Temporary Programmatic Waiver: Waiver of 49 CFR 24.401(b)(1)--Calculation of Replacement Housing Payment for Negativ

Subject:	INFORMATION: Temporary Programmatic Waiver: Waiver of 49 CFR 24.401(b)(1)--Calculation of Replacement Housing Payment for Negative Equity	Date:	Date: April 7, 2009
From:	Gerald Solomon, Esq. Director, Office of Real Estate Services	Reply to	HEPR-10
To:	Division Administrators Attn: Division Realty Professionals

Purpose

Pursuant to its authority under 49 CFR 24.7 to waive any requirement of 49 CFR Part 24 "not required by law if it determines that the waiver does not reduce any assistance or protection provided to an owner or displaced person," and in order to further the congressional intent of The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Uniform Act) (see Attachment A), the Federal Highway Administration (FHWA) is issuing this temporary programmatic waiver (Waiver), as described below, of the methodology set forth in the implementing regulations at 49 CFR 24.401(b)(1), relative to the manner for determining a replacement housing payment (RHP) for 180-day homeowner-occupants (homeowners) in negative equity situations.

As detailed in the background information in Attachment A, the current and historically unique negative equity housing situation has created circumstances where the methodology to calculate a RHP under 49 CFR 24.401(b)(1) ensures that a comparable replacement house is available to the displaced person as required by the Uniform Act. However, while a comparable is technically available, any administrative settlement agreement typically eliminates the RHP assistance available for these homeowners to purchase the replacement dwelling. As a result, the FHWA Office of Real Estate Services is issuing this temporary Waiver for transportation projects undertaken with Federal-aid pursuant to 23 U.S. Code (USC) Title 23, to be implemented in accordance with the following requirements.

Implementation of Waiver

This temporary Waiver shall commence on April 1, 2009, and remain in effect through January 1, 2011, unless otherwise extended in writing by the FHWA. All other requirements of 49 CFR Part 24 remains in effect.

The implementation requirements of this Waiver are described below. For the purpose of this Waiver, negative equity is defined as a situation in which real property is encumbered by a mortgage (or other qualified liens) that exceeds the current market value of the property. In these situations, the Waiver allows the State department of transportation (State Dot) to calculate a RHP pursuant to 49 CFR 24.401(b)(1) by using the initial written offer of just compensation, prepared in accordance with 49 CFR 24.102, as the "acquisition cost" when calculating the amount by which the cost of the replacement dwelling exceeds the acquisition cost. This allows a State Dot to enter into an Administrative Settlement, when appropriately justified (see Attachment B), for the acquisition of a property with negative equity that would not impact the calculation and reimbursement of a RHP. Examples of this calculation are reflected on Attachment C to this Memorandum.

The use of the Waiver is voluntary on the part of the State Dot, and is subject to the FHWA approval. Should a State Dot elect to utilize this Waiver, it must do so in accordance with the following requirements:

Prior to implementing a Waiver, the State Dot shall:

Assure the Waiver will not reduce any assistance or protection to the homeowner.
Make a public interest finding that clearly demonstrates that the proposed process for use of the Waiver is fair and equitable. This may include consideration that the homeowners bought their homes during the times of rapidly increasing home values and while they are in negative equity situations they are not in default and continue to meet their monthly payment obligations in a timely manner. Except for the compulsory sale for a public transportation project, these homeowners could continue to make their payments and wait for the market to stabilize and home values to increase before disposing of, or otherwise selling, their property.
Assure the State Dot's procedures to justify administrative settlements and obtain adequate title, in accordance with its FHWA approved Right-of-Way Manual, will apply to the Waiver.

The State Dot's proposal for implementation of the Waiver shall be submitted in writing to the Division Administrator for review and approval. The Division Administrator will review the proposal and issue either an implementation approval or, where warranted, the Division Administrator may temporarily withhold approval and recommend revisions to the State Dot's proposal in keeping with this guidance and request that the State Dot resubmit its request.

The Waiver must be implemented fairly and consistently. Implementation shall be subject to Division Administrator oversight. It is anticipated that the Division office will review the use and implementation of this Waiver at least annually to evaluate its effectiveness and ensure that it is implemented in a manner consistent with this guidance. Division office approval may be rescinded upon a determination that the waiver is not being properly implemented.

This Waiver is intended to provide an additional tool to assist State Dots in the relocation of homeowners impacted by negative equity in the acquired property, and is not intended to eliminate the need to comply with other requirements of the Uniform Act and implementing regulations, including but not limited to the requirements for relocation planning, advisory services, and coordination pursuant to 49 CFR 24.205. Moreover, it is intended to supplement other available tools (Attachment B) to assist State Dots in addressing all impacts associated with the acquisition and relocation of the homeowner.

Questions concerning this memorandum may be directed to Marshall Wainright at 202 366-4842 or at marshall.wainright@dot.gov, or by contacting your Office of Real Estate point of contact.

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