Notice2022-19019
Change in the Lease-Up Reserve Calculation for the Section 538 Guaranteed Rural Rental Housing 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
September 6, 2022
Effective
September 6, 2022
Issuing agencies
Agriculture DepartmentRural Housing Service
Abstract
The Rural Housing Service (RHS or the Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA), is announcing a new calculation of the required Lease-up Reserve for the Section 538 Guaranteed Rural Rental Housing Program (GRRHP).
Full Text
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<title>Federal Register, Volume 87 Issue 171 (Tuesday, September 6, 2022)</title>
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[Federal Register Volume 87, Number 171 (Tuesday, September 6, 2022)]
[Notices]
[Page 54452]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-19019]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
[Docket No. RHS-19-MFH-0024]
Change in the Lease-Up Reserve Calculation for the Section 538
Guaranteed Rural Rental Housing Program
AGENCY: Rural Housing Service, USDA.
ACTION: Notice.
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SUMMARY: The Rural Housing Service (RHS or the Agency), a Rural
Development (RD) agency of the United States Department of Agriculture
(USDA), is announcing a new calculation of the required Lease-up
Reserve for the Section 538 Guaranteed Rural Rental Housing Program
(GRRHP).
DATES: The effective date of the new calculation is September 6, 2022.
FOR FURTHER INFORMATION CONTACT: Tammy Daniels, Finance and Loan
Analyst, Multi-Family Housing Production and Preservation Division,
Rural Housing Service, USDA, STOP 0781, 1400 Independence Avenue SW,
Washington, DC 20250-0781, Telephone: (202) 720-0021 (this is not a
toll-free number); email: <a href="/cdn-cgi/l/email-protection#1165707c7c683f75707f78747d6251646275703f767e67"><span class="__cf_email__" data-cfemail="b6c2d7dbdbcf98d2d7d8dfd3dac5f6c3c5d2d798d1d9c0">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Authority
The RHS administers the Section 538 Guaranteed Rural Rental Housing
Program (GRRHP) loans under the authority of the Housing Act of 1949,
as amended (42 U.S.C. 1490p-2) and is implemeted under 7 CFR part 3565.
Background
RHS administers the Section 538 GRRHP under the authority of the
Housing Act of 1949, as amended (42 U.S.C. 1490p-2). The purpose of the
GRRHP is to increase the supply of affordable rural rental housing,
using loan guarantees that encourage partnerships between the RHS,
private lenders, and public agencies.
Lease-Up Reserve and Formula
As a condition to making the loan, the RHS Section 538 GRRHP may
require borrowers to establish a lease-up reserve account to help pay
operating costs and debt service costs at the initiation of operations
while units are being leased to their initial occupants. It is an
additional amount (cash deposit), over and above the required initial
operating and maintenance contribution. In short, its purpose is to
ensure that adequate funds are available for unexpected costs. 7 CFR
3565.303(d)(3) requires the project to either attain a minimum level of
acceptable occupancy of 90% for 90 continuous days within the 120-day
period immediately preceding the issuance of the permanent guarantee or
establish a lease-up reserve in an amount the Agency determines is
necessary to cover projected shortfalls. The current lease-up reserve
calculation is based on the appraised value of the project or the total
development cost, whichever is greater and produces an inflated amount
the Agency has determined to be disproportionate. In addition, the
current calculation fails to contemplate a property's specific
operating needs during lease up and bears no correlation to the
timeframe identified in the other acceptable Loan Note Guarantee (LNG)
issuance threshold, which is sustained occupancy at 90% for a period of
90 days. To align the agency's LNG issuance thresholds and reduce the
burden to the borrower, the new lease up reserve calculation described
below, will represent an on-average savings to the borrower of
approximately $100,000 per transaction, while adding a truer level of
protection for project operations (this is based off of a random
sampling of prior transactions).
As set forth in 7 CFR part 3565, the Agency is required to announce
when there is a change in its calculation for the required amount of
the lease-up reserve. To calculate the new required minimum lease-up
reserve amount, add the monthly amount of the Operations and
Maintenance (O&M) expense, the monthly amount of the Debt Service Cost,
and the monthly amount of the Reserve Deposit, then multiply this sum
by three. The calculation may be written as follows:
(Monthly O&M Expense + Monthly Debt Service Amount + Monthly Reserve
Deposit) x 3 = Minimum Required 538 Lease-Up Reserve Amount.
Paperwork Reduction Act
This notice contains no new reporting or recordkeeping burdens
under Office of Management and Budget (OMB) control number 0575-0179
that would require approval under the Paperwork Reduction Act of 1995
(44 U.S.C. Chapter 35).
Non-Discrimination Statement
In accordance with Federal civil rights laws and 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#175856445445394765787065767a3a6765787065767a397e7963767c72576264737639707861"><span class="__cf_email__" data-cfemail="d59a94869687fb85a7bab2a7b4b8f8a5a7bab2a7b4b8fbbcbba1b4beb095a0a6b1b4fbb2baa3">[email protected]</span></a>.
Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2022-19019 Filed 9-2-22; 8:45 am]
BILLING CODE 3410-XV-P
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