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

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.

(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

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.

(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

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

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

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.

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[FR Doc. 99-5861 Filed 3-9-99; 8:45 am] BILLING CODE 4210-27-C