Proposed Rule2023-25314
Streamlining and Improvement of Single Family Housing Direct Programs
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
November 20, 2023
Issuing agencies
Agriculture DepartmentRural Housing Service
Abstract
The Rural Housing Service (RHS or the Agency), an agency in the Rural Development (RD) mission area of the United States Department of Agriculture (USDA), proposes to amend the current regulation for the following Single Family Housing (SFH) Direct Programs: Section 502 Direct Loan Program and the Section 504 Loan and Grant Program. The Agency also intends to update the Section 306C Loan and Grant Programs which is a program administered under the Rural Utilities Service (RUS), and where RHS is designated to make grants to eligible individuals. The intent of this proposed rule is to reduce the regulatory burdens on applicants, borrowers, and partners by enhancing program delivery, expanding customer service, promoting consistency between the direct and guaranteed SFH loan programs where feasible and aligning the programs with current housing market conditions and mortgage loan practices.
Full Text
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[Federal Register Volume 88, Number 222 (Monday, November 20, 2023)]
[Proposed Rules]
[Pages 80641-80647]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-25314]
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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. 222 / Monday, November 20, 2023 /
Proposed Rules
[[Page 80641]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3550
[Docket No. RHS-23-SFH-0016]
RIN 0575-AD33
Streamlining and Improvement of Single Family Housing Direct
Programs
AGENCY: Rural Housing Service, Department of Agriculture (USDA).
ACTION: Proposed rule.
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SUMMARY: The Rural Housing Service (RHS or the Agency), an agency in
the Rural Development (RD) mission area of the United States Department
of Agriculture (USDA), proposes to amend the current regulation for the
following Single Family Housing (SFH) Direct Programs: Section 502
Direct Loan Program and the Section 504 Loan and Grant Program. The
Agency also intends to update the Section 306C Loan and Grant Programs
which is a program administered under the Rural Utilities Service
(RUS), and where RHS is designated to make grants to eligible
individuals. The intent of this proposed rule is to reduce the
regulatory burdens on applicants, borrowers, and partners by enhancing
program delivery, expanding customer service, promoting consistency
between the direct and guaranteed SFH loan programs where feasible and
aligning the programs with current housing market conditions and
mortgage loan practices.
DATES: Comments on the proposed rule must be received on or before
January 19, 2024.
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 for dockets and documents on agency actions'' box, enter the
following docket number: (RHS-23-SFH-0016) or RIN# 0575-AD33. To submit
or view public comments, click the ``Search'' button, select the
``Documents'' tab, then select the following document title:
``Streamlining and Improvement of Single Family Housing Direct
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 RD and its programs
is available at the following website: <a href="https://www.rurdev.usda.gov">https://www.rurdev.usda.gov</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: Sonya Evans, Finance and Loan Analyst,
SFH Direct Loan Division, Rural Housing Service, Rural Development,
United States Department of Agriculture, 1400 Independence Avenue SW,
Washington, DC 20250, Phone: (423) 268-4333, Email:
<a href="/cdn-cgi/l/email-protection#b6e5d9d8cfd798f3c0d7d8c5f6c3c5d2d798d1d9c0"><span class="__cf_email__" data-cfemail="d182bebfa8b0ff94a7b0bfa291a4a2b5b0ffb6bea7">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
The 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 multifamily 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.
Well built, affordable housing is essential to the vitality of
communities in rural America. The Agency's SFH programs give families
and individuals the opportunity to buy, build, or repair affordable
homes located in rural America. Eligibility for these loans, loan
guarantees, and grants is based on income and varies according to the
average median income for each area. The RHS administers the following
SFH Programs:
Section 502 Direct Loan Program is implemented under 7 CFR part
3550 and authorized by section 502 of the Housing Act of 1949, as
amended, (42 U.S.C. 1472). The purpose of the program is to assist low-
and very low-income applicants who currently do not own adequate
housing and cannot obtain other credit, the opportunity to acquire,
build, rehabilitate, improve, or relocate dwellings in rural areas.
Section 502 Guaranteed Loan Program is implemented under 7 CFR part
3555 and is authorized by section 502 of the Housing Act of 1949, as
amended, (42 U.S.C. 1472). The purpose of the program is to assist low-
and moderate-income applicants the opportunity to acquire, build,
rehabilitate, improve, or relocate dwellings in rural areas.
Section 504 Loan and Grant Program is implemented under 7 CFR part
3550 and is authorized by section 504 of the Housing Act of 1949, as
amended, (42 U.S.C. 1474). This program offers loans to very low-income
homeowners who cannot obtain other credit to repair or rehabilitate
their properties. The Section 504 program also offers grants to
homeowners aged 62 or older who cannot obtain a loan to correct health
and safety hazards or to make the unit accessible to household members
with disabilities.
Another RD mission area agency, the RUS, administers the Section
306C Loan and Grant Program which is authorized by section 306C of the
Consolidated Farm and Rural Development Act, as amended, (7 U.S.C.
1926c), and implemented under 7 CFR part 1777 and 7 CFR part 3550.
Under subpart C of 7 CFR part 3550, RHS makes 306C Water and Waste
Disposal (WWD) Grants to very low-income individuals (i.e., homeowners)
in designated colonias who cannot obtain other credit to facilitate
access to community water and waste disposal systems. Grant funds may
be used only to pay for costs related to connection fees and related
costs to connect to a community or central water supply or waste system
which may include installation of necessary plumbing and related
fixtures, and construction or partitioning of a bathroom within
dwellings lacking such facilities.
The SFH program undertook a systematic review of its regulations at
7
[[Page 80642]]
CFR part 3550 and procedures currently in place to administer its
programs. It was determined there was a need to provide additional
clarity and to provide consistency between interdepartmental
regulations. The changes also address the need for program improvements
such as revisions related to down payment requirements within the
Direct Programs.
II. Discussion of the Proposed Rule
This proposed rulemaking is part of the Agency's efforts to: (1)
align, where appropriate, the direct and guaranteed SFH loan programs,
and (2) address current housing market conditions and mortgage loan
practices through program improvements. RHS's intention is to
streamline its program procedures and revise regulations by removing
outdated regulations and simplifying practices and procedures for
borrowers and applicants.
As the Agency reviewed its regulations at 7 CFR part 3550 and the
procedures that are currently in place for administering the Section
502 Direct Loan Program and the Section 504 Loan and Grant Program,
which includes a subpart for application of the 306C WWD Grant, it was
discovered that there is currently no express prohibition against
lending in lava zones under these programs. The Section 502 Guaranteed
Loan Program regulation, does, however, expressly prohibit lending in
lava zones. The proposed change will align the aforementioned programs
on this issue and minimize confusion for applicants and partners in the
affected areas. The proposed changes will also clarify the terms for
new dwellings and new construction for applicants and partners.
Additionally, the proposed changes will assist with addressing the lack
of affordable housing stock by providing flexibility for applicants and
partners purchasing Real Estate Owned (REO) properties or through non-
program loan terms.
The following information provides further details of the proposed
rule changes:
1. Refine the definition of ``New Dwelling or unit'' in 7 CFR
3550.10 Definitions; add a definition for New Construction to alleviate
confusion in the terminology; and corresponding and additional changes
to 7 CFR 3550.53(d)(1)(ii), 7 CFR 3550.63(b)(1), 7 CFR 3550.63(b)(2),
and 7 CFR 3550.102(e)(1), under which the Section 502 Direct Loan and
Section 504 Loan and Grant programs are implemented:
Section 502 Direct Loans may be used by loan recipients to purchase
a building site and construct new housing (`new construction') or
purchase newly constructed housing (`new dwelling'). The builder funds
a new dwelling. The Agency funds a new construction. While the
terminology is similar, the distinction is important because
eligibility for the Compensation for Construction Defects Program
(Section 509) is based on the construction timing, who funds the
construction, and the applicant's program eligibility. The factors that
determine the applicant's eligibility for the Compensation for
Construction Defects Program can be found at 7 CFR 1924.265 and at the
website: <a href="https://www.ecfr.gov/current/title-7/subtitle-B/chapter-XVIII/subchapter-H/part-1924/subpart-F/section-1924.265">https://www.ecfr.gov/current/title-7/subtitle-B/chapter-XVIII/subchapter-H/part-1924/subpart-F/section-1924.265</a>.
The Agency considers funding for a new construction whether or not
the construction has started at the time the purchase agreement was
signed. This includes instances where the builder will retain ownership
of the lot during construction, or the construction has commenced prior
to closing. In these instances, the funded construction can only be
closed after construction of the housing is completed. Alternatively,
if the construction has not started and the Agency will provide the
construction financing, the closing will be prior to construction. As
noted, closing timing is based on when construction occurs and who
funds the construction.
The Agency proposes to clarify terms by adding the language ``prior
to loan closing'' to the phrase ``is to be constructed'' in the
definition of ``new dwelling or unit'' for definitions found at 7 CFR
3550.10. The Agency proposes that this addition will provide
clarification of the timing of construction periods that differentiate
a new dwelling and a new construction. Furthermore, adding the language
``at the time of loan approval'' to the phrase ``less than 1 year old''
clarifies the parameters of this definition.
The addition of the term and definition for `New construction' in 7
CFR 3550.10 is proposed to separate the terms and provide clarity
regarding the varying construction quality documents required for new
dwellings and new construction. Furthermore, this amendment proposes to
support a corresponding update in 7 CFR 3550.63(b)(1).
Removal of 7 CFR 3550.63(b)(2) will streamline market value
limitations, thereby permitting a corresponding change to the program
handbook to allow for a whole house inspection to serve as adequate
documentation of construction quality for a new dwelling.
2. Amend 7 CFR 3550.52(d)(6) to remove reference to State Director
and replace with requirement for Agency approval when granting
allowable exceptions for non-certified loan packaging bodies, revise
language regarding application submission requirements, and allow
certified packaging fees to be added to the loan in excess of the area
loan limit and appraised value of the house, which is implemented under
the Section 502 Direct Loan Program:
The revision will clarify that Form 410-4, Uniform Residential Loan
Application, is part of the application but does not constitute a full
application package.
Lastly, a revision is needed to allow packaging fees resulting from
the certified loan application packaging process outlined in 7 CFR
3550.75 to be added to the Section 502 Direct loan amount in excess of
the area loan limit and appraised value of the house. This cost is
similar to other allowable excess costs for critical loan-related
services or actions, which include the appraisal fee, tax service fee,
homeownership education fee, and initial contribution to the escrow
account. Certified application packagers provide an integral service
that allows many applicants to access the Direct Program who would
otherwise not be aware of it, or who lack the resources to complete the
application process on their own. Well-developed application packages
submitted through the certified process help to reduce Agency
processing time and provide the applicant with a higher priority for
processing. This change will reflect the value the service (and its
cost) provides the applicant.
3. Add language to 7 CFR 3550.56(b) and 7 CFR 3550.105 to prohibit
lending in U.S. Geological Survey (USGS) Lava-Flow Hazard Zones 1 and
2, which will provide interdepartmental alignment between 7 CFR 3550,
which implements the Section 502 Direct Loan Program, and the Section
504 Loan and Grant Program, including the subpart for application of
the 306C WWD Grant, and current regulations in 7 CFR part 3555 for the
Section 502 Guaranteed Loan Program:
A home located in the lava-flow hazard zones 1 and 2 represents a
significantly hazardous risk. 7 CFR 3550.10 defines a hazard as, ``a
condition of the property that jeopardizes the health or safety of the
occupants or members of the community, that does not make it unfit for
habitation (See also the definition of major hazard in this
section.).''
According to 7 CFR 3550.2, the purpose of the direct RHS SFH loan
programs (the Direct Program) is to provide low- and very low-income
[[Page 80643]]
people that live in rural areas with an opportunity to own adequate,
but modest, decent, safe, and sanitary dwellings and related
facilities.
Currently, the Direct Program does not have specific guidance
related to volcanic/lava hazards. The Agency intends to add language to
7 CFR 3550.56(b) and 7 CFR 3550.105 to prohibit lending in U.S.
Geological Survey (USGS) Lava-Flow Hazard Zones 1 and 2. Adding this
language to the regulation will align with the guaranteed loan program
and others in the industry in protecting borrowers.
4. Amend 7 CFR 3550.64 to increase net family asset limits before
consideration of assets toward a down payment requirement and to remove
the down payment requirement when the borrower is purchasing a REO
property from the Agency, which is implemented under the Section 502
Direct Loan Program:
The Agency published a direct final rule in the Federal Register on
August 22, 2008, revising the minimum insurance deductible amounts,
removing specific dollar limits with regards to insurance deductible
clauses, clarifying the amount of required dwelling coverage, and
revising the applicant net asset limitation. An adjustment to asset
limits for non-metropolitan median household income, set at $48,201,
has not been updated since 2008 (73 FR 49593). Non-metropolitan median
household income for 2022 has increased to $71,300. With the median
household increase, there has also been a 37.6% cumulative rate of
inflation from the years 2008 to 2022, thus increasing the cost of
living and goods. Increasing asset limits will allow fixed income
households the ability to hold onto assets for emergency purposes,
rather than relying on credit in these circumstances, and for elderly
households to hold onto funds potentially set-aside for final expenses.
The Agency anticipates that removing the down payment requirement
when the borrower is purchasing a REO property will: (1) increase
borrower interest in purchasing REO properties, (2) reduce holding
times and costs incurred by the Agency and depreciation of the
properties; and (3) promote affordable housing in rural communities.
5. Amend 7 CFR 3550.67(b)(1) to clarify that amounts included for
repairs must be part of an initial purchase or finance loan to qualify
for a 38-year term, which is implemented under the Section 502 Direct
Loan Program:
The intention of this revision is to clarify that amounts included
for repairs must be part of an initial purchase or finance loan to
qualify for a 38-year term; whereas the current language could be read
to allow a 38-year term for initial repair-only loan through the
Section 502 Direct Loan Program which is not consistent with Agency
policy.
6. Remove language in 7 CFR 3550.74(c)(2) and renumber the list
accordingly, which is implemented under the Section 502 Direct Loan
Program:
The Agency proposes the removal of the down payment requirement for
non-program loans. This proposed removal would eliminate a burdensome
requirement for borrowers and applicants who request to purchase
through non-program loan terms and for whom a non-program loan has been
found to be in the Government's best interests. This removal aligns
with another revision in this proposed rule to remove down payment
requirements for the purchase of REOs in 7 CFR 3550.64.
7. Remove language in 7 CFR 3550.75(b)(1)(iv) and (b)(2)(v), that
states ``if determined necessary by a State Director'' which is
contradictory to other instructions for certified packaging
requirements, and is implemented under the Section 502 Direct Loan
Program:
Currently, it is unclear in 7 CFR 3550.75(b)(1)(iv) and (b)(2)(v)
what authority a State Director may or may not have with regard to
waiving the requirement that a certified packager must use an
intermediary. There is guidance that addresses an opt-out option that
State Directors can grant for certified loan packagers to separate from
an intermediary, but it also outlines the requirements that a certified
packager must meet in order to be granted this consideration. The
removal of ``if determined necessary by a State Director'' will avoid
any misunderstanding that a State Director can automatically waive all
requirements for a certified packager to use an intermediary with a
revision to instead address the allowance for the Agency to allow
waivers when applicable.
8. Amend 7 CFR 3550.103(e) to increase net family household assets
for elderly families and non-elderly families before consideration of
funds toward reduction of requested assistance, which is implemented
under the Section 504 Loan and Grant Program and includes a subpart for
application of the 306C WWD Grant:
An adjustment to asset limits has not been made since the Agency
published a direct final rule in 2008 (see, 73 FR 49593 at the website:
<a href="https://www.federalregister.gov/documents/2008/08/22/E8-19350/direct-single-family-housing-loans-and-grants">https://www.federalregister.gov/documents/2008/08/22/E8-19350/direct-single-family-housing-loans-and-grants</a>). In 2008, the non-metropolitan
median household income was at $48,201. Non-metropolitan median
household income for 2022 increased to $71,300. With this median
household income increase, there has also been a 37.6% cumulative rate
of inflation from 2008 through 2022, thus increasing the cost of living
and goods. Increasing asset limits will allow fixed income households
the ability to maintain assets for emergency purposes, rather than
relying on credit in these circumstances. This change will also align
with the proposed changes to 7 CFR 3550.64 regarding excess assets
considered toward down payment. The Agency proposes that amending 7 CFR
3550.103(e) to increase net family household assets for elderly
families and non-elderly families before consideration of funds toward
reduction of requested assistance will increase the number of eligible
applicants.
9. Remove the subdividable lot restrictions in 7 CFR 3550.105(b),
which is implemented under the Section 504 Loan and Grant Program and
includes a subpart for application of the Section 306C WWD Grant:
The Agency has been conducting a pilot program since Fiscal Year
2019 and has found that the removal of the requirement which restricts
subdividable lots in 7 CFR 3550.105(b) held no risk for the Agency. The
Agency concluded that this prohibition is restrictive for the Section
504 program considering ownership is previously established at the time
of application. This restriction is a barrier to very low-income rural
homeowners in need of repairs. The site must still be determined modest
for the area and cannot be used for income producing purposes as
currently defined at 7 CFR 3550.10 and 7 CFR 3550.106(a). If this
restriction is not removed, modest homes that are typical for the area
will not be eligible for necessary repair financing.
10. Amend 7 CFR 3550.108(a) to include the tax service fee as an
allowable loan cost exceeding security value, which is implemented
under the Section 504 Loan and Grant Program which includes a subpart
for application of the 306C WWD Grant:
The Agency believes that the inclusion of the tax service fee as an
allowable excess cost is practical for 504 direct loans that meet the
requirement to contribute to an escrow account for taxes and insurance,
which also activates the requirement of tax service fee payment at
closing. The Agency proposes that amending 7 CFR 3550.108(a) to include
the tax service
[[Page 80644]]
fee as an allowable loan cost exceeding security value will also align
with applicable loan costs which may exceed security value as
designated in 7 CFR 3550.59(a)(2)(i) for the 502 Direct Program.
11. Amend 7 CFR 3550.111, to revise the threshold for requiring an
appraisal based on total Section 504 indebtedness, which is implemented
under the Section 504 Loan and Grant Program and includes a subpart for
application of the Section 306C WWD Grant Program:
Currently, 7 CFR 3550.111 requires an appraisal when total Section
504 indebtedness exceeds $15,000. The Agency proposes to amend 7 CFR
3550.111, to revise the threshold for requiring an appraisal based on
total Section 504 indebtedness. This amendment would increase that
limit to $25,000 and works in tandem with the increased Section 504
maximum loan amount of $40,000 (previously $20,000). The proposed
amendment would retain the flexibility for the Loan Approval Official
to determine if an appraisal is necessary when the assessed valuation
by local authorities does not support a fully secured interest by the
Agency and preserve the requirement to ensure adequate security value.
The Agency projects that due to this proposed change, multiple benefits
are likely, such as a reduction in appraisal orders, lower cost to loan
applicants, and decreased application processing times.
12. Amend 7 CFR 3550.117(d) and (e) to remove overly restrictive
limitations and align with final regulatory revisions to 7 CFR
1777.21(b)(4) and (5)--Section 306C WWD Loans and Grants that
eliminated these limitations and are holding these sections as reserved
(effective May 2, 2023), which is implemented under the 306C WWD Grant
Program as a subpart of the Section 504 Loan and Grant Program:
The Agency has determined that alignment of 306C Colonia programs
governed by 7 CFR part 1777 and 7 CFR part 3550 is necessary to ensure
equal program application. The current prohibitions limit the amount of
assistance applicants with varying household sizes can receive causing
unnecessary hardship for larger families. These proposed rule changes
will provide the Agency flexibility to clarify modest design
limitations in the program handbook, if needed. The Agency proposes
that amending 7 CFR 3550.117 paragraphs (d) and (e) by removing overly
restrictive limitations will align with final regulatory revisions that
were published at 88 FR 6611 to remove 7 CFR 1777.21(b)(4) and (5)--
Section 306C WWD Loans and Grants, which were effective on May 2, 2023.
13. Amend 7 CFR 3550.118(a) Maximum grant to an amount not to
exceed ten percent of the national average area loan limit, which is
implemented under the 306C WWD Grant Program as a subpart of the
Section 504 Loan and Grant Program:
The Agency proposed that amending 7 CFR 3550.118(a) by revising the
maximum grant amount to not exceed ten percent of the national average
area loan limit will align with the regulatory maximum lifetime
assistance in the Section 504 program. This regulatory change will
allow the Agency greater responsiveness to establish future maximum
grant amounts for eligible applicants.
Request for Comment
Stakeholder input is vital to ensure the proposed changes in the
proposed rule would support the Agency's mission, while ensuring that
new regulations and policies are reasonable and do not overly burden
the Agency's lenders and their customers. Comments must be submitted on
or before January 19, 2024 and may be submitted electronically by going
to the Federal eRulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Details
on how to submit comments to the Federal eRulemaking Portal are in the
ADDRESSES section of this proposed rule.
III. Summary of Changes
The following is a summary of the Agency's intended changes in this
proposed rule:
(1) Amend 7 CFR part 3550 by revising the definitions found at 7
CFR 3550.10 by:
(i) revising the definition of ``New dwelling or unit'';
(ii) adding a definition for ``New construction'' to clarify the
terminology;
(ii) and revising corresponding language at 7 CFR
3550.53(d)(1)(ii), 7 CFR 3550.63(b)(1), 7 CFR 3550.63(b)(2), and 7 CFR
3550.102(e)(1).
(2) Amend 7 CFR 3550.52(d)(6) by:
(i) Revising language to remove reference to State Director when
granting allowable exceptions for non-certified loan packing bodies and
instead address the ability for the Agency to provide approval for
packagers who operate outside of the certified process;
(ii) revising language regarding application submission
requirements, and;
(iii) adding language that allows certified packaging fees to be
added to the loan in excess of the area loan limit and appraised value
of the house.
(3) Add language to 7 CFR 3550.56(b) and 7 CFR 3550.105 to prohibit
lending in U.S. Geological Survey (USGS) Lava-Flow Hazard Zones 1 and
2.
(4) Amend 7 CFR 3550.64 by:
(i) increasing the net family asset limits before consideration of
assets toward a down payment requirement; and
(ii) removing the down payment requirement when the borrower is
purchasing a REO property from the Agency.
(5) Amend 7 CFR 3550.67(b)(1) to clarify that amounts included for
repairs must be part of an initial purchase or finance loan to qualify
for a 38-year term.
(6) Remove 7 CFR 3550.74(c)(2) and renumber the list accordingly.
(7) Remove language in 7 CFR 3550.75(b)(1)(iv) and (b)(2)(v), which
states ``if determined necessary by a State Director'' and rather state
``unless waived by the Agency''.
(8) Amend 7 CFR 3550.103(e) to increase net family household assets
for elderly families and non-elderly families before consideration of
funds toward reduction of requested assistance.
(9) Remove 7 CFR 3550.105(b) which restricts subdividable lots.
(10) Amend 7 CFR 3550.108(a) to include the tax service fee as an
allowable loan cost exceeding security value.
(11) Amend 7 CFR 3550.111 to revise the threshold for requiring an
appraisal based on total Section 504 indebtedness.
(12) Amend 7 CFR 3550.117(d) and (e) to remove overly restrictive
limitations and align with the removal of these regulations at 7 CFR
1777.21(b)(4) and (5)--Section 306C WWD Loans and Grants, which are now
held as reserved.
(13) Amend 7 CFR 3550.118(a) by revising the maximum grant amount
to not exceed ten percent of the national average area loan limit.
IV. Regulatory Information
Statutory Authority
These programs are authorized by Sections 502 and 504 of the
Housing Act 1949 and by Section 306C of the Consolidated Farm and Rural
Development Act and implemented under 7 CFR part 3550. 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.
[[Page 80645]]
Executive Order 12372, Intergovernmental Review of Federal Programs
These programs are not subject to the requirements of Executive
Order 12372, which require 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 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 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 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 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#2968606867695c5a4d48074e465f"><span class="__cf_email__" data-cfemail="c5848c848b85b0b6a1a4eba2aab3">[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 is not 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 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 Mandates 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, most 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 rule is
not subject to the requirements of sections 202 and 205 of the UMRA.
Paperwork Reduction Act
This proposed rule does not revise or impose any new information
collection requirements from those approved by OMB Control number 0575-
0172.
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 increased opportunities for citizen access to Government
information, services, and other purposes.
Civil Rights Impact Analysis
RHS 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, or disability. After review and
analysis of the rule and available data, implementation of the rule is
not likely to 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 familiar status.
No major civil rights impact is likely to result from this rule.
Assistance Listing
The programs affected by this regulation are listed in the
Assistance Listing Catalog (formerly Catalog of Federal Domestic
Assistance) under number 10.410, 10.417, and 10.770.
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
[[Page 80646]]
Area, agency, staff office; 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.usda.gov/sites/default/files/documents/ad-3027.pdf">https://www.usda.gov/sites/default/files/documents/ad-3027.pdf</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 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#8dfdffe2eaffece0a3e4e3f9ece6e8cdf8fee9eca3eae2fb"><span class="__cf_email__" data-cfemail="39494b565e4b58541750574d58525c794c4a5d58175e564f">[email protected]</span></a>.
USDA is an equal opportunity provider, employer, and lender.
List of Subjects in 7 CFR Part 3550
Administrative practice and procedure, Environmental impact
statements, Fair housing, Grant programs--housing and community
development, Housing, Loan programs--housing and community development,
Low and moderate income housing, Reporting and recordkeeping
requirements, Rural areas.
For the reasons set forth in the preamble, chapter XXXV of the
title 7, Code of Federal Regulations is proposed to be amended to read
as follows:
PART 3550--DIRECT SINGLE FAMILY HOUSING LOANS AND GRANTS
0
1. The authority citation for part 3550 continues to read as follows:
Authority: 5 U.S.C. 301; 42 U.S.C. 1480.
Subpart A--General
0
2. Amend Sec. 3550.10 by adding a definition for ``New construction''
and revising the definition for ``New dwelling or unit'' to read as
follows:
Sec. 3550.10 Definitions.
* * * * *
New construction. A dwelling that will be constructed after loan
closing. The Agency will monitor construction progress and approve
draws during the construction period. Only new construction meeting
this definition can be considered for compensation under the Section
509, Compensation for Construction Defects Program.
New dwelling or unit. A dwelling that is to be constructed prior to
loan closing, or a dwelling that is less than 1 year old at the time of
loan approval as evidenced by an occupancy permit, certificate of
occupancy or similar document issued by the local authority and has
never been occupied. A new dwelling or unit cannot be considered for
compensation under the Section 509, Compensation for Construction
Defects Program.
* * * * *
Subpart B--Section 502 Origination
0
3. Amend Sec. 3550.52 by revising paragraph (d)(6) to read as follows:
Sec. 3550.52 Loan Purposes.
* * * * *
(d) * * *
(6) Packaging fees resulting from the certified loan application
packaging process outlined in Sec. 3550.75. Such fees resulting from
the certified loan application packaging process may be added to the
loan amount in excess of the area loan limit and appraised value of the
house. The Agency will determine the limit, based on factors such as
the level of service provided and the prevailing cost to provide the
service, and such cap will not exceed two percent of the national
average area loan limit. Nominal packaging fees not resulting from the
certified loan application process are an eligible cost provided the
fee does not exceed a limit determined by the Agency based on the level
and cost of service factors, but no greater than one half percent of
the national average area loan limit; the loan application packager is
a nonprofit, tax exempt partner approved by the Agency to operate
outside the certified loan application packaging process; and the
packager gathers and submits the information needed for the Agency to
determine if the applicant is eligible along with a complete
application. * * *
0
4. Amend Sec. 3550.53 by revising paragraph (d)(1)(ii) to read as
follows:
Sec. 3550.53 Eligibility Requirements.
* * * * *
(d) * * *
(1) * * *
(ii) purchase a different dwelling, if the current dwelling is
deficient housing as defined in Sec. 3550.10; or
* * * * *
0
5. Amend Sec. 3550.56 (b)(1) by adding a comma after the word
``ordinances'', revising paragraph (b)(2), and adding paragraph (b)(3)
to read as follows:
Sec. 3550.56 Site Requirements.
* * * * *
(b) * * *
(1) The site must not be large enough to subdivide into more than
one site under existing local zoning ordinances, and
(2) The site must not include farm service buildings, though small
outbuildings such as a storage shed may be included, and
(3) The site must not be located in U.S. Geological Survey (USGS)
lava-flow hazard zones 1 or 2.
0
6. Amend Sec. 3550.63 by revising paragraph (b) to read as follows:
Sec. 3550.63 Maximum Loan Limit.
* * * * *
(b) Market value limitation.
(1) The market value limitation is 100 percent of market value for
existing housing, new dwellings, and new construction for which RHS
will receive adequate documentation of construction quality and the
source of such documentation is acceptable to RHS.
(2) The market value limitation can be increased by:
(i) Up to one percent, if RHS makes a subsequent loan for closing
costs only, in conjunction with the sale of an REO property or an
assumption.
(ii) The amount necessary to make a subsequent loan for repairs
necessary to protect the Government's interest, and reasonable closing
costs.
(iii) The amount necessary to refinance an existing borrower's RHS
loans, plus closing costs associated with the new loan.
0
7. Revise Sec. 3550.64 to read as follows:
Sec. 3550.64 Down payment.
Elderly families must use any net family assets in excess of
$30,000 towards a down payment on the property. Non-elderly families
must use net family assets in excess of $25,000 towards a down payment
on the property. Applicants may contribute assets in addition to the
required down payment to further reduce the amount to be financed.
Agency borrowers or applicants purchasing REO properties are not
required to provide a down payment.
0
8. Amend Sec. 3550.67 by revising paragraph (b)(1) to read as follows:
Sec. 3550.67 Repayment period.
* * * * *
(b) * * *
(1) For initial loans (including acquisition and repair, but
excluding initial loans solely for repairs), or
[[Page 80647]]
subsequent loans made in conjunction with an assumption, if the
applicant's adjusted income does not exceed 60 percent of the area
adjusted median income and the longer term is necessary to show
repayment ability.
* * * * *
Sec. 3550.74 [Amended]
0
9. Amend Sec. 3550.74 by removing paragraph (c)(2) and redesignating
paragraph (c)(3) as (c)(2).
0
10. Amend Sec. 3550.75 by revising paragraphs (b)(1)(iv) and (b)(2)(v)
to read as follows:
Sec. 3550.75 Certified Loan Application Packaging Process.
* * * * *
(b) * * *
(1) * * *
(iv) Submit applications via an intermediary, unless otherwise
waived by the Agency.
(2) * * *
(v) Submit applications via an intermediary, unless otherwise
waived by the Agency.
* * * * *
Subpart C--Section 504 Origination and Section 306C Water and Waste
Disposal Grants
0
11. Amend Sec. 3550.102 by revising paragraph (e)(1) to read as
follows:
Sec. 3550.102 Grant and loan purposes.
* * * * *
(e) * * *
(1) Assist in the construction of a new dwelling or new
construction.
* * * * *
0
12. Amend Sec. 3550.103 by revising paragraph (e) to read as follows:
Sec. 3550.103 Eligibility Requirements.
* * * * *
(e) Need and use of personal resources. Applicants must be unable
to obtain financial assistance at reasonable terms and conditions from
non-RHS credit or grant sources and lack the personal resources to meet
their needs. Elderly families must use any net family assets in excess
of $30,000 to reduce their section 504 request. Non-elderly families
must use any net family assets in excess of $25,000 to reduce their
section 504 request. Applicants may contribute assets in excess of the
aforementioned amounts to further reduce their request for assistance.
The definition of assets for the purpose of this paragraph (e) is net
family assets as described in Sec. 3550.54, less the value of the
dwelling and a minimum adequate site.
* * * * *
0
13. Amend Sec. 3550.105 by revising paragraph (b) to read as follows:
Sec. 3550.105 Site Requirements.
* * * * *
(b) Lava-flow hazard zones. The site must not be located in U.S.
Geological Survey (USGS) lava-flow hazard zones 1 or 2.
* * * * *
0
14. Amend Sec. 3550.108 by revising paragraph (a) to read as follows:
Sec. 3550.108 Security requirements (loans only).
* * * * *
(a) RHS does not require first lien position, but the total of all
debts on the secured property may not exceed the value of the security,
except by the amount of any required contributions to an escrow account
for taxes and insurance, tax service fee, and any required appraisal
fee.
* * * * *
0
15. Revise Sec. 3550.111 to read as follows:
Sec. 3550.111 Appraisals (loans only).
An appraisal is required when the total section 504 indebtedness
exceeds $25,000 or whenever RHS determines that it is necessary to
establish the adequacy of the security. RHS may charge an appraisal
fee. Appraisals must be made in accordance with the Uniform Standards
of Professional Appraisal Practices. When other real estate is taken as
additional security it will be appraised if it represents a substantial
portion of the security for the loan.
0
16. Amend Sec. 3550.117 by revising paragraphs (d) and (e) to read as
follows:
Sec. 3550.117 WWD grant purposes.
* * * * *
(d) Pay for necessary installation of plumbing and related fixtures
within dwellings lacking such facilities.
(e) Construction and/or partitioning off a portion of the dwelling
for a bathroom which is modest in design.
* * * * *
0
17. Amend Sec. 3550.118 by revising paragraph (a) to read as follows:
Sec. 3550.118 Grant restrictions.
(a) Maximum grant. Lifetime assistance to any individual for
initial or subsequent Section 306C WWD grants may not exceed ten
percent of the national average area loan limit.
* * * * *
Yvonne Hsu,
Acting Administrator, Rural Housing Service.
[FR Doc. 2023-25314 Filed 11-17-23; 8:45 am]
BILLING CODE 3410-XV-P
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</html>Indexed from Federal Register on November 20, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.