[Federal Register Volume 87, Number 211 (Wednesday, November 2, 2022)]
[Rules and Regulations]
[Pages 66075-66077]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23754]



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 Rules and Regulations
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  Federal Register / Vol. 87, No. 211 / Wednesday, November 2, 2022 / 
Rules and Regulations  

[[Page 66075]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Parts 3550 and 3555

[Docket No. RHS-22-SFH-0023]


Single Family Housing Section 502 Direct and Guaranteed 
Manufactured Housing Pilots

AGENCY: Rural Housing Service, USDA.

ACTION: Notice.

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SUMMARY: The Rural Housing Service (RHS or the Agency), a Rural 
Development (RD) agency of the United States Department of Agriculture 
(USDA), is issuing this notice to waive two regulatory requirements for 
the Section 502 Direct and Guaranteed Manufactured Housing pilot 
program. The Agency's intention is to evaluate the existing regulations 
and remove regulatory barriers to assist eligible applicants with 
improved ease of use for very low- to moderate-income homeowners 
seeking to purchase affordable housing. The pilot also supports the 
current Administration's Housing Supply Action Plan which seeks to 
boost new financing mechanisms to build and supply quality affordable 
housing units. This notice briefly discusses the continuation of the 
existing waivers and provides contact information for additional 
details about the pilot program.

DATES: The effective date of the two regulatory waivers is November 2, 
2022. The duration of the pilot program is anticipated to continue 
until November 4, 2024, at which time the RHS may extend the pilot 
program (with or without modifications) or terminate it depending on 
the workload and resources needed to administer the program, feedback 
from the public, and the effectiveness of the program. RHS will notify 
the public whether the pilot program has been extended or terminated.

FOR FURTHER INFORMATION CONTACT: Stephanie Freeman, Finance and Loan 
Analyst, Policy, Analysis, and Communications Branch, Single Family 
Housing Guaranteed Loan Division, Rural Development, U.S. Department of 
Agriculture, Email: [email protected]; Phone: (314) 457-6413 
and Jeremy Anderson, Finance and Loan Analyst, Single Family Housing 
Direct Loan Division, Rural Development, U.S. Department of 
Agriculture, Email: [email protected]; Phone: (202) 690-3971.

SUPPLEMENTARY INFORMATION:

Background

    The RHS is committed to helping improve the economy and quality of 
life in rural areas by offering a variety of programs. The Agency 
offers loans, grants, and loan guarantees to help create jobs, expand 
economic development, and provide critical infrastructure investments. 
RHS also provides technical assistance loans and grants by partnering 
with agricultural producers, cooperatives, Indian tribes, non-profits, 
and other local, state, and federal agencies.
    Affordable housing is essential to the vitality of communities in 
rural America. RD's Single Family Housing Programs give families and 
individuals the opportunity to purchase, build, repair their existing 
home, or to refinance their current mortgage under certain criteria. 
Eligibility for these loans, loan guarantees, or grants is based on 
income which varies according to the average median income for each 
eligible rural area.
    The Section 502 Direct Loan Program under 7 CFR 3550 assists very 
low- and low-income applicants obtain decent, safe and sanitary housing 
in eligible rural areas by providing payment assistance to increase an 
applicant's repayment ability. The payment assistance is a type of 
subsidy that reduces the mortgage payment for a short time and is 
determined by the adjusted family income. There are a number of 
different factors that determine the applicant's eligibility for this 
program but at minimum the applicant, as determined in accordance with 
7 CFR 3550.53 and 42 U.S.C. 1471, must have an adjusted income that is 
at or below the applicable low-income limit for the area where they 
wish to purchase a home and they must demonstrate a willingness and 
have the ability to repay debt.
    The Section 502 Guaranteed Loan Program, under 7 CFR 3555, provides 
a 90% loan note guarantee to approved lenders in efforts to provide 
low- and moderate-income households the opportunity to own adequate, 
modest, decent, safe and sanitary dwellings as their primary residence 
in eligible rural areas. Eligible applicants may purchase, build, 
rehabilitate, improve or relocate a dwelling in an eligible rural area. 
Applicant eligibility for this program is determined by the lender 
pursuant to the criteria set forth in 7 CFR 3555, Subpart D.
    RHS may authorize limited demonstration programs to test new 
approaches to offering housing under the statutory authority granted to 
the Secretary, as set forth in 42 U.S.C. 1476(b), 7 CFR 3550.7 and 7 
CFR 3555.2(b). Demonstration programs are time- and scope-limited 
programs designed to test new approaches and for those reasons, 
demonstration programs need not be consistent with all regulatory 
provisions while active.
    In 2021, the Agency extended the existing Section 502 Manufactured 
Housing Pilot program in order to continue assessing the pilots' 
impact. The first pilot involves financing existing manufactured homes; 
the second pilot involves the ownership requirement for new energy-
efficient manufactured and modular homes in land-lease communities 
operating on a nonprofit basis. These allowances remain unchanged from 
any previous extensions of this pilot program. As pilot programs, the 
number of participating states remain restricted while providing for 
adequate regional representation.

Continuation of the Existing Manufactured Home Pilot

    The Agency is continuing with the existing manufactured housing 
pilot, which was initially implemented on August 12, 2016, in which RD 
waived the regulatory restrictions cited in 7 CFR 3550 and 3555 and 
will finance existing manufactured homes in the pilot states even if 
the home is not currently financed by RD. Under current regulations, 
new manufactured homes are eligible for financing through the Section 
502 Single Family Housing (SFH) Direct and Guaranteed Loan Programs. 
Existing manufactured homes

[[Page 66076]]

are not eligible unless the home is already financed through RD (7 CFR 
3550.52(e)(1); 3550.73(b); 3555.208(b)(3)).

Eligibility Requirements

    Approved lenders in the SFH Guaranteed Loan Program do not require 
additional approval to participate provided the home is in a pilot 
state. The loan request must be from an eligible applicant, all the 
pilot conditions listed in this section must be met, and all other 
program requirements that have not been waived must be met. The 
following States are included in this pilot: Colorado, Iowa, Louisiana, 
Michigan, Mississippi, Montana, Nevada, New Hampshire, New York, North 
Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, 
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and 
Wyoming. The following unit requirements below must be met:
    The unit must have been constructed on or after January 1, 2006, in 
conformance with the Federal Manufactured Home Construction and Safety 
Standards (FMHCSS), as evidenced by an affixed Housing and Urban 
Development (HUD) Certification Label and the unit must not have been 
previously installed on a different homesite, or had any structural 
alterations to it since construction in the factory, except for 
porches, decks or other structures which were built to engineered 
designs or were approved and inspected by local code officials.
    The unit inspection is required using one of two methods: Option 
(1) Form HUD-309, ``HUD Manufactured Home Installation Certification 
and Verification Report'' completed in accordance with 24 CFR 3286.511 
by a qualified party as follows: A manufactured home or residential 
building inspector employed by the local authority having jurisdiction 
over the site of the home, provided that the jurisdiction has a 
residential code enforcement program; a professional engineer, 
registered architect, a HUD-accepted Production Inspection Primary 
Inspection Agency (IPIA) or a Design Approval Primary Inspection Agency 
(DAPIA), or an International Code Council (ICC) certified inspector. 
Option (2) Obtain a certification that the foundation design meets the 
requirements of either HUD Handbook 4930.3G or HUD Publication 7584, 
which updated and revised the pre-1996 version of HUD Handbook 4930.3G, 
``Permanent Foundations Guide for Manufactured Housing (PFGMH).'' 
Certifications referencing either Publication 7584 or Handbook 4930.3G 
are acceptable. The foundation certification must be from a licensed 
professional engineer, or registered architect, who is licensed/
registered in the state where the manufactured home is located and must 
attest to compliance with current guidelines of the PFGMH. The 
certification must be site specific and contain the engineer's or 
registered architect's signature, seal and/or state license/
certification number. This certification can take the place of Form 
HUD-309.
    Guaranteed loan applications submitted under this pilot must be 
manually submitted and underwritten, however the documents may be 
submitted through the Guaranteed Underwriting System (GUS). A job aid 
for this type of submission is available in our USDA LINC Training and 
Resource Library in the ``Loan Origination'' tab or directly here: 
https://www.rd.usda.gov/sites/default/files/linc_manual_submission_job_aid.pdf . Agency staff will need to select 
``MANUFACTURED (PILOT)'' for ``Construction Type'' in the Property 
Information section in the Guaranteed Loan System (GLS). This will 
allow for the proper identification of pilot loans for tracking and 
monitoring purposes.
    Direct loan applications submitted under the pilot are submitted 
directly to the local RD office. Agency staff will need to select 
Program Type Code 1014 (very low income) or 1015 (low income) unless 
the property is located in a persistent poverty county, in which case 
Program Type Code 1114 (very low income) or 1115 (low income) will be 
used. In addition, Agency staff will need to select a Construction Type 
of ``Manuf/Home'' and a Dwelling Type of ``Purchase Old, Refinance, 
Purchase Old/Repair, or Refinance/Repair'' in UniFi. This will allow 
for the proper identification of pilot loans for tracking and 
monitoring purposes.
    The applicant and property must meet all other criteria set forth 
in applicable statutes, 7 CFR part 3550 and HB-1-3550 for Direct loans 
or 7 CFR part 3555 and HB-1-3555 for Guaranteed loans, as applicable. 
These criteria include, but are not limited to, the following: The unit 
must have a floor area of not less than 400 square feet; the unit must 
meet the Comfort Heating and Cooling Certificate Uo (Coefficient of 
heat transmission) Value Zone for the location; the towing hitch and 
running gear must have been removed; the manufactured home must be 
classified and taxed as real estate; the remaining economic life of the 
property must meet or exceed the 30 year term of the proposed loan; and 
the unit replacement cost coverage must be equal to the insured value 
of the improvements or the unpaid principal balance with deductible(s) 
of up to but not exceeding the greater of $1,000 or one percent (1%) of 
the policy.

Continuation of the Ownership Requirement Pilot for Energy Efficient 
Manufactured and Modular Home Financing in Land-Lease Communities 
Operating on a Nonprofit Basis

    The Agency is continuing with the existing pilot that involves the 
ownership requirement for new energy-efficient manufactured and modular 
homes in land-lease communities operating on a nonprofit basis. 
According to 7 CFR 3550.58(b), a leasehold interest must have an 
unexpired term that is at least 150 percent of the term of the mortgage 
for Direct loans. According to 7 CFR 3555.203(b)(3), a leasehold 
interest must have an unexpired term of at least 45 years from the date 
of loan closing for a Guaranteed loan.

Eligibility Requirements

    Under this pilot, RD will accept a lease with an unexpired term 
that is at least two years beyond the term of the promissory note in 
the pilot states. The following States are included in this pilot: 
California, Michigan, Minnesota, New Hampshire, Oregon, Pennsylvania, 
Vermont, and Wisconsin. The loan request must be from an eligible 
applicant, all the pilot conditions must be met, and new manufactured 
and modular homes must meet the following pilot conditions:
    At a minimum, new manufactured and modular homes must be Energy 
Star compliant and the unexpired term of the lease must be at least two 
years longer than the mortgage term. While the lease terms in 7 CFR 
3550.58(b) and 3555.203(b)(3) could be seen as providing borrowers 
additional protection, many states have statutes that promulgate fair 
lease terms and afford protections to residents of land-lease 
communities.
    For the SFH Guaranteed Loan Program, pilot states should consider 
following the recommendations in HUD's interim guidance related to 24 
CFR 3285.312 on the use of frost-free foundations or frost protected 
shallow foundations.
    For the SFH Direct Loan Program, pilot states may use the 
recommendations from HUD's interim guidance on frost-free or frost-
protected shallow foundations in lieu of RD Instruction 1924-A, Exhibit 
J. Under the HUD interim guidance recommendations, the installer should 
install all footings and piers below the

[[Page 66077]]

frost line depth, or for Frost Free Foundations, have a site 
investigation performed by a soil engineer or geotechnical engineer to 
verify if the soil condition at each home site is of a non-frost 
susceptible classification and is well drained. In lieu of a site soil 
investigation, a layer of washed gravel, or crushed stone, or course or 
dense sand may be provided to the frost line depth.
    For either of these alternatives, subsurface drains need to be 
provided; or use a Frost Protected Shallow Foundation system that 
utilizes below ground insulation to protect the soil from freezing with 
subsurface drains provided at each site. The applicant and property 
must meet all other criteria set forth in applicable statutes, 7 CFR 
part 3550 and HB-1- 3550 for Direct loans or 7 CFR part 3555 and HB-1-
3555 for Guaranteed loans, as applicable. Program Directors should use 
the tracking tool under the ``Energy Efficient Housing'' link on the 
SFH SharePoint tracking site to report loans made under this pilot.

Paperwork Reduction Act

    The regulatory waivers for this pilot 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).

Non-Discrimination Statement

    In accordance with Federal civil rights laws and 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.ascr.usda.gov/complaint_filing_cust.html, 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, Washington, DC 
20250-9410; or (2) Fax: (833) 256-1665 or (202) 690-7442; or (3) Email: 
[email protected].

    Authority: Title V, Section 502 of the Housing Act of 1949, as 
amended; 42 U.S.C. 1472.

Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2022-23754 Filed 11-1-22; 8:45 am]
BILLING CODE 3410-XV-P