[Federal Register Volume 87, Number 168 (Wednesday, August 31, 2022)]
[Rules and Regulations]
[Pages 53369-53372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-18626]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3555

[Docket No. RHS-21-SFH-003]
RIN 0575-AD22


Single Family Housing Guaranteed Loan Program

AGENCY: Rural Housing Service, Agriculture Department (USDA).

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 
implementing changes to the Single-Family Housing Guaranteed Loan 
Program (SFHGLP) to update the requirements for Federally supervised 
lenders, minimum net worth and experience for non-supervised lenders, 
approved lender participation requirements, handling of applicants with 
delinquent child support payments, and builder credit requirements.

DATES: This final rule is effective November 29, 2022.

FOR FURTHER INFORMATION CONTACT: Laurie Mohr, Finance and Loan Analyst, 
Single Family Housing Guaranteed Loan Division, Rural Development, U.S. 
Department of Agriculture, STOP 0784, Room 2250, South Agriculture 
Building, 1400 Independence Avenue SW, Washington, DC 20250-0784, 
telephone: (314) 679-6917; or email: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    The Rural Housing Service (RHS or Agency) is an agency of the 
United States Department of Agriculture (USDA) and 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, housing for farm laborers and much more. RHS 
also provides technical assistance loans and grants in partnership with 
non-profit organizations, Indian tribes, State and Federal Government 
agencies, and local communities.
    The RHS is issuing a final rule to amend the Single-Family Housing 
Guaranteed Loan Program (SFHGLP) regulation, 7 CFR part 3555, subparts 
B, C and D which will reinforce oversight and management of the growing 
SFHGLP portfolio. These changes will promote an efficient and robust 
management and oversight structure of lenders in the SFHGLP by 
strengthening underwriting practices, providing guidance for processing 
loan guarantees for applicants who are subject to administrative offset 
to collect delinquent child support payments, and streamline 
requirements for screening builder-contractors by lenders.
    The updates align with the standards for managing credit programs 
recommended by the Office of Management and Budget (OMB) for Federally 
supervised lenders, minimum net worth, minimum line of credits, minimum 
experience, and approved lender participation requirements. These 
updates will also provide guidance for processing applications for 
individuals with delinquent child support payments and relaxes builder 
requirements to better align with the credit program requirements of 
other Federal agencies.

II. Discussion of Public Comments

    RHS published a proposed rule on June 9, 2021 (86 FR 30555) to 
solicit comments on the proposed updated requirements for Federally 
supervised lenders, minimum net worth and experience for non-supervised 
lenders, approved lender participation requirements, treatment of 
applicants with delinquent child support payments, and builder credit 
requirements for SFHGLP (86 FR 30555). The Agency received comments 
from six respondents including individuals, mortgage companies, and 
interested parties. Three of the comments are not applicable to the 
contents of the rule.
    The following is a summary of the relevant comments:
    Comment 1: One respondent opposed eliminating the background checks 
for builders stating the builder's integrity could not be thoroughly 
checked to avoid court appearances and rebuilding homes.
    Agency Response: The Agency still relies on the lender to review 
and approve construction contractors or builders. The Agency has 
determined that these credit requirements are not the industry 
standard. The builder-contractor's ability to participate in such 
projects should be based on the applicant's and lender's review of the 
builder-contractor's experience, reputation, and financial ability to 
complete the project in a timely, efficient, and competent manner. The 
Agency believes the stance is correctly stated and stands behind the 
rule changes.
    Comment 2: One respondent replied in favor of the proposed rule 
stating obtaining background checks for builders were difficult to 
obtain and could potentially hurt a builder's reputation if, for some 
unforeseen reason, you could not obtain a builder approval.
    Agency Response: The Agency has determined no action is required.
    Comment 3: One respondent agreed with certain delinquent child 
support provisions in the rule, however, the respondent raised concerns 
that the proposed change would be unduly difficult for rural families 
and children who are already experiencing housing challenges. The 
respondent noted that employment in rural areas is limited and felt 
that there are other means to addressing delinquent child support.
    Agency Response: The Agency believes the stance is correctly stated 
and stands behind the rule changes.

III. Summary of Rule Changes

    A summary of the changes includes amending 7 CFR 3555.51(a)(8) to 
eliminate items (a)(8)(iv) because it refers to the Office of Thrift 
Supervision (OTS), which no longer exists. Furthermore, the current 
Sec.  3555.51(a)(9) and (10) is intended to provide a path for lenders 
that are not regulated by state or federal agencies and do not meet the 
requirements of (a)(1) through (8) an opportunity to participate in the 
SFHGLP. Therefore, the introductory paragraph of Sec.  3555.51(a)(9) 
and (10) will be amended to clarify that when

[[Page 53370]]

lenders cannot meet the demonstrated ability criteria outlined under 
Sec.  3555.51(a)(1) through (8), those lenders must submit additional 
documentation to demonstrate their ability to originate loans.
    The final rule will amend Sec.  3555.51 by adding paragraph (a)(11) 
(i) and (ii) to reflect Financial Requirements for Non-Supervised 
Lenders. All lenders not supervised by federal entities listed in Sec.  
3555.51 (a)(8) must have: (i) A minimum adjusted net worth of $250,000, 
or at least $50,000 in working capital plus one percent of the total 
volume in excess of $25 million in guaranteed loans originated, 
serviced, or purchased during the lender's prior fiscal year, up to a 
maximum required adjusted net worth of $2.5 million and, (ii) one or 
more lines of credit with a minimum aggregate of $1 million. The 
proposed financial thresholds are based on recommendations analysis of 
participating lenders. Sec.  3555.51(a). Establishing minimum financial 
requirements for non-supervised lenders would potentially reduce the 
Agency's risk of doing business with entities that have insufficient 
financial resources. Lenders that meet these minimum financial 
requirements demonstrate trustworthiness that would contribute to the 
success of the SFHGLP. The Agency took a combination approach when 
developing the minimum requirements, including the Veterans 
Administration (VA) base requirement and adding a volume component to 
it. This is structured and capped following the FHA standard. By taking 
this action, the Agency will align lender approval requirements with 
those of other Federal credit programs and incorporate \1\ the best 
practice recommendations outlined in Office of Management and Budget 
(OMB) Circular A-129.\2\
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    \2\ Available at: https://fiscal.treasury.gov/files/dms/circ-a129-upd-0113.pdf. OMB requires credit granting agencies to 
establish and publish in the Federal Register specific eligibility 
criteria for lender or servicer participation in Federal credit 
programs, including qualification requirements for principal 
officers and staff of the lender or servicer. OMB Circular A-129, p. 
12.
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    Federally supervised lenders that meet the criteria of Sec.  
3555.51(a)(8) have demonstrated ability and will not be required to 
provide additional documentation. The Agency will require less 
documentation from the lender and make the process more efficient for 
Federally supervised lenders.
    This final rule clarifies that lenders must meet applicable 
requirements in order to begin and continue participation in the 
SFHGLP. The Agency generally reviews each lender every two years to 
ensure compliance.
    The Agency will amend Sec.  3555.51 (b), SFHGLP participation 
requirements, to clarify by adding subparagraph (23) that lender 
eligibility will be reviewed every two years for continued 
participation in the SFHGLP. In addition, the Agency will clarify by 
adding subparagraph (24) that principal officers must have a minimum of 
two years of experience in originating or servicing mortgage loans as 
recommended in OMB Circular A-129. In order to be deemed eligible for 
continued lender participation in the SFHGLP, the lender and its 
principal officers must continue to meet all the criteria as outlined 
in Sec.  3555.51, which, as amended, will include specific experience 
in underwriting and servicing loans, financial requirements for non-
supervised lenders, and SFHGLP participation requirements.
    The Agency has determined that obtaining builder-contractors credit 
and background checks is not an industry standard. The builder-
contractor's ability to participate in such projects should be based on 
the applicant's and lender's review of the builder-contractor's 
experience, reputation, and financial ability to complete the project 
in a timely, efficient, and competent manner. The Agency will remove 
Sec.  3555.105(b)(4) and (5) and thus streamline screening 
requirements, reduce administrative burden on the lender, and align 
with other Federal programs, including the agency's Direct Section 502 
loan program, which does not have such requirements for builder-
contractors.
    Additionally, the Agency considers delinquent child support 
payments subject to administrative offset a significant derogatory 
obligation and an indication that an applicant does not have the 
reasonable ability or willingness to meet their obligations. It would 
be against the federal government's interest to guarantee a loan for an 
applicant from whom the federal government is simultaneously pursuing 
collection for a delinquent debt. This final rule will amend Sec.  
3555.151(i) (9) to specify that borrowers with delinquent child support 
payments, subject to collection by administrative offset, are 
ineligible unless the payments are brought current, the debt is paid in 
full, or otherwise satisfied.

IV. Regulatory Information

Statutory Authority

    Section 510(k) of Title V the Housing Act of 1949 (42 U.S.C. 
1480(k)), as amended, authorizes the Secretary of the Department of 
Agriculture to promulgate rules and regulations as deemed necessary to 
carry out the purpose of that title.

Executive Order 12866, Classification

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

Executive Order 12988, Civil Justice Reform

    This rule has been reviewed under Executive Order 12988. In 
accordance with this rule: (1) Unless otherwise specifically provided, 
all state and local laws that conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule 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 bringing suit in 
court that challenges action taken under this rule.

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 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.

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

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National Environmental Policy Act of 1969, Public Law 91-190, an 
Environmental Impact Statement is not 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 
final rule impose substantial direct compliance costs on state and 
local governments. Therefore, consultation with the States is not 
required.

Regulatory Flexibility Act

    The 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.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This program is not subject to the requirements of Executive Order 
12372, ``Intergovernmental Review of Federal Programs,'' as implemented 
under USDA's regulations at 7 CFR part 3015.

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 final rule, they 
are encouraged to contact USDA's Office of Tribal Relations or RD's 
Native American Coordinator at: [email protected] to request such a 
consultation.

Programs Affected

    The program affected by this final rule is listed in the Assistance 
Listing (AL) (formerly Catalog of Federal Domestic Assistance) under 
number 10.410, Very Low to Moderate Income Housing Loans (Section 502 
Rural Housing Loans).

Paperwork Reduction Act

    This final rule contains no new reporting or recordkeeping burdens 
under OMB control number 0575-0179 that would require approval under 
the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

Civil Rights Impact Analysis

    Rural Development has reviewed this final rule in accordance with 
USDA Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify 
any major civil rights impacts the rule might have on program 
participants on the basis of age, race, color, national origin, sex, 
disability, marital or familial status. Based on the review and 
analysis of the rule and all available data, issuance of this final 
rule is not likely to negatively impact low and moderate-income 
populations, minority populations, women, Indian tribes, or persons 
with disability, by virtue of their age, race, color, national origin, 
sex, disability, or marital or familial status.

E-Government Act Compliance

    Rural Development is committed to the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

USDA Non-Discrimination Policy

    In accordance with Federal civil rights laws and U.S. Department of 
Agriculture (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 Area, agency, or staff office; the USDA TARGET 
Center at (202) 720-2600 (voice and TTY); or the Federal Relay Service 
at (800) 877-8339.
    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 https://www.ocio.usda.gov/document/ad-3027, 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:
    (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    (2) Fax: (833) 256-1665 or (202) 690-7442; or
    (3) Email: [email protected].
    USDA is an equal opportunity provider, employer, and lender.

List of Subjects in 7 CFR Part 3555

    Construction, Eligible loan purpose, Home improvement, Loan 
programs--housing and community development, Loan terms, Mortgage 
insurance, Mortgages, and Rural areas.

    For the reasons discussed in the preamble, the Agency is proposing 
to amend 7 CFR part 3555 as follows:

PART 3555--GUARANTEED RURAL HOUSING PROGRAM

0
1. The authority citation for part 3555 continues to read as follows:

    Authority: 5 U.S.C. 301; 42 U.S.C. 1471 et seq.

Subpart B--Lender Participation

0
2. Amend Sec.  3555.51 by:
0
(a) Revising paragraph (a)(8), the introductory text of paragraph 
(a)(9) and the introductory text of paragraph(10).
0
(b) Adding paragraph (a)(11); and
0
(c) Adding paragraphs (b)(23) and (24).
    The additions and revisions read as follows:


Sec.  3555.51   Lender eligibility.

* * * * *
    (a) * * *
    (8) A Federally supervised lender that provides documentation of 
its ability to

[[Page 53372]]

originate, underwrite, and service single-family loans. Acceptable 
sources of supervision include:
    (i) Being a member of the Federal Reserve System.
    (ii) The Federal Deposit Insurance Corporation (FDIC).
    (iii) The National Credit Union Administration (NCUA).
    (iv) The Office of the Comptroller of the Currency (OCC).
    (v) The Federal Housing Finance Board regulating lenders within the 
Federal Home-Loan Bank (FHLB) system.
    (9) If lenders cannot meet the requirements under paragraphs (a)(1) 
through (8) of this section, they may demonstrate its ability to 
originate and underwrite loans by submitting appropriate documentation, 
examples of which include, but are not limited to:
* * * * *
    (10) A lender that proposes to service loans that cannot meet 
paragraphs (a)(1) through (8) of this section must demonstrate its 
ability by submitting appropriate documentation, examples of which 
include but are not limited to:
* * * * *
    (11) The financial requirements for non-supervised lenders not 
covered in paragraph (a)(8), must have:
    (i) A minimum adjusted net worth of $250,000, or $50,000 in working 
capital plus one percent of the total volume in excess of $25 million 
in guaranteed loans originated, serviced, or purchased during the 
lender's prior fiscal year, up to a maximum required adjusted net worth 
of $2.5 million, and
    (ii) One or more lines of credit with a minimum aggregate of one 
million dollars.
    (b) * * *
* * * * *
    (23) Provide documentation as required by the Agency to be reviewed 
every two years for lender participation and,
    (24) Provide evidence that principal officers have a minimum of two 
years of experience in originating or servicing guaranteed mortgage 
loans as recommended in OMB Circular A-129.

Subpart C--Loan Requirements


Sec.  3555.105  [Amended]

0
3. Amend Sec.  3555.105 paragraph (b) by removing paragraphs (b)(4) and 
(5) and redesignating paragraph (b)(6) as (b)(4).

Subpart D--Underwriting the Applicant

0
4. Amend Sec.  3555.151 by adding paragraph (i)(9) to read as follows:


Sec.  3555.151  Eligibility Requirements.

* * * * *
    (i) * * *
    (9) Applicants with delinquent child support payments subject to 
collection by administrative offset are ineligible unless the payments 
are brought current, the debt is paid in full, or otherwise satisfied.
* * * * *

Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2022-18626 Filed 8-30-22; 8:45 am]
BILLING CODE 3410-XV-P