Multifamily Housing Program Update to the Credit Report Process
| Published date | 29 March 2024 |
| Record Number | 2024-06596 |
| Citation | 89 FR 22094 |
| Court | Rural Housing Service |
| Section | Proposed rules |
Federal Register, Volume 89 Issue 62 (Friday, March 29, 2024)
[Federal Register Volume 89, Number 62 (Friday, March 29, 2024)]
[Proposed Rules]
[Pages 22094-22097]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-06596]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 89, No. 62 / Friday, March 29, 2024 /
Proposed Rules
[[Page 22094]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Parts 1910, 1955, and 3560
[Docket No. RHS-24-MFH-0003]
RIN 0575-AD30
Multifamily Housing Program Update to the Credit Report Process
AGENCY: Rural Housing Service, U.S. Department of Agriculture (USDA).
ACTION: Proposed 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
proposing to update its regulations on how credit reports are obtained
for the purposes of determining eligibility and feasibility for
Multifamily Housing (MFH) Programs.
DATES: Comments on the proposed rule must be received by May 28, 2024.
ADDRESSES: Comments may be submitted electronically by the Federal
eRulemaking Portal: Go to http://www.regulations.gov and, in the
``Search Field'' box, labeled ``Search for dockets and documents on
agency actions,'' enter the following docket number: ``RHS-24-MFH-
0003'' or Regulation Identifier Number (RIN): ``0575-AD30,'' then click
search. To submit or view public comments, select the following
document title: ``Updates to Credit Report Process'' from the ``Search
Results,'' and select the ``Comment'' button. Before inputting your
comments, you may also review the ``Commenter's Checklist'' (optional).
Insert your comments under the ``Comment'' title, click ``Browse'' to
attach files (if available). Input your email address and select
``Submit Comment.'' Information on using Regulations.gov, including
instructions for accessing documents, submitting comments, and viewing
the docket after the close of the comment period, is available through
the site's ``FAQ'' link.
Other Information: Additional information about RD and its programs
is available on the internet at https://www.rd.usda.gov.
All comments will be available for public inspection online at the
Federal eRulemaking Portal (http://www.regulations.gov).
In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed
rule may be found by going to http://www.regulations.gov and in the
``Search for dockets and documents on agency actions'' box, enter the
following docket number: RHS-24-MFH-0003.
FOR FURTHER INFORMATION CONTACT: Abby Boggs, Branch Chief, Program
Support Branch, Production and Preservation Division, Multifamily
Housing, Rural Development, U.S. Department of Agriculture, 1400
Independence Avenue SW, Washington, DC 20250, telephone: (615) 490-1371
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 nonprofit
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 Multifamily Housing (MFH) Programs.
The RHS operates the Direct MFH Loan and Grant Programs. The direct
loan program provides loans to eligible borrowers unable to get
financing through traditional lenders. Multifamily direct loans feature
terms and conditions that support the development or preservation of
affordable rural rental housing for low-income, elderly, or disabled
people. Loan funds can be used for all construction hard costs and
land-related costs, including land acquisition and development.
II. Discussion of Proposed Rule
RHS regulation 7 CFR 3560.56(d)(5) provides that for initial loan
applications, eligibility and feasibility of a housing proposal will be
determined based on, amongst other requirements, an analysis of current
credit reports. Currently, the agency collects a credit report fee from
applicants during the application process and agency staff obtain the
required credit report through a contract with a credit reporting
agency. RHS has relied on various internal guidance documents to staff
to provide information on this credit report process. By not having the
credit report process clearly codified, the Agency makes the process
unnecessarily complicated for the applicant and Agency staff. When the
Multifamily Housing Program realigned all staff members to the National
Office level, applicants were required to submit the credit report fee
electronically to the Agency's Business Center Servicing Office using a
payment link. The process for creating the payment link is cumbersome.
Agency staff must determine and notify the applicant of the credit
report fee applicable for the applicant's particular request. Agency
staff will request the Servicing Office to create a staged payment link
for the fee through a SharePoint portal. Once the payment link is
created, the Servicing Office notifies the requesting Agency staff and
provides the payment link. Agency staff, in turn, notifies the
applicant of the payment link and the applicant must process the
payment before the link expires in 30 days. After the applicant's
payment processes successfully, the Agency orders the credit report
from a contracted bureau.
The agency is proposing to change the process by which credit
reports are obtained to determine credit worthiness, eligibility, and
feasibility for applicants and borrowers for MFH funding, transfers,
and servicing actions. In lieu of the applicant submitting the fee, the
Agency will require the applicant to provide the credit report(s).
It is the Agency's expectation that this regulation update for
obtaining
[[Page 22095]]
borrower credit reports will align the Agency with current industry
practices and create an efficiency for applicants and borrowers by
streamlining the application process.
Request for Comment
Stakeholder input is vital to ensure the proposed changes in the
proposed rule would support the Agency's mission, while ensuring that
new regulations and policies are reasonable and do not overly burden
the Agency's lenders and their customers. Comments must be submitted by
May 28, 2024 and may be submitted electronically by going to the
Federal eRulemaking Portal: https://www.regulations.gov. Details on how
to submit comments to the Federal eRulemaking Portal are in the
ADDRESSES section of this proposed rule.
III. Summary of Changes
The Agency proposes to revise 7 CFR part 3560 by:
(1) Adding the definition of Current Comprehensive Credit Report to
Sec. 3560.11;
(2) Updating Sec. 3560.56(d)(5) to include the requirements of a
valid credit report which must address both the entity and the actual
individual principals, partners, members, etc., within the applicant
entity, including any subentities who are responsible for controlling
the ownership and operations of the entity;
(3) Updating Sec. 3560.405 to include the requirement for a credit
report in cases of change to the borrower's organization structure or
entity's controlling interest;
(4) Updating Sec. 3560.406 to include the requirement for a credit
report for approval of transfers and sales; and
(5) Establishing a new subpart R to provide detailed requirements
of the credit reporting process.
In addition, this proposed rule intends to include conforming
changes to rescind 7 CFR part 1910 subparts B and C; and update 7 CFR
1955.118 which is outdated.
IV. Regulatory Information
Statutory Authority
The Direct Multifamily Housing Loan and Grant program is authorized
under sections 514, 515, and 516 of title V of the Housing Act of 1949,
as amended, 42 U.S.C. 1471 et seq., and implemented under 7 CFR part
3560. Section 510(k) of Title V of 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 and grants are subject to the provisions of Executive
Order 12372, which requires intergovernmental consultation with State
and local officials to foster the intergovernmental partnership and
strengthen federalism by relying on State and local processes for the
coordination and review of proposed Federal financial assistance and
direct Federal development.
Applicants for the Direct Multifamily Housing Loan and Grant
program are required to contact their State's Single Point of Contact
(SPOC) to submit their Statement of Activities and find out more
information on how to comply with the State's process under Executive
Order 12372. To locate a SPOC for your state, the Office of Management
and Budget (OMB) has an official SPOC list on its website https://www.whitehouse.gov/omb/management/office-federal-financial-management.
For those States that have a home page for their designated SPCO, a
direct link has been provided by clicking on the State name. SPOC
information is also available in any RD Agency office or on the RD
Agency's website.
States that are not listed on the OMB website have chosen not to
participate in the intergovernmental review process, and therefore, do
not have a SPOC. If you are located within a State that does not have a
SPOC, you may send application materials directly to the Federal RD
awarding agency. RHS conducts intergovernmental consultations for each
loan in accordance with 2 CFR part 415, subpart C.
Executive Order 12866, Regulatory Planning and Review
This proposed rule has been determined to be nonsignificant and,
therefore, was not reviewed by the Office of Management and Budget
(OMB) under Executive Order 12866.
Executive Order 12988, Civil Justice Reform
This proposed 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 proposed 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 proposed
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 proposed 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 proposed
rule is not subject to the requirements of Executive Order 13175. If
tribal leaders are interested in consulting with RHS on this rule, 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 proposed 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 proposed 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
[[Page 22096]]
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 proposed 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 proposed
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 proposed 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 proposed rule in accordance with USDA
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any
major civil rights impacts the proposed rule might have on program
participants on the basis of age, race, color, national origin, sex, or
disability. After review and analysis of the proposed 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
proposed rule.
Assistance Listing
The programs affected by this regulation is listed in the
Assistance Listing Catalog (formerly Catalog of Federal Domestic
Assistance) under numbers 10.415--Rural Rental Housing Loans and
10.405--Farm Labor Housing Loans and Grants.
Non-Discrimination Statement 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, staff office, or the 711 Federal
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:
(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
7 CFR Part 1910
Agriculture, Credit, Grant programs--agriculture, Grant programs--
housing and community development, Loan programs--agriculture, Loan
programs--housing and community development, Low and moderate income
housing, Reporting and recordkeeping requirements, Rural areas.
7 CFR Part 1955
Agriculture, Drug traffic control, Government property, Loan
programs--agriculture, Loan programs--housing and community
development, Low and moderate income housing, Rural areas.
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 set forth in the preamble, the Rural Housing
Service proposes to amend 7 CFR parts 1910, 1955, and 3560 as follows:
PART 1910--GENERAL
0
1. The authority citation for part 1910 continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart B--[Removed and Reserved]
0
2. Remove and reserve subpart B, consisting of Sec. Sec. 1910.51
through 1910.100.
Subpart C--[Removed and Reserved]
0
3. Remove and reserve subpart C, consisting of Sec. Sec. 1910.101
through 1910.150.
[[Page 22097]]
PART 1955--PROPERTY MANAGEMENT
0
4. The authority citations for part 1955 continues to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart C--Disposal of Inventory Property
0
5. Amend Sec. 1955.118 by revising paragraphs (b)(2), (b)(6),
(b)(8)(iii), and (b)(11) to read as follows:
Sec. 1955.118 Processing cash sales or MFH credit sales on nonprogram
terms.
* * * * *
(b) * * *
(2) Processing. Purchasers requesting credit on NP terms will be
required to submit documentation to establish financial stability,
repayment ability, and creditworthiness. Standard forms used to process
program applications may be utilized or comparable documentation may be
accepted from the purchaser with the servicing official having the
discretion to determine what information is required to support loan
approval for the type of property involved. Individual credit reports
will be ordered for each individual applicant and each principal within
an applicant entity in accordance with subpart R of part 3560.
Commercial credit reports will be ordered for profit corporations and
partnerships, and organizations with a substantial interest in the
applicant entity in accordance with subpart R of part 3560.
* * * * *
(6) Term of note. The note amount will be amortized over a period
not to exceed 10 years. If the Leadership Designee determines more
favorable terms are necessary to facilitate the sale, the note amount
may be amortized using a 30-year factor with payment in full (balloon
payment) due not later than 10 years from the date of closing. In no
case will the term be longer than the period for which the property
will serve as adequate security.
* * * * *
(8) * * *
(iii) The Agency will provide the closing agent with the necessary
information for closing the sale. The assistance of OGC will be
requested to provide closing instructions for all MFH sales.
* * * * *
(11) Form RD 1910-11, ``Applicant Certification, Federal Collection
Policies for Consumer or Commercial Debts.'' The Agency must review
Form RD 1910-11, ``Applicant Certification, Federal Collection Policies
for Consumer or Commercial Debts,'' with the applicant, and the form
must be signed by the applicant.
* * * * *
PART 3560--DIRECT MULTIFAMILY HOUSING LOANS AND GRANTS
0
6. The authority citation for part 3560 continues to read as follows:
Authority: 42 U.S.C. 1480.
Subpart A--General Provisions and Definitions
0
7. Amend Sec. 3560.11 by adding the definition of Comprehensive Credit
Report in alphabetical order.
Sec. 3560.11 Definitions.
* * * * *
Current Comprehensive Credit Report. A credit report no older than
6 months from the date of issuance, that contains details of both
current open credit accounts and closed accounts, and that is provided
by one of the three accredited major credit bureaus (Experian, Equifax,
or TransUnion).
* * * * *
Subpart B--Direct Loan and Grant Origination
0
8. Amend Sec. 3560.56 by revising paragraph (d)(5) to read as follows:
Sec. 3560.56 Processing section 515 housing proposals.
* * * * *
(d) * * *
(5) An analysis of current credit reports in accordance with
subpart R of this part.
* * * * *
Subpart I--Servicing
0
9. Amend Sec. 3560.405 by adding paragraph (b)(4) to read as follows:
Sec. 3560.405 Borrower organizational structure or ownership interest
changes.
* * * * *
(b) * * *
(4) Borrowers must submit a credit report in accordance with
subpart R of this part.
* * * * *
0
10. Amend Sec. 3560.406 by adding paragraph (c)(6) to read as follows:
Sec. 3560.406 MFH ownership transfers or sales.
* * * * *
(c) * * *
(6) A credit report in accordance with subpart R of this part.
* * * * *
Subpart Q--[Reserved]
0
11. Add and reserve subpart Q, consisting of Sec. Sec. 3560.801
through 3560.850.
0
12. Add subpart R to read as follows:
Subpart R--Credit Report Requirements
Sec.
3560.851 General.
3560.852 Requirements.
Sec. 3560.851 General.
This subpart contains the Agency's credit reporting requirements
for all Multifamily (MFH) programs.
Sec. 3560.852 Requirements.
When required to submit a credit report under any provision of this
part, such submission must include a current comprehensive credit
report for both the entity and the individual principals, partners,
members, and the individual sub-entities or natural persons who are
responsible for controlling the ownership and operations of the
applicant entity, including but not limited to principals, partners, or
members. The Agency will also accept combination comprehensive credit
reports which provide a comprehensive view of the applicant's credit
profile by combining data from all three major credit bureaus
(Experian, Equifax, and TransUnion).
Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2024-06596 Filed 3-28-24; 8:45 am]
BILLING CODE 3410-XV-P
