[Federal Register Volume 78, Number 164 (Friday, August 23, 2013)]
[Proposed Rules]
[Pages 52460-52464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-20447]


 ========================================================================
 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. 78, No. 164 / Friday, August 23, 2013 / 
Proposed Rules  

[[Page 52460]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3550

RIN 0575-AC88


Single Family Housing Direct Loan Program

AGENCY: Rural Housing Service, USDA.

ACTION: Proposed rule and information collection; request for comments.

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SUMMARY: Through this action, the Rural Housing Service (RHS) is 
proposing to amend its regulations for the section 502 direct single 
family housing loan program to create a certified loan application 
packaging process for eligible loan application packagers. Loan 
application packagers, who are separate and independent from the 
Agency, provide an optional service to parties seeking mortgage loans 
by helping them navigate the loan application process. Currently, 
packagers assisting parties applying for section 502 direct loans do so 
under an informal arrangement, which is free from Agency oversight or 
minimum competency standards. This proposed rule will impose 
experience, training, proficiency, and structure requirements on 
eligible service providers. This proposed rule also regulates the 
packaging fee that will be allowed under this process.
    By establishing a vast network of competent, experienced, and 
committed Agency-certified packagers, this action is intended to 
benefit low- and very low-income people who wish to achieve 
homeownership in rural areas by increasing their awareness of the 
Agency's housing program, increasing specialized support available to 
them to complete the application for assistance, and improving the 
quality of loan application packages submitted on their behalf.

DATES: Comments on the proposed rule and the information collection 
under the Paperwork Reduction Act of 1995 must be received on or before 
October 22, 2013.

ADDRESSES: You may submit comments to this rule by any of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     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 Avenue SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or another mail 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, Suite 701, 
Washington, DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street SW., address listed above.

FOR FURTHER INFORMATION CONTACT: Brooke Baumann, Finance and Loan 
Analyst, Single Family Housing Direct Loan Division, USDA Rural 
Development, Stop 0783, 1400 Independence Avenue SW., Washington, DC 
20250-0783, Telephone: 202-690-4250. Email: 
[email protected].

SUPPLEMENTARY INFORMATION:

Statutory Authority

    Title V, Section 1480(k) of the Housing Act authorizes the 
Secretary of Agriculture to promulgate rules and regulations as deemed 
necessary to carry out the purpose of that title.

Executive Order 12866

    The Office of Management and Budget (OMB) has designated this rule 
as significant under Executive Order 12866 and, therefore, OMB has 
reviewed this proposed rule. A regulatory impact analysis of this rule 
is summarized below and is available from www.regulations.gov.

Regulatory Impact Analysis Summary

    In accordance with this EO, the Agency identified and compared the 
costs and benefits associated with creating a certified loan 
application packaging process from the borrower's perspective and from 
the Agency's perspective.
    The analysis concluded that for borrowers that elect to submit an 
application through the certified loan application packaging process, 
their increased loan costs are more than offset by the benefits they 
will ultimately experience (largely being made aware of an affordable 
homeownership program that they may not have otherwise heard of and 
having a knowledgeable and committed packager hold their hand through 
the entire application process). The packaging fee will translate to an 
increase in the borrower's monthly mortgage payment of up to $6.09 
(based on the full note rate in effect during December of 2012 and 
standard terms). Because many borrowers receive the maximum payment 
assistance allowed, the increase they will actually see in their 
monthly billing statements is up to $4.46 (based on an effective 
interest rate of one percent and standard terms).
    For the Agency, using loan funds to finance the packaging fee 
(provided the borrower has repayment ability for this additional cost 
and the total secured indebtedness is within the limit outlined in 
Sec.  3550.63) is highly beneficial from a salaries and time savings 
standpoint as well as from a marketing and transportation standpoint. 
Implementing this proposed rule will save the Agency approximately $1.5 
million in salaries and expenses per fiscal year in comparison to 
maintaining the status quo.

Executive Order 12988, Civil Justice Reform

    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

[[Page 52461]]

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.

Executive Order 13132, Federalism

    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.

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, while affecting small entities, will not have 
an adverse economic impact on small entities. The Agency made this 
determination based on the fact that this regulation only impacts those 
who choose to participate in the certified loan application packaging 
process. Small entities engaged in this process will not be affected to 
a greater extent than large entities engaged in this process.

Executive Order 12372, Intergovernmental Review of Federal Programs

    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).

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have tribal implications or 
preempt tribal laws. Rural Development 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 the Indian 
tribes. Thus, this proposed rule is not subject to the requirements of 
Executive Order 13175.

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

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3501 et seq.), RHS is requesting comments from all interested 
individuals and organizations on information collection activities 
related to the regulatory changes in this proposed rule. The new 
information collection request is subject to review and approval by 
OMB.
    Title: Single Family Housing Direct Loan Program.
    OMB Control Number: 0575-New. Upon OMB approval, this package will 
merge with OMB No. 0575-0172.
    Type of Request: New Collection.
    Abstract: Under this proposed rule, qualified employers that employ 
individuals seeking or who have been designated as an Agency-certified 
loan application packagers will be required to provide monthly reports 
to the Agency outlining the packaging activities of their packager(s); 
this monthly report will include certifications that they and their 
packager(s) are not debarred from participating in Federal programs and 
are in compliance with the Secure and Fair Enforcement Mortgage 
Licensing Act of 2008 (SAFE Act) as well as all applicable laws, 
regulations, and Executive Orders. This burden will fall upon the 
Agency-approved intermediaries when present.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 1.5 hours per response.
    Respondents: Qualified employers or Agency-approved intermediaries.
    Estimated Number of Respondents: 350.
    Estimated Number of Responses per Respondent: 12.
    Estimated Total Annual Burden on Respondents: 6,300 hours.
    Comments are invited on: (1) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Agency, including whether the information will have practical 
utility; (2) the accuracy of the Agency's estimate of the burden of the 
proposed collection of information, including the validity of the 
methodology and assumptions used; (3) the quality, utility, and clarity 
of the information to be collected; and (4) ways to minimize the burden 
of the collection of information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology. Comments may be sent to Jeanne Jacobs, Regulations and 
Paperwork Management Branch, Support Services Division, U.S. Department 
of Agriculture, Rural Development, Stop 0742, 1400 Independence Ave. 
SW., Washington, DC 20250-0742. All responses to this proposed rule 
will be summarized and included in the request for OMB approval. All 
comments will also become a matter of public record.

E-Government Act Compliance

    The Rural Housing Service is committed to complying with the E-
Government Act, 44 U.S.C. 3601 et. seq., 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.

I. Background

    The section 502 direct single family housing loan program provides 
subsidized mortgage loans for modest homes in rural areas to primarily 
first-time homebuyers who are low- and very

[[Page 52462]]

low-income. While loan approval and underwriting are strictly functions 
of the Agency staff, the Agency's nonprofit partners often play a role 
in educating potential homebuyers in homeownership and in originating 
section 502 loans.
    Loan application packaging is not new to the program. Loan 
application packagers play an important role in increasing awareness of 
the section 502 program among potential homeowners and provide a 
valuable service to potential homeowners. As it stands today, however, 
the packaging process is an informal arrangement and the packagers' 
level of program knowledge and expertise, as well as their level of 
service, is inconsistent.
    In Fiscal Year 2010, the Agency undertook a pilot program to 
evaluate how the loan application packaging process could be improved. 
This pilot program introduced the use of intermediaries in the 
packaging process. The five intermediaries in the pilot program are 
nonprofits whose mission is to serve low-income people in rural 
communities with an emphasis on affordable housing. The intermediaries 
reach out to other nonprofits to serve as packagers, ensure those 
packagers are qualified and trained, perform quality assurance reviews 
to prevent the submission of incomplete or ineligible loan application 
packages to the Agency, and serve as a liaison between the Agency and 
the packager.
    Under this pilot, the Agency observed that the use of loan 
application packagers who have successfully completed an Agency-
approved packaging course and who submit loan packages through an 
intermediary can shorten the Agency's processing time of loan 
applications (the days between the date of application and date of loan 
closing) by approximately 34 percent. The Agency also observed that 
staff time was freed to focus on other responsibilities because (1) 
pre-screening, counseling, application origination, and document 
preparation were completed by the qualified and trained loan 
application packagers and (2) the intermediaries checked the 
completeness and viability of the loan application package before 
submission to the Agency.
    To integrate the successes and lessons from the pilot program, the 
Agency proposes to create a certified loan application packaging 
process. The structure and requirements outlined for this process are 
similar to those used in the pilot program. Persons interested in 
applying for a section 502 loan may, but are not required to, engage 
the service offered under this process.

II. Section-by-Section Discussion of Changes

A. Definitions (7 CFR 3550.10)

    Definitions for an Agency-approved intermediary, an Agency-
certified loan application packager, a qualified employer, and the 
national average area loan limit were added.

B. Certified Loan Application Packaging Process (7 CFR 3550.75)

    The process includes (1) the requirements for individuals seeking 
or who have been designated as an Agency-certified loan application 
packager, (2) the requirements for their qualified employers, and (3) 
the requirements for Agency-approved intermediaries. The use of an 
intermediary is at the qualified employer's discretion once all of 
their packagers on staff have the designation as an Agency-certified 
loan application packager. Under this process, the groups must maintain 
clear separation of duties.
    1. Agency-certified loan application packagers. To obtain RHS 
certification as a loan application packager, an individual must: (1) 
Have at least one year of real estate and/or mortgage experience, (2) 
be employed by a qualified employer, (3) successfully complete an 
Agency-approved loan application packaging course, and (4) demonstrate 
their packaging proficiencies. Proficiency standards will be outlined 
by the Agency in the Direct Single Family Housing Loans and Grants--
Field Office Handbook (Handbook-1-3550) or its successor. The standards 
will take into account the program's current and projected funding 
levels, which will impact the activity levels of the Agency-certified 
packagers.
    The designation as an Agency-certified loan application packager is 
portable; that is, the certified packager can go work for another 
qualified employer and maintain the benefits of being a certified 
packager. The designation cannot be used, however, while the individual 
is not employed by a qualified employer. The designation is subject to 
revocation for nonperformance, violation of pertinent rules and laws 
(including civil rights), or failure to submit any viable packaged loan 
applications to the Agency in any consecutive 12-month period.
    2. Qualified employers. Individuals seeking or who have been 
designated as an Agency-certified loan application packager must be 
employed by a qualified employer. A qualified employer must (1) be a 
nonprofit organization or other public agency, (2) be tax exempt under 
the Internal Revenue Code and be engaged in affordable housing, (3) 
have at least three years of experience with the Agency's direct single 
family housing loan programs, (4) agree to report on the packaging 
activities of their packagers, and (5) prepare an affirmative fair 
housing marketing plan for Agency approval.
    3. Agency-approved intermediaries. An Agency-approved intermediary 
must (1) be a nonprofit organization or other public agency, (2) be tax 
exempt under the Internal Revenue Code and be engaged in affordable 
housing, (3) have at least five years of experience with the Agency's 
direct single family housing loan programs, (4) develop quality control 
procedures designed to prevent submission of incomplete or ineligible 
loan application packages to the Agency, (5) ensure that their quality 
assurance staff successfully complete an Agency-approved loan 
application packaging course to confirm that their individual 
competency level reflects the organization's years of experience with 
the Agency, and (6) not have any financial interest in the subject 
property.

C. Packaging Fee Provisions (7 CFR 3550.52(d)(6))

    Under the certified loan application packaging process, the 
packaging fee will be no more than two percent of the national average 
area loan limit as determined by the Agency and may be limited further 
by the Agency in the Direct Single Family Housing Loans and Grants--
Field Office Handbook (Handbook-1-3550) or its successor. The packaging 
fee will reflect the responsibilities placed on individuals seeking or 
who have been designated as an Agency-certified loan application 
packager, their qualified employers, and Agency-approved 
intermediaries.
    The following supplemental guidance regarding the packaging fee 
associated with the certified loan application packaging process will 
be placed in Handbook-1-3550 once the final rule is published:
     Initially, the Agency will limit the fee to up to $1,500 
if an Agency-approved intermediary is involved in the process. If an 
intermediary is not involved, the fee will be limited to up to $1,000.
     Only a single fee can be charged at loan closing. The 
Agency will not dictate who charges that single fee or how that single 
fee is subsequently divided among the Agency-certified packager, 
qualified employer, and Agency-approved intermediary.
     Agency financing of the packaging fee is dependent on the 
borrower's

[[Page 52463]]

repayment ability and the total secured indebtedness limitation 
outlined in 7 CFR 3550.63. If all or part of the fee cannot be financed 
by the Agency, proof that that portion of the fee will be covered 
without adversely affecting the applicant's qualification must be 
submitted to the Agency.
     Packaging fees are not permitted for loans involving the 
purchase of an RHS Real Estate Owned property or loans under the Mutual 
Self-Help Housing program since Self-Help Grantees receive Section 523 
grant funds to (in part) recruit families and provide assistance in the 
preparation of their loan applications.
     Individuals and entities that do not meet the requirements 
of 7 CFR 3550.75 may package a section 502 loan application on behalf 
of an applicant, but any fee charged is not an allowable loan purpose 
and proof that the fee will be covered without adversely affecting the 
applicant's qualification must be submitted to the Agency.
Solicitation of Comments
    While the Agency welcomes comments on all aspects of this proposed 
rule, comments on the topics listed below are particularly being 
sought. When providing a comment, please provide the rational for the 
comment as well as any data or information to support the comment, if 
possible.
     The inclusion of intermediaries in the certified loan 
application packaging process; whether intermediaries would play a 
critical role in improving the quality of loan application packaging; 
whether the regulations should specify additional qualifying 
requirements for the intermediaries and what those requirements should 
be; how the Agency should handle the process of approving 
intermediaries; and how the coverage area for intermediaries should be 
handled (county, region, state, multiple states, etc.).
     Whether the funding priorities outlined in 7 CFR 
3550.55(c) should be revised to consider applications received by the 
Agency through the certified loan application packaging process as a 
fourth priority item. Currently, first priority is given to existing 
customers who request subsequent loans to correct health and safety 
hazards; second priority is given to loans for the sale of real estate 
owned properties or transfers of existing Agency-financed properties; 
third priority is given to applicants facing housing related hardships; 
fourth priority is given to loans for homes involved in Agency-approved 
self-help projects or loans that include leveraging funds from other 
sources; and fifth priority is given to all other applicants.
     Whether limiting qualified employers and intermediaries to 
non-profit entities would provide better protection to borrowers and 
the government or increase the packaging fees by limiting competition.

List of Subjects in 7 CFR Part 3550

    Administrative practice and procedure, Conflict of interests, 
Environmental impact statements, Equal credit opportunity, Fair 
housing, Accounting, Housing, Loan programs--housing and community 
development, Low and moderate income housing, Manufactured homes, 
Reporting and recordkeeping requirements, Rural areas, Subsidies.

    For the reasons stated in the preamble, chapter XXXV, Title 7 of 
the Code of Federal Regulations, is proposed to be amended 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.

0
2. Amend Sec.  3550.10 by adding definitions for ``Agency-approved 
intermediary,'' ``Agency-certified loan application packager,'' 
``National average area loan limit,'' and ``Qualified employer'' in 
alphabetical order to read as follows:


Sec.  3550.10  Definitions.

* * * * *
    Agency-approved intermediary. An affordable housing nonprofit 
approved by RHS to perform quality assurance reviews and monitoring 
activities on individuals seeking or who have been designated as an 
Agency-certified loan application packager and their qualified 
employers. See Sec.  3550.75 for further details.
    Agency-certified loan application packager. An individual certified 
by RHS under this subpart to package section 502 loan applications 
while employed by a qualified employer. See Sec.  3550.75 for further 
details.
* * * * *
    National average area loan limit. Across the nation, the average 
area loan limit as specified in Sec.  3550.63(a). The national average 
is considered when determining the maximum packaging fee permitted 
under the certified loan application packaging process under the 
section 502 program.
* * * * *
    Qualified employer. A nonprofit organization or public agency that 
meets the requirements outlined in Sec.  3550.75(b)(2) and is involved 
in the certified loan application packaging process under the section 
502 program.
* * * * *
0
3. Amend Sec.  3550.52 by revising paragraph (d)(6) to read as follows:


Sec.  3550.52  Loan purposes.

* * * * *
    (d) * * *
    (6) For section 502 loans, packaging fees resulting from the 
certified loan application packaging process outlined in Sec.  3550.75. 
The fee may not exceed two percent of the national average area loan 
limit as determined by the Agency and may be limited further in the 
Direct Single Family Housing Loans and Grants--Field Office Handbook 
(Handbook-1-3550) or its successor. For section 504 loans, loan 
application packaging fees to public and private nonprofit 
organizations that are tax exempt under the Internal Revenue Code. See 
Handbook-1-3550 or its successor for fee limitations.
* * * * *
0
4. Add Sec.  3550.75 to read as follows:


Sec.  3550.75  Certified loan application packaging process.

    Persons interested in applying for a section 502 loan may, but are 
not required to, submit an application through the certified loan 
application packaging process.
    (a) General. The certified loan application packaging process 
involves individuals seeking or who have been designated as an Agency-
certified loan application packager, their qualified employers, and, at 
least initially, Agency-approved intermediaries. Once all of their 
packagers on staff have the designation as an Agency-certified loan 
application packager, the use of an intermediary is at the qualified 
employer's discretion.
    (b) Process requirements. To package section 502 loan applications 
under this process, each of the following conditions must be met:
    (1) Agency-certified loan application packager. An individual 
seeking to acquire RHS certification as a loan application packager 
must meet all of the following conditions:
    (i) Have at least one year of real estate and/or mortgage 
experience;
    (ii) Be employed by a qualified employer as outlined in paragraph 
(b)(2) of this section;
    (iii) Complete an Agency-approved loan application packaging course 
and successfully pass the corresponding test as specified in paragraph 
(c) of this section; and

[[Page 52464]]

    (iv) Demonstrate their loan application packaging proficiencies. 
Proficiency standards will be outlined by the Agency in the Direct 
Single Family Housing Loans and Grants--Field Office Handbook 
(Handbook-1-3550) or its successor.
    (2) Qualified employer. Individuals seeking or who have been 
designated as an Agency-certified loan application packager must be 
employed by a qualified employer. To be considered a qualified 
employer, the packager's employer must meet or perform, as applicable, 
each of the conditions specified in paragraphs (b)(2)(i) through 
(b))(2)(vi) of this section.
    (i) Be a nonprofit organization or public agency.
    (ii) Be tax exempt under the Internal Revenue Code and be engaged 
in affordable housing per their regulations, articles of incorporation, 
or bylaws.
    (iii) Have at least three years of verifiable experience with the 
Agency's direct single family housing loan programs. Experience with 
the programs is largely determined by the number of years the entity 
has been partnering with the Agency to provide supplemental financing, 
assistance, and/or services to direct loan borrowers.
    (iv) Agree to prepare and submit a monthly report to the Agency 
outlining the loan application packaging activities of their 
packager(s). This monthly report must include certifications that they 
and their packager(s) are not debarred from participating in Federal 
programs and are in compliance with applicable laws and regulations, 
including the Secure and Fair Enforcement Mortgage Licensing Act of 
2008 (SAFE Act). This report must be submitted through the Agency-
approved intermediary when present.
    (v) Notify the Agency-approved intermediary, Agency, and the 
applicant if they or their packager(s) are the developer, builder, 
seller of, or have any other such financial interest in, the property 
for which the application package is submitted.
    (vi) Prepare an affirmative fair housing marketing plan for Agency 
approval as outlined in RD Instruction 1901-E (or in any superseding 
guidance provided in the impending RD Instruction 1940-D).
    (3) Agency-approved intermediaries. To be Agency-approved, the 
intermediary must meet each of the following conditions:
    (i) Be a nonprofit organization or other public agency;
    (ii) Be tax exempt under the Internal Revenue Code and be engaged 
in affordable housing in accordance with their regulations, articles of 
incorporation, or bylaws;
    (iii) Have at least five years of verifiable experience with the 
Agency's direct single family housing loan programs;
    (iv) Develop quality control procedures designed to prevent 
submission of incomplete or ineligible application packages to the 
Agency;
    (v) Ensure that their quality assurance staff complete an Agency-
approved loan application packaging course and successfully pass the 
corresponding test; and
    (vi) Not be the developer, builder, seller of, or have any other 
such financial interest in, the property for which the application 
package is submitted.
    (c) Loan application packaging courses. Prospective loan 
application packagers and the intermediaries' quality assurance staff 
must successfully complete an Agency-approved course that covers the 
material identified in paragraph (c)(1) of this section. Prospective 
intermediaries must also successfully complete an Agency-approved 
course as specified in paragraph (c)(2) of this section.
    (1) Loan application packagers. At a minimum, the certification 
course for individuals seeking to become certified packagers will be a 
three-day classroom session that provides:
    (i) An overview of the section 502 direct single family housing 
loan program and the regulations and laws that govern the program 
(including civil rights lending laws such as the Equal Credit 
Opportunity Act, Fair Housing Act, and Section 504 of the 
Rehabilitation Act of 1973);
    (ii) A detailed discussion on the program's application process and 
borrower/property eligibility requirements;
    (iii) An examination of the Agency's loan underwriting process 
which includes the use of payment subsidies; and
    (iv) The roles and responsibilities of a loan application packager 
and the Agency staff.
    (2) Intermediaries. The required course for an intermediary's 
quality assurance staff will cover the components described in 
paragraph (c)(1) of this section.
    (3) Non-Agency trainers. Prior to offering the packager or 
intermediary course, non-Agency trainers must obtain approval from 
designated Agency staff. Non-Agency trainers, who will be limited to 
housing nonprofit organizations, must provide proof of relevant 
experience and resources for delivery; present evidence that their 
individual trainers are competent and knowledgeable on all subject 
areas; submit course materials for Agency review; agree to maintain 
attendance records, test results, and course materials; and bear the 
cost of providing the training. The course schedule must be approved by 
RHS and each session will be attended by a designated Agency staff 
member. A list of eligible non-Agency trainers will be published on the 
Agency's Web site as an attachment to Handbook-1-3550 or its successor 
(http://www.rurdev.usda.gov/Handbooks.html ).
    (d) Confidentiality. The Agency-certified loan application 
packager, qualified employer, Agency-approved intermediary and their 
agents must safeguard each applicant's personal and financial 
information.
    (e) Retaining designation. The Agency will meet with the Agency-
certified loan application packager, their qualified employer, and 
Agency-approved intermediary (if applicable) at least annually to 
maintain open lines of communication; discuss their packaging 
activities; identify and resolve deficiencies in the packaging process; 
and stipulate any training requirements for retaining designation 
(including civil rights refresher training).
    (f) Revocation. The designation as an Agency-certified loan 
application packager or Agency-approved intermediary is subject to 
revocation by the Agency under any of the following conditions:
    (1) The rate of packaged loan applications that receive RHS 
approval is below the acceptable limit published as an attachment to 
Handbook-1-3550 or its successor, available at http://www.rurdev.usda.gov/Handbooks.html );
    (2) Violation of pertinent rules and laws; or
    (3) No viable packaged loan applications are submitted to the 
Agency in any consecutive 12-month period.

    Dated: July 24, 2013.
Dominique McCoy,
Acting Administrator, Rural Housing Service.
[FR Doc. 2013-20447 Filed 8-22-13; 8:45 am]
BILLING CODE 3410-XV-P