Rule2024-05571
Changes Related to Reserve Account Administration in Multi-Family Housing (MFH) Direct Loan Programs
Primary source
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Published
March 18, 2024
Effective
April 17, 2024
Issuing agencies
Agriculture DepartmentRural Housing Service
Abstract
The Rural Housing Service (RHS or Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA), is updating its regulations and implementing changes related to the administration of property reserve accounts under the Multi-Family Housing (MFH) section 515, Rural Rental Housing (RRH), and section 514, 516 Farm Labor Housing (FLH) programs. This final rule will increase flexibility in project refinancing for additional capital improvements needed at MFH section 515, RRH, and section 514, 516 FLH properties.
Full Text
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<title>Federal Register, Volume 89 Issue 53 (Monday, March 18, 2024)</title>
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[Federal Register Volume 89, Number 53 (Monday, March 18, 2024)]
[Rules and Regulations]
[Pages 19225-19228]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05571]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3560
[Docket #: RHS-23-MFH-0025]
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).
[[Page 19226]]
ACTION: Final rule.
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SUMMARY: The Rural Housing Service (RHS or Agency), a Rural Development
(RD) agency of the United States Department of Agriculture (USDA), is
updating its regulations and implementing changes related to the
administration of property reserve accounts under the Multi-Family
Housing (MFH) section 515, Rural Rental Housing (RRH), and section 514,
516 Farm Labor Housing (FLH) programs. This final rule will increase
flexibility in project refinancing for additional capital improvements
needed at MFH section 515, RRH, and section 514, 516 FLH properties.
DATES: This final rule is effective April 17, 2024.
FOR FURTHER INFORMATION CONTACT: Michael Resnik, Director, Asset
Management Division, Multifamily Housing Programs and Housing Service,
Rural Development, U.S. Department of Agriculture, 1400 Independence
Avenue SW, Washington, DC 20250, telephone: 202-430-3114; or email:
<a href="/cdn-cgi/l/email-protection#b3fedad0dbd2d6df9de1d6c0dddad8f3c6c0d7d29dd4dcc5"><span class="__cf_email__" data-cfemail="4d00242e252c2821631f283e2324260d383e292c632a223b">[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 RRH 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 FLH 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''). This final rule is designed to increase flexibility in
project refinancing for additional capital improvements needed for a
section 515 or 514, 516 MFH property.
II. Purpose of This Rulemaking
RHS published a proposed rule on January 9, 2023 [88 FR 1149], in
the Federal Register to solicit comments on the proposed updates to 7
CFR part 3560 and changes related to the administration of property
reserve accounts under the MFH section 515, RRH, and section 514, 516
FLH programs. 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 change to the current regulation will allow the borrower to use
surplus cash to fund Agency-approved soft debt. MFH approved soft-debt
is a type of debt that generally (1) is not immediately due and
payable, (2) has lenient repayment terms, and/or (3) has no-interest or
low-interest rates, for example a ``cash flow note''. Soft debt is
often provided by State or local government as vital, additional
sources of MFH direct loan property rehabilitation funding. This final
rule change 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.
It is designed to increase flexibility in project refinancing for
additional capital improvements under 7 CFR 3560.306 to implement
changes related to the administration of property reserve accounts
under the MFH section 515, RRH, and section 514, 516 FLH programs.
III. Discussion of Public Comments
In response to the published proposed rule on January 9, 2023 [88
FR 1149], RHS received two identical comments from one respondent with
positive feedback on the MFH programs. The comment did not include
direct statements regarding the proposed changes and is not applicable
to the contents of the rule. The comments did not result in the Agency
changing plans for the final rule.
IV. Summary of Changes
The changes to amend 7 CFR 3560.306 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 final 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.
V. Regulatory Information
Statutory Authority
The RRH and FLH programs are authorized under sections 514, 515,
516 of title V of the Housing Act of 1949, as amended (42 U.S.C. 1484-
86); and implemented under 7 CFR part 3560. Section 510(k) of Title V
the Housing Act of 1949 (42 U.S.C. 1480(k)), as amended, authorizes the
Secretary of Agriculture to promulgate rules and regulations as deemed
necessary to carry out the purpose of that title.
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.
[[Page 19227]]
Executive Order 12866, Regulatory Planning and Review
This final 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 final 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 final 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 final
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 final rule does not have a
substantial direct effect on one or more Indian Tribe(s) or on either
the relationship or the distribution of powers and responsibilities
between the Federal Government and Indian Tribes. Thus, this final rule
is not subject to the requirements of Executive Order 13175. If Tribal
leaders are interested in consulting with RHS on this 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#74353d353a34010710155a131b02"><span class="__cf_email__" data-cfemail="8ccdc5cdc2ccf9ffe8eda2ebe3fa">[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 final rule has been reviewed with regard to the requirements
of the Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned
has determined and certified by signature on this document that this
final rule will not have a significant economic impact on a substantial
number of small entities since this rulemaking action does not involve
a new or expanded program nor does it require any more action on the
part of a small business than required of a large entity.
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 final 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 final 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 final 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 increased opportunities for citizen access to government
information, services, and other purposes.
Civil Rights Impact Analysis
RD has reviewed this final rule in accordance with USDA Regulation
4300-4, Civil Rights Impact Analysis, to identify any major civil
rights impacts the final rule might have on program participants on the
basis of age, race, color, national origin, sex, or disability. After
review and analysis of the final 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 final 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 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 19228]]
Area, agency, or staff office; or the 711 Relay Service.
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 (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:
a. Mail: U.S. Department of Agriculture, Office of the Assistant
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC
20250-9410; or
b. Fax: (833) 256-1665 or (202) 690-7442; or
c. Email: <a href="/cdn-cgi/l/email-protection#b3c3c1dcd4c1d2de9ddaddc7d2d8d6f3c6c0d7d29dd4dcc5"><span class="__cf_email__" data-cfemail="7303011c1401121e5d1a1d0712181633060017125d141c05">[email protected]</span></a>.
List of Subjects in 7 CFR Part 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 discussed in the preamble, the Agency amends 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.
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.
* * * * *
Yvonne Hsu,
Acting Administrator, Rural Housing Service.
[FR Doc. 2024-05571 Filed 3-15-24; 8:45 am]
BILLING CODE 3410-XV-P
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