Displacement Plan for CDBG and HOME

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8924 Federal Register / Vol 54. No. 40 / Thursday. March 2. 1989 / Rules and Regulations stuns of the common governmentwide rule, to provide that the payment shall be based on the remaining term of the mortgage on the displacement dwelling or the actual terra of the new mortgage, whichever is less. Many of the same commenters who preferred this method did not think that their agency could make the increased mortgage interest payments at the time of dosing because of their payment procedures or the loan processing procedures of lending institutions. In response, the final rule has been revised to provide that the payments must be made "at or near" We time of dosing. However. the implied purpose of the li increased mortgage interest coots payment is to reduce the replacement mortgage; therefore this payment must d be available to lower the amount of the u mortgage in a timely manner, preferably w at the time of the closing on the replacement property. 'Ibis procedure c does require close coordination with the de closing agent. but is more coat -effective than the amortization method. The eh agencies who thought they would be most successful using the bay -down au procedure were those who used escrow d accounts to make funds available to of displaced persons. cal There were oho several commentsthe about home equity loans and the inclusion of these mortgages in the computation of the increased mortgage Interest costa payment. Home equity th loans are valid mortgage liens on residential real property regardless of how the proceeds from the loans are us pied Therefore, they must be included In the computation. a In answer to another comment, the co co mortgage rate to be used to compute the m increased mortgage interest coats m payment when the property is pecured ha with an adjustable rate mortgage is the Pe interest rate that Is current on the a The first issue was the inclusion of coat ofutWties in the computation of rental assistance payment- The inclusion of utilities has been an ong issue since the Publication of the common rule in 1985. Since that time, utility services have been included in the computation of a rental assistance payment if they were included at the displacement dwelling and/or the comparable dwelling as a part of the rent. FHWA recognizes the concerns =rent the 14 commenters about the increased administrative burden for securing information and the variable In utility usage due to differing user restyles. Hese concerns can be ddressed in various ways. One commenter suggested that a schedule evised for utility costs with the input tility companies in the project area th ill reflect actual, reasonable coats. Another agency suggested that if true omparables are used far payment termination. the utility costa should also be comparable and their inclusion mild net increase the cost of replacement housing. Relocation from batandard dwelling to a standard welling could, in fact, decease the utilities, especial' the cost of heat ass a larger dwelling is used to mac needs of a family. or if all utilities ere not available in the displacement welling. as noted by another commenter. Agencies may establish their owndeterminingprocedures to be used for determining e cost of utilities if the procedures are ed uniformly. FHWA is continuing to include Odes in the monthly base housing mputatfon because utilities are nsidered to be an integral part of onthly housing coats and historically ve been treated as such by several deral programs including those dministered by HUD as a standard Pr actice. The existence of adequate the do agree that some tenants voluntarf y the elect to spend more than 30 percent of their Income for housing when more oing affordable housing is available. However. FHWA believes these lifestyle choices for convenience, prestige or other reasons to be the exceptions, not the rule. Consideration must also be given to the fact that private lending institution requirements set the 'knit on the monthly cost of housing after of purchase of a dwelling at approximately the same level as the 30 percent of income criteria established for tenants. The inclusion of a person's income in computing a base monthly rent figure was also opposed by several be . commenters. The biggest concern was a perceived difficulty in the verification of of income and an implied reluctance to at accept income information from some displaced persons. FHWA believes that accurate information concerning income can be obtained from most persona. 1.f there is obvious evidence that a person has more income than reported. it is the s Agency's prerogative to accept the income u reported. to request additional verification of income. co property as of the date of acquisition. ad Mies is a primary requirement for a ailing to be decent, safe, and anitary. The 30 percent figure used in 24.402(b)12)(li) to determine base nthly rental is considered a "unable percentage of income to be plied to rental housing costa under current market and economic nditiona, and is consistent with the rcentage of income figures currently ing used in other subsidized housing d related programa of HUD and other endes. Several commenters stated t. in their experience. many tenants now paying 40 percent or more of err for housing cods. Our cern hi that the 40 percent paymmts primarily reflect the lack of affordable tel housing In the current market. Ws A sample computation of an increased dw mortgage interest costs payment is included In Appendix A, as requested by a number of commenters. An IBM PC compatible computer program and mo financial calculator instructions will be tea made available as technical guidance as ap soon as feasible. Section 24.402 Replacement Housing co Payment for 90 -Day Occupants pe Section 24.402(42XllJ(A). The change an made in 124.401(a)(2)(t). concerning the ag deposit of estimated just compensation, the is made bete also, err, Section 24.402(b) Rental assislance th payment. There were numerqua can comments about the made In this median. ran including income tax returns. or to inform the person that there is reasonable doubt that the information is accurate. If the income information is not provided or amplified as requested, the Agency may take such action as it deems necessary to obtain income information under a uniform agency - wide or area -wide policy. Section 24.402(b)171 Maurer of disbursement. Eleven comments were received concerning the vesting of the full amount of the rental assistance payment when the displaced tenant receives the first rental assistance payment, either in Lump sum or as an installment. Most of the comments took exception to the idea of vesting. The vesting of the full amount of the rental assistance payment is Intended to establish at a definite point in time, the full amount of the payment for the 42 month period after displacement. Vesting eliminates the red -tape requirements of recordkeeping, re- inspection. and recertification of the replacement dwellings, and continued contacts with the displaced person and the person's landlord that would otherwise be necessary. It also eliminates the potential problem of additional project costs as rents are increased or new DSS dwellings need to be found for those who no longer live in standard housing. FHWA understands that thesame r.ommantersare concerned shout the diversion of.lump sans rental assistance ppaa_ymagts for non- housing uses. and a sabssgnent return of