Notice2026-05394
Single Family Housing Section 502 Guaranteed Loan Program Lender Interactive Test Environment (LITE) Delegated Authority Pilot Program
Primary source
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Published
March 19, 2026
Effective
September 1, 2026
Issuing agencies
Agriculture DepartmentRural Housing Service
Abstract
The Rural Housing Service (RHS), a division of the Rural Development Agency within the United States Department of Agriculture (USDA), is implementing the Lender Interactive Test Environment (LITE) Delegated Authority Pilot Program for the Section 502 Single Family Housing Guaranteed Loan Program (SFHGLP). The purpose of this pilot program is to test a change in the SFHGLP loan approval process by replacing the Agency's pre-closing loan approval requirement with the delegation of loan approval authority to eligible lenders, consistent with the Delegated Authority final rule (Federal Register Docket Number RHS-21-SFH-0017). This pilot program is authorized under 42 U.S.C. 1476(b). This notice provides detailed information about the pilot program, including eligibility criteria, application process, operational procedures, monitoring, and oversight mechanisms.
Full Text
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<title>Federal Register, Volume 91 Issue 53 (Thursday, March 19, 2026)</title>
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[Federal Register Volume 91, Number 53 (Thursday, March 19, 2026)]
[Notices]
[Pages 13277-13280]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05394]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
[Docket No. RHS-25-SFH-0200]
Single Family Housing Section 502 Guaranteed Loan Program Lender
Interactive Test Environment (LITE) Delegated Authority Pilot Program
AGENCY: Rural Housing Service, USDA.
ACTION: Notice.
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SUMMARY: The Rural Housing Service (RHS), a division of the Rural
Development Agency within the United States Department of Agriculture
(USDA), is implementing the Lender Interactive Test Environment (LITE)
Delegated Authority Pilot Program for the Section 502 Single Family
Housing Guaranteed Loan Program (SFHGLP). The purpose of this pilot
program is to test a change in the SFHGLP loan approval process by
replacing the Agency's pre-closing loan approval requirement with the
delegation of loan approval authority to eligible lenders, consistent
with the Delegated Authority final rule (Federal Register Docket Number
RHS-21-SFH-0017). This pilot program is authorized under 42 U.S.C.
1476(b). This notice provides detailed information about the pilot
program, including eligibility criteria, application process,
operational procedures, monitoring, and oversight mechanisms.
DATES: The effective date of the pilot program is September 1, 2026.
The pilot program will continue for two years, ending September 28,
2028.
FOR FURTHER INFORMATION CONTACT: Sara Thieleke, Deputy Director,
Policy, Analysis, and Communications Branch, Single Family Housing
Guaranteed Loan Division, Rural Development, U.S. Department of
Agriculture, Email: <a href="/cdn-cgi/l/email-protection#a4d7c5d6c58ad0cccdc1c8c1cfc1e4d1d7c0c58ac3cbd2"><span class="__cf_email__" data-cfemail="61120013004f150908040d040a0421141205004f060e17">[email protected]</span></a>; Phone: (314) 457-5242.
SUPPLEMENTARY INFORMATION:
Authority
Title V, Section 502 of the Housing Act of 1949, as amended; 42
U.S.C. 1472; 42 U.S.C. 1476(b).
Acronyms
CFR Code of Federal Regulations
GUS Guaranteed Underwriting System
LITE Lender Interactive Test Environment
RHS Rural Housing Service
Sec. Section
SFHGLP Single Family Housing Guaranteed Loan Program
USDA U.S. Department of Agriculture
Background
The Section 502 Guaranteed Loan Program, regulated by 7 CFR part
3555, offers a 90% loan note guarantee to approved lenders to assist
low- and moderate-income households in purchasing adequate, modest,
safe, and sanitary dwellings as their primary residence in eligible
rural areas. The SFHGLP provides opportunities for applicants lacking
sufficient resources to acquire, build, rehabilitate, improve, or
relocate a dwelling in a rural area.
To streamline the SFHGLP, the RHS has been working on incorporating
a delegated authority process for eligible lenders through a final rule
(``Delegated Authority'') (Federal Register Docket Number RHS-21-SFH-
0017). While the necessary technology advancements needed for full
implementation of Delegated Authority are in process, RHS has
established the LITE Delegated Authority Pilot Program to phase in and
test Delegated Authority in a controlled environment. The pilot will
permit participating LITE Delegated Lenders to approve loans and obtain
Loan Note Guarantees with limited Agency involvement. The objective of
this pilot is to test the implementation of Delegated Authority by
streamlining and expediting loan approvals, similar to the efficiencies
seen in the Federal Housing Administration and the Department of
Veterans Affairs programs, thereby leveraging the expertise of private-
sector lenders to balance growing demand and limited federal resources.
This notice outlines the new LITE Delegated Authority Pilot Program
under the Section 502 SFHGLP.
Eligibility Requirements
Lenders interested in participating must notify the Agency at
<a href="/cdn-cgi/l/email-protection#8bc7c2dfcedbe2e7e4ffcbfef8efeaa5ece4fd"><span class="__cf_email__" data-cfemail="bbf7f2effeebd2d7d4cffbcec8dfda95dcd4cd">[email protected]</span></a>. To qualify for the pilot program, lenders must
demonstrate above-average loan performance based on delinquencies, loss
claims, and default rates over the past two years when compared to the
SFHGLP portfolio; have originated at least 10 SFHGLP loans in the last
12 months; and be current on all lender certifications, fees, and loan
requirements. Lenders must have a satisfactory compliance record, with
no failed Corrective Action Reviews or Reduced Sample Reviews for the
past 24 months. The Agency will review qualifications for the pilot
program as lenders submit notifications. The number of lenders approved
for LITE Delegated Lender status will be contingent on the progress of
the Agency's system modifications, budgetary constraints, portfolio
performance, and availability of resources required to perform lender
oversight and monitoring. Selection criteria will include lender
performance metrics and the number of volunteer lenders.
Operational Procedures
Approved lenders and their agents operating under the LITE
Delegated program must continue to utilize the Agency's automated loan
underwriting and closing systems for all supported loan submissions.
When manual submissions are necessary due to Guaranteed Underwriting
System (GUS) limitations, lenders must follow the Manual Submission Job
Aid procedures which can be located on the USDA LINC Training and
Resource Library located at <a href="https://www.rd.usda.gov/resources/usda-linc-training-resource-library/loan-origination">https://www.rd.usda.gov/resources/usda-linc-training-resource-library/loan-origination</a>. All aspects of loan
origination, processing, closing,
[[Page 13278]]
and servicing must strictly comply with published regulations and
handbook guidelines. For LITE Delegated Lenders, the organization will
perform the pre-closing loan approval process and manage post-closing
issuance of the Loan Note Guarantee with minimal Agency oversight.
These lenders have the delegated authority to approve loans either
through the Agency's automated underwriting system, or by manually
underwriting a file not supported by GUS. Processing times vary by
submission type. GUS submissions will be completed within 2 business
hours, while manual submissions will follow standard processing
timeframes.
After closing, LITE Delegated Authority submissions qualify for a
streamlined closing process. LITE Delegated Lenders will use the Lender
Loan Closing system to enter basic loan closing information and
authorize electronic payment of the upfront Guarantee Fee and USDA
Technology Fee via the <a href="http://Pay.gov">Pay.gov</a> system. Documentation uploads are only
required if specifically requested by the Agency. The Agency will issue
the Loan Note Guarantee within two business days of receipt,
retrievable from the Agency's Lender Loan Closing system. The Loan Note
Guarantee is backed by the full faith and credit of the United States
as per Sec. 3555.108. Consequently, the LITE Delegated Lender is
responsible for ensuring that both the applicant and the property meet
the eligibility requirements and certification for the loan guarantee
under subparts C, D, and E of 7 CFR part 3555, as well as the
environmental requirements in Sec. 3555.5.
Variance From Procedures (for LITE Delegated Lenders)
The Agency is modifying the procedures for LITE Delegated Lenders
as follows:
Environmental Reviews: SFHGLP loans are generally considered
categorical exclusions under 7 CFR 1b. If there is an extraordinary
circumstance, the LITE Delegated Lender must notify the Agency to
decide the appropriate course of action.
Appraisal Reviews: Agency administrative appraisal reviews under
Sec. 3555.107(d)(4) are inapplicable to loans approved via LITE
delegated authority. LITE Delegated Lenders are responsible for
ensuring that appraisal reports meet all requirements under Sec.
3555.107(d).
Application Priority Processing: The requirements under Sec.
3555.107(a) for prioritizing applications do not apply to LITE
Delegated Lenders as adequate budget authority exists.
Conflict of Interest: When a conflict of interest is disclosed by
either the borrower or a Rural Development employee, as described in
Sec. 3555.8, the LITE Delegated Lender is required to document the
disclosure in the permanent loan file. However, since Delegated Lenders
will process pre-closing and post-closing activities with limited
Agency assistance, reassignment of the application as described in
Sec. 3555.8(d) is not required.
Pilot Program Evaluation and Oversight
The LITE Delegated Authority Pilot Program will be tested in a
controlled environment. Any technological shortcomings encountered
during the pilot program will be addressed through a workaround process
provided to participating lenders. The program's effectiveness will be
evaluated through comprehensive file reviews. Participating lenders
will be required to submit fully documented, post-closing, loan
submissions for evaluation. Initially, the Agency will review the first
5 to 15 loan files submitted by participating lenders, depending on
loan volume. Additionally, 2% of files originated each month, per
lender, will be reviewed utilizing the existing compliance review
process. Should any concerns regarding regulatory or statutory non-
compliance be identified during these reviews, participating lenders
will be given 90 days from the date of notification by the Agency to
make the necessary corrections. Failure to address these issues within
the stipulated timeframe will result in the lender's removal from the
pilot program. Furthermore, SFHGLP Senior Leadership retains the right
to withdraw approval and participation in the program for any lender
found to be engaging in misconduct. If a lender violates program
guidelines or fails to meet eligibility standards, the Agency may issue
cease and desist letters to halt improper actions. Additionally, all
loans are subject to future indemnification per Sec. 3555.108(d).
The requirements for LITE Delegated Lender status include meeting
the general eligibility criteria in Sec. 3555.51, having participated
in the SFHGLP for at least two years, and maintaining above-average
performance standards in delinquency, default, and loss claim rates.
Eligibility is reassessed every two years, requiring lenders to be
registered in SAM, complete mandatory recertification training, and
respond within the timeframe specified in the agency notification
provided to the Lender. Guarantee fees must be paid electronically at
loan closing. LITE Delegated Lenders are required to continuously
maintain these standards and are subject to regular assessments. To
maintain eligibility, lenders must enter into a User Agreement to
receive automated notifications and ensure compliance with Sec.
3555.107. The Agency reserves the right to adjust, modify, or cancel
the pilot program based on budget, performance, and integrity
considerations.
In the event that modifications are made to the performance metrics
for new LITE Delegated Lenders, existing LITE Delegated Lenders will
retain their status, and the Agency will provide a reasonable timeframe
to meet the new performance metrics to continue retaining LITE
Delegated Lender status. Any modifications made to the performance
metrics for LITE Delegated Lenders will be publicly announced through a
notice in the Federal Register. The Agency will conduct lender
approvals at a limited pace to foster smooth implementation of the LITE
Delegated Authority Pilot Program. The rollout will be phased in to
allow the Agency some control over the number of loans guaranteed by
LITE Delegated Lenders throughout the pilot program. The Agency will
evaluate the performance and efficacy of the process and make any
necessary adjustments. The Agency will continue to phase in new lenders
as the process is refined. The number of lenders approved for LITE
Delegated Lender status will be contingent on the progress of the
Agency's systems modifications, budgetary constraints, portfolio
performance, and availability of resources required to perform lender
oversight and monitoring.
The Agency has the right to suspend or terminate any lender's
delegated status for reasons including, but not limited to, approving
loans that do not meet Agency loan program guidelines; providing data
to the Agency's automated underwriting system that is not supported by
documentation retained by the lender; maintaining a portfolio that does
not meet the established delinquency, loss claim, and default rate
performance metrics; and an inability to meet the criteria described in
Sec. 3555.51, ``Lender eligibility.'' Adverse decisions made by the
Agency may be appealed to the USDA National Appeals Division in
accordance with 7 CFR 3555.4.
The Agency is implementing ongoing monitoring and oversight for
LITE Delegated Lenders from two perspectives: Monitoring Performance
and Lender Oversight.
Monitoring Performance: Loan-level data is collected from lenders
each month through the Electronic Status
[[Page 13279]]
Reporting system. This data is compiled, reviewed, and monitored by the
Agency every month to determine portfolio performance as well as risks
and trends in delinquency, default, and loss claim rates. This loan
level data will be collected and analyzed to provide the Agency with
information regarding their performance.
Lender Oversight Reviews/Examinations: The Agency's Quality
Assurance and Lender Oversight Division will establish a regular
process specifically for LITE Delegated Lenders to ensure adherence to
Agency loan program requirements in 7 CFR part 3555 and ongoing
eligibility for the program. This process involves reviewing and
examining multiple aspects of mortgage origination and servicing, based
on a representative sample of loans, financial requirements, and
portfolio performance.
Lender Oversight reviews will be conducted on lenders within the
first 12 months of participation in the LITE Delegated Authority Pilot
Program. Lenders will be notified of the current process, and the
oversight review will be consistent with established procedures.
Participating lenders will be required to submit fully documented
loan submissions for evaluation. Lenders must provide comprehensive and
complete documentation for each loan they originate under the program.
The documentation must include all necessary information to support the
loan application and ensure it meets the program's eligibility
criteria.
The Agency may request a fully documented case file at any time
from the lender for review if additional loan documentation is
determined necessary for risk management. An ineligible loan may result
in future indemnification and/or loss claim payment reduction/denial.
A report will be provided, with findings and observations recorded
and communicated back to the lender or servicer, along with any
suggestions for improvement. If necessary, the lender will have the
opportunity to implement a Corrective Action Plan to address any
deficiencies and will receive guidance, be provided with training, and
given the opportunity to improve their performance. Recurring findings
identified through the Lender Oversight process may result in
additional reviews and examinations and may adversely affect a lender's
LITE Delegated Lender status.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995, the
information collection requirements associated with the programs, as
covered in this notice, have been approved by the Office of Management
and Budget (OMB) under OMB Control Number 0575-0179. The regulatory
waivers for this pilot program contain no new reporting or
recordkeeping burdens.
National Environmental Policy Act
All recipients under this notice are subject to the requirements of
7 CFR part 1b.
Federal Funding Accountability and Transparency Act
All applicants, in accordance with 2 CFR part 25, must be
registered in SAM and have a UEI number as stated in Section D.3 of
this notice. All recipients of Federal financial assistance are
required to report information about first-tier sub-awards and
executive total compensation in accordance with 2 CFR part 170.
Civil Rights Act
All awards of Federal financial assistance made under this NOFO are
subject to applicable civil rights laws, which may include Title VI of
the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of
1973, the Age Discrimination Act of 1975, Title VIII of the Civil
Rights Act of 1968, Title IX of the Education Amendments Act of 1973,
and the Equal Credit Opportunity Act of 1974.
Equal Opportunity for Religious Organizations
a. Faith-based organizations may apply for this award on the same
basis as any other organization, as set forth at, and subject to the
protections and requirements of, this part and any applicable
constitutional and statutory requirements, including 42 U.S.C. 2000bb
et seq. USDA will not, in the selection of recipients, discriminate for
or against an organization on the basis of the organization's religious
character, motives, or affiliation, or lack thereof, or on the basis of
conduct that would not be considered grounds to favor or disfavor a
similarly situated secular organization.
b. A faith-based organization that participates in this program
will retain its independence from the Government and may continue to
carry out its mission consistent with religious freedom and conscience
protections in Federal law. Religious accommodations may also be sought
under many of these religious freedom and conscience protection laws.
c. A faith-based organization may not use direct Federal financial
assistance from USDA to support or engage in any explicitly religious
activities except when consistent with the Establishment Clause of the
First Amendment and any other applicable requirements. An organization
receiving Federal financial assistance also may not, in providing
services funded by USDA, or in their outreach activities related to
such services, discriminate against a program beneficiary or
prospective program beneficiary on the basis of religion, a religious
belief, a refusal to hold a religious belief, or a refusal to attend or
participate in a religious practice.
Non-Discrimination Statement
In accordance with Federal civil rights law and U.S. Department of
Agriculture (USDA) civil rights regulations and policies, the USDA, its
Agencies, offices, and employees, and institutions participating in or
administering USDA programs are prohibited from discriminating based on
race, color, national origin, religion, sex, 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.
Persons with disabilities who require alternative means of
communication for program information (e.g., Braille, large print,
audiotape, American Sign Language, etc.) should contact the State or
local Agency that administers the program or contact USDA through the
Telecommunications Relay Service at 711 (voice and TTY). Additionally,
program information may be made available in languages other than
English.
To file a program discrimination complaint, complete the USDA
Program Discrimination Complaint Form, AD-3027, found online at <a href="https://www.usda.gov/about-usda/general-information/staff-offices/office-assistant-secretary-civil-rights/how-file-pro">https://www.usda.gov/about-usda/general-information/staff-offices/office-assistant-secretary-civil-rights/how-file-pro</a>ram-discrimination-
complaint and at any USDA office or write a letter addressed to USDA
and provide in the letter all of the information requested in the form.
To request a copy of the complaint form, call (866) 632-9992. Submit
your completed form or letter to USDA by:
(1) Mail: U.S. Department of Agriculture, Office of the Assistant
Secretary for Civil Rights, 1400 Independence Avenue, Washington, DC
20250-9410; or
(2) Fax: (833) 256-1665 or (202) 690-7442; or
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(3) Email:<a href="/cdn-cgi/l/email-protection#28785a474f5a49450661465c49434d685d5b4c49064f475e"><span class="__cf_email__" data-cfemail="5c0c2e333b2e3d31721532283d37391c292f383d723b332a">[email protected]</span></a>.
USDA is an equal opportunity provider, employer, and lender.
George Kelly,
Administrator, Rural Housing Service.
[FR Doc. 2026-05394 Filed 3-18-26; 8:45 am]
BILLING CODE 3410-XV-P
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