[Federal Register Volume 89, Number 53 (Monday, March 18, 2024)]
[Rules and Regulations]
[Pages 19225-19228]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05571]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3560

[Docket #: RHS-23-MFH-0025]
RIN 0575-AD23


Changes Related to Reserve Account Administration in Multi-Family 
Housing (MFH) Direct Loan Programs

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

[[Page 19226]]


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 
updating its regulations and implementing changes related to the 
administration of property reserve accounts under the Multi-Family 
Housing (MFH) section 515, Rural Rental Housing (RRH), and section 514, 
516 Farm Labor Housing (FLH) programs. This final rule will increase 
flexibility in project refinancing for additional capital improvements 
needed at MFH section 515, RRH, and section 514, 516 FLH properties.

DATES: This final rule is effective April 17, 2024.

FOR FURTHER INFORMATION CONTACT: Michael Resnik, Director, Asset 
Management Division, Multifamily Housing Programs and Housing Service, 
Rural Development, U.S. Department of Agriculture, 1400 Independence 
Avenue SW, Washington, DC 20250, telephone: 202-430-3114; or email: 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    The RHS, an agency of the USDA, 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, and housing for farm laborers. RHS also provides 
technical assistance loans and grants in partnership with non-profit 
organizations, Indian Tribes, State and Federal government agencies, 
and local communities.
    Title V of the Housing Act of 1949 (Act) authorized the USDA to 
make housing loans to farmers to enable them to provide habitable 
dwellings for themselves or their tenants, lessees, sharecroppers, and 
laborers. The USDA then expanded opportunities in rural areas, making 
housing loans and grants to rural residents through the Single-Family 
Housing (SFH) and Multi-Family Housing (MFH) Programs.
    The RHS operates the MFH section 515 RRH direct loan program. The 
section 515 program employs a public-private partnership by providing 
subsidized loans at an interest rate of one percent to developers to 
construct or renovate affordable rental complexes in rural areas. This 
one percent loan keeps the debt service on the property sufficiently 
low to support below-market rents affordable to low-income tenants. 
Many of these projects also utilize low-income housing tax credit 
proceeds.
    The RHS also operates the MFH FLH direct loan and grant programs 
under sections 514 and 516 which provide low interest loans and grants 
to provide housing for farmworkers. These eligible farmworkers may work 
either at the borrower's farm (``on-farm'') or at any other farm 
(``off-farm''). This final rule is designed to increase flexibility in 
project refinancing for additional capital improvements needed for a 
section 515 or 514, 516 MFH property.

II. Purpose of This Rulemaking

    RHS published a proposed rule on January 9, 2023 [88 FR 1149], in 
the Federal Register to solicit comments on the proposed updates to 7 
CFR part 3560 and changes related to the administration of property 
reserve accounts under the MFH section 515, RRH, and section 514, 516 
FLH programs. The MFH direct loan project's general operating account 
is deemed to contain surplus funds when the balance at the end of the 
housing project's fiscal year, after all payables, exceeds 20 percent 
of the operating and maintenance expenses. When a MFH property's 
Agency-approved budget results in surplus cash at the end of the year, 
this change to the current regulation will allow the borrower to use 
surplus cash to fund Agency-approved soft debt. MFH approved soft-debt 
is a type of debt that generally (1) is not immediately due and 
payable, (2) has lenient repayment terms, and/or (3) has no-interest or 
low-interest rates, for example a ``cash flow note''. Soft debt is 
often provided by State or local government as vital, additional 
sources of MFH direct loan property rehabilitation funding. This final 
rule change will allow owners the flexibility to access surplus cash 
notes as a new source of capital for property improvements, and to 
implement operating cost increases in property reserve contributions. 
It is designed to increase flexibility in project refinancing for 
additional capital improvements under 7 CFR 3560.306 to implement 
changes related to the administration of property reserve accounts 
under the MFH section 515, RRH, and section 514, 516 FLH programs.

III. Discussion of Public Comments

    In response to the published proposed rule on January 9, 2023 [88 
FR 1149], RHS received two identical comments from one respondent with 
positive feedback on the MFH programs. The comment did not include 
direct statements regarding the proposed changes and is not applicable 
to the contents of the rule. The comments did not result in the Agency 
changing plans for the final rule.

IV. Summary of Changes

    The changes to amend 7 CFR 3560.306 include reducing debt service 
on other third-party debt, as an allowable use of funds, including 
payments toward cash flow notes. Allowing borrowers to use surplus 
funds to repay third-party debt would allow those borrowers to access 
State and local government funding available as a capital source for 
property improvements. Acceptable third-party debt, including cash flow 
notes, will take the form of a written agreement for the payment of an 
Agency-approved debt obligation, with or without interest. Payments may 
occur only after approval has been granted by the Agency. These changes 
are designed to improve property condition and increase tools available 
to borrowers to preserve properties as affordable housing resources. 
This final rule no longer includes the reduction in rents as an 
allowable use of surplus funds, as rent-setting is part of the annual 
proposed budget process and should not be included in the reserve 
account section of this regulation. These changes are designed to 
improve property condition and increase tools available to borrowers to 
preserve properties as affordable housing resources.

V. Regulatory Information

Statutory Authority

    The RRH and FLH programs are authorized under sections 514, 515, 
516 of title V of the Housing Act of 1949, as amended (42 U.S.C. 1484-
86); and implemented under 7 CFR part 3560. Section 510(k) of Title V 
the Housing Act of 1949 (42 U.S.C. 1480(k)), as amended, authorizes the 
Secretary of Agriculture to promulgate rules and regulations as deemed 
necessary to carry out the purpose of that title.

Executive Order 12372, Intergovernmental Review of Federal Programs

    These loans are subject to the provisions of Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. RHS conducts intergovernmental consultations for each loan 
in accordance with 2 CFR part 415, subpart C.

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Executive Order 12866, Regulatory Planning and Review

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

Executive Order 12988, Civil Justice Reform

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

Executive Order 13132, Federalism

    The policies contained in this final rule do not have any 
substantial direct effect on States, on the relationship between the 
National Government and the States, or on the distribution of power and 
responsibilities among the various levels of government. This final 
rule does not impose substantial direct compliance costs on State and 
local governments; therefore, consultation with States is not required.

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

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 National 
Environmental Policy Act of 1969, Public Law 91-190, an Environmental 
Impact Statement (EIS) is not required.

Regulatory Flexibility Act

    This final 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.

Unfunded Mandates Reform Act (UMRA)

    Title II of the UMRA, Public Law 104-4, establishes requirements 
for Federal agencies to assess the effects of their regulatory actions 
on State, local, and Tribal governments and on the private sector. 
Under section 202 of the UMRA, Federal agencies generally must prepare 
a written statement, including 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 a Federal 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 final rule contains no Federal mandates (under the regulatory 
provisions of title II of the UMRA) for State, local, and Tribal 
governments or for the private sector. Therefore, this final rule is 
not subject to the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

    The information collection requirements contained in this 
regulation have been approved by OMB and have been assigned OMB control 
number 0575-0189. This final rule contains no new reporting and 
recordkeeping requirements that would require approval under the 
Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35).

E-Government Act Compliance

    RHS is committed to complying with the E-Government Act by 
promoting the use of the internet and other information technologies to 
provide increased opportunities for citizen access to government 
information, services, and other purposes.

Civil Rights Impact Analysis

    RD has reviewed this final rule in accordance with USDA Regulation 
4300-4, Civil Rights Impact Analysis, to identify any major civil 
rights impacts the final rule might have on program participants on the 
basis of age, race, color, national origin, sex, or disability. After 
review and analysis of the final rule and available data, it has been 
determined that implementation of the rulemaking will not adversely or 
disproportionately impact very low, low- and moderate-income 
populations, minority populations, women, Indian Tribes, or persons 
with disability by virtue of their race, color, national origin, sex, 
age, disability, or marital or familial status. No major civil rights 
impact is likely to result from this final rule.

Assistance Listing

    The program affected by this regulation is listed in the Assistance 
Listing Catalog (formerly Catalog of Federal Domestic Assistance) under 
number 10.415-Rural Rental Housing Loans.

Non-Discrimination Statement Policy

    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

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Area, agency, or staff office; or the 711 Relay Service.
    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.usda.gov/sites/default/files/documents/ad-3027.pdf 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:
    a. Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    b. Fax: (833) 256-1665 or (202) 690-7442; or
    c. Email: [email protected].

List of Subjects in 7 CFR Part 3560

    Accounting, Administrative practice and procedure, Aged, Conflicts 
of interest, Government property management, Grant programs--housing 
and community development, Insurance, Loan programs--agriculture, Loan 
programs--housing and community development, Low and moderate-income 
housing, Migrant labor, Mortgages, Nonprofit organizations, Public 
housing, Rent-subsidies, Reporting and recordkeeping requirements, 
Rural areas.

    For the reasons discussed in the preamble, the Agency amends 7 CFR 
part 3560 as follows:

PART 3560--DIRECT MULTI-FAMILY HOUSING LOANS AND GRANTS

0
1. The authority citation for part 3560 continues to read as follows:

    Authority: 42 U.S.C. 1480.


0
2. Amend Sec.  3560.306 by revising paragraph (d)(2) to read as 
follows:


Sec.  3560.306  Reserve account.

* * * * *
    (d) * * *
    (2) If a housing project's general operating account has surplus 
funds at the end of the housing project's fiscal year per paragraph 
(d)(1) of this section, the borrower will be required to use such 
surplus for one of the following (not in priority order): use the 
surplus funds to address capital needs, make a deposit in the reserve 
account or reduce the debt service on the borrower's loans, including 
Agency-approved third-party debt. The prior written consent of the 
Agency must be obtained before surplus funds may be used to pay debt 
service on third-party debt. At the end of the borrower's fiscal year, 
if the borrower is required to transfer surplus funds from the general 
operating account to the reserve account, the transfer does not change 
the future required contributions to the reserve account.
* * * * *

Yvonne Hsu,
Acting Administrator, Rural Housing Service.
[FR Doc. 2024-05571 Filed 3-15-24; 8:45 am]
BILLING CODE 3410-XV-P