Federal Housing Administration (FHA) Section 232 Healthcare Mortgage Insurance Program: Partial Payment of Claims
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CFR Part: "24 CFR Part 232"
RIN Number: "RIN-2502-AJ04"
Citation: "77 FR 72920"
Document Number: "Docket No. FR-5537-F-02"
"Rules and Regulations"
SUMMARY: This rule amends the regulations governing FHA's Section 232
EFFECTIVE DATE: Effective Date:
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION: FHA's Section 232 program insures mortgage loans to facilitate the construction, substantial rehabilitation, purchase, and refinancing of nursing homes, intermediate care facilities, board and care homes, and assisted-living facilities. A project may include more than one type of facility and financing, and a combination of these uses is acceptable. The Section 232 program is authorized under the National Housing Act (12 U.S.C. 1715w). HUD's regulations for the Section 232 program are codified in 24 CFR part 232. While many aspects of HUD's healthcare facility operations, including the basic contract and eligibility requirements, are governed by the regulations applicable to HUD's multifamily mortgage insurance programs, separate healthcare regulations have been adopted to address program operations specific to healthcare facilities, such as state licensing requirements. /1/
FOOTNOTE 1 The regulations codified at 24 CFR part 200 (entitled "Introduction to FHA programs") set forth, in a single location of the Code of Federal Regulations, requirements that are generally applicable to FHA programs. The regulations at 24 CFR 232.2 require that facilities meet state licensing requirements. END FOOTNOTE
One process well-established and long used in HUD's multifamily housing programs is acceptance of partial payment of claims (PPCs). The regulations implementing the statutory authority to accept PPCs, which FHA adopted in 1985, and which are codified in 24 CFR 207.258b, specifically excluded FHA's Section 232 program from the multifamily PPC process. (See 24 CFR 232.251(a).)
B. The Proposed Rule and Public Comments
The proposed regulations governing PPCs in the Section 232 program used the current multifamily program regulations governing PPCs, codified at 24 CFR 207.258b, as a baseline. Those PPC regulations were modified based on FHA's experience in implementing the PPC process in its multifamily housing programs, and in utilizing PPCs in the Section 232 program on a periodic and temporary basis.
The proposed rule added a new
As stated in the proposed rule preamble and emphasized here in this preamble to the final rule, FHA's partial payment of claim is made pursuant to the contract of mortgage insurance between FHA and the mortgage lender, which are the only parties to the contract. Borrowers and operators are neither parties to the contract of insurance, nor are they third-party beneficiaries, and thus they do not have any rights or expectations in regard to any decision made by FHA to accept or reject a mortgagee's request for a partial payment of claim.
By establishing a standard process and criteria for acceptance and payment of PPCs in the Section 232 program, partial payment of claims can occur more frequently than they do now in the Section 232 program, not only resulting in savings to the FHA insurance fund, but helping to restore a project to financial stability.
The public comment period for the
C. This Final Rule
In this final rule, HUD adopts the proposed rule without substantive change, but makes an organizational change and makes certain citation revisions as a result of the organizational change. In this final rule, HUD is adding the PPC provisions to subpart B, entitled Contract Rights and Obligations. In the proposed rule, these changes were proposed to be added to subpart D, which is also titled Contract Rights and Obligations, but subpart D follows subpart C, Supplemental Loans to Finance Purchase and Install Fire Safety Equipment, and focuses on payments and claims related to loans to finance the purchase and installation of fire safety equipment. Relocating the PPC provisions to part 232 subpart B, which addresses contract rights and obligations generally under the Section 232 program, was determined to be a more appropriate fit. Further, HUD has made several minor revisions in the final rule stage to conform the references in this rule to the relevant sections describing the claims process to reflect the change from subpart D.
Findings and Certifications
Executive Order 13563, Regulatory Review
The President's Executive Order (EO) 13563, entitled "Improving Regulation and Regulatory Review," was signed by the President on
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) (5 U.S.C.
This rule is directed to strengthening HUD's Section 232 program by establishing a process and criteria by which the FHA may allow partial payment of claims for Section 232 projects. As noted under the discussion of EO 13563, establishment of this process also opens up another means by which healthcare project owners can restore troubled projects to financial stability. Acceptance of PPCs helps healthcare project owners and operators to lower project debt, and continue to provide valued healthcare services to the communities they serve. This established process for acceptance of PPCs will help all healthcare project owners, large and small. Additionally, by clarifying and codifying existing requirements, the rule makes it easier for borrowers and operators to comply with their legal obligations. Accordingly, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities.
Information Collection Requirements
The information collection requirements contained in this rule were reviewed by the
In accordance with the Paperwork Reduction Act, 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 currently valid OMB control number.
The docket file is available for public inspection.
A Finding of No Significant Impact with respect to the environment for this rule was made at the proposed rule stage 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)). That Finding of No Significant Impact remains applicable to this final rule and is available for public inspection
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 will not have federalism implications and would not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) 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 any federal mandates on any state, local, or tribal governments, or on the private sector, within the meaning of UMRA.
Catalogue of Federal Domestic Assistance
The Catalogue of Federal Domestic Assistance Number for the
List of Subjects in 24 CFR Part 232
Fire prevention, Health facilities, Loan programs--health, Loan programs--housing and community development, Mortgage insurance, Nursing homes, Reporting and recordkeeping requirements.
Accordingly, for the reasons cited in the preamble, HUD amends part 232 of title 24 of the Code of Federal Regulations as follows:
PART 232--MORTGAGE INSURANCE FOR NURSING HOMES, INTERMEDIATE CARE FACILITIES, BOARD AND CARE HOMES, AND ASSISTED LIVING FACILITIES
1. The authority citation for 24 CFR part 232 is revised to read as follows:
Authority: 12 U.S.C. 1715b, 1715w, 1735f-19; 42 U.S.C. 3535(d).
(a) When a lender for a loan on a healthcare project becomes eligible to file an insurance claim and to assign the mortgage to the Commissioner pursuant to
(b) The Commissioner may request the lender to participate in a partial payment of claim in lieu of assignment only after a determination that partial payment would be less costly to the Federal Government than other reasonable alternatives for maintaining the project and that would keep the healthcare facility operational to serve community needs. In addition to any findings that may be provided in other guidance, the Commissioner shall base the determination on the findings listed below:
(1) The lender is entitled, after a default as defined in
(2) The relief resulting from partial payment, when considered with other resources available to the project, would be sufficient to restore the financial viability of the project;
(3) The project is or can (at reasonable cost) be made physically sound;
(4) The current or proposed operator of the facility is satisfactory to the Commissioner, as demonstrated by past experience in operating similar types of healthcare facilities and by state regulatory performance;
(5) The default under the insured mortgage was beyond the control of the borrower and/or operator, or in the case of a transfer of physical assets (TPA), the proposed borrower or operator, unless the Commissioner determines that any borrower/operator deficiencies giving rise to the default have clearly been addressed; and
(6) The project is serving as, or potentially could serve as, a needed nursing home, intermediate care facility, board and care home, or assisted living facility.
(c) Partial payment of a claim under this section shall be made only when:
(1) The property covered by the mortgage is free and clear of all liens other than the insured first mortgage and such other liens as the Commissioner may have approved;
(2) The lender has voluntarily agreed to accept a PPC under the mortgage insurance contract and to recast the remaining mortgage amount under terms and conditions prescribed by the Commissioner; and
(3) The borrower has agreed to repay to the Commissioner an amount equal to the partial payment, with the obligation secured by a second mortgage on the project containing terms and conditions prescribed by the Commissioner. The terms of the second mortgage will be determined on a case-by-case basis to ensure that the estimated project income will be sufficient to cover estimated operating expenses and debt service on the recast insured mortgage. The Commissioner may provide for postponed amortization of the second mortgage.
(d) Payment of insurance benefits under this section shall be in cash.</p>
(e) A lender receiving a partial payment of claim, following the Commissioner's endorsement of the mortgage for full insurance under 24 CFR part 252, will pay HUD a fee in an amount set forth through
Acting Assistant Secretary for Housing--
[FR Doc. 2012-29545 Filed 12-6-12;
BILLING CODE 4210-67-P
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