On April 19, 2004, HUD issued proposed regulations for the conversion of the 2530 process to electronic submissions. This rule, once implemented, would require participants in HUD-insured mortgage programs, Section 8 programs, and other programs to file 2530s electronically and to disclose participants on all levels of their organizational structure (beyond the three tiers currently required).
We issued an Affordable Housing Law Alert in November 2003 discussing HUD's plans to switch to electronic 2530 submissions. HUD's goal was to implement that electronic system by January 1, 2004, and to stop taking paper 2530 submissions. However, HUD yielded to certain practical realities of implementing a new computer system, as well as the legal requirements of providing notice and comment to the public, and did not implement at that time.
HUD believes it is now ready to implement electronic-only filing of 2530s. This short regulation provides for public notice and comment by May 19, 2004. The following is the text of the new rule:
Sec. 200.217 Filing of previous participation certificate on prescribed form.
(a) Effective [effective date of final rule to be inserted at publication of final rule], or on such later date as may be allowed by HUD, all participants/principals in HUD multifamily mortgage- and projectbased 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, participants 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:(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 participant or 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.
HUD's 2530 office has begun encouraging some participants to get an early start and use the electronic system now. We expect that a participant will not be able to access the new system unless he or she already has a HUD coordinator ID or a user ID. If a participant does not presently have these IDs, they will have to register electronically with HUD through a different Web site. Generally, if the participant has filed an audited financial statement, then it is registered.
This electronic filing process is not so much a new effort, but part of the long-term development of the Active Partners Performance System ("APPS") project that has been in testing at HUD since at least 1999. HUD published descriptions of the APPS software in the June 18, 2003, Federal Register.
More changes to the 2530 process are on the way. On April 13 and 14, HUD headquarters held an industry meeting of key industry business people that included our Affordable Housing Practice Group leader, Monica Sussman. The meeting's purpose was to address certain operational disconnects that have arisen over time in the 2530 process. We expect that those issues will be addressed after this new rule goes into effect.
If you have any questions, please call either Richard Price, Monica Sussman, or Anthony Ruvolo at 202-585-8000.