Guaranteed Rural Rental Housing Program

[Federal Register Volume 64, Number 115 (Wednesday, June 16, 1999)]
[Rules and Regulations]
[Pages 32370-32372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15288]



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Part VI





Department of Agriculture





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Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
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7 CFR Parts 1940 and 3565



Guaranteed Rural Rental Housing Program; Final Rule

Availability of Funding and Requests for Proposals for Guaranteed Loans 
Under the Section 538 Guaranteed Rural Rental Housing Program; Notice

Federal Register / Vol. 64, No. 115 / Wednesday, June 16, 1999 / 
Rules and Regulations

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DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service
Farm Service Agency

7 CFR Parts 1940 and 3565

RIN 0575-AC14


Guaranteed Rural Rental Housing Program

AGENCIES: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, Farm Service Agency, USDA.

ACTION: Final rule; adoption of interim rule with changes.

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SUMMARY: The Rural Housing Service (RHS) is issuing final regulations 
for the Guaranteed Rural Rental Housing Program (GRRHP). This action is 
taken to implement the ``Housing Opportunity Program Extension Act of 
1996.'' The program is intended to increase the supply of affordable 
rural multifamily housing through partnerships between the Agency and 
major lending sources, including banks, state and local housing finance 
agencies, and bond issuers.

EFFECTIVE DATE: July 16, 1999.

FOR FURTHER INFORMATION CONTACT: Carl W. Wagner, Deputy Division 
Director, Guaranteed Loans, Multi-Family Housing Processing Division, 
Rural Housing Service, USDA, STOP 0781, 1400 Independence Avenue, SW, 
Washington, DC 20250-0781, telephone: (202) 720-1604.

SUPPLEMENTARY INFORMATION:

Classification

    This rule has been redesignated from significant to not-significant 
since the publication of the interim final rule. This rule has now 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.

Programs Affected

    The affected program is listed in the Catalog of Federal Domestic 
Assistance under Number 10.415, Rural Rental Housing Loans.

Discussion of Use of Final Rule

    Program funding levels are made public in a ``Notice of Funds 
Availability'' (NOFA) published concurrently with this final rule. 
Approximately $74 million in guaranteed loans is available in this 
fiscal year. Potential applicants are encouraged to apply as soon as 
possible.

Civil Justice Reform

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. In accordance with this order: (1) All state and local 
laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule; and 
(3) administrative proceedings in accordance with 7 CFR part 11, must 
be exhausted before bringing suit in court challenging action taken 
under this rule unless those regulations specifically allow bringing 
suit at an earlier time.

Intergovernmental Consultation

    The program is subject to Executive Order 12372 which requires 
intergovernmental consultation with state and local officials. 
Intergovernmental consultation has been conducted in accordance with 7 
CFR part 3015, subpart V, ``Intergovernmental Review of Department of 
Agriculture Programs and Activities.''

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, an 
Environmental Impact Statement is not required.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 
establishes requirements for Federal Agencies to assess the effects 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 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, more cost-
effective, or least burdensome alternative that achieves the objections 
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.

Paperwork Reduction Act

    The information and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
(OMB) under the provisions of 44 U.S.C. chapter 35 and were assigned 
OMB control number 0575-0174, in accordance with the Paperwork 
Reduction Act of 1995. Under the Paperwork Reduction Act of 1995, no 
person is required to respond to a collection of information unless it 
displays a valid OMB control number. This final rules does not impose 
any new information or recordkeeping requirements from those approved 
by OMB.

Purpose and Program Summary

    The program has been designed to increase the availability of 
affordable multifamily housing through partnerships between the Agency 
and lending sources, as well as state and local housing finance 
agencies and bond issuers. Qualified lenders will be authorized to 
originate, underwrite, and close loans for multifamily housing projects 
to be guaranteed under this program. Projects may be for new 
construction or acquisition with substantial rehabilitation. The Agency 
will guarantee such loans upon review of the lender's underwriting 
package, appraisal report, appropriate certifications, project 
information, and satisfactory completion of the appropriate level of 
environmental review by the Agency. Lenders will be responsible for 
loan underwriting, management and servicing associated with these 
projects. The lender will be expected to provide servicing or contract 
for servicing of each loan it underwrites. In turn, RHS will guarantee 
the lender's loan up to 90 percent of total development cost and 
commits to pay up to a maximum of 90 percent of the outstanding 
principal and interest balance of such loan in the case of default of 
the loan and filing of a claim. In no event will the Agency pay more 
than 90 percent of the original principal amount. This means that the 
Agency will have a risk exposure under the GRRHP of approximately 80 
percent of the total development cost. Any losses would be shared on a 
pro-rate basis between the lender and the Agency from the first dollar 
lost.

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    Program applicability and funding will be announced by NOFA 
published in the Federal Register. When program funding levels exceed 
$100 million, funds are allocated to states based on the following 
criteria: (1) State's percentage of national rural population, (2) 
State's percentage of the national number of rural households between 
50 and 115 percent of the area median income, and (3) State's 
percentage of National average cost per unit. These criteria for 
allocation of funds to the states are consistent with other Agency 
housing programs. The criteria will enable the Agency to allocate funds 
based on a state's population and available households with income 
sufficient to meet the proposed rents, and to adjust the allocation for 
per unit new construction cost. The purpose of having a cost factor is 
to assure units produced reflect criteria for need, especially for high 
cost states. Eighty percent of the weight will be divided equally 
between population and income and 20 percent based on cost. When the 
funding levels are under $100 million, funds will all be held in a 
National Office reserve and made available administratively in 
accordance with the NOFA and program regulations.

Public Comments

    The Agency received the following comments as the result of the 
publication of the regulation as an Interim Final Rule in the Federal 
Register on July 22, 1998 (62 FR 39452).
    The Agency received seven comments on the regulation. The 
commentators represented the following:
    •  Mortgage Banker and User of Program.
    •  Developer.
    •  Interest Group.
    •  Public Body.
    •  Private consultant.
    •  Two Tenants' Rights Group.
    Many of the comments related to the how things will be done (e.g. 
``How will interest credit be calculated and paid?''). Such questions 
are addressed in the Guaranteed Rural Rental Housing Program 
Origination and Servicing Handbook (HB-1-3565) which was not available 
during the comment period. The Handbook was made available to the 
public on December 18, 1998. It provides the reader with instruction on 
matters such as the Agency's internal processing procedures. The 
Handbook will not be published in the Federal Register, but is 
available to the public at no cost. The Handbook can also be found on 
the Internet at http://rdinit.usda.gov/regs/.
    The comments that we adopted in the regulation are as follows:
    1. Two commentors recommended extending the construction/permanent 
loan period from 12 to 24 months.
    2. Two respondents commented that a Regulatory Agreement is 
typically not recorded of record. The requirement to have the 
Regulatory Agreement recorded was removed because the requirement to 
maintain the property in affordable housing will be recorded in the 
deed.
    3. Two commentors responded on the exclusion of tax exempt bonds in 
the program. Since tax exempt bond financing is now authorized by 
legislation passed in August 1998, the Final Rule has been changed 
accordingly.
    4. Three respondents suggested that three of the priority items 
used to rank and score NOFA responses be included in the regulation 
(Namely priority for projects in smaller communities, low income 
communities, and Empowerment Zones/Enterprise Communities). These 
priorities will be included in the Final Rule.
    5. Four respondents commented on the requirement for the lender to 
certify that the project is in compliance with local, state, federal 
laws and program requirements. This requirement will be changed to 
require the lender to obtain borrower certification that the project is 
in compliance with local, state, federal laws and program requirements.
    The issues that we were not able to adopt are as follows:
    1. Two commentors responded that rental assistance be provided to 
538 projects. We could not consider this because rental assistance is 
not authorized by the Housing Act of 1949 (the Act).
    2. One commentor believed that the amount of the loan guarantee 
should be increased to 100%. This is not permitted by the Act.
    3. One commentor responded that the non-assumability or release of 
borrower provision be removed. This is not permitted by the Act.
    4. One commentor suggested that the rural area definition be 
changed to allow places up to 50,000 population. This change is not 
permitted by the Act.
    5. Several commentors asked for a more complete discussion of 
interest credit. This was not added to the Final Rule but was added to 
the Handbook.

List of Subjects

7 CFR Part 1940

    Administrative practice and procedure, Agriculture, Grant 
programs--Housing and community development, Loan programs--
Agriculture, Rural areas.

7 CFR Part 3565

    Bankruptcy, Banks, Banking civil rights, Conflict of interests, 
Credit, Environmental impact statements, Fair housing, Government 
procurement, Guaranteed loans, Hearing and appeal procedures, Housing 
standards, Lobbying, Low and moderate income housing, Manufactured 
homes, Mortgages, Real property acquisition, Surety bonding.
    Accordingly, chapters XVIII and XXXV, title 7, Code of Federal 
Regulations are amended by adopting the interim rule published on July 
22, 1998 (63 FR 39452) as a final rule with amendments as follows:

PART 3565--GUARANTEED RURAL RENTAL HOUSING PROGRAM

    1. The authority citation for part 3565 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart A--General Provisions

    2. Revise section 3565.5 (b) to read as follows:


Sec. 3565.5  Ranking and selection criteria.

* * * * *
    (b) Priority projects. Priority will be given to projects: in 
smaller rural communities, in the most needy communities having the 
highest percentage of leveraging, having the lowest interest rate, 
having the highest ratio of 3-5 bedroom units to total units, or 
located in Empowerment Zones/Enterprise Communities or on tribal lands. 
In addition, the Agency may, at its sole discretion, set aside 
assistance for or rank projects that meet important program goals. 
Assistance will include both loan guarantees and interest credits. 
Priority projects must compete for set-aside funds. The Agency will 
announce any assistance set aside and selection criteria in the NOFA.
    3. Revise section 3565.6 to read as follows:


Sec. 3565.6  Inclusion of tax-exempt debt.

    Tax-exempt financing can be used a source of capital for the 
guaranteed loan.
    4. Revise section 3565.8 to read as follows:


Sec. 3565.8  Civil Rights Compliance.

    (a) All actions taken by the Agency, or on behalf of the Agency, by 
a lender will be conducted without regard to race, color, religion, 
national origin, sex, marital status, age, income from public 
assistance or having exercised their right under the Consumer Credit 
Protection Act, and in accordance with

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the Equal Credit Opportunity Act (ECOA).
    (b) Any action related to the sale, rental or advertising of 
dwellings; in the provision of brokerage services; or in making 
available residential real estate transactions involving Agency 
assistance, must be in accordance with the Fair Housing Act, which 
prohibits discrimination on the basis of race, color, religion, sex, 
national origin, familial status or handicap. It is unlawful for a 
lender or borrower participating in the program to:
    (1) Refuse to make accommodations in rules, policies, practices, or 
services if such accommodations are necessary to provide a person with 
a disability an opportunity to use or continue to use a dwelling unit 
and all public and common use areas; and
    (2) Refuse to allow an individual with a disability to make 
reasonable modifications to a unit at his or her expense, if such 
modifications may be necessary to afford the individual full enjoyment 
of the unit.
    (c) Any resident or prospective resident seeking occupancy or use 
of a unit, property or related facility for which a loan guarantee has 
been provided, and who believes that he or she is being discriminated 
against may file a complaint with the lender, the Agency or the 
Department of Housing and Urban Development. A written complaint should 
be sent to the Secretary of Agriculture or of the Department of Housing 
and Urban Development in Washington, DC.
    (d) Lenders and borrowers that fail to comply with the requirements 
of title VIII of the Civil Rights Act of 1968, as amended (the Fair 
Housing Act), are liable for those sanctions authorized by law.
    (e) For guaranteed loans with ``interest credit,'' the following 
additional civil rights laws will apply and be enforced by the agency 
delivering this guarantee program: title VI of the Civil Rights Act of 
1964, section 504 of the Rehabilitation Act of 1973, the Americans with 
Disabilities Act, Age Discrimination Act of 1975, and title IX of the 
Education Amendments of 1972.
    (f) In accordance with title VI, borrowers will be subjected to 
compliance reviews for projects that receive interest credit.


Sec. 3565.9  [Amended]

    5. Amend section 3565.9 to remove paragraph (e) and redesignate 
paragraph (f) as paragraph (e).
    6. Revise section 3565.13 to read as follows:


Sec. 3565.13  Exception Authority.

    An Agency official may request and the Administrator or designee 
may make an exception to any requirement or provision, or address any 
omission of this part, if the Administrator determines that application 
of the requirement or provision, or failure to take action, would 
adversely affect the government's interest or the program objectives, 
and provided that such an exception is not inconsistent with any 
applicable law or statutory requirement.

Subpart B--Guarantee Requirements


Sec. 3565.52  [Amended]

    7. Amend the introductory text of section 3565.52 by revising the 
words ``12 months'' to read ``24 months.''
    8. Amend section 3565.53 by revising paragraph (a) and the last 
sentence in paragraph (b) to read as follows:


Sec. 3565.53  Guarantee fees.

* * * * *
    (a) Initial guarantee fee. The Agency will charge an initial 
guarantee fee equal to one percent of the guarantee amount. For 
purposes of calculating this fee, the guarantee amount is the product 
of the percentage of the guarantee times the initial principal amount 
of the guaranteed loan.
    (b) * * * This fee will be collected on January 1, of each calendar 
year.
* * * * *

Subpart C--Lender Requirements

    9. Add section 3565.103(d)(9) to read as follows:


Sec. 3565.103  Approval requirements.

* * * * *
    (d) * * *
    (9) The lender must certify that they have computer systems that 
comply with year 2000 technology.

Subpart G--Processing Requirements


Sec. 3565.303  [Amended]

    10. Amend section 3565.303(d)(8) by revising the word ``a'' to read 
``an'' and by removing the word ``recordable,''.

Subpart H--Project Management

    11. Amend section 3565.351 by amending paragraph (a) to remove the 
words ``which will be filed in the real estate records of the 
appropriate jurisdiction'' and by revising the introductory text of the 
section to read as follows:


Sec. 3565.351  Project Management.

    As a condition of the guarantee, the lender is to obtain borrower 
certification that the project is in compliance with local, state, 
federal laws and program requirements.
* * * * *
    Dated: June 9, 1999.
Inga Smulkstys,
Acting Under Secretary, Rural Development.
[FR Doc. 99-15288 Filed 6-15-99; 8:45 am]
BILLING CODE 3410-XV-U