Multifamily Housing Program Update to the Credit Report Process

DEPARTMENT OF AGRICULTURE <SUBAGY>Rural Housing Service</SUBAGY> <CFR>7 CFR Parts 1910, 1955, and 3560</CFR> <DEPDOC>[Docket No. RHS-24-MFH-0003]</DEPDOC> <RIN>RIN 0575-AD30</RIN> <SUBJECT>Multifamily Housing Program Update to the Credit Report Process</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Rural Housing Service, U.S. Department of Agriculture (USDA). <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments on the proposed rule must be received by May 28, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Comments may be submitted electronically by the Federal eRulemaking Portal: Go to <E T="03">http://www.regulations.gov</E> 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 <E T="03">Regulations.gov</E> , 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. <E T="03">Other Information:</E> Additional information about RD and its programs is available on the internet at <E T="03">https://www.rd.usda.gov.</E> All comments will be available for public inspection online at the Federal eRulemaking Portal ( <E T="03">http://www.regulations.gov</E> ). In accordance with 5 U.S.C. 553(b)(4), a summary of this proposed rule may be found by going to <E T="03">http://www.regulations.gov</E> and in the “Search for dockets and documents on agency actions” box, enter the following docket number: RHS-24-MFH-0003. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> 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: <E T="03">Abby.Boggs@usda.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> 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. <HD SOURCE="HD1">II. Discussion of Proposed Rule</HD> 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 borrower credit reports will align the Agency with current industry practices and create an efficiency for applicants and borrowers by streamlining the application process. <HD SOURCE="HD2">Request for Comment</HD> 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: <E T="03">https://www.regulations.gov.</E> Details on how to submit comments to the Federal eRulemaking Portal are in the <E T="02">ADDRESSES</E> section of this proposed rule. <HD SOURCE="HD1">III. Summary of Changes</HD> The Agency proposes to revise 7 CFR part 3560 by: (1) Adding the definition of <E T="03">Current Comprehensive Credit Report</E> to § 3560.11; (2) Updating § 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 § 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 § 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. <HD SOURCE="HD1">IV. Regulatory Information</HD> <HD SOURCE="HD2">Statutory Authority</HD> 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 <E T="03">et seq.,</E> 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. <HD SOURCE="HD2">Executive Order 12372, Intergovernmental Review of Federal Programs</HD> 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 <E T="03">https://www.whitehouse.gov/omb/management/office-federal-financial-management.</E> 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 avail ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 26k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━