[Federal Register Volume 76, Number 209 (Friday, October 28, 2011)]
[Proposed Rules]
[Pages 66860-66862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27945]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 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. 76, No. 209 / Friday, October 28, 2011 / 
Proposed Rules  

[[Page 66860]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Services

Rural Utilities Service

Farm Service Agency

7 CFR Part 1980

RIN 0575-AC90


Single Family Housing Guaranteed Loan Program

AGENCY: Rural Housing Service, Rural Business-Cooperative Services, 
Rural Utilities Service, Farm Service Agency, USDA.

ACTION: Proposed rule.

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SUMMARY: The United States Department of Agricultural (USDA), Rural 
Housing Service (RHS) proposes a change to its Single Family Housing 
Guaranteed Loan Program (SFHGLP) regulation. The proposed action is 
taken to implement authorities granted the Secretary of the USDA, in 
Sec. 102 of the Supplemental Appropriations Act, 2010 (Pub. L. 111-212, 
July 29, 2010) to collect from the lender an annual fee not to exceed 
0.5 percent of the outstanding principal balance of the loan for the 
life of the loan. The intent of the annual fee is to make the SFHGLP 
subsidy neutral when used in conjunction with the one-time guarantee 
fee, thus eliminating the need for taxpayer support of the program. For 
Fiscal Year (FY) 2012, an annual fee of 0.3 percent of the outstanding 
principal balance will be required in order that the SFHGLP may 
maintain subsidy neutrality. Beginning with all loans obligated on or 
after October 1, 2011, RHS proposes to charge an annual fee of 0.3 
percent of the outstanding principal balance of the loan for the life 
of the loan.

DATES: Written or email comments on the proposed rule must be received 
on or before December 27, 2011.

ADDRESSES: You may submit comments on this proposed rule by any one of 
the following methods:
     Email: [email protected]. Include ``RIN No. 0575-
AC90'' in the subject line of the message.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments electronically.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Ave., SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express mail, or other courier service requiring a street address to 
the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Cathy Glover, Senior Loan Specialist, 
Single Family Housing Guaranteed Loan Division, USDA Rural Development, 
Room 2250, STOP 0784, 1400 Independence Ave., SW., Washington, DC 
20250, Telephone: (202) 720-1452, Email: [email protected].

SUPPLEMENTARY INFORMATION:

Classification

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

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Except where specified, all State and local laws and 
regulations that are in direct conflict with this rule will be 
preempted. Federal funds carry Federal requirements. No person is 
required to apply for funding under this program, but if they do apply 
and are selected for funding, they must comply with the requirements 
applicable to the Federal program funds. This rule is not retroactive. 
It will not affect agreements entered into prior to the effective date 
of the rule. Before any judicial action may be brought regarding the 
provisions of this rule, the administrative appeal provisions of 7 CFR 
part 11 must be exhausted.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effect of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million, or more, in any one year. When such a statement is needed for 
a rule, section 205 of the UMRA generally requires the Agency to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, most cost-effective, or least burdensome 
alternative that achieves the objectives of the rule.
    This proposed rule contains no Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local, and 
tribal governments or the private sector. Therefore, this 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 the 
Agency 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 required.

Federalism--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 State and local 
governments. Therefore, consultation with the States is not required.

[[Page 66861]]

Regulatory Flexibility Act

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

Intergovernmental Consultation

    This program/activity is not subject to 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 Number 10.410, Very Low to Moderate Income Housing 
Loans (Section 502 Rural Housing Loans).

Paperwork Reduction Act

    The information collection and record keeping requirements 
contained in this regulation have been approved by OMB in accordance 
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The 
assigned OMB control number is 0575-AC83.

E-Government Act Compliance

    The Rural Housing Service 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

    As a result of Public Law 111-212, ``Supplemental Appropriations 
Act, 2010,'' enacted on July 29, 2010, Section 502 (h)(8) of the 
Housing Act of 1949 (42 U.S.C. 1472 (h) (8)), was amended to read as 
follows: ``(8) Fees.--Notwithstanding paragraph (14) (D), with respect 
to a guaranteed loan issued or modified under this subsection, the 
Secretary may collect from the lender--``(A) at the time of issuance of 
the guarantee or modification, a fee not to exceed 3.5 percent of the 
principal obligation of the loan; and ``(B) an annual fee not to exceed 
0.5 percent of the outstanding principal balance of the loan for the 
life of the loan.''
    The annual fee provision is applicable to purchase and refinance 
loan transactions. The intent of the annual fee is to make the SFHGLP 
subsidy neutral, thus eliminating the need for taxpayer support of the 
program. RHS has determined that in order for the SFHGLP to maintain 
subsidy neutrality, beginning with loans obligated on or after October 
1, 2011, an annual fee of 0.3 percent will be charged on the 
outstanding principal balance of the loan for the life of the loan.
    RHS currently collects an upfront guarantee fee of 3.5 percent for 
purchase loans, and 1 percent for refinance loan transactions. The 
lender collects the upfront guarantee fee from the borrower at the time 
of loan closing. The borrower either pays the upfront guarantee fee 
from personal funds, or the fee may be included in the guaranteed loan 
amount. The proposed annual fee of 0.3 percent will be collected in 
addition to the upfront guarantee fee.
    RHS operational systems currently do not accommodate the annual fee 
provision. RHS will take steps necessary to enhance the operational 
systems in the coming months so that an annual fee of 0.3 percent may 
be collected on all loans obligated on or after October 1, 2011. RHS is 
aware that lenders will need time to enhance their systems, and intends 
to work closely with lenders and service bureaus to ensure they can 
support the proposed annual fee requirement in the shortest possible 
timeframe. Supporting documentations for servicers as well as training 
materials for loan originators and servicers will be developed by RHS 
prior to implementation of the annual fee.
    RHS proposes to structure the annual fee as follows:
    (1) Determining the Annual Fee: The annual fee will be calculated 
based on the guaranteed loan amount and on the average annual scheduled 
unpaid principal balance for the life of the loan. The fee will be 
calculated when the loan is made and every 12 months thereafter, until 
the loan is paid in full or no longer outstanding and the guarantee is 
cancelled or expired. For example, to determine the annual fee for a 
$100,000 loan (guaranteed amount), 6% interest rate, 30 year term, 
calculate as follows:
    a. Step 1: Compute the average annual scheduled unpaid principal 
balance (UPB). The average annual scheduled UPB for year 1, for a 
$100,000 loan = $99,443.244 is $99,443.24 (standard 5-3-3 rounding)
    b. Step 2: Compute Annual Fee based off the average annual UPB. 
Based on an annual fee of.3%, $99,443.24 x .3% = $298.33 (rounded up to 
the next cent)
    c. Step 3: Compute monthly escrow required for annual fee. $298.33/
12 = $24.87 (rounded up to the next cent).
    (2) Annual Fee Billing
    a. Lenders will be billed retroactively for a 12 month period, 
commencing on the first anniversary of the loan and each anniversary 
thereafter. For example, if the loan closes on November 1, 2011, the 
lender will be billed for the initial fee on December 1, 2012.
    b. The annual fee payment will be due to RHS by the 15th calendar 
day after each anniversary of the loan. Using the example above, the 
initial annual fee will be due to RHS by no later than December 15, 
2012.
    c. If the fee is not paid by the due date, RHS will assess a late 
fee of 4 percent of the billed amount on the 16th calendar day after 
the bill is due. If the annual fee for a loan is still unpaid after 30 
days, RHS may assess additional late fees on the delinquent fee amount.
    d. Although, RHS will collect the fee annually, lenders may 
establish an escrow account to collect the fee from the borrower on a 
monthly basis.
    (3) The Annual Fee will be collected through Pay.Gov as follows:
    a. Fully web-based for lenders with 3,000 or less loans; and
    b. An overnight matching batch process for lenders with greater 
than 3,000 loans.

List of Subjects in 7 CFR Part 1980

    Home improvement, Loan programs--Housing and community development, 
Mortgage insurance, Mortgages, Rural areas.

    For the reason stated in the preamble, Chapter XVIII, Title 7 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 1980--GENERAL

    (1) The authority citation for part 1980 continues to read as 
follows:

    Authority:  5 U.S.C. 301 and 7 U.S.C. 1989. Subpart E also 
issued under 7 U.S.C. 1932(a).

Subpart D--Rural Housing Loans

    (2) Section 1980.323 is revised to read as follows:


Sec.  1980.323  Guarantee loan fees.

    The Lender will pay an up-front guarantee fee, and will also be 
charged an annual fee. The amount of the up-front guarantee fee and 
annual fee will be calculated based on the figure identified in exhibit 
K of subpart A of part 1810 of this chapter (RD Instruction 440.1, 
available in any Rural Development office). The nonrefundable fees may 
be passed on to the borrower.

[[Page 66862]]

    (a) Up-front guarantee fee. The amount of the up-front guarantee 
fee is determined by multiplying the appropriate figure in RD 
Instruction 440.1, Exhibit K, times 90 percent of the principal amount 
of the loan.
    (b) Annual fee. The annual fee will be based on the average annual 
scheduled unpaid principal balance of the guaranteed loan amount. The 
fee percentage can be found in RD Instruction 440.1, Exhibit K. The 
Agency will assess a late fee for annual fees not timely paid.
* * * * *

    Dated: July 19, 2011.
Dallas Tonsanger,
Under Secretary, Rural Development.
    Dated: August 2, 2011.
Michael Scuse,
Acting Under Secretary, Farm and Foreign Agriculture Services.
[FR Doc. 2011-27945 Filed 10-27-11; 8:45 am]
BILLING CODE 3410-XV-P