data. For example, HUD now makes data
regarding the participant's portfolio available on-line and has
adjusted the system to remove some redundant and repetitive steps. The
Department continues to work to make the system efficient and easy to
use. HUD believes, based on its experience, that the solution that the
commenter suggests would actually decrease the system's efficiency.
Comment: Effective Date and Transition Period: Three commenters
stated their concern of being required to use the electronic system
immediately, beginning 30 days following the date the final rule is
published in the Federal Register. One comment requested an effective
date of at least six months because ``[t]he effective date of this rule
should recognize that experience with [APPS]
varies across the
affordable housing industry.'' Two commenters
[[Page 19661]]
suggested a transition period during which the applicants could submit
certifications on paper while any difficulties or technical issues with
the system are being resolved. One commenter also suggested that ``HUD
must allow itself sufficient time to make this requirement practical,''
and two commenters noted that training on the electronic system should
be widely available prior to the effective date.
HUD Response: HUD plans a transition period of six months from the
effective date of this final rule. This will allow time for
registration and entry of data by participants and for participants to
become familiar with the processes. The APPS process requires the entry
of baseline data about individuals and companies, collectively known as
participants. It is similar in nature to the paper process where the
parties listed on the paper form HUD-2530 listed names, addresses,
employer identification, taxpayer identification, and other data. After
the baseline is entered, the participant is responsible to keep the
data updated at all times. The second and final step is to link
individual property experience to the participant. All work is on-line
through HUD's secure servers. During the transition period,
participants will be required to file paper form HUD-2530 Previous
Participation Certifications for all new business. On and after the
effective date, paper forms will not be accepted.
In order to facilitate the transition, HUD is providing
informational materials, including the APPS user guide, on HUD's Web
site at http://www.hud.gov/offices/hsg/mfh/apps/appsmfhm.cfm. 
The APPS online application itself has on-line help functions to assist
while the participant is entering data.
Comment: Information Collection: Three commenters discussed the
issue of information collection generally. One commenter ``urge[d] HUD
to carefully review all information requested under the new submission
procedure to ensure that it is consistent with current 2530
regulations.'' Another commenter noted ``[t]he computerized system
should clearly allow for similar entries to the system as currently
structured, and not increase the scope of entities subject to
submission.'' The commenters also suggested that HUD use the new
electronic system to communicate to users, for example, any changes
that affect the system should be promptly posted. Two commenters
suggested specifically for HUD to be able to notify participants when
flags are placed and/or resolved to their account.
HUD Response: HUD does not believe that the requirements of this
final rule seek information beyond the scope of what is required now.
The APPS will reduce the burden on the public through on-line storage
of all required data, which will be secure, accessible, and able to be
updated by the participant.
On the point raised about electronic communication, HUD agrees that
digital communications to participants about APPS-related events would
be beneficial. HUD is considering this functionality for the future.
Presently, HUD communicates with participants using various methods.
Inspection report information is presently sent to participants by e-mail.
Comment: Definition of ``Participant'': Three commenters expressed
their concern over the lack of a definition for ``participant.'' One
commenter noted that `` `principal' is defined under 24 CFR 200.215,
but `participant' is not, and there is no definition for that term in
the Proposed Rule.'' One commenter stated they were advised that the
``three-tier rule in the 2530 handbook would be effectively eliminated
and thus numerous additional (undefined) `participants' would be
required to file certifications.'' Because ``principal'' and
``participant'' are important terms, the commenters suggested that they
should be clearly defined in the regulations.
HUD Response: ``Participant'' is the term that refers generically
to all principals, affiliates, etc. referred to in existing
regulations. So as not to confuse users, HUD has replaced references to
``participant'' with ``principal.''
As to the so-called ``three-tier rule,'' that ``rule'' is not based
on a regulation promulgated after notice-and-comment rulemaking, but
rather is a procedural guideline. A careful reading of HUD's codified
regulations does not include any limitation on organizational levels
that must file certifications. HUD Handbook 4065.1 will be updated to
reflect this regulation and more current policy.
Comment: Program References: Two commenters noted that the proposed
rule appears to reference HUD programs which no longer exist and fails
to reference current HUD program activities. One commenter suggested
that HUD should ``delete or revise 24 C.F.R. Section 200.213.''
HUD Response: This change would be beyond the scope of the current
rulemaking. HUD plans to update this section in the future.
Comment: Limited Liability Companies (LLCs) and Limited
Partnerships (LPs): Two commenters stated that it is unclear whether
the proposed rule would apply to LLCs and LPs equally or whether
different standards would apply. Both commenters suggested that the
final rule should clarify that equal requirements apply to both LLCs
and LPs. Moreover, one commenter maintained that ``passive investors,''
such as Limited Partners, should not be made to track some of the
information required in the HUD-2530 because they are not actively
involved in the management of the property.
HUD Response: HUD is considering changes to 24 CFR, Subpart H that
will clarify treatment of ``passive investors'' and recently created
business entity types. Under existing regulations at 24 CFR part
200.215, other public and private entities proposing to participate in
HUD programs are covered. Therefore, even where not specifically
mentioned, LLCs and LPs are covered.
At the present time, the Department has chosen to treat LLCs as if
they were partnerships. The Managing Member will be considered a
general partner and the members limited partners for participation
clearance purposes.
Comment: Interest Reduction Payment Contract: One commenter
requested clarification as to whether the HUD-2530 would have to be
filed by the owner of the property or the lender, in connection with
the assumption of an Interest Reduction Contract. The commenter
suggested that only the owner should be required to file the HUD-2530.
HUD Response: The previous participation process requires a HUD-
2530, Previous Participation Certification, to be submitted when there
is new or significantly expanded participation. To determine whether a
submission or application is required, Field Offices have been advised
to require a Previous Participation Certification when there is any
apparent change in control, including introduction of new entities.
Each case must be evaluated on its own terms as to whether it requires
a new filing.
Comment: 30-Day Advance Filing: One commenter stated that the
existing rule requires only that a HUD-2530 be filed prior to the date
of the proposed transaction, whereas the proposed rule requires that
the HUD-2530 be filed a least 30 days prior to the transaction. The
commenter requested clarification on this apparent discrepancy.
HUD Response: HUD is making this change because recent experience
has shown that in order to prevent delays from occurring in business
transactions, HUD needs this material to be filed earlier than previously.
[[Page 19662]]
Comment: Disclosure of Principals: One commenter noted that ``the
proposed rule places no limitation or qualification for disclosure and
places companies at risk of violating a rule unless they spend
significant time documenting information clearly relevant to a
transaction.'' The commenter suggested that the disclosure of up to
``three tiers'' in the organizational structure, per guidance contained
in HUD Handbook 4065.1, be required. Additionally, the commenter
suggested that disclosure of principals in large public entities should
be limited to ``affiliates, persons or divisions with operational
control over the property at issue.''
HUD Response: As stated earlier, the so-called ``three-tier rule''
is derived from Handbook policy and is not a rule promulgated under the
Administrative Procedure Act. A careful reading of the regulations does
not include any limitation on organizational levels. HUD Handbook
4065.1 will be updated to reflect this regulation and current policy.
HUD Handbook 4065.1 allows the Department to limit disclosure of the
principals in large public entities. HUD may clarify this distinction
in future rule changes.
Comment: Definition of Interest: One commenter noted that the
proposed rule does not contain a definition of interest. The commenter
stated ``[t]he previous participation procedures require submission for
all limited partners with more than 25% interest and stockholders with
more than 10% interest in the property. However, there is no definition
of what constitutes an interest.''
HUD Response: The definition of ``interest'' in this regulation is
the ordinary legal definition: ``A legal share in something; all or
part of a legal or equitable claim to or right in property'' (Black's
Law Dictionary 828 (8th ed. 2004)). Because the commonly-understood
definition of ``interest'' is being used, it is not necessary to
specifically define the term in this rule.
Comment: Migration of Data: One commenter stated that APPS should
allow the migration of data from other commonly-used databases.
HUD Response: HUD does not plan to provide this functionality at
this time due to budgetary constraints.
Comment: Task Force: One commenter states that a task force review
should be completed prior to requiring the use of a computerized
system, and that such a delay would provide for a transitional period.
HUD Response: HUD has considered this comment, and believes that it
is appropriate at this time to go forward with the transition to
electronic filing. HUD has built a six-month transition period into the
rule, making any further delay unnecessary.
V. Findings and Certifications
Paperwork Reduction Act
The information collection requirements contained in Sec. 200.217
have been approved by the Office of Management and Budget (OMB) in
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520) and assigned OMB control number 2502-0118. An agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless the collection displays a valid
control number.
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was 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 (42 U.S.C. 4332(2)(C)). The Finding of No Significant Impact
remains applicable to this final rule and is available for public
inspection between the hours of 8 a.m. and 5 p.m. weekdays in the
Regulations Division, Office of General Counsel, Room 10276, Department
of Housing and Urban Development, 451 Seventh Street, SW., Washington,
DC 20410-0500.
Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538)
establishes requirements for federal agencies to assess the effects of
their regulatory actions on state, local, and tribal governments and on
the private sector. This rule does not impose a federal mandate on any
state, local, or tribal government, or on the private sector, within
the meaning of the Unfunded Mandates Reform Act of 1995.
Impact on Small Entities
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), generally
requires an agency to conduct a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements unless the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities. This rule does not
change informational obligations for entities, but simply provides for
electronic filing of the same information that is currently required.
Therefore, the undersigned certifies that this proposed rule will
not have a significant economic impact on a substantial number of small
entities, and an initial regulatory flexibility analysis is not required.
Executive Order 13132, Federalism
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either imposes substantial direct compliance costs on state and local
governments and is not required by statute, or the rule preempts state
law, unless the agency meets the consultation and funding requirements
of section 6 of the Executive Order. This rule does not have federalism
implications and does not impose substantial direct compliance costs on
state and local governments nor preempt state law within the meaning of
the Executive Order.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number is 14.117.
List of Subjects in 24 CFR Part 200
Administrative practice and procedure, Claims, Equal employment
opportunity, Fair housing, Housing standards, Lead poisoning, Loan
programs-housing and community development, Mortgage insurance,
Organization and functions (Government agencies), Penalties, Reporting
and recordkeeping requirements, Social security, Unemployment
compensation, Wages.
? Accordingly, for the reasons described in the preamble, HUD amends 24
CFR part 200 as follows:
PART 200--INTRODUCTION TO FHA PROGRAMS
? 1. The authority citation for part 200 continues to read as follows:
Authority: 12 U.S.C. 1702-1715z-21; 42 U.S.C. 3535(d).
? 2. Amend Sec. 200.217 by revising paragraph (a) to read as follows:
Sec. 200.217 Filing of previous participation certificate on
prescribed form.
(a) Effective October 11, 2005, or on such later date as may be
allowed by HUD, all principals in HUD multifamily mortgage and project
based subsidy programs must submit an electronic Previous Participation
Certificate (form HUD-2530) via HUD's secure web server as a condition
prerequisite to new or revised participation. Prior to this date,
principals are required to file form HUD-2530 as a condition
prerequisite to new or revised participation. Filing requirements are
as prescribed by the Assistant Secretary for Housing-Federal Housing
Commissioner at the occurrence of any of the events below:
[[Page 19663]]
(1) With an Application for a Site Appraisal/Market Analysis
Letter, Feasibility Letter, Conditional Commitment for Mortgage
Insurance, or Firm Commitment for Mortgage Insurance, whichever
application is first filed, for projects to be financed or refinanced
with mortgages insured under the National Housing Act;
(2) With an Application for a Fund Reservation for projects
financed or to be financed with direct loans or capital advances under
section 202 of the Housing Act of 1959 (Housing for the Elderly and
Handicapped);
(3) With an Application for a Fund Reservation for projects
financed or to be financed with direct loans or capital advances under
Section 811 of the Cranston-Gonzales National Affordable Housing Act
(Supportive Housing for Persons with Disabilities);
(4) With the first request for a reservation of funds for
assistance payments for projects in which 20 percent or more of the
units are to receive a subsidy described in Sec. 200.213(c);
(5) With an Application for any Transfer of Physical Assets;
(6) With a request to assume any existing Housing Assistance
Payments Contract, Interest Reduction Contract, Rent Supplement
Contract, or Rental Assistance Payments Contract;
(7) With a request to change ownership of a property regulated or
controlled by a HUD ``use agreement'';
(8) With an application or request to change the approved lessee
operating a nursing home, assisted living, or skilled care facility;
(9) With a bid to purchase a project being sold at foreclosure by
HUD or by a foreclosure commissioner acting for HUD, when the terms of
the sale permit HUD to disapprove a bidder;
(10) With a bid to purchase a Secretary-owned project;
(11) With a bid to purchase a mortgage note held by the Commissioner;
(12) At least 30 days prior to the date of any proposed
substitution or addition of a new principal in an existing project,
such as management agents, LLC members, directors, or partners, or
proposed participation in a different capacity from that previously
approved for the same project;
(13) At least 30 days prior to the proposed acquisition by an
existing limited partner, stockholder, or any principal of additional
interests resulting in a total interest of at least 25 percent
(partners) or 10 percent (non-partners); or
(14) Certificates of participation must be submitted for interests
acquired by any party or organization by inheritance or court decree
within 30 days after said acquisition or decree, but will not be
subject to review or disapproval.
* * * * *
Dated: April 4, 2005.
John C. Weicher,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 05-7351 Filed 4-12-05; 8:45 am]
BILLING CODE 4210-27-P