pleted and submitted with the Preliminary Proposal.

(p) Whether the Owner proposes to limit the number of assisted units to 20 percent of the dwelling units in the project.

§ 1277.206 Submission of preliminary proposals.

(a) Preliminary Proposals shall be submitted to HUD on or before the published deadline date and time for opening, in the number of copies specified in the Rehabilitation Program Packet. Proposal documents shall be sealed in an inner envelope marked "Sealed Proposal-Open on [date and time specified in the Invitation]". This sealed proposal shall be submitted in an outer envelope or package which shall show the name of the locality, be addressed to the HUD field office, and be clearly and distinctively marked "Section 8 Housing Assistance Payments Program-Substantial Rehabilitation Preliminary Proposal".

(b) Submission of Preliminary Proposals shall be by hand delivery or certified mail. Any Preliminary Proposal received by HUD after the deadline date and time shall not be accepted but shall be returned unopened. No Preliminary Proposal shall be opened by HUD until the deadline.

§ 1277.207 Proposals involving HUDFHA mortgage insurance.

(a) Advance mortgage insurance processing. This paragraph (a) applies to Owners who apply for HUD-FHA mortgage insurance prior to the submission of a Preliminary Proposal under this Part. Such an Owner may apply for a Feasibility Letter, a Conditional Commitment, or a Firm Commitment for mortgage insurance by submitting an application on the prescribed form with supporting exhibits and the required fee. Such an application will have to meet the marketability test without reliance upon housing assistance payments under this Part, or, in the alternative, approval for mortgage insurance shall be conditioned upon subsequent approval of a section 8 proposal for the same project. If a Feasibility Letter, Conditional Commitment, or Firm Commitment, whichever is applicable, is issued, and if prior to expiration thereof the Owner submits a Preliminary Proposal under this Part which is consistent with the proposal as approved for mortgage insurance, such proposal will nevertheless be subject to review and evalua

tion in accordance with the procedures under this Part; however, if the Preliminary Proposal is selected in accordance with the procedures under this Part, further processing will be coordinated in accordance with paragraph (b) of this section to the extent applicable, and the rents which were approved for mortgage insurance purposes will be accepted for purposes of such Preliminary Proposal provided that they are otherwise approvable in accordance with this Part.

(b) Concurrent processing. The provisions of this paragraph (b) apply where the Preliminary Proposal indicates an intention to finance a project with a HUD-FHA insured mortgage. Such a Preliminary Proposal will not be selected under this Part unless it meets the market and site acceptability criteria of the applicable mortgage insurance program except as modified by this paragraph. The processing of such a proposal for mortgage insurance will be integrated with the section 8 review and evaluation process. Selection by HUD of such a Preliminary Proposal for preparation of a Final Proposal will be made only where HUD has also determined that the proposal will qualify for mortgage insurance subject to a satisfactory demonstration by the Owner of his capability to complete the projects and subject to subsequent determinations of "as is" value, the loan amount and credit approval. A proposed project which qualified as "substantial rehabilitation" under section 8 may fail to qualify as substantial rehabilitation under mortgage insurance programs (because of the different definition of "substantial rehabilitation"); nevertheless, such a proposal would qualify for mortgage insurance as "existing construction," and mortgage insurance commitments will be conditioned upon the satisfactory completion of all rehabilitation work.

(1) A section 8/HUD-FHA mortgage insurance project will be required to meet the marketability test of the applicable mortgage insurance program; provided, however, that the number of units in the proposal for which housing assistance payments are to be made available will be considered as an addition to the effective demand for unassisted rental units. As in the case of any other market analysis for market rate unassisted mortgage insurance programs, the supply of suitable vacant existing units, units under construction, and units in process

must be subtracted from the estimate of total effective demand. Consequently, section 8/HUD-FHA insured units could be added to a market in which supply and demand are in equilibrium or in which there is an undersupply of rental units, but could not be added to a market in which there is an oversupply of rental units in the same competitive range of market rents as the proposed section 8/ HUD-FHA insured project.

(2) After selection of a Preliminary Proposal which involves HUD-FHA mortgage insurance the Owner will be required to submit, with the Final Proposal, an application for HUD-FHA Conditional Commitment with fee (two dollars per thousand dollars of mortgage requested) under the applicable mortgage insurance program. Such Final Proposals will not be approved under Section 8 unless they also qualify for isssuance of a HUD-FHA Conditional Commitment under the applicable mortgage insurance program. The HUD notification of approval of the Final Proposal will be accompanied by a HUD-FHA Conditional Commitment for HUD-FHA mortgage insurance. The Owner's acceptance of HUD's notification of approval of the Final Proposal will constitute concurrent acceptance of the conditions and terms of the HUD-FHA Conditional Commitment for mortgage insurance.

(3) The rents of those units scheduled for assisted occupancy, when projected for purpose of determining a mortgage limitation based on the debt service criterion, shall be the Contract Rents set forth in the approved Final Proposal.

(4) Prior to the execution of the Agreement, the Owner will be required to ob'tain a Firm Commitment for HUD-FHA mortgage insurance. This will require the submission of an application for a Firm Commitment, with an additional fee (one dollar per thousand dollars of the mortgage requested), upon acceptance of HUD's notification of approval or the submission of the architect's certification accompanying the working drawings and specifications in accord with § 1277.211.

(c) Delayed Mortgage Insurance Processing. Where an Owner does not indicate in his Preliminary Proposal that he intends to utilize HUD-FHA mortgage insurance and applies for HUD-FHA mortgage insurance after HUD approval of the Preliminary Proposal under this Part, he risks (1) having his approved

proposal rejected for HUD-FHA mortgage insurance and (2) having lower rents approved under the mortgage insurance program than the rents set forth in the approved proposal under this Part. § 1277.208 Screening and evaluation of preliminary proposals.

(a) Initial Screening. Promptly after the deadline date for receipt of Preliminary Proposals, HUD will screen all the proposals to determine which are complete and responsive and eligible for further processing. Where a proposal lacks one or more of the required elements (see Sec. 1277.205), or is clearly not responsive to the conditions of the Invitation and the Rehabilitation Program Packet, the HUD field office shall give the Owner the shortest reasonable time (generally not to exceed 10 days) to remedy the deficiency.

(b) A-95 Clearance: Notice to Unit of General Local Government. (1) Promptly after the deadline date for receipt of proposals (or after the appropriate later date for proposals completed pursuant to paragraph (a) of this section), the HUD field office will, for each complete and responsive Preliminary Proposal which is subject to A-95 clearance, send a copy of the proposal to the appropriate A-95 Clearinghouse for review, inviting a response within 34 days from the date of the letter of transmittal.

(2) Within 10 working days after the deadline date for receipt of proposals (or after the appropriate later date for proposals completed pursuant to paragraph (a) of this section), the HUD field office will forward, under cover of a letter on the appropriate prescribed form, a copy of each complete and responsive Preliminary Proposal to the chief executive officer (or such designee as such officer may designate in writing to the HUD field office) of the unit of general local government in which the proposed housing is to be located. The cover letter will invite a response within 30 days from the date the letter and copy of the proposal are received.

(c) Evaluation of preliminary proposals by HUD. HUD may begin its evaluation promptly after the deadline date, but no selection or ranking may be completed until the response periods referred to in paragraph (b) of this section have ended. Each Preliminary Proposal will be evaluated and ranked by HUD on the basis of all pertinent factors under this Part including, the best combination of

rent, site, design and previous experience of the proposed Owner and on the basis of comments, if any, received during the response periods from the appropriate A-95 Clearinghouse and the unit of general local government.

(d) Selection (where approvable proposals do not exceed number by size) of units advertised. For each geographic area HUD will determine which Preliminary Proposals, in its judgment, can be developed into Final Proposals meeting the requirements of the Rehabilitation Program Packet. If the units covered by such Preliminary Proposals could all be accommodated in the number of units (by unit size) specified in the Invitation, HUD will request all Owners of acceptable Preliminary Proposals to prepare Final Proposals in accordance with § 1277.209.

(e) Selection where approviable proposals exceed number (by size) of units advertised. If the units covered by acceptable Preliminary Proposals cannot all be accommodated by the number of units (by unit size) specified in the Invitation, HUD will proceed as follows:

(1) Proposals consisting of projects to be developed entirely or predominantly for the elderly shall be listed in rank order and a second rank listing shall be established for projects to be developed entirely or predominantly for family housing.

(2) With respect to the listing of proposals for elderly housing, the HUD field office will identify for selection the highest ranking proposals in descending order which will most nearly provide the number of units of elderly housing called for in the Invitation.

(3) With respect to the listing of proposals for family housing, the HUD field office will identify for selection the highest ranking proposals in descending order which collectively will most nearly provide the number and sizes of units of family housing called for in the Invitation; provided however that if there is a Preliminary Proposal for the rehabilitation of more than 50 units of family housing which indicates that assistance will be limited to 20 percent or less of the units to be rehabilitated, this proposal shall be given priority over the lowest ranking proposal (s) identified for selection which is for more than 50 units and which is for generally the same number and sizes of units.

(4) The field office shall determine whether the combined results of the ten

tative selections from both listings would exceed the number and sizes of units called for in the Invitation. If so, the field office shall make such revisions in the tentative selections as it may determine to be necessary.

(f) Use of residual units. For any residual number of units, HUD may publish another Invitation for Proposals, but this shall not delay the further processing of those Preliminary Proposals submitted in response to the prior Invitation that have been selected as a result of the prior Invitation.

(g) Notification of selection. (1) With respect to those Preliminary Proposals which have been selected in accordance with this section, HUD will notify the Owners, on a prescribed form, and request them to submit within a reasonable time (to be specified in the notification) a Final Proposal in accordance with the requirements of the provisions of § 1277.209. The notification shall specify:

(i) The Contract Rents that will be acceptable to HUD where these are lower than the Contract Rents proposed by the Owner, and the reason for the reduction;

(ii) The term of the Contract that will be acceptable to HUD where it is shorter than the term proposed by the Owner, and the reason for the shorter term;

(iii) That the services of a registered architect must be utilized where HUD has determined that the nature and extent of the rehabilitation requires the utilization of such services;

(iv) The estimate of the amount of relocation payments, where applicable; and

(v) Other special conditions or requirements, if any.

(2) The notification will request the Owner to return a copy of the notification with an indication of his acceptance thereof by a specified date. If the Owner does not accept the notification by the date specified, HUD may rescind the notification and select another approvable proposal.

(h) Notification of nonselection. Owners whose Preliminary Proposals were not selected by HUD shall be sent a letter notifying them of such determination.

§ 1277.209 Final proposals.

(a) Contents of Final Proposal. Each Final Proposal shall indicate or include the following:

(1) A copy of the site option agreement(s), contract(s) of sale, or other document(s) which evidence (s) the proposer's effective control of the property to be rehabilitated (however, only the proposed price is required for a New Communities project).

(2) A description of the proposed rehabilitation covering each basic element (e.g., roof, exterior walls, porches and steps; interior walls, ceilings, and floors; kitchen and bathroom facilities and equipment; plumbing, heating and electrical equipment; landscaping; etc.) indicating the nature of the work to be done on each element and the grade and quality of the work, materials and equipment. If alteration, renovation or remodeling are indicated, preliminary drawings and plans and outline specifications on the prescribed form.

(3) The Contract Rent per unit, by size and structure type.

(4) The equipment to be included in the Contract Rent.

(5) The utilities and services to be included in the Contract Rent and those utilities and services not so included. For each utility and service not so included, an estimate of the average monthly cost (for the first year of occupancy) to the occupants by unit size and structure type.

(6) In the case of a PHA-Owner Project, a statement that (i) the PHA will undertake liability for and provide the funding of all relocation payments under sections 202, 203, and 204 of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, or (ii) other commitments, which the Owner believes to be satisfactory to HUD, have been made for the funding of such payments. In the latter case, the PHA shall specify such other commitments. (In the case of a Private-Owner Project or a Private-Owner/PHA Project, the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 is inapplicable.)

(7) The proposed term of the Contract (including all renewals) and justification for such term in accordance with § 1277.103(g).

(8) Submission of an Affirmative Fair Housing Marketing Plan (if the proposal is for five or more units), a signed assurance of compliance with Title VI of the Civil Rights Act of 1964, Title VIII of the Civil Rights Act of 1968, Executive Order 11063, and certifications required pursuant to Executive Order 11246.

(9) Submissions as required by HUD regulations and other requirements pursuant to section 3 of the Housing and Urban Development Act of 1968.

(10) The identity of the Owner, rehabilitator, architect (if applicable) and managing agent (if known); the qualifications and experience of each; and the names of officials and principal members, shareholders and investors, and other parties having substantial interest, and the prior participation of each in HUD programs, using the prescribed form.

(11) Submission of evidence of management capability and a proposed management plan and a certification by the Owner and the management agent, if any, in a format acceptable to HUD; or, if the proposal is for less than 15 units, evidence of capability of providing the required management and maintenance services. If the Owner proposes to contract with another entity, including a PHA, for management and/or maintenance services for the project, he shall include a copy of the proposed contract(s).

(12) Submission of the form of Lease the Owner proposes to use, which shall be in accordance with § 1277.218(c).

(13) The proposed method of financing and whether the Owner intends to pledge or offer the Agreement and/or Contract as security for any loan or obligation (see Sec. 1277.103 (q)). If the Owner intends to utilize FHA mortgage insurance, an application for a Conditional Commitment on the prescribed form shall be completed and submitted with the prescribed fee with the Final Proposal.

(14) Evidence that the proposed rehabilitation is permissible under the applicable zoning, building, housing and other codes, ordinances or regulations; or a statement of the proposed action to make the rehabilitation permissible and that such action will be successfully completed prior to the Owner's acceptance or the architect's certification (if required) pursuant to § 1277.211(b).

(15) The anticipated time required for completion of the rehabilitation after the Agreement is signed (if the project is to be completed in stages, identification of the units comprising each stage and the estimated dates for commencement and completion of each stage).

(b) Consistency with preliminary proposal. The Final Proposal shall be consistent with the Preliminary Proposal.

Any material deviations from the Preliminary Proposal in the Final Proposal will cause reconsideration by HUD of such Final Proposal and may result in its rejection.

§ 1277.210 Evaluation of final proposals.

(a) Evaluation of final proposals by HUD. Each Final Proposal will be evaluated by HUD to determine that the provisions of this Part have been complied with and that such Final Proposal is consistent with the Preliminary Proposal.

(b) Clarifications or modifications. HUD may request clarification of individual items, additional information, or modifications of the Final Proposal.

(c) HUD determination. HUD shall notify the Owner (and the PHA, if applicable) as to whether the Final Proposal is:

(1) Approved.

(2) Approvable only if specified deficiencies are corrected and that HUD will approve the Final Proposal if it receives within a specified time evidence of such necessary corrections.

(3) Not approved. If a Final Proposal is not approved or if the conditions for approval under paragraph (c) (2) of this section are not met, HUD shall so advise the Owner and may request the preparation of a Final Proposal (s) with respect to the highest ranking Preliminary Proposal (s) not previously selected, or may issue another Invitation for Preliminary Proposals.

(d) Notification. The appropriate A-95 Clearinghouses and the unit of general local government shall be notified by HUD of its final action.

§ 1277.211

Owner's acceptance of notification and submission of architect's certification.

(a) Owner's acceptance. Upon receipt by the Owner of the notification of approval of the Final Proposal, the Owner shall return to HUD a copy indicating his acceptance within the time prescribed in such notification (copy to the PHA, if applicable). If the Owner does not accept the notification by the date specified, HUD may rescind the notification and proceed in accordance with § 1277.210(c) (3).

(b) Architect's certification. (1) If the services of a registered architect are to be used, HUD may not enter into an Agreement (or, where applicable, an

ACC and an Agreement) until after the Owner has submitted to HUD the architect's certification on the prescribed form. Such certification shall be made by the architect responsible for the preparation of the working drawings and specifications.

(2) The architect's certification shall state that, to the best of the architect's knowledge, belief, and professional judgment, (i) the working drawings and specifications are consistent with the approved Final Proposal (including any modifications required by HUD in its review of the Final Proposal), and (ii) the proposed rehabilitation in accordance with these plans and specifications is permissible under the applicable zoning, building, housing, and other codes, ordinances or regulations, as modified by any waivers obtained from the appropriate officials. This certification shall also cover compliance with the appropriate HUD Minimum Designed Standards for Rehabilitation for Residential Properties and other standards, guidelines and criteria applicable under this Part.

(3) One copy of the certified working drawings and specifications shall be submitted with the architect's certification to HUD, which shall retain it and any changes approved by HUD for at least three years from the date of acceptance of the project; provided, however, that receipt and retention by HUD of these working drawings and specifications shall not denote or constitute HUD review or approval of such drawings or specifications.

(4) If the Owner fails to submit the certification by the date specified in the notification, HUD shall rescind the notification (and may proceed in accordance with § 1277.210(c)(3)) unless it determines that a reasonable extension of time should be granted.

§ 1277.212 Annual contributions co contract and agreement (private-owner/ PHA projects).

(a) Preparation of ACC. After receipt of the accepted notification (and, where required, the architect's certification with the working drawings and specifications), the HUD field office shall prepare the ACC, shown as Appendix III. The ACC shall be transmitted to the PHA for execution and returned to HUD. This transmittal shall advise the PHA that it must simultaneously submit for HUD approval its Initial Estimate of Required Annual Contributions (Preliminary