[Federal Register Volume 73, Number 214 (Tuesday, November 4, 2008)]
[Rules and Regulations]
[Pages 65503-65505]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25849]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 1980

RIN 0575-AC73


Income Limit Modification

AGENCY: Rural Housing Service, USDA.

ACTION: Direct final rule.

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SUMMARY: The Rural Housing Service (RHS) is amending its exiting income 
limit structure for the Single Family Housing Guaranteed Loan Program 
(SFHGLP). The effect of this action is to provide more efficient 
service to lenders, investors and Agency staff by modifying the 
existing Rural Development eight (8) tiered income structure into a 
simplified two (2) tiered structure. This modification will simplify 
program requirements and the qualification process.

DATES: This rule is effective January 20, 2009, unless we receive 
written adverse comments or written notices of intent to submit adverse 
comments on or before January 5, 2009.

FOR FURTHER INFORMATION CONTACT: Joaqu[iacute]n Tremols, Acting 
Director, Single Family Housing Guaranteed Loan Division, USDA, Rural 
Development, 1400 Independence Avenue, SW., Room 2250, Stop 0784, 
Washington, DC 20250, telephone (202) 720-1465, e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

Classification

    This rule has been determined to be non-significant by the Office 
of Management and Budget (OMB) under Executive Order 12866 and, 
therefore, has not been reviewed by OMB.

Civil Justice Reform

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: (1) All state and 
local laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule; and 
(3) administrative proceedings in accordance with the regulations of 
the National Appeals Division of USDA at (7 CFR Part 11), must be 
exhausted before bringing suit in court challenging action taken under 
this rule unless those regulations specifically allow bringing suit at 
an earlier date.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1996 (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 alternative 
that achieves the objectives of this rule. This rule contains no 
Federal mandates (under the regulatory provisions of Title II of the 
UMRA) for

[[Page 65504]]

State, local, and tribal governments or the private sector. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
the UMRA.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' It is the determination of Rural 
Development that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment and in 
accordance with the National Environmental Policy Act of 1969, Public 
Law 91-190, neither an Environmental Assessment nor an Environmental 
Impact Statement is not required.

Federalism Assessment--Executive Order 13132

    The policies contained in this 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. Nor does this 
rule impose substantial direct compliance costs on States and local 
governments. Therefore, consultation with the States is not required.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
602) the undersigned has determined and certified by signature of this 
document that this rule will not have a significant impact on a 
substantial number of lenders or entities. This rule does not impose 
any significant new requirements on Agency applicants and borrowers, 
and the regulatory changes affect only Agency determination of program 
benefits for guarantees on loans made to individuals.

Intergovernmental Consultation

    This program/activity is excluded from the provisions of Executive 
Order 12372 which require intergovernmental consultation with State and 
local officials. (See the Notice related to 7 CFR part 3015, subpart V, 
at 48 FR 29112, June 24, 1983; 49 FR 22675, May 31, 1984; 50 FR 14088, 
April 10, 1985).

Programs Affected

    This program is listed in the Catalog of Federal Domestic 
Assistance under 10.410, Very low- to Moderate-Income Housing Loans 
(Section 502 Rural Housing Loans).

Paperwork Reduction Act

    This rule does not revise or impose any new information collection 
or recordkeeping requirements.

E-Government Act Compliance

    The RHS is committed to complying with the E-Government Act, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Background

    On April 10, 2008 [73 FR 19433], RHS published an advanced notice 
of proposed rule making with request for comments on the existing 
income limits structure.
    Instead of eligible adjusted income based on households ranging 
from 1-8 persons according to 7 CFR Sec.  1980.345(a) and RD 
Instruction 1980-D, Exhibit C, a two-tier income structure consisting 
of a 1-4 member household and a 5-8 member household is adopted. The 
new adjusted income limit for the 1-4 member household, for example, 
would be the current adjusted income limit for the 4-member household. 
The present add-on income limits for larger households will remain 
unchanged. Eight percent is added to the limit for each person in 
excess of 8 persons. The present eight-tier income limits (1-8 persons) 
are cumbersome, and the proposed consolidation is expected to simplify 
program delivery as well as allow the agency to serve additional 
qualified homebuyers. The SFHGLP is in partnership with many State 
Housing Agencies throughout the United States. The majority of these 
agencies already maintain a two-tier income structure, and this change 
would allow a seamless integration of the respective programs. This 
policy would not apply to other Rural Development housing programs. RHS 
therefore adopts a two-tier income structure, and current policy on 
determining moderate income according to statutory requirements and 
raising the income limit for families in excess of 8 persons. RD 
Instruction 1980-D, Exhibit C, listing the specific dollar limits for 
areas by state is being revised to adopt the two-tier system also. 
Moderate income figures continue to be provided by the United States 
Department of Housing and Urban Development (HUD). Rural Development 
only modifies the HUD figures for the state of Alaska to comply with 
Public Law 110-5, Section 754 (February 15, 2007). That law provides in 
the case of a high-cost isolated rural area in Alaska not connected to 
a road system, the maximum level for single family housing assistance 
will be 150 percent of the median household income level in the 
nonmetropolitan area of the state, and 115 percent of all other 
eligible areas of the state. RHS considers this rule to be 
noncontroversial and unlikely to result in adverse comments.

Discussion of Comments

    Rural Development received comments from 429 respondents. Comments 
were from mortgage lenders, mortgage brokers, secondary market sources, 
realtors, employee groups, builder organizations and agency employees, 
and various other interest groups.
    There were 420 respondents in favor of the income limit 
modification and that it was:
    1. Beneficial to the homebuyer as the change would allow an 
increased number of families to participate in the program, allowing 
more families to be able to obtain the American dream of homeownership, 
and that this program improvement is needed because it is the only true 
100% loan program available to non-veterans. (383 comments)
    2. Beneficial to the lender in that it would simplify the process 
and make the lending limits more consistent with the state housing 
agencies across the country and all were pleased with the two-level 
income modification. (174 comments)
    3. Beneficial to the rural area itself as the change would bring 
much needed workers and their families to underserved areas, create 
more homeownership opportunities for working middle class families in 
rural America, provide a positive change to the much troubled housing 
and mortgage industry in rural America, help build and stimulate a more 
robust and solid economy in the rural areas and lastly, open the rural 
housing market to more individuals. (94 comments)
    Nine respondents simply stated that the proposed change would be 
for the good of the program.
    Six respondents thought the proposed change would be beneficial in 
one or more of the above categories; however, they had additional 
concerns.
    One respondent commented that both the lender and the borrower 
would benefit from the proposed changes, but was concerned that there 
should also be an increase in our funding levels.
    Response: The SFHGLP depends on appropriated funds each year to 
continue the program. The Administration each year proposes a budget to 
the United States Congress.

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After considering the Administration's budget, Congress appropriates 
funding and sends an appropriation bill to the President for review and 
concurrence. Any increase in funding is beyond the scope of this 
regulation. No action is taken based upon this comment.
    One respondent commented that the borrower would benefit from the 
program but that the income limits were overly restrictive because they 
are too low.
    Response: Section 502(h)(3) of the Housing Act of 1949, as amended, 
however, requires that the program be delivered only to low- and 
moderate-income borrowers whose incomes do not exceed 115 percent of 
the median income of the area as determined by the Secretary. This 
limit is met if the borrower's income does not exceed 115 percent of 
the median family income of the United States under Section 751 of 
Public Law 106-387 (October 28, 2000). In certain areas of Alaska, the 
limit is 150 percent of the median household income level in the 
nonmetropolitan areas of the state pursuant to Sec.  754 of Public Law 
110-5 (February 15, 2007). No action, therefore, can be taken to exceed 
the statutory limits.
    Two respondents stated that rural areas would greatly benefit from 
the proposed changes, but that we should have no income limits at all.
    Response: Once again, the Housing Act of 1949, as amended, requires 
that the program be delivered only to low- and moderate-income 
borrowers. By statute, the income limits cannot be made higher than 
low- and moderate-income levels. No action is taken based upon these 
comments.
    One respondent commented that the Agency should consider the 
possibility of refinancing any type of loan into our program.
    Response: Under Section 502(h)(14) of the Housing Act of 1949, as 
amended, only Section 502 Guaranteed and Direct loans may be refinanced 
with a Section 502 Guarantee. Refinance limitations are statutory and 
beyond the scope of this rule. No action is taken based upon this 
comment.
    One respondent commented that the Agency is too strict with debt-
to-income ratios and should be more flexible in this regard.
    Response: USDA Rural Development already allows lenders to exceed 
the baseline ratio thresholds with documented compensating factors and 
Agency concurrence. This comment also is beyond the scope of this rule 
making. No action is taken based on this comment.
    One respondent stated that borrowers would benefit from the 
program, but was hoping RHS would still allow income adjustments for 
day care expenses, a $480 deduction for dependents.
    Response: This proposed income limit change will not affect 
eligible deductions currently allowed, and the adjustment referred by 
the commentator will still be permissible. No action is taken based on 
this comment.
    Of the entire 429 comments received, each one had one or more 
positive comments. There were no negative responses.

    Dated: October 23, 2008.
Russell T. Davis,
Administrator, Rural Housing Service.
[FR Doc. E8-25849 Filed 11-3-08; 8:45 am]
BILLING CODE 3410-XV-P