This rule also amends the definition of ``mortgagee or lender'' because the rule used the term ``mortgagee'' to refer to the applicant as well as the original lender. Therefore, a definition of ``mortgagee'' will clarify any possible ambiguity regarding to whom ``mortgagee'' refers.

The definition of ``construction'' inadvertently omitted reference to ``substantial rehabilitation''. As is made clear in other parts of the rule, including in the definition of ``project,'' substantial rehabilitation such as additions and renovations are supported by the program. However, to remove any possible ambiguity, the phrase ``or the substantial rehabilitation of an existing facility'' is being added to the definition of ``construction''.

With respect to the definition of ``surplus cash,'' it was the intent of the final rule that ``surplus cash'' includes cash from prior periods. This statement was made in the preamble of the final rule in response to public comments. (See 72 FR 67529.) This technical correction adds language to make this explicit in the definition of ``surplus cash''.

Additionally, a new paragraph (h) is added for the same reasons provided in the amendment to Sec. 242.56.

Justification for Final Rulemaking

In general, the Department publishes a rule for public comment before issuing a rule for effect, in accordance with its own regulations on rulemaking, 24 CFR part 10. However, part 10 does provide for exceptions from that general rule where the agency finds good cause to omit advance notice and public participation. The good cause requirement is satisfied when prior public procedure is ``impracticable, unnecessary, or contrary to the public interest'' (24 CFR 10.1). In this case, public comment is unnecessary because HUD is making only technical corrections and clarifying amendments to a previously published final rule.

Regulatory Flexibility Act

The undersigned, in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed and approved this rule, and in so doing certified that this rule will not have a significant economic impact on a substantial number of small entities. This rule only makes technical corrections and clarifying amendments to a previously published final rule.

Environmental Impact

A Finding of No Significant Impact with respect to the environment was made in connection with this rulemaking in accordance with HUD regulations at 24 CFR part 50, which implement section 102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of No Significant Impact remains applicable, and is available for public inspection between 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 204105000.

Executive Order 13132, Federalism

Executive Order 13132 (entitled ``Federalism'') prohibits, to the extent practicable and permitted by law, an agency from promulgating a regulation that has federalism implications and either imposes substantial direct compliance costs on state and local governments and is not required by statute, or preempts state law, unless the relevant requirements of section 6 of the Executive Order are met. This final rule does not have federalism implications and does not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive Order. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 15311538) (UMRA) establishes requirements for federal agencies to assess the effects of their regulatory actions on state, local, and tribal governments, and on the private sector. This final rule does not impose any federal mandates on any state, local, or tribal government, or on the private sector, within the meaning of UMRA.

List of Subjects in 24 CFR Part 242

Hospitals, Mortgage insurance, Reporting and recordkeeping requirements.
Accordingly, for the reasons described in the preamble, HUD amends 24 CFR part 242 to read as follows:
PART 242MORTGAGE INSURANCE FOR HOSPITALS

1. The authority citation is revised to read:

Authority: 12 U.S.C. 1709, 1710, 1715b, 1715u, and 1715z7; 42 U.S.C. 3535d.
Subpart AGeneral Eligibility Requirements
2. Amend Sec. 242.1 by revising the definitions of ``chronic convalescent and rest,'' ``construction,'' ``mortgagee or lender'' and first sentence of the definition of ``surplus cash,'' to read as follows:
Sec. 242.1 Definitions.

* * * * *

Chronic convalescent and rest means skilled nursing services, intermediate care services, respite care services, hospice services, and other services of a similar nature.

Construction means the creation of a new or replacement hospital facility, or the substantial rehabilitation of an existing facility. The cost of acquiring new or replacement equipment may be included in the cost of construction. * * *

Mortgagee or lender means the applicant for insurance or the original lender under a mortgage. * * *

Surplus Cash means any cash remaining after all of the following conditions have been met:
* * * * *
3. Revise the second sentence of Sec. 242.10 as follows:
Sec. 242.10 Eligible mortgagors.
* * * The mortgagor shall be approved by HUD and, except in those cases where the hospital is leased as permitted in Sec. 242.72, shall possess the powers necessary and incidental to operating a hospital. * * *
Subpart BApplication Procedures and Commitments
4. Revise Sec. 242.23(a) and the last sentence of paragraph (c) to read as follows:
Sec. 242.23 Maximum mortgage amounts and cash equity requirements. (a) Adjusted mortgage amountrehabilitation projects. A mortgage financing the substantial rehabilitation of an existing hospital shall be subject to the following limitations, in addition to those set forth in Sec. 242.7:
(1) Property held unencumbered. If the mortgagor is the fee simple owner of the property and the property is not encumbered by an outstanding indebtedness, the mortgage shall not exceed 100 percent of HUD's estimate of the cost of the proposed substantial rehabilitation. (2) Property subject to existing mortgage. If the mortgagor owns the property subject to an outstanding indebtedness, which is to be refinanced with part of the insured mortgage, the mortgage shall not exceed the total of the following:
(i) The Commissioner's estimate of the cost of substantial rehabilitation, plus
(ii) Such portion of the outstanding indebtedness as does not exceed 90 percent of HUD's estimate of the fair market value of such land and improvements prior to substantial rehabilitation.
[[Page 35923]]
(3) Property to be acquired. If the property is to be acquired by the mortgagor and the purchase price is to be financed with a part of the insured mortgage, the mortgage shall not exceed 90 percent of the total of the following:
(i) The Commissioner's estimate of the cost of substantial rehabilitation, plus
(ii) The actual purchase price of the land and improvements or HUD's estimate (prior to substantial rehabilitation) of the fair market value of such land and improvements, whichever is the lesser. * * * (c) Cash equity. * * *. A private nonprofit or public mortgagor, but not a proprietary mortgagor, at the mortgagee's option and subject to 24 CFR 242.49, may provide any such required equity in the form of a letter of credit.
Subpart CMortgage Requirements
5. Revise Sec. 242.33 to read as follows:
Sec. 242.33 Covenant for malpractice, fire, and other hazard insurance.

The mortgage shall contain a covenant binding the mortgagor to maintain adequate liability, fire, and extended coverage insurance on the property. The mortgage shall also contain a covenant binding the mortgagor to maintain adequate malpractice coverage. All coverage shall be acceptable to the mortgagee or HUD.
6. Revise Sec. 242.35(d) to read as follows:
Sec. 242.35 Mortgage lien certifications.
* * * * *
(d) The mortgagor has notified HUD in writing of all unpaid obligations in connection with the mortgage transaction, the purchase of the mortgaged property, the construction or substantial rehabilitation of the project, or the purchase of the equipment financed with mortgage proceeds.
Subpart EConstruction
7. Revise the second sentence of Sec. 242.50 to read as follows: Sec. 242.50 Funds and finances: offsite utilities and streets. * * * Where such assurance is required, it shall be in the form of a cash escrow deposit, a letter of credit, the retention of a specified amount of mortgage proceeds by the mortgagee, or a combination thereof. * * * * *
8. Revise Sec. 242.52(a) to read as follows:
Sec. 242.52 Construction contracts.
(a) Awarding of contract. A contract for the construction or substantial rehabilitation of a hospital shall be entered into by a mortgagor, with a builder selected by a competitive bidding procedure acceptable to HUD.
* * * * *
Subpart GRegulatory Agreement, Accounting and Reporting, and Financial Requirements
9. Amend Sec. 242.56 by adding a new sentence at the end of the section to read as follows:
Sec. 242.56 Form of regulation.
* * * In those cases in which the hospital facility is leased as permitted by Sec. 242.72, the provisions of this section also shall apply to the lessee.
10. Revise Sec. 242.58(c)(1) and add a new paragraph (h) to read as follows:
Sec. 242.58 Books, accounts, and financial statements.
* * * * *
(c) * * * (1) Notforprofit and state and local governments shall conduct audits in accordance with the Consolidated Audit Guide for Audits of HUD Programs (Handbook 2000.04) and OMB Circular A133 (Audits of states, local governments, and nonprofit organizations). * * *
(h) In those cases in which the hospital facility is leased as permitted by Sec. 242.72, the requirements pertaining to the mortgagor in Sec. 242.58 (a) through (g) also shall pertain to the lessee. 11. Revise Sec. 242.61(a) to read as follows:
Sec. 242.61 Management.
* * * (a) Contract Management of Hospital. The mortgagor shall not execute a management agreement or any other contract for management of the hospital without HUD's prior written approval. (Management of the hospital, which requires HUD's prior written approval, refers to management of the hospital not management of components within the hospital such as the hospital cafeteria or hospital pharmacy.) Any management agreement or contract for management of the hospital shall contain a provision that it shall be subject to termination without penalty and with or without cause, upon written request by HUD addressed to the mortgagor and management agent.
* * * * *
Subpart HMiscellaneous Requirements
12. Revise Sec. 242.90(a) to read as follows:
Sec. 242.90 Eligibility of mortgages covering hospitals in certain neighborhoods.
(a) A mortgage financing the repair, substantial rehabilitation, or construction of a hospital located in an older declining urban area shall be eligible for insurance under this subpart, subject to compliance with the additional requirements of this section. * * * * *

Dated: June 16, 2008.
Brian D. Montgomery,
Assistant Secretary for HousingFederal Housing Commissioner. [FR Doc. E814131 Filed 62408; 8:45 am]
BILLING CODE 421067P

FOR FURTHER INFORMATION CONTACT Roger E. Miller, Director, Office of Insured Health Care Facilities, Office of Housing, Department of Housing and Urban Development, 451 Seventh Street, SW., Room 9224, Washington, DC 204108000; telephone (202) 7080599 (this is not a tollfree number). Hearing and speechimpaired persons may access this number through TTY by calling the Federal Information Relay Service at (800) 8778339 (this is a tollfree number).