Proposed Rule2021-11937
Single Family Housing Guaranteed Loan Program
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 9, 2021
Issuing agencies
Agriculture DepartmentRural Housing Service
Abstract
The Rural Housing Service (RHS or Agency), proposes to amend the current regulation for the Single Family Housing Guaranteed Loan Program (SFHGLP) to update the requirements for Federally supervised lenders, minimum net worth and experience for non-supervised lenders, approved lender participation requirements, treatment of applicants with delinquent child support payments and builder credit requirements. These changes would promote an efficient and robust management and oversight structure of lenders in the SFHGLP, strengthen underwriting practices by denying loan guarantees for applicants who are subject to administrative offset to collect delinquent child support payments and streamline requirements for screening builder-contractors by lenders.
Full Text
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<title>Federal Register, Volume 86 Issue 109 (Wednesday, June 9, 2021)</title>
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[Federal Register Volume 86, Number 109 (Wednesday, June 9, 2021)]
[Proposed Rules]
[Pages 30555-30558]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-11937]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 86, No. 109 / Wednesday, June 9, 2021 /
Proposed Rules
[[Page 30555]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3555
[Docket No. RHS-21-SFH-0003]
RIN 0575-AD22
Single Family Housing Guaranteed Loan Program
AGENCY: Rural Housing Service, Agriculture Department (USDA).
ACTION: Proposed rule.
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SUMMARY: The Rural Housing Service (RHS or Agency), proposes to amend
the current regulation for the Single Family Housing Guaranteed Loan
Program (SFHGLP) to update the requirements for Federally supervised
lenders, minimum net worth and experience for non-supervised lenders,
approved lender participation requirements, treatment of applicants
with delinquent child support payments and builder credit requirements.
These changes would promote an efficient and robust management and
oversight structure of lenders in the SFHGLP, strengthen underwriting
practices by denying loan guarantees for applicants who are subject to
administrative offset to collect delinquent child support payments and
streamline requirements for screening builder-contractors by lenders.
DATES: Comments must be submitted on or before August 9, 2021.
ADDRESSES: Comments may be submitted by going to the Federal
eRulemaking Portal: Go to <a href="http://www.regulations.gov">http://www.regulations.gov</a> and in the
``Search Documents'' box, enter the Docket Number (RHS-21-SFH-0003) or
the RIN# 0575-AD22, and click the ``Search'' button. To submit a
comment, choose the ``Comment Now!'' button. Information on using
<a href="http://Regulations.gov">Regulations.gov</a>, including instructions for accessing documents,
submitting comments, and viewing the docket after the close of the
comment period, is available under the ``Help'' tab at the top of the
Home page.
Other Information: Additional information about Rural Development
and its programs is available on the internet at <a href="http://www.rurdev.usda.gov/index.html">http://www.rurdev.usda.gov/index.html</a>.
All comments will be available for public inspection online at the
Federal eRulemaking Portal (<a href="https://www.regulations.gov">https://www.regulations.gov</a>).
FOR FURTHER INFORMATION CONTACT: Ana Placencia, Finance and Loan
Analyst, Single Family Housing Guaranteed Loan Division, Rural
Development, U.S. Department of Agriculture, STOP 0784, Room 2250,
South Agriculture Building, 1400 Independence Avenue SW, Washington, DC
20250-0784, telephone: (254) 721-0770; or email:
<a href="/cdn-cgi/l/email-protection#debfb0bff0aeb2bfbdbbb0bdb7bf9eabadbabff0b9b1a8"><span class="__cf_email__" data-cfemail="0e6f606f207e626f6d6b606d676f4e7b7d6a6f20696178">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Background
Rural Housing Service (RHS) is issuing a proposed rule to amend the
Single-Family Housing Guaranteed Loan Program (SFHGLP) regulations as
outlined in 7 CFR part 3555, subparts B, C and D by updating the
regulations to strengthen oversight and management of the growing
SFHGLP portfolio. The revisions align with the standards for managing
credit programs recommended by the Office of Management and Budget
(OMB) for Federally supervised lenders, minimum net worth, minimum
experience for non-supervised lenders, and approved lender
participation requirements. The revisions would also provide guidance
for processing applicants with delinquent child support payments and
relaxes builder requirements to better align with the credit program
requirements of other Federal agencies.
Discussion of the Rule
(1) Minimum Net Worth Requirements for Non-Supervised Lenders
Currently, the Agency does not impose minimum financial or
experience criteria for non-supervised lenders. Non-supervised lenders
(i.e., lenders not supervised by federal entities listed in Sec.
3555.51(a)(8)) that do not meet the minimum capital and financial
requirements are considered to have a weak financial position that may
pose an incremental risk to the program. The Agency proposes to amend
Sec. 3555.51 and add paragraph (b)(i) and (ii) to reflect that non-
supervised lenders must have a minimum adjusted net worth of $250,000,
or at least $50,000 in working capital plus one percent of the total
volume in excess of $25 million in guaranteed loans originated,
serviced or purchased during the lender's prior fiscal year, up to a
maximum required adjusted net worth of $2.5 million and one or more
lines of credit with a minimum aggregate of $1 million. The proposed
financial thresholds are based on recommendations of a third-party
contractor's analysis \1\ of participating lenders. The contractor's
recommendation for adopting these capital and financial requirements
for non-supervised lenders was derived from an analysis of the capital
and net worth requirements of recognized sources or eligibility
determinations outlined in Sec. 3555.51(a). Establishing minimum
financial requirements for non-supervised lenders would potentially
reduce the Agency's risk of doing business with entities that have
insufficient financial resources. Lenders that meet these minimum
financial requirements also demonstrate trustworthiness that would
contribute to the success of the SFHGLP. The contractor recommendation
was determined using a combination approach of the Veterans
Administration (VA) base requirement and adding the volume component,
which is structured and capped following the FHA standard, see Falcon
Capital Advisor, CLIN 0003 Report. The flexibility would allow the
Agency to adjust the requirements in the technical handbook without
requiring revisions to the regulatory language.
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\1\ Falcon Capital Advisors, CLIN 0003 Report, Capital and
Financial Requirements for Non-Regulated Lenders available at
<a href="https://www.rd.usda.gov/page/usda-linc-training-resource-library">https://www.rd.usda.gov/page/usda-linc-training-resource-library</a>.
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This action will align lender approval requirements with those of
other Federal credit programs and incorporates best practice
recommendations outlined in Office of Management and Budget (OMB)
Circular A-129.\2\
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\2\ Available at: <a href="https://fiscal.treasury.gov/files/dms/circ-a129-upd-0113.pdf">https://fiscal.treasury.gov/files/dms/circ-a129-upd-0113.pdf</a>. OMB requires credit granting agencies to
establish and publish in the Federal Register specific eligibility
criteria for lender or servicer participation in Federal credit
programs, including qualification requirements for principal
officers and staff of the lender or servicer. OMB Circular A-129, p.
12.
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[[Page 30556]]
(2) Federally Supervised Lenders
Currently, the regulation requires that all lenders approved for
participation in the SFHGLP must provide additional information to
demonstrate its ability to originate, underwrite and service loans.
However, the Agency has determined that lenders that are Federally
supervised and meet the criteria in the current Sec. 3555.51(a)(8)
have demonstrated ability and should not be required to provide
additional documentation. The proposal will alleviate the process for
obtaining Agency approval, reduce the required lender documentation and
reflect a more streamlined process for Federally supervised lenders.
A summary of the changes includes amending 7 CFR 3555.51(a)(8) to
eliminate (a)(8)(iv) because it refers to the Office of Thrift
Supervision (OTS), which no longer exists. Furthermore, the current
Sec. 3555.51(a)(9) and (10) is intended to provide a path for lenders
that are not regulated by state or federal agencies and do not meet the
requirements of (a)(1) through (8) an opportunity to participate in the
SFHGLP. Therefore, the Agency also proposes to amend the introductory
texts of Sec. 3555.51(a)(9) and (10) to clarify that when lenders
cannot meet the demonstrated ability criteria outlined under Sec.
3555.51(a)(1) through (8), those lenders must submit additional
documentation to demonstrate their ability to originate loans.
(3) Approved Lender Participation Requirements
Lenders must meet applicable requirements in order to begin and
continue participation in the SFHGLP. Currently, the Agency generally
reviews each lender every 2 years to ensure compliance. However, this
process is not codified in the regulations. Therefore, the Agency
proposes to amend Sec. 3555.51 and add paragraph (c) under SFHGLP
participation requirements, to clarify that lender eligibility will be
reviewed every 2 years for continued participation in the SFHGLP. The
proposal will also add a requirement that principal officers of lenders
must have a minimum of 2 years of experience in originating or
servicing guaranteed mortgage loans as recommended in OMB Circular A-
129. In order to be deemed eligible for continued lender participation
in the SFHGLP, the lender and its principal officers must continue to
meet all the criteria as outlined in Sec. 3555.51 which, as proposed
to be amended, would include (a) specific experience in underwriting
and servicing loans, (b) financial requirements for non-supervised
lenders, and (c) SFHGLP participation requirements.
(4) Builder-Contractor Requirements
At present, Sec. 3555.105(b)(4) and (5) require that builder-
contractors have acceptable credit histories free of judgments,
collections, or liens related to previous projects the builder-
contractor was involved with and that they not have a criminal history.
Currently, the lender is responsible for obtaining the [builder-
contractor's] credit history and background checks. However, the Agency
has determined that these requirements are not the industry standard.
The builder-contractor's ability to participate in such projects should
be based on the applicant's and lender's review of the builder-
contractor's experience, reputation and financial ability to complete
the project in a timely, efficient and competent manner. The proposal
would remove Sec. 3555.105(b)(4) and (5). The changes would streamline
screening requirements, reduce administrative burden on the lender and
would also align with other Federal programs, including the Direct
Section 502 loan program, which do not have such requirements for
builder-contractors. The Agency is specifically soliciting comments on
the impact of eliminating the credit and criminal background checks for
building contractors.
(5) Applicants Delinquent on Child Support
Currently, the Agency does not have explicit instructions on how
lenders should treat an applicant's delinquent child support payments
that are subject to collection by federal administrative offset. The
Agency considers delinquent child support payments subject to
administrative offset a significant derogatory obligation and an
indication that an applicant does not have the reasonable ability or
willingness to meet their obligations. Furthermore, it would be against
the federal government's interest to guarantee a loan for an applicant
from whom the federal government is simultaneously pursuing collection
for a delinquent debt. Therefore, RHS proposes to amend Sec.
3555.151(i) to specify that borrowers with delinquent child support
payments subject to collection by administrative offset are ineligible
unless the payments are brought current, the debt is paid in full, or
otherwise satisfied.
Statutory Authority
Section 510(k) of Title V the Housing Act of 1949 (42 U.S.C.
1480(k)), as amended, authorizes the Secretary of the Department of
Agriculture to promulgate rules and regulations as deemed necessary to
carry out the purpose of that title.
Executive Order 12866, Classification
This rule has been determined to be not significant for the
purposes of Executive Order 12866 and, therefore, has not been reviewed
by the Office of Management and Budget (OMB).
Executive Order 12988, Civil Justice Reform
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Except where specified, all state and local laws and
regulations that are in direct conflict with this rule will be
preempted. Federal funds carry federal requirements. No person is
required to apply for funding under SFHGLP, but if they do apply and
are selected for funding, they must comply with the requirements
applicable to the federal program funds. This rule is not retroactive.
It will not affect agreements entered into prior to the effective date
of the rule. Before any judicial action may be brought regarding the
provisions of this rule, the administrative appeal provisions of 7 CFR
part 11 must be exhausted.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effect of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, the
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal
mandates'' that may result in expenditures to State, local, or tribal
governments, in the aggregate, or to the private sector, of $100
million, or more, in any one year. When such a statement is needed for
a rule, section 205 of the UMRA generally requires the Agency to
identify and consider a reasonable number of regulatory alternatives
and adopt the least costly, most cost-effective, or least burdensome
alternative that achieves the objectives of the rule.
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the UMRA) for state, local, and tribal
governments or the private sector. Therefore, this rule is not subject
to the requirements of sections 202 and 205 of the UMRA.
[[Page 30557]]
National Environmental Policy Act
This document has been reviewed in accordance with 7 CFR part 1970,
subpart A, ``Environmental Policies.'' RHS determined that this action
does not constitute a major Federal action significantly affecting the
quality of the environment. In accordance with the National
Environmental Policy Act of 1969, Public Law 91-190, an Environmental
Impact Statement is not required.
Executive Order 13132, Federalism
The policies contained in this rule do not have any substantial
direct effect on states, on the relationship between the national
government and states, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on state and local
governments. Therefore, consultation with the states is not required.
Regulatory Flexibility Act
The rule has been reviewed with regard to the requirements of the
Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned has
determined and certified by signature on this document that this rule
will not have a significant economic impact on a substantial number of
small entities since this rulemaking action does not involve a new or
expanded program nor does it require any more action on the part of a
small business than required of a large entity.
Executive Order 12372, Intergovernmental Review of Federal Programs
This program is not subject to the requirements of Executive Order
12372, ``Intergovernmental Review of Federal Programs,'' as implemented
under USDA's regulations at 7 CFR part 3015.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This executive order imposes requirements on RHS in the development
of regulatory policies that have tribal implications or preempt tribal
laws. RHS has determined that the rule does not have a substantial
direct effect on one or more Indian tribe(s) or on either the
relationship or the distribution of powers and responsibilities between
the federal government and Indian tribes. Thus, this rule is not
subject to the requirements of Executive Order 13175. If tribal leaders
are interested in consulting with RHS on this rule, they are encouraged
to contact USDA's Office of Tribal Relations or RD's Native American
Coordinator at: <a href="/cdn-cgi/l/email-protection#4b0a020a050b3c2f28653e382f2a652c243d"><span class="__cf_email__" data-cfemail="eeafa7afa0ae998a8dc09b9d8a8fc0898198">[email protected]</span></a> to request such a consultation.
Programs Affected
The program affected by this proposed rule is listed in the Catalog
of Federal Domestic Assistance under Number 10.410, Very Low to
Moderate Income Housing Loans (Section 502 Rural Housing Loans).
Paperwork Reduction Act
This rule contains no new reporting or recordkeeping burdens under
OMB control number 0575-0179 that would require approval under the
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).
Civil Rights Impact Analysis
Rural Development has reviewed this rule in accordance with USDA
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any
major civil rights impacts the rule might have on program participants
on the basis of age, race, color, national origin, sex, disability,
marital or familial status. Based on the review and analysis of the
rule and all available data, issuance of this Final Rule is not likely
to negatively impact low and moderate-income populations, minority
populations, women, Indian tribes or persons with disability, by virtue
of their age, race, color, national origin, sex, disability, or marital
or familial status.
E-Government Act Compliance
Rural Development is committed to the E-Government Act, which
requires Government agencies in general to provide the public the
option of submitting information or transacting business electronically
to the maximum extent possible.
Nondiscrimination Statement
In accordance with Federal civil rights law and U.S. Department of
Agriculture (USDA) civil rights regulations and policies, the USDA, its
agencies, offices, and employees, and institutions participating in or
administering USDA Programs are prohibited from discriminating based on
race, color, national origin, religion, sex, gender identity (including
gender expression), sexual orientation, disability, age, marital
status, family/parental status, income derived from a public assistance
program, political beliefs, or reprisal or retaliation for prior civil
rights activity, in any program or activity conducted or funded by USDA
(not all bases apply to all programs). Remedies and complaint filing
deadlines vary by program or incident.
Persons with disabilities who require alternative means of
communication for program information (e.g., Braille, large print,
audiotape, American Sign Language, etc.) should contact the responsible
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or
contact USDA through the Federal Relay Service at (800) 877-8339.
Additionally, program information may be made available in languages
other than English.
To file a program discrimination complaint, complete the USDA
Program Discrimination Complaint Form, AD-3027, found online at <a href="https://www.usda.gov/oascr/how-to-file-a-program-discrimination-complaint">https://www.usda.gov/oascr/how-to-file-a-program-discrimination-complaint</a> and
at any USDA office or write a letter addressed to USDA and provide in
the letter all of the information requested in the form. To request a
copy of the complaint form, call (866) 632-9992. Submit your completed
form or letter to USDA by: mail: U.S. Department of Agriculture, Office
of the Assistant Secretary for Civil Rights, 1400 Independence Avenue
SW, Washington, DC 20250-9410; or
(1) Email: <a href="/cdn-cgi/l/email-protection#c18e808281b4b2a5a0efa6aeb7"><span class="__cf_email__" data-cfemail="c48b858784b1b7a0a5eaa3abb2">[email protected]</span></a>
USDA is an equal opportunity provider, employer, and lender.
List of Subjects in 7 CFR Part 3555
Construction, Eligible loan purpose, Home improvement, Loan
programs--housing and community development, Loan terms, Mortgage
insurance, Mortgages, and Rural areas.
For the reasons discussed in the preamble, the Agency is proposing
to amend 7 CFR part 3555 as follows:
PART 3555--GUARANTEED RURAL HOUSING PROGRAM
0
1. The authority citation for part 3555 continues to read as follows:
Authority: 5 U.S.C. 301; 42 U.S.C. 1471 et seq.
0
2. Amend Sec. 3555.51 by:
0
(a) Revising paragraph (a)(8);
0
(b) Revising the introductory text of paragraphs (a)(9) and (10);
0
(c) Revising paragraph (b) and (b)(1);
0
(d) Adding paragraph (c).
The revisions and additions read as follows:
Sec. 3555.51 Lender eligibility.
* * * * *
(a) * * *
(8) A Federally supervised lender. Acceptable sources of Federal
supervision include:
(i) Being a member of the Federal Reserve System;
[[Page 30558]]
(ii) The Federal Deposit Insurance Corporation (FDIC);
(iii) The National Credit Union Administration (NCUA);
(iv) The Office of the Comptroller of the Currency (OCC);
(v) The Federal Housing Finance Board regulating lenders within the
Home Loan Bank (FHLB) system.
(9) If lenders cannot meet the requirements under (a)(1) through
(8), they may demonstrate its ability to originate and underwrite loans
by submitting appropriate documentation, examples of which include, but
are not limited to: * * *
(10) A lender that proposes to service loans that cannot meet
(a)(1) through (8) must demonstrate its ability by submitting
appropriate documentation, examples of which include but are not
limited to: * * *
(b) Financial Requirements for Non-Supervised Lenders. All lenders
not covered in paragraph (8) of this section, must have:
(i) A minimum adjusted net worth of $250,000, or $50,000 in working
capital plus one percent of the total volume in excess of $25 million
in guaranteed loans originated, serviced or purchased during the
lender's prior fiscal year, up to a maximum required adjusted net worth
of $2.5 million, and
(ii) one or more lines of credit with a minimum aggregate of one
million dollars.
* * * * *
(c) SFHGLP participation requirements Lenders and their agents must
comply with the following requirements:
(1) Keep up to date, and comply with, all Agency regulations and
handbooks, including all amendments and revisions of program
requirements and policies. Lenders must also comply with all other
applicable federal, state, and local laws, rules, and requirements,
including those under the purview of the Consumer Financial Protection
Bureau, such as the Real Estate Settlement Procedures Act and the Truth
in Lending Act. Lenders who originate a minimal number loans, as
determined by the Agency, in a 24 month time frame may be required to
take updated training to ensure a lender's continued knowledge of the
program;
(2) Regularly check Rural Development's website for new issuances
related to the program;
(3) Underwrite loans according to Rural Development regulations and
process and approve loans in accordance with program instructions;
(4) Review loan applications for accuracy and completeness;
(5) Ensure that applicant income limits are not exceeded;
(6) Ensure that borrowers have adequate loan repayment ability and
acceptable credit histories;
(7) Ensure that loss claims include only supportable costs;
(8) Cooperate fully with Agency reporting and monitoring
requirements;
(9) Comply with limitations on loan purposes, loan limitations,
interest rates, and loan terms;
(10) Inform Rural Development immediately after the sale, transfer,
or change of servicers of any Agency guaranteed loan;
(11) Maintain reasonable and prudent business practices consistent
with generally accepted mortgage industry standards, such as
maintaining fidelity bonding;
(12) Remain responsible for servicing even if servicing has been
contracted to a third party;
(13) Use Rural Development, HUD, Fannie Mae, or Freddie Mac forms,
unless otherwise approved by Rural Development;
(14) Maintain eligibility under paragraph (a) of this section;
(15) Notify Rural Development if there are any material changes in
organization or practices;
(16) Be neither debarred nor suspended from participation in
Federal programs, not debarred, suspended or sanctioned under state
licensing and certification laws and regulations;
(17) Notify Rural Development in the event of its bankruptcy or
insolvency;
(18) Remain free from default and delinquency on any debt owed to
the Federal government;
(19) Allow Rural Development or its representative access to the
lender's records, including, but not limited to, records necessary for
on-site and desk reviews of the lender's operation and the operations
of any of its agents to verify compliance with Agency regulations and
guidelines;
(20) Maintain adequate operational quality control and reporting
procedures to prevent fraud;
(21) Maintain complete loan files with all required documentation
that is accessible by Agency upon request for review;
(22) Execute a lender's agreement provided by Rural Development;
(23) Evidence that principal officers must have a minimum of two
years of experience in originating or servicing guaranteed mortgage
loans; and
(24) Provide documentation as required by the Agency to be reviewed
every two years for continued lender participation.
* * * * *
Sec. 3555.105 [Amended]
0
4. Amend Sec. 3555.105 by removing paragraphs (b)(4) and (5) and
renumbering paragraph (b)(6) as appropriate.
0
5. Amend Sec. 3555.151 by adding paragraph (i)(9) to read as follows:
Sec. 3555.151 Eligibility Requirements.
* * * * *
(i) * * *
(9) Applicants with delinquent child support payments subject to
collection by administrative offset are ineligible unless the payments
are brought current, the debt is paid in full, or otherwise satisfied.
* * * * *
Chadwick Parker,
Acting Administrator, Rural Housing Service.
[FR Doc. 2021-11937 Filed 6-8-21; 8:45 am]
BILLING CODE 3410-XV-P
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