Proposed Rule2023-00140
Changes Related to Reserve Account Administration in Multi-Family Housing (MFH) Direct Loan Programs
Primary source
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Published
January 9, 2023
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), proposes to amend its regulation to implement changes related to the administration of property reserve accounts under the Multi-Family Housing (MFH) section 515, Rural Rental Housing, and section 514 Farm Labor Housing programs. The intent of this proposed rule is to increase flexibility in project refinancing for additional capital improvements needed at MFH section 515, Rural Rental Housing, and section 514 Farm Labor Housing properties.
Full Text
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<title>Federal Register, Volume 88 Issue 5 (Monday, January 9, 2023)</title>
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[Federal Register Volume 88, Number 5 (Monday, January 9, 2023)]
[Proposed Rules]
[Pages 1149-1151]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-00140]
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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. 88, No. 5 / Monday, January 9, 2023 /
Proposed Rules
[[Page 1149]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR 3560
[Docket No. RHS-22-MFH-0005]
RIN 0575-AD23
Changes Related to Reserve Account Administration in Multi-Family
Housing (MFH) Direct Loan Programs
AGENCY: Rural Housing Service, U.S. Department of Agriculture (USDA).
ACTION: Proposed 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),
proposes to amend its regulation to implement changes related to the
administration of property reserve accounts under the Multi-Family
Housing (MFH) section 515, Rural Rental Housing, and section 514 Farm
Labor Housing programs. The intent of this proposed rule is to increase
flexibility in project refinancing for additional capital improvements
needed at MFH section 515, Rural Rental Housing, and section 514 Farm
Labor Housing properties.
DATES: Comments on the proposed rule must be received on or before
March 10, 2023.
ADDRESSES: Comments may be submitted electronically by the Federal
eRulemaking Portal: Go to <a href="https://www.regulations.gov">https://www.regulations.gov</a> and, in the
``Search Field'' box, labeled ``Search for Rules, Proposed Rules,
Notices, or Supporting Documents,'' enter the following docket number:
(RHS-22-MFH-0005) or the RIN# 0575-AD23. To submit or view public
comments, click the ``Search'' button, select the ``Documents'' tab,
then select the following document title: (Changes Related to Reserve
Account Administration in Multi-Family Housing (MFH) Direct Loan
Programs) from the ``Search Results,'' and select the ``Comment''
button. Before inputting your comments, you may also review the
``Commenter's Checklist'' (optional). Insert your comments under the
``Comment'' title, click ``Browse'' to attach files (if available).
Input your email address and select ``Submit Comment.'' 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 through the site's ``FAQ'' link.
Other Information: Additional information about Rural Development
(RD) and its programs is available on the internet at <a href="https://www.rd.usda.gov/">https://www.rd.usda.gov/</a>.
All comments will be available online for public inspection at the
Federal eRulemaking Portal (<a href="https://www.regulations.gov">https://www.regulations.gov</a>).
FOR FURTHER INFORMATION CONTACT: Jennifer Larson, Multi-Family Housing
Portfolio Management Division, Rural Housing Service, 1400 Independence
Avenue SW, Washington DC 20250-0782, Telephone: (202) 720-1615; Email:
<a href="/cdn-cgi/l/email-protection#88e2ede6e6e1eeedfaa6e4e9fafbe7e6c8fdfbece9a6efe7fe"><span class="__cf_email__" data-cfemail="88e2ede6e6e1eeedfaa6e4e9fafbe7e6c8fdfbece9a6efe7fe">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The RHS, an agency of the USDA, 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, and housing for farm laborers. RHS also provides
technical assistance loans and grants in partnership with non-profit
organizations, Indian tribes, state and Federal government agencies,
and local communities.
Title V of the Housing Act of 1949 (Act) authorized the USDA to
make housing loans to farmers to enable them to provide habitable
dwellings for themselves or their tenants, lessees, sharecroppers, and
laborers. The USDA then expanded opportunities in rural areas, making
housing loans and grants to rural residents through the Single-Family
Housing (SFH) and Multi-Family Housing (MFH) Programs.
The RHS operates the MFH section 515 Rural Rental Housing direct
loan program. The Section 515 program employs a public-private
partnership by providing subsidized loans at an interest rate of one
percent to developers to construct or renovate affordable rental
complexes in rural areas. This one percent loan keeps the debt service
on the property sufficiently low to support below-market rents
affordable to low-income tenants. Many of these projects also utilize
low-income housing tax credit proceeds.
The RHS also operates the MFH Farm Labor Housing direct loan and
grant programs under sections 514 and 516 which provide low interest
loans and grants to provide housing for farmworkers. These eligible
farmworkers may work either at the borrower's farm (``on-farm'') or at
any other farm (``off-farm'').
II. Purpose of This Regulatory Action
On March 1, 2022, RHS published a final rule in the Federal
Register (87 FR 11275) requiring MFH direct loan housing projects to
maintain a reserve account, subject to the requirements of 7 CFR part
1902, subpart A, regarding supervised bank accounts. The final rule
also stipulated that a MFH housing project's reserve account may
alternatively be escrowed by the Agency when the Agency deems
necessary. In addition, the March 1, 2022, rule allowed for an annual
U.S. Department of Housing and Urban Development Operating Cost
Adjustment Factor (OCAF) increase in contributions to a MFH project
reserve account. The borrower may choose the option for annual
incremental OCAF increases in a project's reserve account
contributions, which may improve property preparedness to address
capital needs over the life of the project.
Amendments proposed in this rule are designed to increase
flexibility in project refinancing for additional capital improvements
needed for a section 515 or 514 MFH property. The MFH direct loan
project's general operating account is deemed to contain surplus funds
when the balance at the end of the housing project's fiscal year, after
all payables, exceeds 20 percent of the operating and maintenance
expenses. When a MFH property's Agency-approved budget results in
surplus cash at the end of the year, this proposed change to the
current regulation will allow the borrower to use surplus cash to fund
Agency-approved soft debt. MFH-approved soft debt, such as ``cash flow
notes,'' are often provided by state
[[Page 1150]]
or local government as vital, additional sources of MFH direct loan
property rehabilitation funding. The changes will allow owners the
flexibility to access surplus cash notes as a new source of capital for
property improvements, and to implement operating cost increases in
property reserve contributions.
III. Summary of Changes
The proposed changes would amend 7 CFR 3560.306 to include reducing
debt service on other third-party debt, as an allowable use of funds,
including payments toward cash flow notes. Allowing borrowers to use
surplus funds to repay third-party debt would allow those borrowers to
access state and local government funding available as a capital source
for property improvements. Acceptable third-party debt, including cash
flow notes, will take the form of a written agreement for the payment
of an Agency-approved debt obligation, with or without interest.
Payments may occur only after approval has been granted by the Agency.
These changes are designed to improve property condition and increase
tools available to borrowers to preserve properties as affordable
housing resources. This proposed rule no longer includes the reduction
in rents as an allowable use of surplus funds, as rent-setting is part
of the annual proposed budget process and should not be included in the
reserve account section of this regulation. These changes are designed
to improve property condition and increase tools available to borrowers
to preserve properties as affordable housing resources.
IV. Regulatory Information
Statutory Authority
The Rural Rental Housing program is authorized under sections 514,
515, 516 of title V of the Housing Act of 1949, as amended; 42 U.S.C.
1480 et seq.; and implemented under 7 CFR part 3560.
Executive Order 12372, Intergovernmental Review of Federal Programs
These loans are subject to the provisions of Executive Order 12372,
which requires intergovernmental consultation with state and local
officials. RHS conducts intergovernmental consultations for each loan
in accordance with 2 CFR part 415, subpart C.
Executive Order 12866, Regulatory Planning and Review
This proposed rule has been determined to be non-significant and,
therefore, was not reviewed by the Office of Management and Budget
(OMB) under Executive Order 12866.
Executive Order 12988, Civil Justice Reform
This proposed rule has been reviewed under Executive Order 12988.
In accordance with this rulemaking: (1) Unless otherwise specifically
provided, all state and local laws that conflict with this rulemaking
will be preempted; (2) no retroactive effect will be given to this
rulemaking 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
suing in court that challenges action taken under this rulemaking.
Executive Order 13132, Federalism
The policies contained in this proposed rule do not have any
substantial direct effect on States, on the relationship between the
National Government and the States, or on the distribution of power and
responsibilities among the various levels of government. This proposed
rule does not impose substantial direct compliance costs on state and
local governments; therefore, consultation with States is not required.
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 proposed 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 proposed
rule is not subject to the requirements of Executive Order 13175. If
tribal leaders are interested in consulting with RHS on this
rulemaking, they are encouraged to contact USDA's Office of Tribal
Relations or RD's Tribal Coordinator at: <a href="/cdn-cgi/l/email-protection#7f3e363e313f0a0c1b1e51181009"><span class="__cf_email__" data-cfemail="6928202827291c1a0d08470e061f">[email protected]</span></a> to request such
a consultation.
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 (EIS) is not required.
Regulatory Flexibility Act
This proposed 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 proposed 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.
Unfunded Mandate Reform Act (UMRA)
Title II of the UMRA, Public Law 104-4, establishes requirements
for Federal agencies to assess the effects of their regulatory actions
on state, local, and tribal governments and on the private sector.
Under section 202 of the UMRA, Federal agencies generally must prepare
a written statement, including 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 a Federal agency to identify and consider a reasonable number
of regulatory alternatives and adopt the least costly, more cost-
effective, or least burdensome alternative that achieves the objectives
of the rule.
This proposed rule contains no Federal mandates (under the
regulatory provisions of title II of the UMRA) for state, local, and
tribal governments or for the private sector. Therefore, this proposed
rule is not subject to the requirements of sections 202 and 205 of the
UMRA.
Paperwork Reduction Act
The information collection requirements contained in this
regulation have been approved by OMB and have been assigned OMB control
number 0575-0189. This proposed rule contains no new reporting and
recordkeeping requirements that would require approval under the
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35).
E-Government Act Compliance
RHS is committed to complying with the E-Government Act by
promoting the use of the internet and other information technologies to
provide
[[Page 1151]]
increased opportunities for citizen access to government information,
services, and other purposes.
Civil Rights Impact Analysis
Rural Development has reviewed this proposed rule in accordance
with USDA Regulation 4300-4, Civil Rights Impact Analysis, to identify
any major civil rights impacts the proposed rule might have on program
participants on the basis of age, race, color, national origin, sex, or
disability. After review and analysis of the proposed rule and
available data, it has been determined that implementation of the
rulemaking will not adversely or disproportionately impact very low,
low- and moderate-income populations, minority populations, women,
Indian tribes, or persons with disability by virtue of their race,
color, national origin, sex, age, disability, or marital or familial
status. No major civil rights impact is likely to result from this
proposed rule.
Assistance Listing
The program affected by this regulation is listed in the Assistance
Listing Catalog (formerly Catalog of Federal Domestic Assistance) under
number 10.415-Rural Rental Housing Loans.
Non-Discrimination Statement Policy
In accordance with Federal civil rights laws and U.S. Department of
Agriculture (USDA) 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#473735282035262a692e2933262c22073234232669202831"><span class="__cf_email__" data-cfemail="81f1f3eee6f3e0ecafe8eff5e0eae4c1f4f2e5e0afe6eef7">[email protected]</span></a>.
USDA is an equal opportunity provider, employer, and lender.
List of Subjects in 7 CFR 3560
Accounting, Administrative practice and procedure, Aged, Conflicts
of interest, Government property management, Grant programs-housing and
community development, Insurance, Loan programs-agriculture, Loan
programs-housing and community development, Low and moderate-income
housing, Migrant labor, Mortgages, Nonprofit organizations, Public
housing, Rent-subsidies, Reporting and recordkeeping requirements,
Rural areas.
For the reasons set forth in the preamble, Rural Housing Service
proposes to amend 7 CFR part 3560 as follows:
PART 3560--DIRECT MULTI-FAMILY HOUSING LOANS AND GRANTS
0
1. The authority citation for part 3560 continues to read as follows:
Authority: 42 U.S.C. 1480.
Subpart G--Financial Management
0
2. Amend Sec. 3560.306 by revising paragraph (d)(2) to read as
follows:
Sec. 3560.306 Reserve account.
* * * * *
(d) * * *
(2) If a housing project's general operating account has surplus
funds at the end of the housing project's fiscal year per paragraph
(d)(1) of this section, the borrower will be required to use such
surplus for one of the following (not in priority order): use the
surplus funds to address capital needs, make a deposit in the reserve
account or reduce the debt service on the borrower's loans, including
Agency-approved third-party debt. The prior written consent of the
Agency must be obtained before surplus funds may be used to pay debt
service on third-party debt. At the end of the borrower's fiscal year,
if the borrower is required to transfer surplus funds from the general
operating account to the reserve account, the transfer does not change
the future required contributions to the reserve account.
* * * * *
Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2023-00140 Filed 1-6-23; 8:45 am]
BILLING CODE 3410-XV-P
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