83 FR 41056 - Establishment of Maximum Interest Rate

DEPARTMENT OF AGRICULTURE
Rural Housing Service

Federal Register Volume 83, Issue 160 (August 17, 2018)

The Rural Housing Service (RHS or Agency) seeks public comments on updating the provisions of the Single Family Housing Guaranteed Loan Program (SFHGLP), specifically regarding the maximum interest rate, its impact on loan making to potential SFHGLP borrowers, and possible changes to the interest rate cap. RHS is soliciting input regarding the maximum interest rate to help the Agency determine whether the interest rate cap should be modified in order to support the agency's mission to offer applicants, who are unable to secure the credit necessary for such housing from other sources under conventional credit terms, an opportunity to acquire new or existing housing for use as a primary residence; finance the repair and rehabilitation costs associated with the purchase of the home; and refinance an existing Section 502 loan to lower the interest rate. These opportunities are provided to applicants under terms and conditions which the applicant can reasonably be expected to fulfill.

[Federal Register Volume 83, Number 160 (Friday, August 17, 2018)]
[Notices]
[Pages 41056-41057]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-17764]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Rural Housing Service


Establishment of Maximum Interest Rate

AGENCY: Rural Housing Service, USDA.

ACTION: Request for information.

-----------------------------------------------------------------------

SUMMARY: The Rural Housing Service (RHS or Agency) seeks public 
comments on updating the provisions of the Single Family Housing 
Guaranteed Loan Program (SFHGLP), specifically regarding the maximum 
interest rate, its impact on loan making to potential SFHGLP borrowers, 
and possible changes to the interest rate cap. RHS is soliciting input 
regarding the maximum interest rate to help the Agency determine 
whether the interest rate cap should be modified in order to support 
the agency's mission to offer applicants, who are unable to secure the 
credit necessary for such housing from other sources under conventional 
credit terms, an opportunity to acquire new or existing housing for use 
as a primary residence; finance the repair and rehabilitation costs 
associated with the purchase of the home; and refinance an existing 
Section 502 loan to lower the interest rate.
    These opportunities are provided to applicants under terms and 
conditions which the applicant can reasonably be expected to fulfill.

DATES: Written Comments: Interested parties must submit written 
comments on or before October 16, 2018.

ADDRESSES: Submit comments in either paper or electronic format by the 
following methods:
     Federal eRulemaking Portal at http://www.regulations.gov. 
Follow instructions for submitting comments.
     Postal Mail/Commercial Delivery: Please send your comments 
addressed to Kate Jensen, Finance and Loan Analyst, Single Family 
Housing Guaranteed Loan Program, USDA Rural Development, 1400 
Independence Avenue, STOP 0784, Room 2250, Washington, DC 20250-1522.

FOR FURTHER INFORMATION CONTACT: Kate Jensen, Finance and Loan Analyst, 
at [email protected] or (503) 894-2382.

SUPPLEMENTARY INFORMATION: 

Background

    RHS delivers programs authorized by the Housing Act of 1949, as 
amended (42 U.S.C. 1472 et seq.) (Housing Act). The preamble to the 
Housing Act declares that every American deserves a ``decent home and a 
suitable living environment.'' RHS guarantees a variety of housing 
loans for home purchases, repair, and rental housing development in 
rural areas. The SFHGLP provides low- and moderate-income borrowers 
access to mortgage credit by guaranteeing loans issued by agency-
approved private sector lenders. Loans may finance the full 
construction and acquisition cost of a property up to 100 percent of 
the appraised value. Mortgages have 30-year terms and fixed rates 
negotiated with the lender that cannot exceed an interest rate cap that 
is determined by the Agency. Financing may also be used to refinance 
existing USDA guaranteed or direct loans. The program maintains its 
neutral or slightly negative subsidy status through guarantee and 
annual loan fees.

Request for Comment

    Stakeholder input is vital to ensure that the maximum interest rate 
continues to support the agency's mission and not overly burden SFHGLP 
lenders and their customers. Currently, the maximum allowable interest 
rate is defined in Section 7.3.B of the program handbook (available at 
https://www.rd.usda.gov/files/3555-1chapter07.pdf) as the current 
Fannie Mae posted yield for 90-day delivery (Actual/Actual), plus one 
percent for 30-year fixed rate conventional loans, rounded up to the 
nearest one quarter of one percent. The Agency is considering whether 
to modify the maximum interest rate and would like stakeholder feedback 
on the issue.
    The following questions and discussion items are posed to guide 
stakeholder comments. Where possible, RHS requests that comments 
include specific suggestions regarding ways to improve existing 
programs and delivery mechanisms and eliminate or minimize the 
duplication of RHS's regulation and policies with work performed by 
other entities, including federal, state, and local agencies. RHS 
welcomes pertinent comments that are beyond the scope of these 
questions.
    1. Should the Agency continue with the requirement that the maximum 
allowable interest rate shall not exceed the current Federal National 
Mortgage Association posted yield for 90-day delivery (Actual/Actual) 
plus one percent for 30-year fixed rate conventional loans, rounded up 
to the nearest one quarter of one percent?
    2. Should the Agency consider indexing the maximum allowable 
interest rate to a source other than the Federal National Mortgage 
Association?
    3. Should a higher maximum allowable interest rate cap be 
established? If so, what maximum rate is recommended, and why?
    4. Does the current maximum interest rate create any barriers to 
loan making in eligible rural areas? If so, how and under what 
circumstances?
    5. What effect would increasing or eliminating the maximum interest 
rate have for loan originators and borrowers in underserved populations 
and rural communities?
    6. If the maximum allowable interest rate cap were to be increased 
or

[[Page 41057]]

eliminated, what protections exist to prevent consumers from being 
overcharged?
    7. If the maximum allowable interest rate is raised or removed, 
what steps should the Agency take to monitor lenders to ensure that 
borrowers are not overcharged?

Non-Discrimination Statement

    In accordance with Federal civil rights law and U.S. Department of 
Agriculture (USDA) civil rights regulations and policies, the USDA, its 
Agencies, offices, and 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.
    Persons with disabilities who require alternative means of 
communication for program information (e.g., Braille, large print, 
audiotape, American Sign Language, etc.) should contact the responsible 
Agency or USDA's TARGET Center at (202) 720-2600 (voice and TTY) or 
contact USDA through the Federal Relay Service at (800) 877-8339. 
Additionally, program information may be made available in languages 
other than English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at http://www.ascr.usda.gov/complaint_filing_cust.html and at any USDA office or 
write a letter addressed to USDA and provide in the letter all of the 
information requested in the form. To request a copy of the complaint 
form, call (866) 632-9992. Submit your completed form or letter 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;
    (2) Fax: (202) 690-7442; or
    (3) Email: [email protected].
    USDA is an equal opportunity provider, employer, and lender.

    Dated: August 13, 2018.
Joel C. Baxley,
Administrator, Rural Housing Service.
[FR Doc. 2018-17764 Filed 8-16-18; 8:45 am]
BILLING CODE 3410-XV-P