Proposed Rule2023-01636
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
January 27, 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 the current regulation for the Single-Family Housing Guaranteed Loan Program (SFHGLP) to implement changes related to the use of Special Servicing Options for Non-performing Loans. This proposed rule is intended to benefit borrowers by offering a less cumbersome option to eliminate documentation and eligibility challenges for borrowers who do not require payment reduction, provide lenders more flexibility in their servicing options, and reduce program risk of the guaranteed loan portfolio.
Full Text
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<title>Federal Register, Volume 88 Issue 18 (Friday, January 27, 2023)</title>
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[Federal Register Volume 88, Number 18 (Friday, January 27, 2023)]
[Proposed Rules]
[Pages 5275-5278]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-01636]
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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. 18 / Friday, January 27, 2023 /
Proposed Rules
[[Page 5275]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3555
[Docket No. RHS-22-SFH-0012]
RIN 0575-AD28
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), a Rural Development
(RD) agency of the United States Department of Agriculture (USDA),
proposes to amend the current regulation for the Single-Family Housing
Guaranteed Loan Program (SFHGLP) to implement changes related to the
use of Special Servicing Options for Non-performing Loans. This
proposed rule is intended to benefit borrowers by offering a less
cumbersome option to eliminate documentation and eligibility challenges
for borrowers who do not require payment reduction, provide lenders
more flexibility in their servicing options, and reduce program risk of
the guaranteed loan portfolio.
DATES: Comments must be submitted on or before March 28, 2023.
ADDRESSES: Comments may be submitted by going to 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-SFH-0012) or the RIN# 0575-AD28. To submit or view public
comments, click the ``Search'' button, select the ``Documents'' tab,
then select the following document title: (Single-Family Housing
Guaranteed Loan Program) 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
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: Ticia Weare, Finance and Loan Analyst,
Single Family Housing Guaranteed Loan Division, Rural Development, U.S.
Department of Agriculture, STOP 0784, South Agriculture Building, 1400
Independence Avenue SW, Washington, DC 20250-0784. Telephone: (314)
679-6919; or email: <a href="/cdn-cgi/l/email-protection#ff8b969c969ed1889a9e8d9abf8a8c9b9ed1989089"><span class="__cf_email__" data-cfemail="f7839e949e96d98092968592b782849396d9909881">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The USDA's RHS 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 purpose of the SFHGLP is to assist approved lenders in
providing low- and moderate-income households the opportunity to own
adequate, modest, decent, safe, and sanitary dwellings as their primary
residence in eligible rural areas. Eligible applicants may purchase,
build, rehabilitate, improve, or relocate a dwelling in an eligible
rural area with 100 percent financing. The USDA-RD backed 90 percent
loan note guarantee encourages lender participation by minimizing the
risk of extending 100 percent loan to value, also referred to as no-
money-down mortgage loans, to eligible low- and moderate-income rural
applicants. Providing affordable homeownership opportunities promotes
prosperity, which in turn creates thriving communities and improves the
quality of life in rural areas.
The SFHGLP is authorized by the requirements of section 502(h) of
the Housing Act of 1949, (42 U.S.C. 1472(h)), as amended. 7 CFR part
3555 sets forth the regulatory requirements of the SFHGLP which
includes policies regarding originating, servicing, holding and
liquidating SFGHLP loans. SFHGLP approved lenders make the initial
eligibility determinations, and the Agency reviews those determinations
to make a final eligibility decision. Under 7 CFR 3555.303 lenders are
provided several traditional servicing options for Non-Performing
Loans, and 7 CFR 3555.304 provides for the use of special servicing
options if the traditional servicing options provided at 7 CFR 3555.303
have been exhausted or the lender has determined that the use of such
servicing options would not resolve the delinquency.
The Agency's intent is to update the Special Servicing Options for
Non- Performing Loans to improve the process for lenders requesting a
Mortgage Recovery Advance (MRA).
II. Discussion of the Proposed Rule
RHS is issuing a proposed rule to amend the SFHGLP regulation, 7
CFR part 3555, subpart G, to change how MRA funds are advanced and
repaid.
The MRA is available to the lender only after all traditional
options provided at 7 CFR 3555.303 have been considered or the lender
has determined that use of such servicing options would resolve the
delinquency. While this remains unchanged, the Agency proposes to
change how the funds are advanced and repaid. In the coming months and
years, the Agency anticipates a greater volume of MRA's to be necessary
to solve for the forbearance volume initiated by borrowers impacted by
circumstances beyond their control.
A partial claim, or MRA as the Agency refers to it under 7 CFR
3555.304(d), is one of several special servicing options currently
available to lenders. The MRA is funds advanced by the lender on behalf
of a borrower to satisfy the borrower's debt, pay legal fees and
foreclosure costs related to a cancelled foreclosure action and reduce
principal.
[[Page 5276]]
The Agency will track the MRA payment due from the lender and
perform normal servicing activities to collect the debt. The lender is
advised to collect the debt from the borrower prior to releasing the
lien. The lender's failure to collect the debt from the borrower will
not relieve the lender from their obligation to repay the debt to USDA.
If the lender does not repay the debt to USDA, that failure to repay
could result in the lender losing their approved lender status. In the
event of a loss claim by the lender, the MRA will be subtracted from
the final calculation of the claim to be paid by the Agency.
The Agency also proposes to eliminate the second lien required by 7
CFR 3555.304(d)(7). By eliminating this requirement, modification of
the loan would not always be required when there is no change to the
terms, which may allow the loan to remain securitized. The lender or
servicer issuing a servicer advance to the borrower and seeking
reimbursement by the Agency should follow the Agency suggested
practices. The amount of the servicer advance will show on the
borrower's statement along with the principal balance of the loan, but
no payment arrangement will be required. The lender or servicer will
collect the servicer advance from the borrower when the first lien is
satisfied, and the full amount of the servicer advance will be due to
the Agency from the lender.
The current process for a lender to take advantage of this
servicing option and be reimbursed for the advance requires the
borrower to sign the subordinate promissory note payable to the Agency,
a second lien be placed on the property, and the final recorded
mortgage be submitted to the Agency. Placing a second lien on the
property puts the burden of collection on the Agency instead of the
lender.
These proposed changes are expected to provide lenders more
flexibility in their servicing options and will benefit borrowers and
lenders by offering a less expensive and less cumbersome option,
creating an environment that supports successful future homeownership.
III. Summary of Proposed Rule Changes
The following is a summary of the proposed changes to 7 CFR part
3555.
(1) Amend Sec. 3555.304(b)(3) by removing language pertaining to
title search and recording fees. These services will no longer be
utilized by the lender.
(2) Amend Sec. 3555.304(d)(4) by removing language pertaining to
the reimbursement of fees for title search and/or recording fees, which
costs will no longer be incurred. The lender will be responsible for
issuing a servicer advance to the borrower and seeking reimbursement
from the Agency. The advance will show on the statement along with the
principal balance of the loan, but no payment arrangement will be
required. The full amount of the advance will be due from the lender
prior to the release of lien on the original recorded note.
(3) Amend Sec. 3555.304(d)(6) by revising sub-paragraphs (i),
(ii), (iii), (iv), and (v) to eliminate the second lien requirement. By
eliminating this requirement, modification of the loan would not always
be required as there is no change to the terms, thus may allow the loan
to remain securitized.
(4) Amend Sec. 3555.304 by amending sub-paragraph (d)(7) and
eliminating (d)(8) to remove references to the borrower's requirement
to execute a promissory note payable to the Agency and a mortgage or
deed-of-trust in recordable form perfecting a lien naming the Agency as
the secured party for the amount of the mortgage recovery advance.
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. Regulations implementing section
502(h), the SFHGLP, are located at 7 CFR part 3555.
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 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 proposed rule: (1) unless otherwise
specifically provided, all state and local laws that conflict with this
proposed rule will be preempted; (2) no retroactive effect will be
given to this proposed rule except as specifically prescribed in the
proposed 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 proposed rule.
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 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 the 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 proposed
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#03424a424d43767067622d646c75"><span class="__cf_email__" data-cfemail="cf8e868e818fbabcabaee1a8a0b9">[email protected]</span></a> to request such a
consultation.
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
[[Page 5277]]
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 the private sector. Therefore, this proposed
rule is not subject to the requirements of sections 202 and 205 of the
UMRA.
National Environmental Policy Act
In accordance with the National Environmental Policy Act of 1969,
Public Law 91-190, this proposed rule has been reviewed in accordance
with 7 CFR part 1970 (``Environmental Policies and Procedures''). The
Agency has determined that (i) this action meets the criteria
established in 7 CFR 1970.53(f); (ii) no extraordinary circumstances
exist; and (iii) the action is not ``connected'' to other actions with
potentially significant impacts, is not considered a ``cumulative
action'' and is not precluded by 40 CFR 1506.1. Therefore, the Agency
has determined that the action does not have a significant effect on
the human environment, and therefore neither an Environmental
Assessment nor an Environmental Impact Statement is required
Regulatory Flexibility Act
This proposed rule has been reviewed with regards 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.
Assistance Listing
The program affected by this proposed rule is listed in the
Assistance Listing Catalog (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
The information collection requirements contained in this
regulation have been approved by OMB and have been assigned OMB control
number 0575-0179. This proposed rule contains no new reporting or
recordkeeping requirements 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 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
proposed rule will not adversely or disproportionately impact very low,
low- and moderate-income populations, minority populations, women,
Indian tribes, or persons based on 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.
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.
Non-Discrimination Policy
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#562624393124373b783f3822373d33162325323778313920"><span class="__cf_email__" data-cfemail="0b7b79646c796a662562657f6a606e4b7e786f6a256c647d">[email protected]</span></a>.
USDA is an equal opportunity provider, employer, and lender.
List of Subjects in 7 CFR Part 3555
Loss claim coverage--loan guarantee limits, Mortgage recovery
advance, Special relief measures, Special servicing options, Stand-
alone MRA.
For the reasons discussed in the preamble, the Rural Housing
Service 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 G--Servicing Non-Performing Loans
0
2. Amend Sec. 3555.304 by revising paragraph (b)(3), (d)(4), (d)(6)(i)
through (v), (d)(7), and removing (d)(8) to read as follows:
Sec. 3555.304 Special servicing options.
* * * * *
(b) * * *
(3) Expenses related to special loan servicing shall not be charged
to the borrower. However, if a foreclosure was initiated and canceled
prior to special loan servicing, legal fees and costs for work
performed in relation to the foreclosure costs before the cancellation
date may be charged to the borrower.
* * * * *
(d) * * *
(4) If the borrower is eligible for a mortgage recovery advance,
the servicer will advance the funds to the borrower's
[[Page 5278]]
account and create a non-interest-bearing recoverable servicing
advance. The advance is to be provided on the mortgage statements,
along with the principal balance of the loan, but no payment
arrangement will be required. The servicing advance must be collected
from the borrower prior to the earlier of the release of lien or the
transfer of title to the property by voluntary or involuntary means.
* * * * *
(6) The following terms apply to the repayment of mortgage recovery
advances:
(i) Borrowers are not required to make any monthly or periodic
payments on the mortgage recovery advance; however, borrowers may
voluntarily submit partial payments without incurring any prepayment
penalty.
(ii) The borrower is responsible for payment of the mortgage
recovery advance to the lender in full at the earlier of the following:
(A) When the mortgage lien and the guaranteed note are paid off; or
(B) When the borrower transfers title to the property by voluntary
or involuntary means.
(iii) Repayment of any part of the mortgage recovery advance
reimbursed by the Agency must be remitted to the Agency by the lender
at the earlier of the following:
(A) When payment is received from the borrower.
(B) The mortgage lien is released; or
(C) The borrower transfers title to the property by voluntary or
involuntary means.
(iv) The Agency will collect this Federal debt from the lender.
(v) In the event of a loss claim, the mortgage recovery advance
will be considered in calculating the claim paid by the Agency. The
total amount paid, including the mortgage recovery advance, cannot
exceed the Agency's maximum exposure, as defined in Sec. 3555.351(b).
(7) The lender may request reimbursement from the Agency for a
mortgage recovery advance. The lender shall repay any such
reimbursement as provided in paragraph (d)(6) of this section.
Cathy Glover,
Acting Administrator, Rural Housing Service.
[FR Doc. 2023-01636 Filed 1-26-23; 8:45 am]
BILLING CODE 3410-XV-P
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