Multi-Family Housing Simple Transfer Pilot Program

<RULE> DEPARTMENT OF AGRICULTURE <SUBAGY>Rural Housing Service</SUBAGY> <CFR>7 CFR Part 3560</CFR> <DEPDOC>[Docket No. RHS-24-MFH-0041]</DEPDOC> <SUBJECT>Multi-Family Housing Simple Transfer Pilot Program</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Rural Housing Service, USDA. <HD SOURCE="HED">ACTION:</HD> Extension of pilot program. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Rural Housing Service (RHS or the Agency), a Rural Development (RD) agency of the United States Department of Agriculture (USDA), is announcing the extension of a pilot program with updates for simple transfers of USDA Section 514 Farm Labor Housing & 515 Rural Rental Housing properties through December 9, 2025. The Agency's intention is to evaluate the existing regulations and remove regulatory barriers to reduce application requirements for certain types of transfers, resulting in lower transaction-related costs for applicants and improved processing times. </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> The effective date of the Simple Transfer Pilot Program is extended to December 9, 2025, at which time the RHS may extend the pilot program (with or without modifications) or terminate it depending on the workload, budget and resources needed to administer the program, feedback from the public, and the effectiveness of the program. If the pilot program is extended or terminated, the RHS will notify the public. </DATES> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> For general information about the pilot program, contact Jessica Long, Asset Management Division at <E T="03">jessica.long@usda.gov</E> or at 270-392-4526. Owners that are interested in participating in the pilot program should contact the project's assigned servicing specialist in the Field Operations Division. The assigned specialist can be found on the Agency's website at <E T="03">https://www.sc.egov.usda.gov/data/MFH.html.</E> Select the file under the heading “Multi-Family Housing 514 & 515 Property Assignments.” The servicing specialist is listed in the column labeled “Assigned To” and their email is in the column “Assigned To Email.” </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> Title V, Section 506(b) of the Housing Act of 1949, as amended; 42 U.S.C. 1476(b). <HD SOURCE="HD1">Background</HD> RHS is committed to helping improve the economy and quality of life in rural areas by offering a variety of programs such as loans, grants, and loan guarantees to help create jobs, expand economic development, and provide critical infrastructure investments. RHS also provides technical assistance, loans, and grants by partnering with agricultural producers, cooperatives, Indian tribes, non-profits, and other local, state, and federal agencies. The Multi-family Housing Program (MFH), an RHS program, assists rural property owners through loans, loan guarantees, and grants that enable owners to develop and rehabilitate properties for low-income, elderly, and disabled individuals and families as well as domestic farm laborers. MFH works with the owners of its direct and farm labor housing loan properties to subsidize rents for low-income tenants who cannot afford to pay their full rent. These programs assist qualified applicants that cannot obtain commercial credit on terms that will allow them to charge rents that are affordable to low-income tenants. <HD SOURCE="HD1">Summary of Updates to the Pilot Program</HD> 1. The pilot program is extended by one year until December 9, 2025. 2. Section 514 properties are now included in the pilot program. 3. The RHS contact person is updated. 4. Under Option 1, an exception for extending terms for imminent maturing mortgages has been added. 5. The Agency has made clarifications to Option 2 by removing (iii) (c) which was repetitive of (iii)(a) and (b). <HD SOURCE="HD1">Transfer Types: Simple and Standard Transfers</HD> MFH utilizes a variety of tools to revitalize and preserve the physical and financial health of more than 13,000 properties currently in USDA's rural rental portfolio. The Agency may authorize limited demonstration programs to test new approaches to offering housing under the statutory authority granted to the Secretary, as set forth in 42 U.S.C. 1476(b) and 7 CFR 3560.53(t). Such demonstration programs may authorize procedures and requirements that differ from those set forth in statute or regulation. However, any program requirements that are not expressly waived, whether statutory or regulatory, remain in effect. There are two primary types of ownership changes that require approval by MFH which are (1) a change in the borrower entity's organizational structure or (2) a transfer of ownership to a new entity. Organizational changes that include changes in a borrower's current ownership entity structure are addressed in 42 U.S.C. 1485(h) and 7 CFR 3560.405. Transfers, which are sales of projects to new owners that continue to operate the projects in the 515 program, are detailed in 42 U.S.C. 1485(h) and 7 CFR 3560.406. MFH has identified the need to simplify the transfer of ownership for certain types of transactions. The current process places the same submission requirements on applicants regardless of the complexity of the transaction, resulting in undue burdens for relatively uncomplicated transfers, thereby reducing potential transfer and preservation activity in the portfolio. To address this issue, MFH is implementing the Simple Transfer Pilot Program which will offer three additional transfer options as a way to encourage preservation and revitalize its portfolio. MFH expects that by reducing application requirements for certain types of transfers, the result will be lower transaction-related costs for applicants and improved processing times. At the end of the pilot program, MFH will evaluate the findings with consideration towards, if successful, future regulatory changes that could be codified into 7 CFR part 3560 and applied program wide. <HD SOURCE="HD1">Discussion of the Transfer Pilot Program</HD> (1) <E T="03">Simple Transfer Pilot Program:</E> For a simple transfer, under certain conditions the Agency will process an application for an ownership change without requiring full rehabilitation financing and or reserve account funding typically needed to approve a standard transfer. Simple transfers include restrictions on new debt, equity payouts, and other limitations that are not included for standard transfers. The Agency must determine that the new owner can operate the property successfully and that the ownership change will benefit the government and tenants even if there are remaining rehabilitation needs post-transfer. The property must meet the required conditions to be processed as a simple transfer. The Asset Management Division (AMD) will process simple transfers. (2) <E T="03">Standard Transfer:</E> All transfers that do not meet the requirements for a simple transfer are considered standard transfers. Standard transfers often include third-party financing, such as Low-Income Housing Tax Credits (LIHTC), and may include one property or multiple properties in a portfolio. Standard transfers follow the guidance in 7 CFR 3560.406. The Production and Preservation Division (P2) will continue to process standard transfers. <HD SOURCE="HD1">Implementation of the Simple Transfer Pilot Program</HD> Eligible properties include Section 514 Farm Labor Housing and Section 515 Rural Rental Housing properties. Eligibility for the pilot program will be based on property conditions and the ability and willingness of the buyer and seller to meet required simple transfer conditions. Buyers must meet the eligibility criteria in 7 CFR 3560.406. Applicants must be able to clearly demonstrate that the property can operate successfully under new ownership. Applicants must abide by the regulatory requirements set forth in 7 CFR part 3560 and the requirements set forth in applicable statutes, except for the exceptions made available through this pilot program, as detailed in this Notice. Under the pilot program, three simple transfer options are available to address different property circumstances, which are outlined below: <HD SOURCE="HD2">Option 1: Simple Transfer With Expedited Ownership Change Required</HD> Option 1 is the most streamlined transfer process. It is available in circumstances where the Agency determines that an expedited ownership change is in the best interest of the Government, property, and tenants. <HD SOURCE="HD3">(1) Requirements</HD> (i) Property is in acceptable physical condition as determined by the Agency based on information submitted by the applicant, available in Agency files, or available from third parties, AND (ii) Conditions exist that require an expedited transfer, including but not limited to: deceased borrower or general partner, hardship, insolvency, receivership, imminent loan maturity, or sale to nonprofit under prepayment, AND (iii) No additional debt will be incurred by the Buyer or secured by the property as part of the transfer, AND (iv) New owner (nonprofit or for-profit) will provide a plan for the long-term viability of the property, which may include recapitalization/rehabilitation or resetting of reserves. The Agency must determine that the proposed viability plan demonstrates the continued physical and financial viability of the property. <HD SOURCE="HD3">(2) Pilot Program Modification to Current Standard Transfer Requirements in 7 CFR 3560</HD> (i) No Capital Needs Assessment (CNA) is required with the transfer application (the CNA requirement in 7 CFR 3560.406(d)(5) is waived for transfers qualifying for Option 1). (ii) No new valuation of the property is required with the transfer application (the requirement in 3560.406(d)(3)(i) and (ii) that the security value of the housing project b ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 20k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━