[Federal Register Volume 62, Number 88 (Wednesday, May 7, 1997)]
[Rules and Regulations]
[Pages 25062-25071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11817]
[[Page 25061]]
_______________________________________________________________________
Part III
Department of Agriculture
_______________________________________________________________________
Rural Housing Service
_______________________________________________________________________
Rural Business-Cooperative Service
_______________________________________________________________________
Rural Utilities Service
_______________________________________________________________________
Farm Service Agency
_______________________________________________________________________
7 CFR Parts 1930, et al.
Rural Rental Housing (RRH) Assistance and Processing Requests for
Section 515 Rural Rental Housing (RRH) Loans; Interim and Final Rules
and Notice of Funding Availability (NOFA) for the Section 515 Rural
Rental Housing Program; Notice
Federal Register / Vol. 62, No. 88 / Wednesday, May 7, 1997 / Rules
and Regulations
[[Page 25062]]
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DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Parts 1930, 1944, 1951, and 1965
RIN 0575-AC15
Rural Rental Housing (RRH) Assistance
AGENCIES: Rural Housing Service, Rural Business-Cooperative Service,
Rural Utilities Service, and Farm Service Agency, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: The Rural Housing Service (RHS), formerly Rural Housing and
Community Development Service (RHCDS), a successor Agency to the
Farmers Home Administration (FmHA), amends its regulations for the
Rural Rental Housing (RRH) program to implement legislative reforms
mandated by the Agriculture, Rural Development, Food and Drug
Administration, and Related Agencies Appropriations Act, 1997, Public
Law 104-180, enacted August 6, 1996 (hereinafter referred to as the
Act.) The following revisions are included in this rule: Prioritization
of assistance; assurances that the amount of assistance provided is no
more than is necessary; assurance that project transfers are in the
best interest of the tenants and the government; elimination of the
occupancy surcharge; changes to the equity loan program; and
implementation of penalties for equity skimming by project owners and
managers. The intended effect of these reforms is to improve the
effectiveness of the Section 515 Rural Rental Housing Program.
DATES: The effective date of this interim final rule is May 7, 1997.
Written comments must be received on or before July 7, 1997.
ADDRESSES: Written comments may be submitted, in duplicate, to the
Director, Support Services Division, U.S. Department of Agriculture,
Stop 0743, 1400 Independence Avenue SW, Washington, D.C. 20250.
Comments may be submitted via the Internet by addressing them to
comments@rus.usda.gov'' and must contain the word ``reforms'' in the
subject. All written comments will be available for public inspection
at the above address during normal working hours.
FOR FURTHER INFORMATION CONTACT: Linda Armour or Carl Wagner, Senior
Loan Specialists, Multi-Family Housing Processing Division, Rural
Housing Service, U.S. Department of Agriculture, Room 5349--South
Building, Stop 0781, Washington, D.C. 20250, telephone (202) 720-1608.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be significant for purposes of
Executive Order 12886 and therefore has been reviewed by the Office of
Management and Budget.
Paperwork Reduction Act
The information collection requirements contained in this
regulation have been previously approved by the Office of Management
and Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and have
been assigned OMB control number 0575-0047 in accordance with the
Paperwork Reduction Act of 1995. This rule does not impose any new
information collection requirements.
Under the Paperwork Reduction Act of 1995, no persons are required
to respond to a collection of information unless it displays a valid
OMB control number. The valid OMB control number assigned to the
collection of information in these final regulations is displayed at
the end of the affected section of the regulations.
Civil Justice Reform
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. In accordance with this rule: (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.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (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 the private sector. Under section 202 of the UMRA, RHS
generally must prepare a written statement, including a 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 RHS 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
objectives 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.
Discussion of Use of Interim Final Rule
It is the policy of this Department that rules relating to public
property loans, grants, benefits or contracts shall be published for
comment notwithstanding the exemption in 5 U.S.C. 553 with respect to
such rules. These amendments, however, are not published for proposed
rulemaking since the purpose of the change is to comply with mandatory
statutory provisions and any delay would be contrary to the public
interest. The Act requires six reforms to the MFH program in direct
response to reports issued by the General Accounting Office (GAO),
Surveys and Investigations Staff of the House Appropriations Committee,
and USDA Office of the Inspector General (OIG). These reports
highlighted program deficiencies and the potential for fraud and waste.
Congress mandated immediate action on all reforms, and specifically
directed the Agency to implement one reform within 60 days through
negotiated rulemaking. The Agency was not able to accomplish the 60-day
deadline because the negotiated rulemaking process takes an estimated
18 months; however, this provides further documentation of Congress'
intent that these regulations be implemented without delay. In
addition, the effect of including these reforms in the Agency's
appropriation bill precludes the Agency from obligating any loan funds
for new construction until the reforms are enacted, with the result
being that many very-low and low income families are being denied
access to decent, safe and sanitary housing. In addition, our other
partners in the development of affordable housing such as state housing
financing agencies administering low-income housing tax credits, and
other loan and grant programs are adversely affected by the Agency's
inability to make loan commitments on jointly financed proposals. And
finally, there are provisions of the Act that affect the management of
our existing loan portfolio. Their immediate implementation will serve
to reduce unnecessary outlays of federal
[[Page 25063]]
resources, reduce paperwork burden, improve program performance, and
impose stricter penalties on program abusers.
Due to its exigency, this rule also constitutes an emergency for
purposes of section 534(c) of the Housing Act of 1949 and thus is an
exception to the proposed rulemaking requirements in section 534(a) of
the Housing Act of 1949. Comments are being solicited on this interim
final rule and will be considered in the development of the final rule.
Programs Affected
The affected programs are listed in the Catalog of Federal Domestic
Assistance under Numbers 10.405, Farm Labor Housing Loans and Grants,
10.415, Rural Rental Housing Loans and 10.427, Rural Rental Assistance
Payments.
Intergovernmental Consultation
This program is subject to Executive Order 12372 which requires
intergovernmental consultation with State and local officials. RHS has
conducted intergovernmental consultation in the manner delineated in RD
Instruction 1940-J.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' It is the determination of RHS
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, Public
Law 91-190, an Environmental Impact Statement is not required.
Civil Rights Impact Analysis
This document has been reviewed in accordance with RD Instruction
2006-P, ``Civil Rights Impact Analysis.'' It is the determination of
RHS that this document complies with the requirements of this
Instruction.
Background and Information
The Act included reforms in six areas of the multi-family housing
program. Four of the six reforms were directive and could be
implemented as enacted without the need for public comment. For
example, the Act eliminated occupancy surcharge. Two of the reforms,
however, provided for substantive changes in the manner in which MFH
loan requests are processed and gave the Secretary administrative
discretion in their implementation. The Act required that one of these
reforms, determining the amount of assistance necessary to develop the
proposed rental housing, be implemented within 60 days through
negotiated rulemaking as a means of assuring that the public was both
informed and consulted regarding the Agency's intentions and
requirements that would impact them as potential users of the program.
Unfortunately, such process takes an estimated 18 months and could not
be accomplished within the confines of the law (that is, within 60 days
of enactment). In order to meet the spirit of negotiated rulemaking,
the Agency sought extensive public input through several informal
meetings with developers, major housing groups, and Agency personnel so
that the Agency would gain a full measure of public input before
developing the regulations. The Act further required the Agency to
follow 5 U.S.C. 557 if negotiated rulemaking could not be accomplished.
Therefore, in accordance with 5 U.S.C. 557, the Agency is publishing
the rule for notice and comment.
Following is a discussion of each of the six reforms included in
this rule:
(1) Limitation on Project Transfers. If a borrower fails to perform
the duties contained in their RHS security instruments, the Agency can
authorize the transfer of the property to an operator who is able to
protect the housing and the health and safety of the tenants. Borrowers
demonstrating a record of substantial noncompliance on one or more
projects may be ineligible for financial assistance from the
government. Borrowers must be in compliance and operating successfully
on loans or be successfully operating on a workout plan in order to
qualify for federal assistance. Furthermore, the government must
evaluate the proposed costs and impacts associated with rehabilitation
efforts. The government is seeking to ensure that rehabilitation costs
are reasonable, that the efforts will minimize tenant displacement, and
that the community will benefit by achieving decent, safe, sanitary,
modest, and affordable housing for very low-, low-, and moderate income
rural residents. Since 1994, RHS has taken an aggressive stance toward
servicing delinquent and problem borrowers. Delinquencies of 180 days
or more have dropped 28%, while the overall program delinquency rate
for the past two years has stayed at or near 2.6%, a very low rate for
this type of portfolio. The reform amendments formalize the Agency's
role in servicing these accounts by stipulating that the Agency will
determine if a project transfer is in the best interest of the tenants
and the government. 7 CFR part 1965, subpart B, ``Security Servicing
for Multiple Housing Loans,'' is revised to implement this provision.
(2) Eliminating the Occupancy Surcharge. Occupancy surcharges were
enacted as a mechanism to build an equity reserve fund to defray some
of the costs of guaranteed equity takeout loans. The surcharge program
adds $2 to the monthly rental rate for each rental unit each year,
thereby increasing the amount of rental assistance (RA) RHS must
provide tenants who receive RA, and reducing the amount of available
RA. The reform amendments eliminated the requirement to collect
occupancy surcharges. The elimination of the occupancy surcharge will
reduce the amount of RA provided to tenants by nearly $600,000 per
month. The Agency is amending 7 CFR part 1951, subpart K,
``Predetermined Amortization Schedule System (PASS) Account
Servicing;'' part 1930, subpart C, ``Management and Supervision of
Multiple Family Housing Borrowers and Grant Recipients;'' and part
1965, subpart B, ``Security Servicing for Multiple Housing Loans'' to
implement these changes. Rural Development Administrative Notice (AN)
3301 (1930-C) was issued on December 18, 1996, to provide guidance to
Agency field offices on how to implement the process to repeal the
occupancy surcharge. At this time, no determination has been made
regarding occupancy surcharges previously collected by the Agency.
(3) Revising the Equity Loan Program. The equity loan program was
enacted as an incentive for owners not to prepay their RHS loans and to
keep their projects in use as low-and very low-income housing for the
full terms of their loans. This rule includes revisions to 7 CFR part
1965, subpart E, ``Prepayment and Displacement Prevention of Multi-
Family Housing Loans,'' to implement statutory provisions that allow
any owner with a pre-1989 loan to apply for an equity loan. The primary
focus of this reform is to ensure that any developer who has
restrictive-use provisions currently on its property would not be
eligible to receive any incentives, including equity loans, until their
existing restrictive-use provisions have expired. An additional change
to the statute, to improve program consistency, allows owners with
post-1979 but pre-1989 loans to obtain equity loans once their
restrictive use period expires. Prior to this statutory change, the
program allowed only owners with pre-1979 loans to recover some of
their equity through low-interest government loans. A significant
number of owners will now become eligible for equity loans with this
change once their restrictive use
[[Page 25064]]
period expires, but given current and projected funding levels, RHS's
ability to finance these loans is severely limited.
The Act also contained language which appeared to make farm labor
housing borrowers eligible for equity loans. Specifically, the Act
contained language providing authority to make equity loans to farm
labor housing borrowers under ``section 514(j)'' of the Housing Act of
1949. However, section 514(j) of the Housing Act does not pertain to
equity loans; it deals specifically with equity skimming penalties for
farm labor housing borrowers who abuse rent receipts, physical
property, etc. Since the Act did not provide clear authority for equity
loans to farm labor housing borrowers, this provision could not be
implemented.
(4) Preventing equity skimming by project owners and managers. RHS
has implemented numerous administrative measures to prevent owners and
managers from defrauding the government by ``equity skimming''
(misusing rent receipts, physical property, and reserve accounts.) In
addition, under current law, owners and managers found defrauding the
government may be prevented from doing business with the federal
government for a certain number of years (debarment). However, the
administration of these measures varies from case to case and depends
on the servicing arrangements between the government and the operator.
The Act enhances the Agency's ability to deter waste, fraud, and abuse
by making equity skimming a criminal offense, punishable by a fine of
up to $250,000 or up to 5 years in prison, or both. This provision has
been added to 7 CFR part 1930, subpart C, ``Management and Supervision
of Multiple Family Housing Borrowers and Grant Recipients,'' and will
provide a strong and consistent deterrent to defrauding the government.
(5) Prioritization of Assistance. Prior to the passage of the Act,
the Agency used a point system that heavily weighted proposals for
projects in areas at least 20 miles from an urban center. This system,
designed to ensure that truly rural areas receive housing assistance,
was criticized for placing too much emphasis on the proximity of a
community to an urban center and not fully reflecting a rural
community's need for housing. The new legislation allows the Agency a
more proactive role in selecting areas of greatest need based on
specific criteria contained in the Act. The regulation, developed with
input from program users, contains specific criteria and parameters for
selecting areas, provides guidance on optional criteria permitted by
the law, and establishes the timing for area selection and for
selection of loans within such areas. The Agency has developed a
ranking system for selecting and designating places for which loan
requests will be invited, based on the following objective measures
required by the Act: The incidence of poverty; the lack of affordable
housing and the existence of substandard housing; the lack of mortgage
credit; and the rural characteristics of the location. Loan requests
received for designated places will be scored and ranked using
objective criteria developed by the Agency. The highest ranked loan
requests within the State's funding levels will be further processed.
(6) Necessary Assistance. Responding to the concern that rural
rental housing developers may be earning excessive profits through
government subsidies, the reform legislation provides that the Agency
can adjust the amount of its loan if excess assistance is being
provided. RHS already has in place a provision that each State will
enter into a memorandum of understanding (MOU) with state housing
agencies agreeing to coordinate the award of program benefits. In
developing regulations to implement the reform legislation, input was
obtained from program users in determining appropriate caps to use for
builder's profit, general overhead, and general requirements;
calculation of a maximum allowable developer's fee; the timing of the
determination of the amount of necessary assistance; and the process to
be used in determining the amount of necessary assistance. The
regulations will require an evaluation of the subsidy being provided to
the proposed project, using a computer-based analysis. That evaluation
will be shared with the state housing finance agency providing tax
credits and with other participants in the financing of the proposal.
If indicated by the evaluation, RHS will work with other participants
to reduce their contribution, or as a final step, will reduce the
amount of RHS resources to ensure that excess assistance is not
provided.
This rule also makes other minor revisions and clarifications of a
housekeeping nature, such as correcting certain references to
applicable Civil Rights legislation or regulatory cross-references.
Implementation Proposal
This rule changes the manner in which multi-family housing loan
requests are processed; adds provisions to ensure that the amount of
assistance provided is no more than is necessary; reinforces the
Agency's role in project transfers; eliminates the occupancy surcharge;
revises the equity loan parameters; and institutes measures to prevent
equity skimming. All provisions of the rule become effective the date
of publication of this interim final rule. Loan requests on hand and
existing loans will be reviewed for compliance with the revised
regulations.
Concurrently, upon publication of this rule, the Agency will
discontinue its priority point system and change to a NOFA (Notice of
Funds Availability) system which is published elsewhere in this issue
of the Federal Register. Under the NOFA system, the amount of available
funds and application deadlines will be announced each funding cycle in
the Federal Register. Loan requests will be reviewed and selected based
on objective criteria in accordance with the new regulations; loan
requests not selected for funding will be returned to the applicant.
The Agency intends to fund eligible loan requests on hand that were
issued an AD-622, ``Notice of Preapplication Review Action,'' inviting
a formal application prior to November 7, 1996 (the date Agency staff
were advised that no further AD-622s be issued pending implementation
of the new statutory provisions), in date order of complete application
received, provided the applications comply with the new statutory
requirements and are in designated areas in accordance with the new
regulations. In these instances, the Agency will not invite further
loan requests for designated areas where a loan request has been issued
an AD-622. Since regulations in effect prior to this rulemaking action
allowed States to authorize applications up to either 150 or 200
percent of their annual allocation, existing applications will be
considered until the beginning of FY 1999. At that time, any remaining
outstanding applications authorized prior to November 7, 1996, which
have not been reached for funding will be returned to the applicant.
Loan requests that have been issued an AD-622 inviting a formal
application that are not located in a designated place in accordance
with the new requirements will be returned to the applicant. The Agency
recognizes the impact on applicants thus affected; however, we are
mandated by Congress to institute measures to ensure assistance is
provided only to those rural areas with the greatest need.
Loan requests on hand that have not been issued an AD-622 inviting
a formal application will be returned to the applicant. Loan requests
thus
[[Page 25065]]
returned may, of course, be submitted for consideration with other loan
requests when the availability of funds is announced, if they are
located in communities on the State's list of designated places.
List of Subjects
7 CFR Part 1930
Grant programs--housing and community development, Loan programs--
housing and community development, Low and moderate income housing,
Reporting and recordkeeping requirements, Rural areas.
7 CFR Part 1944
Administrative practice and procedure, Aged, Handicapped, Loan
programs--housing and community development, Low and moderate income
housing, Mortgages, Nonprofit organizations, Rent subsidies, Rural
areas.
7 CFR Part 1951
Accounting, Loan programs--agriculture, Loan programs--housing and
community development, Low and moderate income housing, Mortgages,
Reporting and recordkeeping requirements, Rural areas.
7 CFR Part 1965
Low and moderate income housing, Mortgages, Reporting and
recordkeeping requirements, Rural areas.
Therefore, chapter XVIII, title 7, Code of Federal Regulations is
amended as follows:
1. 7 CFR chapter XVIII is amended by revising the word
``preapplication'' to read ``loan request'' in the following places:
a. Part 1944, Sec. 1944.211(a)(13)(i)
b. Part 1944, introductory text of Sec. 1944.213(b)
c. Part 1944, Sec. 1944.213(d)(1)(i)
d. Part 1944, Sec. 1944.213(d)(1)(ii)
e. Part 1944, Sec. 1944.224(a)(4)
f. Part 1944, Sec. 1944.224(a)(6)
g. Part 1944, Sec. 1944.224(a)(7)
h. Part 1944, introductory text of Sec. 1944.235(h)
i. Part 1944, subpart E, Exhibit A, paragraph IV.B.4.
j. Part 1944, subpart E, Exhibit A, paragraph IV.B.22.
k. Part 1944, subpart E, Exhibit A-7, paragraph I.A.(4)
l. Part 1944, subpart E, Exhibit E, paragraph III
m. Part 1944, subpart E, Exhibit E, introductory text of paragraph V.A.
n. Part 1944, subpart E, Exhibit E, introductory text of paragraph V.B.
o. Part 1944, subpart E, Exhibit E, introductory text of paragraph V.D.
p. Part 1944, subpart E, Exhibit E, introductory text of paragraph V.E.
q. Part 1944, subpart E, Exhibit E, paragraph VII
2. 7 CFR chapter XVIII is amended by removing the words ``,
occupancy surcharge'' in the following places:
a. Part 1930, subpart C, Exhibit B, paragraph XIII.C.2.f(1)
b. Part 1951, Sec. 1951.517(b)(4)(i)(A)
c. Part 1951, Sec. 1951.517(b)(4)(i)(B)
d. Part 1951, Sec. 1951.517(b)(4)(ii)(A)
e. Part 1951, Sec. 1951.517(b)(4)(ii)(B)
f. Part 1951, Sec. 1951.517(b)(4)(iii)
3. 7 CFR chapter XVIII is amended by removing the words ``and
occupancy surcharge'' in the following places:
a. Part 1930, subpart C, Exhibit B, introductory text of paragraph
XIV.A.5.b
b. Part 1930, subpart C, Exhibit B, paragraph XIV.A.5.b(1)(i)(A)--2
times
c. Part 1930, subpart C, Exhibit B, paragraph XIV.A.5.b(1)(i)(B)
d. Part 1930, subpart C, Exhibit B, paragraph XIV.A.5.b(2)(vi)(A)--2
times
e. Part 1930, subpart C, Exhibit B-1, paragraph 4.b
f. Part 1930, subpart C, Exhibit B-1, heading of paragraph 6
g. Part 1930, subpart C, Exhibit B-1, paragraph 6.a
h. Part 1930, subpart C, Exhibit E, paragraph II.A.2
4. 7 CFR chapter XVIII is amended by removing the words ``or
occupancy surcharge'' in part 1951, Sec. 1951.506(a)(3).
5. 7 CFR chapter XVIII is amended by removing the words ``, as well
as the occupancy surcharge'' in the following places:
a. Part 1930, subpart C, Exhibit B, paragraph XIV.A.5.b(1)(v)(C)
b. Part 1930, subpart C, Exhibit B, paragraph XIV.A.5.b(2)(iv)
PART 1930--GENERAL
6. The authority citation for part 1930 is revised to read as
follows:
Authority: 5 U.S.C. 301; 42 U.S.C. 1480.
Subpart C--Management and Supervision of Multiple Family Housing
Borrowers and Grant Recipients
7. Section 1930.105 is amended by revising paragraph (b)(10) to
read as follows:
Sec. 1930.105 Objective of management and supervision.
* * * * *
(b) * * *
(10) Operate the facilities according to applicable Civil Rights
laws, Title VI of the Civil Rights Act of 1964, Title VIII of the Civil
Rights Act of 1968, Section 504 of the Rehabilitation Act of 1973,
Executive Order 11246, the Americans with Disabilities Act of 1990, and
the Age Discrimination Act of 1975.
* * * * *
8. Section 1930.106 is added to read as follows:
Sec. 1930.106 Project operations.
Project operations shall be conducted to meet the actual needs and
necessary expenses of the property or for any other purpose authorized
under Agency regulations. Whoever willfully uses, or authorizes the
use, of any part of the rents, assets, proceeds, income, or other funds
derived from such property for unauthorized purposes is subject to
penalty. This includes an owner, agent, or manager, or person who is
otherwise in custody, control, or possession of property that is
security for a multi-family housing loan. Those violating these
provisions are subject to penalties set out under Agency regulations
and the law. Under law (42 U.S.C. 1484 and 1485), federal penalties
consisting of fines of not more than $250,000 or imprisonment of not
more than five years, or both, may be imposed for operating a project
in a manner inconsistent with the provisions of this section.
9. Subpart C, Exhibit B is amended in paragraph II by removing the
definition of ``Occupancy surcharge'' and by removing the words ``,
including occupancy surcharge,'' in the definition of ``Tenant
contribution''; in paragraph V F 1 a by removing the last sentence; in
paragraph V F 1 b by removing the last sentence; in paragraph VII F 6
(c) in the second sentence by removing the words ``as well as maximum
occupancy surcharge''; in paragraph VII F 6 d in the third sentence by
removing the words ``and occupancy surcharges''; by removing paragraph
VIII A 3; by redesignating paragraphs VIII A 4 through VIII A 8 as
paragraphs VIII A 3 through VIII A 7 respectively; in the introductory
text of paragraph VIII B by revising the words ``paragraphs 1, 4b, 4d,
4e, 5, and 7'' to read ``paragraphs VIII B 1, VIII B 4 b, VIII B 4 d,
VIII B 4 e, VIII B 5, and VIII B 7;'' in paragraph VIII B 4 by revising
the word ``Occupancy'' to read ``Cooperative occupancy'' and by
revising the words ``paragraphs VII B 4 b, d, and e'' to read
``paragraphs VIII B 4 b, VIII B 4 d, and VIII B 4 e''; in paragraph
VIII D 2 by removing the words ``, including occupancy surcharge
levied, if any''; in paragraph XIII B 2 a (2) by removing the words
``occupancy surcharge monies,''; in paragraph XIII B 2 a (3) by
removing
[[Page 25066]]
the words ``including occupancy surcharge''; in paragraph XIV A 5 b (1)
(i) (B) by removing the words ``or to pay the occupancy surcharge''; in
paragraph XIV A 5 b (2) (vi) (B) by removing the words ``or the
occupancy surcharge''; in paragraph XIV A 5 B(1)(I)(b) by removing the
words ``or to pay the occupancy surcharge''; in paragraph XIV A 5 b (2)
(vi) (C) by removing the words ``and reimbursement for occupancy
surcharge''; and in paragraph II by revising the definition of
``Shelter cost'' to read as follows:
EXHIBITS TO SUBPART C
* * * * *
EXHIBIT B--MULTIPLE HOUSING MANAGEMENT HANDBOOK
* * * * *
II * * *
Shelter cost. Consists of basic or note rate rent plus utility
allowance when used. Basic or note rate rent must be shown on the
project budget for the year and approved according to paragraph XII
of this exhibit. Utility allowances, when required, must be
determined and approved according to part 1944, subpart E, Exhibit
A-6, of this chapter. Any change in rental rates or utility
allowances must be processed according to Exhibit C of this subpart.
The shelter cost in a cooperative housing project will consist of
occupancy charge plus utility allowance.
* * * * *
10. Subpart C, Exhibit E is amended by revising paragraph II K to
read as follows:
* * * * *
EXHIBIT E--RENTAL ASSISTANCE PROGRAM
* * * * *
II * * *
K Shelter cost. The approved shelter cost consists of basic or
note rate rent plus utility allowance when used. Basic or note rate
rent must be shown on the project budget for the year and approved
according to Sec. 1930.122(b)(1). Utility allowances, when required,
are determined and approved according to part 1944, subpart E,
Exhibit A-6, of this chapter. Any change in rental rates or utility
allowances must be processed according to Exhibit C of this subpart.
* * * * *
PART 1944--HOUSING
11. The authority citation for part 1944 is revised to read as
follows:
Authority: 5 U.S.C. 301; 42 U.S.C. 1480.
Subpart E--Rural Rental and Rural Cooperative Housing Loan
Policies, Procedures, and Authorizations
12. Section 1944.205 is amended in the definition of ``Rural area''
by revising the words ``Sec. 1944.10 of subpart A of part 1944 of this
chapter'' to read ``Sec. 3550.10 of this title'' and by adding in
alphabetical order definitions to read as follows:
Sec. 1944.205 Definitions.
* * * * *
Agency. The Rural Housing Service within the Rural Development
mission area of the U.S. Department of Agriculture or its successor
agency which administers Section 515 loans and Section 521 rental
assistance.
* * * * *
Census Designated Place (CDP). An unincorporated population center
identified by the Census Bureau.
* * * * *
Consolidated Plan. A plan developed by a community or state
addressing community planning and development that is used to support
requests for assistance from the Department of Housing and Urban
Development.
* * * * *
HUD. The U.S. Department of Housing and Urban Development.
* * * * *
LIHTC. Low-income housing tax credits.
* * * * *
MFH. Multi-Family Housing.
* * * * *
NOFA. Notice of funds availability.
* * * * *
RCH. Rural Cooperative Housing.
* * * * *
RHS. Rural Housing Service.
RRH. Rural Rental Housing.
* * * * *
Section 515. Section 515 of title V of the Housing Act of 1949 (42
U.S.C. 1485 et seq.).
* * * * *
Sec. 1944.213 [Amended]
13. Section 1944.213 is amended in the introductory text of
paragraph (b) in the second sentence by revising the words
``Sec. 1944.231(k)'' to read ``Sec. 1944.231(h)'', and in the third
sentence by removing the words ``Form AD-622, `Notice of Preapplication
Review Action,' or any other''; in the introductory text of paragraph
(d) in the first sentence by revising the words ``preapplication for a
loan'' to read ``loan request'' and adding the words ``and the
environmental requirements of part 1940, subpart G, of this chapter''
following the words ``of this subpart'' and in the second sentence by
removing the word ``preapplication''; and by revising paragraph (a),
the heading of paragraph (f), and paragraphs (f)(2)(i) and (f)(3) to
read as follows:
Sec. 1944.213 Limitations.
(a) Loan limits. The Agency must certify that assistance provided
any housing project is not more than is necessary to make the project
affordable to potential tenants and the Government. The applicant must
disclose, during each stage of the process, all other assistance
proposed for the project, including all other government assistance as
defined in Sec. 1944.205.
(1) Fee norms. RHS has established the fee norms below for purposes
of analysis. The total of the three fees may not exceed 21 percent.
(i) Builder's profit: up to 10% of the construction contract.
(ii) General overhead: up to 4% of the construction contract.
(iii) General requirements: up to 7 % of the construction contract.
(iv) Developer's fee: up to 15% of the total development costs
authorized for tax credit purposes on new construction or
rehabilitation; up to 8% of the acquisition costs only for the
acquisition rehabilitation costs.
(2) Other fee norms. (i) RHS has established the new construction
and rehabilitation fee norm for a developer's fee at up to 15% of the
total development cost authorized for tax credit purposes. (A
developer's fee is not an authorized Section 515 loan purpose.)
(ii) For transfer proposals that include acquisition costs, RHS has
established the developer's fee on the acquisition costs at up to 8% of
the acquisition costs only when authorized by the state agency and only
for tax credit purposes. (A developer's fee is not an authorized
Section 515 loan purpose.)
(3) Analysis of loan requests to determine the minimum amount of
assistance.
(i) The fee structure of the state agency administering low-income
housing tax credits will be used in the RHS analysis of the amount of
assistance that is necessary for a proposal.
(ii) In all cases where the results of an analysis indicate that
there will be excess assistance (defined as more than the lesser of
$25,000 or 1 percent of the total development cost as authorized by the
state agency), RHS will consult with the applicant, as well as with the
state agency, to strive to reach an agreement for reducing the excess
assistance.
(iii) In the event that excess assistance is not reduced through an
agreement with the applicant, RHS will adjust the amount of equity
contribution by the amount of excess assistance (through the reduction
of the loan) to ensure that assistance provided is not more than is
[[Page 25067]]
necessary to provide affordable housing after taking into account
assistance from all Federal, state and local sources.
* * * * *
(f) New loans in areas with RHS, the Department of Housing and
Urban Development (HUD), or similar type rental housing assistance.
* * * * *
(2) * * *
(i) Another RRH or RCH loan request in the same market area has
been selected for further processing; or
* * * * *
(3) Status. When a loan proposal or project exists in the market
area which meets any of the criteria in paragraph (f)(2) of this
section, loan requests in the same market area will be returned to the
applicant in accordance with Sec. 1944.231. This does not affect the
processing of loan requests in other market areas.
* * * * *
Sec. 1944.215 [Amended]
14. Section 1944.215 is amended in paragraph (a)(1) in the ninth
sentence by removing the word ``preapplication'' and by revising the
words ``in this paragraph'' to read ``in accordance with
Sec. 1944.213(a)(1)(iii) and (a)(1)(iv)'' and by removing the last
three sentences; in paragraph (r)(1) by adding the words ``, persons
with disabilities,'' following the words ``elderly persons''; in
paragraph (r)(2) by revising the words ``should promote an equal
opportunity'' to read ``are to promote equal access''; in the
introductory text of paragraph (r)(4) by revising the words ``priority
points'' to read ``preference''; in paragraph (r)(4)(i) by revising the
words ``meets all FmHA or its successor agency under Public Law 103-354
site criteria'' to read ``meets the site criteria of this paragraph (r)
and the environmental requirements of part 1940, subpart G, of this
chapter''; in the last sentence of paragraph (r)(4)(ii) by revising the
words ``additional priority points'' to read ``preference''; in
paragraph (r)(4)(vii) by revising the words ``Sec. 1944.231(i)(6)'' to
read ``Sec. 1944.231(e)''; and in paragraph (r)(7) by revising the
words ``Sec. 1944.10 of subpart A of part 1944 of this chapter'' to
read ``7 CFR 3550.10'', by revising the word ``preapplications'' to
read ``loan requests'', and by removing the phrase ``, including rating
and ranking for potential authorization''.
Sec. 1944.224 [Amended]
15. Section 1944.224 is amended in the introductory text of
paragraph (a)(5) in the second sentence by revising the words
``paragraph III of exhibit J of subpart C of part 1930 of this
chapter'' to read ``part 1930, subpart C, exhibit J, paragraph V, of
this chapter''.
16. Section 1944.228 is added to read as follows:
Sec. 1944.228 Ranking of rural places based on greatest need for
Section 515 housing.
The Agency will rank rural places based on greatest need for
Section 515 housing in accordance with this section. Places may be
incorporated population centers such as cities, boroughs, towns, and
villages; or unincorporated population centers identified by the Census
Bureau (known as Census Designated Places (CDPs)). States must be
consistent state-wide in their use of place types that are included in
the list of designated places. Ranking will be based on the following:
(a) Qualifies as a rural area in accordance with 7 CFR 3550.10.
(b) Lacks mortgage credit for borrowers in accordance with
Sec. 1944.211(a)(2).
(c) Demonstrates a need for multi-family housing based on the
following factors, with equal weight given to each. Data for this
purpose will be provided to States by the National Office from the most
recent rural place data obtained from the Census Bureau. If Census data
is not available for an eligible rural place, the State may request
authority from the National Office to include the place on the list of
designated places established in accordance with Sec. 1944.229,
provided the place meets the requirements of Sec. 1944.229(b) and it
can be demonstrated that there is a high need for assisted multi-family
housing based on information obtained from reliable local or state
sources. The State may request authority from the National Office to
use other state-wide data if it is objective and consistent with the
Housing Act of 1949, as amended.
(1) The incidence of poverty, measured by determining households
below 60 percent of the county rural median income.
(2) The existence of substandard housing, measured by determining
the number of occupied housing units that lack complete plumbing or
have more than one occupant per room.
(3) The lack of affordable housing, measured by determining
households below 60 percent of county rural median income paying more
than 30 percent of income in rent.
17. Section 1944.229 is added to read as follows:
Sec. 1944.229 Establishing the list of designated places for which
Section 515 applications will be invited.
States will compile a list of designated places for which Section
515 applications will be invited, in accordance with the provisions of
this section and the ranking process described in Sec. 1944.228.
Inclusion on the list of designated places does not indicate that
market need and demand has been established; this will be a loan
feasibility determination. Once placed on the list of designated
places, places will be considered equal, with no regard to their
ranking on the ranking list or order of selection. In exceptional
circumstances, there may be an instance when a place with an urgent
need for multi-family housing is not reflected in the ranking process
in Sec. 1944.228; for example, a place that has had a substantial
increase in income-eligible population since the most recent decennial
Census data because of a new industry, a place that has experienced a
loss of affordable housing because of a natural disaster, or a
community within the limits of an Indian reservation or tribal alloted
or trust land with a demonstrated need for multifamily housing. With
concurrence from the National Office, the State may include the place
on the list of designated places.
(a) Establishing the number of designated places. Initially, the
number of designated places may equal up to 5 percent of the state's
total eligible rural places ranked in accordance with Sec. 1944.228,
but must equal, in all cases, at least 10 places. For example, in a
state with 1,000 total rural places, the State may designate up to 5
percent, or 50 places. However, in a state with 60 total rural places,
the State would use the minimum number of 10 places, since 5 percent of
60 equals 3. In states where 5 percent equals more than the minimum
number of 10, consideration in determining the number of places to
include on the list should be given to the size and population of the
state, funding levels, and the potential for leveraging. States that
anticipate high loan activity because of leveraging may designate a
number of places higher than 5 percent or the minimum 10 places with
the concurrence of the National Office.
(b) Requirements for inclusion on the list of designated places.
Places selected for the list of designated places:
(1) Must have 250 or more households as a minimum feasibility
threshold for multi-family housing; and
(2) May not have any of the ``build and fill'' conditions described
in Sec. 1944.213(f)(2). Places thus identified will be deferred for
inclusion on the current year's list of designated places. Deferred
places will be reviewed annually and, at such time that the ``build and
fill'' conditions no longer
[[Page 25068]]
exist, will be considered for inclusion on the list for the next fiscal
year in accordance with this section. To the extent practicable, States
will consult with HUD and other state or local agencies or entities
that provide very low- or low-income rental housing to determine places
where loan proposals have been approved or are in process.
(c) Selection of designated places. Places meeting the requirements
of paragraph (b) of this section will be selected from the ranking list
as follows:
(1) At least 90 percent of the State's total designated places must
be selected in rank order from the list.
(2) With concurrence from the National Office, up to 10 percent of
the State's designated places may be selected in accordance with the
following guidelines: Provided, That such places fall within the top-
ranked 10 percent of the state's total rural places (or a minimum of 20
places) meeting the requirements of paragraph (b) of this section. For
example, in a state with 1,000 total rural places, the State has
elected to select designated places equal to the maximum 5 percent, or
50 places. Of the 50 places, at least 90 percent, or 45 places, must be
selected from the places that meet the requirements of paragraph (b) of
this section in order of their ranking. Up to 10 percent, or 5 places,
may be selected from the top-ranked 100 places (10 percent of the total
rural places in the state) that meet the requirements of paragraph (b)
of this section, as follows:
(i) Places that provide geographic diversity in the state. Places
thus selected must be the highest ranked place in each geographic
division designated by the State. Geographic divisions must correspond
with established State divisions, such as districts, regions, or
servicing areas.
(ii) Places that have been identified as high need areas for multi-
family housing in the state Consolidated Plan or similar state plan or
needs assessment report.
(d) Length of designation. Places will remain on the list of
designated places for three years or until a loan request is selected
for funding, whichever occurs first. A place where a loan request is
selected for Section 515 funding will be reevaluated for potential
inclusion on the next fiscal year's list of designated places when the
complex is completed, in accordance with the ``build and fill''
provisions of Sec. 1944.213(f)(2). A place may be removed from the list
prior to the end of the 3-year designation period because of a
substantial loss of income-eligible population or an increase in the
affordable rental housing supply, for example, a place that experiences
the closing of a military base or other major employer.
(e) List of designated places. A list of designated places may be
obtained by contacting the State Office or any Rural Development office
in the state.
18. Section 1944.230 is added to read as follows:
Sec. 1944.230 Application submission deadline and availability of
funds.
(a) Application submission and funding cycle. Dates governing the
submission and funding cycle of Section 515 loan requests will be
published annually in the Federal Register and may be obtained from any
Rural Development office.
(b) Availability of funds. The amount of funds available for each
State, as well as any limits on the amount of individual loan requests,
will be published as a notice annually in the Federal Register.
19. Section 1944.231 is revised to read as follows:
Sec. 1944.231 Processing loan requests.
(a) Actions by the applicant. Loan requests may be submitted for
designated areas when the availability of funds is announced. The loan
request will consist of an application form prescribed by the Agency
and the items listed in Exhibit A-7 of this subpart. If an application
is selected, the applicant will be required to provide the additional
items required by Exhibit A-9 of this subpart within the timeframes
established by the Agency.
(b) Actions by the Agency.--(1) Actions by the Agency on loan
requests received. Loan requests received after the deadline announced
in the Federal Register will not be considered for funding in that
funding cycle and will be returned to the applicant.
(2) Review and scoring of loan requests. Loan requests will be
reviewed:
(i) To determine if the loan request is complete and includes the
additional information required in NOFA;
(ii) To determine if the request is for an authorized purpose; and
(iii) To establish a point score based on the following factors:
(A) The presence and extent of leveraged assistance (including
services, abatement of taxes, etc.) for the units that will serve RHS
income-eligible tenants, not including tax credits or donated land.
Scoring will be based on the presence and extent of leveraged
assistance for each loan request compared to the other loan requests
being reviewed, computed as a percent of the total development cost of
the units that will serve RHS income-eligible tenants. A total monetary
value will be determined for leveraged assistance in order to compare
such items equitably with leveraged funds. As part of the loan
application, the applicant must include specific information on the
source and value of the services for this purpose. Proposals will then
be ranked in order of the percent of leveraged funds and assigned a
point score accordingly. (0 to 20 points)
(B) The loan request is for units to be developed in a colonia,
tribal land, or EZ/EC community, or in a place identified in the state
Consolidated Plan or state needs assessment as a high need community
for multi-family housing. (20 points)
(C) The loan request is in support of a National Office initiative
announced in NOFA. (20 points)
(D) The loan request is in support of an optional factor developed
by the State that promotes compatibility with special housing
initiatives in conjunction with state-administered housing programs
such as HOME funds or low income housing tax credits.
A factor thus developed cannot duplicate factors already included
in this paragraph and must be provided to the National Office prior to
the funding cycle for concurrence and inclusion in NOFA. (20 points)
(E) The loan request includes donated land meeting the provisions
of Sec. 1944.215(r)(4). (5 points)
(3) Point score ties and ranking of loan requests. Loan requests
will be ranked in order of highest point score or, where there are
point score ties, in order of highest point score and number assigned
as follows:
(i) If one of the same-pointed requests is from an entity meeting
the requirements of paragraph (e) of this section, it will be denoted
with a #1 following the point score. If two or more are from entities
meeting these requirements, a lottery will be held. The first drawn
request will be denoted #1, the second drawn #2, etc.
(ii) After all requests from entities meeting the requirements of
paragraph (e) of this section have been numbered, the next sequential
number will be assigned to a loan request from an entity not meeting
the requirements of paragraph (e) of this section. If there are two or
more requests from entities not meeting the requirements of paragraph
(e) of this section, a lottery will be held and each request numbered
in the order it is drawn, beginning with the next sequential number.
(4) Preliminary eligibility and feasibility review. In order of
ranking, a preliminary review of eligibility and
[[Page 25069]]
feasibility will be made on the highest ranked requests, including:
(i) A review of the preliminary plans and cost estimates.
(ii) A market feasibililty review, including the Agency's review of
the market, a review of HUD's (and similar lender's, if applicable)
feedback on the market area, and a review to ensure compliance with the
``build and fill'' provisions of Sec. 1944.213(f).
(iii) A site visit and preliminary review to determine if the site
criteria of Sec. 1944.215(r) can be met.
(iv) A review of the Affirmative Fair Housing Marketing Plan.
(v) Analysis of a current (within 6 months) credit report.
(5) Selection of loan requests for further processing. The Agency
will select loan requests for further processing from loan requests
determined preliminarily eligible and feasible, in ranking order,
taking into consideration the amount of available funds.
(i) If any selected loan requests are later withdrawn, rejected, or
delayed for a period of time that will not permit funding in the
current funding cycle, the Agency will select additional loan requests
in ranking order as funding levels permit. For this purpose, the State
may keep the next highest ranked loan request until it is determined
that all selected loan requests will be funded. Applicants whose loan
requests are held for this purpose will be advised that their loan
request was not selected but ranked sufficiently high to be retained in
the event a selected request is withdrawn or rejected in the current
funding cycle.
(ii) Loan requests not funded in the funding cycle, including
incomplete requests, or requests not meeting the requirements of
Exhibit A-7 of this subpart or NOFA, will be returned to the applicant
with the reason it was not considered.
(c) Additional requirements for selected loan requests. For
selected loan requests, the applicant must provide the additional
information required by Exhibit A-9 of this subpart and any additional
State requirements within the timeframes established by the Agency. If
the applicant fails to meet established timeframes, the Agency may
grant an extension if the delay appears reasonable and granting the
extension will still permit funding of the loan request in the current
funding cycle.
(d) Site rejections. Site rejections will be handled as follows:
(1) Applicants will be given 15 calendar days from the date of the
Agency's site rejection letter to submit a new site option. If the
applicant appeals the decision but submits a new site option within 15
days, the new site option will be accompanied by a copy of their letter
to the National Appeals Division withdrawing their appeal request. If
the new site is acceptable, processing will continue. If the new site
is not acceptable, the loan request will be rejected.
(2) If the applicant does not submit a new site option within 15
days, and has appealed the Agency's decision, the Agency will not delay
processing of loan requests in other market areas pending the outcome
of the appeal. The next ranked loan request, within available funding
limits, will be selected for further processing.
(3) If the applicant prevails in the appeal, the loan request will
be considered in the next funding cycle. The applicant will be given
the opportunity to amend their loan request consistent with NOFA.
(e) Nonprofit or public body preference. Preference in ranking loan
requests will be provided to an entity that meets all of the following
conditions:
(1) Is a local nonprofit organization, public body, or Indian Tribe
whose principal purposes include the planning, development, and
management of low-income housing;
(2) Is exempt from Federal income taxes under section 501(c)(3) or
501(c)(4) of the Internal Revenue Code (26 U.S.C. 501(c)(3) or
501(c)(4));
(3) Is not wholly or partially owned or controlled by a for-profit
or limited-profit type entity;
(4) Whose members, or the entity, do not share an identity of
interest with a for-profit or limited-profit type entity;
(5) Is not co-venturing with another entity; and
(6) The entity or its members will not be receiving any direct or
indirect benefits pursuant to LIHTC.
(f) RCH loan requests. (1) Loan requests for RCH assistance will be
processed in the order in which a complete loan request was received.
(2) All loan requests for RCH assistance will be reviewed for
eligibility and feasibility. In cases where the proposal is not
eligible or feasible, the proposal will be rejected. Proposals which
appear eligible and feasible will be forwarded to the National Office
for review and authorization.
(3) If authorized by the National Office, the State will notify the
applicant that the proposal appears eligible and feasible. The
applicant will be requested to provide the additional information
required by Exhibit A-9 of this subpart and any additional State
requirements.
(4) If funds are not available in the current funding cycle, the
loan request will be considered for funding in the next funding cycle.
(g) General guidance on processing requests for Multi-Family
Housing (MFH) Assistance. (1) All applicants must provide their
taxpayer identification number. The taxpayer identification number for
individuals who are not businesses is their Social Security Number.
(2) A loan request for MFH assistance may be withdrawn upon written
request of the applicant at any time. The Agency may withdraw a loan
request for failure of an applicant to provide necessary information to
process a request for assistance should the applicant fail to respond
to a written request which provides the applicant with a reasonable
time period to submit the information.
Sec. 1944.237 [Amended]
20. Section 1944.237 is amended in paragraph (a) in the second
sentence by revising the words ``be rated and ranked'' to read
``compete for funding'' and by removing the words ``the priority point
system contained in'', and in the last sentence by removing the words
``under the priority point system''.
21. Exhibit A of subpart E is amended in section IV. A. in the
first sentence by revising the words ``When an applicant is authorized
to submit a formal application'' to read ``When a loan request is
selected for further processing''; in the introductory text of section
IV. B. in the last sentence by revising the word ``preapplication'' to
read ``loan request'' and the words ``when developing an application''
to read ``for loan requests selected for further processing''; and in
section VIII in the contents listing for exhibit A-7 by revising the
word ``Preapplication'' to read ``a Loan Request'', in the contents
listing for exhibit A-9 by adding the word ``Additional'' before the
word ``Information'', by removing the words ``with Application'', and
by revising the word ``Loans'' to read ``Loan Requests'', and by
removing and reserving the contents listing for Exhibit A-10; and by
revising sections II. and III. to read as follows:
Exhibits to Subpart E
EXHIBIT A--HOW TO BRING RENTAL AND COOPERATIVE HOUSING TO YOUR TOWN
* * * * *
II. APPLYING FOR A LOAN
A. An individual, organization, or group organizing to provide
housing may contact any Rural Development office processing Section
515 loan requests to obtain
[[Page 25070]]
information and necessary forms. The Section 515 program is
administered by Rural Development's Rural Housing Service (RHS).
B. Each funding cycle, RHS will publish in the Federal Register
a notice of the availability of funds (NOFA) for Section 515 loans
and a list of designated places (communities) for which loan
requests may be submitted. The list of designated places is also
available from any Rural Development office processing Section 515
loan requests. Designated places are rural places identified by RHS
as having the greatest potential need for Section 515 housing.
Except in unusual circumstances, places are designated for a period
of three years or until a loan has been selected for funding,
whichever occurs first.
C. Applicants must submit a loan request by the deadline
announced in the Federal Register, and available in any Rural
Development office, to be considered in the funding cycle. Section
III of this exhibit provides information on the loan review and
selection process. In addition, applicants are advised to read this
subpart, which provides detailed information on the Section 515
program.
D. The loan request consists of SF-424.2, ``Application for
Federal Assistance (For Construction),'' the supporting material or
information listed in exhibit A-7 of this subpart, and any
additional information required in NOFA. This information will
enable the Agency to determine:
1. The eligibility of the applicant;
2. The feasibility (economic, environmental, and architectural)
of the proposed housing;
3. That prospective cooperative members have read and understand
their responsibilities as outlined in ``What is Cooperative
Housing?'' (available in any Rural Development office) before
agreeing to a cooperative housing project;
4. Whether the proposed housing can appropriately be financed by
RHS; and
5. Its Civil Rights impact.
E. This information usually can be furnished by the applicant
without hiring extensive professional services. However, fees for
professional packaging services rendered to a nonprofit organization
can be made a part of loan development costs.
III. REVIEW OF THE LOAN REQUEST
A. Loan requests received by the deadline announced in the NOFA
will be reviewed, scored, and ranked based on the loan selection
criteria announced in the NOFA. Requests that rank sufficiently high
will be reviewed for eligibility and feasibility.
B. Upon completion of the loan review process, applicants will
be advised of RHS' decision. Applicants whose loan requests are
selected for further processing will be notified of the additional
steps that need to be taken. Loan requests not selected for further
processing in the current funding cycle will be returned to the
applicant.
* * * * *
22. Exhibit A-7 of subpart E is amended in the introductory text by
removing the words ``(for preapplication submission)''; in paragraph
I.A.(6) by removing the last sentence; in paragraph I.A.(7)(A) by
removing the words ``preapplication or''; and by revising the heading
of the exhibit and paragraphs IV.C. and VI to read as follows:
* * * * *
EXHIBIT A-7--INFORMATION TO BE SUBMITTED WITH A LOAN REQUEST FOR A
RURAL RENTAL HOUSING (RRH) OR A RURAL COOPERATIVE HOUSING (RCH)
LOAN
* * * * *
IV. * * *
C. The size and type of other facilities to be included in the
project, such as laundry rooms, storage spaces, etc., and a
justification for any related facilities to be financed wholly or in
part by RHS funds.
* * * * *
VI. Form RD 1940-20, ``Request for Environmental Information.''
* * * * *
23. Exhibit A-9 of subpart E is amended by removing the
introductory text; in paragraph 5 by revising the words ``since the
applicant submitted the market analysis'' to read ``since the market
analysis was completed''; by removing paragraph 15 and by redesignating
paragraph 16 as paragraph 15; and by revising the heading of the
exhibit and paragraph 10 to read as follows:
* * * * *
EXHIBIT A-9--ADDITIONAL INFORMATION TO BE SUBMITTED FOR RURAL
RENTAL HOUSING (RRH) AND RURAL COOPERATIVE HOUSING (RCH) LOAN
REQUESTS
* * * * *
10. The applicant will submit all proposed agreements for
architectural, engineering, and legal services.
* * * * *
EXHIBIT A-10--[REMOVED AND RESERVED]
24. Subpart E, Exhibit A-10, is removed and reserved.
PART 1951--SERVICING AND COLLECTIONS
25. The authority citation for part 1951 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart K--Predetermined Amortization Schedule System (PASS)
Account Servicing
Sec. 1951.504 [Amended]
26. Section 1951.504 is amended by removing the alphabetic
paragraph designations and placing the definitions in alphabetical
order and by removing the definition for ``Occupancy surcharges''.
Sec. 1951.506 [Amended]
27. Section 1951.506 is amended by removing paragraph (a)(5)(iv);
by redesignating paragraph (a)(5)(v) as paragraph (a)(5)(iv); and in
newly redesignated paragraph (a)(5)(iv) in the third sentence by
removing the words ``, occupancy surcharges'' and in the fourth
sentence by removing the words ``, occupancy surcharge''.
Sec. 1951.509 [Removed]
28. Section 1951.509 is removed and reserved.
Exhibit B--[Removed and Reserved]
29. Part 1951, subpart K, Exhibit B, is removed and reserved.
PART 1965--REAL PROPERTY
30. The authority citation for part 1965 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart B--Security Servicing for Multiple Housing Loans
31. Section 1965.65 is amended by revising the introductory text of
paragraph (a) to read as follows:
Sec. 1965.65 Transfer of real estate security and assumption of loans.
(a) General. The transfer may be approved only if it is determined
that the transfer would ensure the further availability of the housing
and related facilities for very-low, low, and moderate income families
or persons and would be in the best interests of the residents and the
Federal Government.
* * * * *
Sec. 1965.68 [Amended]
32. Section 1965.68 is amended by removing paragraph (c)(9).
Subpart E--Prepayment and Displacement Prevention of Multi-Family
Housing Loans
33. Section 1965.210 is revised to read as follows:
Sec. 1965.210 Loans approved prior to December 15, 1989--RHS actions
when processing prepayment requests.
For loans approved prior to December 15, 1989, that have not
subsequently accepted prepayment incentives, the Servicing Office or
other designated office must evaluate the need for the housing to
determine the level of incentives to be offered, including equity
loans, and whether the prepayment may be legally accepted with or
without restrictive-use provisions. A reasonable effort must be made to
enter into an agreement with
[[Page 25071]]
the borrower to maintain the housing for low-income use that takes into
consideration the economic loss the borrower may suffer by foregoing
prepayment. When developing an incentive offer, the Servicing Office or
other designated office must first offer incentives other than equity
loans, unless it is determined that alternative incentives are not
adequate to provide a fair return to the borrower, prevent prepayment
of the loan, or prevent displacement of the tenants. The guidance
provided in Secs. 1965.213 and 1965.214 and Exhibit E of this subpart
(available in any Rural Development State or District Office) will be
used to determine the appropriate incentive package. Once an incentive
offer has been accepted on a project, the project will be considered
ineligible for future incentive offers until such time as the
restrictive-use period associated with the incentive offer has expired.
Sec. 1965.213 [Amended]
34. Section 1965.213 is amended by redesignating paragraphs (a),
(b), and (c) as paragraphs (b), (c) and (d) respectively; and by adding
a new paragraph (a) and by revising the introductory text of newly
redesignated paragraph (b) and paragraph (b)(1) to read as follows:
Sec. 1965.213 Offer of incentives to borrowers.
* * * * *
(a) Availability of incentives. Incentives may be offered only if
the restrictive period has expired for any RRH project loan.
(b) Available incentives. One or more of the following incentives
will be offered to the borrower. The amount of incentives will be
determined in accordance with Exhibits D and E of this subpart
(available in any Rural Development State or District Office).
(1) Equity loans. In RRH projects, a subsequent loan may be offered
for equity for the difference between the current unpaid loan balance
and a maximum of 90 percent of the project's value appraised as
unsubsidized conventional housing. Equity loans may not be offered
unless the servicing official determines that other incentives offered
under this paragraph are not adequate to provide a fair return on the
investment of the borrower, to prevent prepayment of the loan, or to
prevent the displacement of project tenants.
* * * * *
Dated: May 1, 1997.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 97-11817 Filed 5-6-97; 8:45 am]
BILLING CODE 3410-XV-U
