Rule2022-18626
Single Family Housing Guaranteed Loan Program
Primary source
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Published
August 31, 2022
Effective
November 29, 2022
Issuing agencies
Agriculture DepartmentRural Housing Service
Abstract
The Rural Housing Service (RHS or Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA), is implementing changes to 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, handling of applicants with delinquent child support payments, and builder credit requirements.
Full Text
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<title>Federal Register, Volume 87 Issue 168 (Wednesday, August 31, 2022)</title>
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[Federal Register Volume 87, Number 168 (Wednesday, August 31, 2022)]
[Rules and Regulations]
[Pages 53369-53372]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-18626]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3555
[Docket No. RHS-21-SFH-003]
RIN 0575-AD22
Single Family Housing Guaranteed Loan Program
AGENCY: Rural Housing Service, Agriculture Department (USDA).
ACTION: Final rule.
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SUMMARY: The Rural Housing Service (RHS or Agency), a Rural Development
(RD) agency of the United States Department of Agriculture (USDA), is
implementing changes to 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, handling of applicants with
delinquent child support payments, and builder credit requirements.
DATES: This final rule is effective November 29, 2022.
FOR FURTHER INFORMATION CONTACT: Laurie Mohr, 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: (314) 679-6917; or email: <a href="/cdn-cgi/l/email-protection#f09c9185829995de9d9f9882b085839491de979f86"><span class="__cf_email__" data-cfemail="f09c9185829995de9d9f9882b085839491de979f86">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The Rural Housing Service (RHS or Agency) is an agency of the
United States Department of Agriculture (USDA) and offers a variety of
programs to build or improve housing and essential community facilities
in rural areas. RHS offers loans, grants, and loan guarantees for
single- and multi-family housing, childcare centers, fire and police
stations, hospitals, libraries, nursing homes, schools, first responder
vehicles and equipment, housing for farm laborers and much more. RHS
also provides technical assistance loans and grants in partnership with
non-profit organizations, Indian tribes, State and Federal Government
agencies, and local communities.
The RHS is issuing a final rule to amend the Single-Family Housing
Guaranteed Loan Program (SFHGLP) regulation, 7 CFR part 3555, subparts
B, C and D which will reinforce oversight and management of the growing
SFHGLP portfolio. These changes will promote an efficient and robust
management and oversight structure of lenders in the SFHGLP by
strengthening underwriting practices, providing guidance for processing
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.
The updates 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 line of credits, minimum
experience, and approved lender participation requirements. These
updates will also provide guidance for processing applications for
individuals with delinquent child support payments and relaxes builder
requirements to better align with the credit program requirements of
other Federal agencies.
II. Discussion of Public Comments
RHS published a proposed rule on June 9, 2021 (86 FR 30555) to
solicit comments on the proposed updated 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 for SFHGLP (86 FR 30555). The Agency received comments
from six respondents including individuals, mortgage companies, and
interested parties. Three of the comments are not applicable to the
contents of the rule.
The following is a summary of the relevant comments:
Comment 1: One respondent opposed eliminating the background checks
for builders stating the builder's integrity could not be thoroughly
checked to avoid court appearances and rebuilding homes.
Agency Response: The Agency still relies on the lender to review
and approve construction contractors or builders. The Agency has
determined that these credit 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
Agency believes the stance is correctly stated and stands behind the
rule changes.
Comment 2: One respondent replied in favor of the proposed rule
stating obtaining background checks for builders were difficult to
obtain and could potentially hurt a builder's reputation if, for some
unforeseen reason, you could not obtain a builder approval.
Agency Response: The Agency has determined no action is required.
Comment 3: One respondent agreed with certain delinquent child
support provisions in the rule, however, the respondent raised concerns
that the proposed change would be unduly difficult for rural families
and children who are already experiencing housing challenges. The
respondent noted that employment in rural areas is limited and felt
that there are other means to addressing delinquent child support.
Agency Response: The Agency believes the stance is correctly stated
and stands behind the rule changes.
III. Summary of Rule Changes
A summary of the changes includes amending 7 CFR 3555.51(a)(8) to
eliminate items (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 introductory paragraph of Sec. 3555.51(a)(9)
and (10) will be amended to clarify that when
[[Page 53370]]
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.
The final rule will amend Sec. 3555.51 by adding paragraph (a)(11)
(i) and (ii) to reflect Financial Requirements for Non-Supervised
Lenders. All lenders not supervised by federal entities listed in Sec.
3555.51 (a)(8) must have: (i) 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, (ii) one or
more lines of credit with a minimum aggregate of $1 million. The
proposed financial thresholds are based on recommendations analysis of
participating lenders. 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 demonstrate trustworthiness that would contribute to the
success of the SFHGLP. The Agency took a combination approach when
developing the minimum requirements, including the Veterans
Administration (VA) base requirement and adding a volume component to
it. This is structured and capped following the FHA standard. By taking
this action, the Agency will align lender approval requirements with
those of other Federal credit programs and incorporate \1\ the 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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Federally supervised lenders that meet the criteria of Sec.
3555.51(a)(8) have demonstrated ability and will not be required to
provide additional documentation. The Agency will require less
documentation from the lender and make the process more efficient for
Federally supervised lenders.
This final rule clarifies that lenders must meet applicable
requirements in order to begin and continue participation in the
SFHGLP. The Agency generally reviews each lender every two years to
ensure compliance.
The Agency will amend Sec. 3555.51 (b), SFHGLP participation
requirements, to clarify by adding subparagraph (23) that lender
eligibility will be reviewed every two years for continued
participation in the SFHGLP. In addition, the Agency will clarify by
adding subparagraph (24) that principal officers must have a minimum of
two years of experience in originating or servicing 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 amended, will include specific experience
in underwriting and servicing loans, financial requirements for non-
supervised lenders, and SFHGLP participation requirements.
The Agency has determined that obtaining builder-contractors credit
and background checks is not an 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 Agency will remove
Sec. 3555.105(b)(4) and (5) and thus streamline screening
requirements, reduce administrative burden on the lender, and align
with other Federal programs, including the agency's Direct Section 502
loan program, which does not have such requirements for builder-
contractors.
Additionally, 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. 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. This final rule will amend Sec.
3555.151(i) (9) 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.
IV. Regulatory Information
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 final 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. In
accordance with this rule: (1) Unless otherwise specifically provided,
all state and local laws that conflict with this rule will be
preempted; (2) no retroactive effect will be given to this rule except
as specifically prescribed in the rule; and (3) administrative
proceedings of the National Appeals Division of the Department of
Agriculture (7 CFR part 11) must be exhausted before bringing suit in
court that challenges action taken under this rule.
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.
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
[[Page 53371]]
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
final 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 final
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 final 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 final rule
is not subject to the requirements of Executive Order 13175. If tribal
leaders are interested in consulting with RHS on this final 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#de9f979f909eabadbabff0b9b1a8"><span class="__cf_email__" data-cfemail="0b4a424a454b7e786f6a256c647d">[email protected]</span></a> to request such a
consultation.
Programs Affected
The program affected by this final rule is listed in the Assistance
Listing (AL) (formerly 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 final 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 final 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.
USDA Non-Discrimination Policy
In accordance with Federal civil rights laws and U.S. Department of
Agriculture (USDA) civil rights regulations and policies, the USDA, its
Mission Areas, agencies, staff offices, 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.
Program information may be made available in languages other than
English. Persons with disabilities who require alternative means of
communication to obtain program information (e.g., Braille, large
print, audiotape, American Sign Language) should contact the
responsible Mission Area, agency, or staff office; the USDA TARGET
Center at (202) 720-2600 (voice and TTY); or the Federal Relay Service
at (800) 877-8339.
To file a program discrimination complaint, a complainant should
complete a Form AD-3027, USDA Program Discrimination Complaint Form,
which can be obtained online at <a href="https://www.ocio.usda.gov/document/ad-3027">https://www.ocio.usda.gov/document/ad-3027</a>, from any USDA office, by calling (866) 632-9992, or by writing a
letter addressed to USDA. The letter must contain the complainant's
name, address, telephone number, and a written description of the
alleged discriminatory action in sufficient detail to inform the
Assistant Secretary for Civil Rights (ASCR) about the nature and date
of an alleged civil rights violation. The completed AD-3027 form or
letter must be submitted to USDA by:
(1) Mail: U.S. Department of Agriculture, Office of the Assistant
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC
20250-9410; or
(2) Fax: (833) 256-1665 or (202) 690-7442; or
(3) Email: <a href="/cdn-cgi/l/email-protection#5a0a28353d283b377413342e3b313f1a2f293e3b743d352c"><span class="__cf_email__" data-cfemail="7f2f0d10180d1e125136110b1e141a3f0a0c1b1e51181009">[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.
Subpart B--Lender Participation
0
2. Amend Sec. 3555.51 by:
0
(a) Revising paragraph (a)(8), the introductory text of paragraph
(a)(9) and the introductory text of paragraph(10).
0
(b) Adding paragraph (a)(11); and
0
(c) Adding paragraphs (b)(23) and (24).
The additions and revisions read as follows:
Sec. 3555.51 Lender eligibility.
* * * * *
(a) * * *
(8) A Federally supervised lender that provides documentation of
its ability to
[[Page 53372]]
originate, underwrite, and service single-family loans. Acceptable
sources of supervision include:
(i) Being a member of the Federal Reserve System.
(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
Federal Home-Loan Bank (FHLB) system.
(9) If lenders cannot meet the requirements under paragraphs (a)(1)
through (8) of this section, 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
paragraphs (a)(1) through (8) of this section must demonstrate its
ability by submitting appropriate documentation, examples of which
include but are not limited to:
* * * * *
(11) The financial requirements for non-supervised lenders not
covered in paragraph (a)(8), 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.
(b) * * *
* * * * *
(23) Provide documentation as required by the Agency to be reviewed
every two years for lender participation and,
(24) Provide evidence that principal officers have a minimum of two
years of experience in originating or servicing guaranteed mortgage
loans as recommended in OMB Circular A-129.
Subpart C--Loan Requirements
Sec. 3555.105 [Amended]
0
3. Amend Sec. 3555.105 paragraph (b) by removing paragraphs (b)(4) and
(5) and redesignating paragraph (b)(6) as (b)(4).
Subpart D--Underwriting the Applicant
0
4. 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.
* * * * *
Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2022-18626 Filed 8-30-22; 8:45 am]
BILLING CODE 3410-XV-P
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