Updating Manufactured Housing Provisions

<RULE> DEPARTMENT OF AGRICULTURE <SUBAGY>Rural Housing Service</SUBAGY> <CFR>7 CFR Parts 3550 and 3555</CFR> <DEPDOC>[Docket No. RHS-24-SFH-0034]</DEPDOC> <RIN>RIN 0575-AD32</RIN> <SUBJECT>Updating Manufactured Housing Provisions</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Rural Housing Service, Department of Agriculture (USDA). <HD SOURCE="HED">ACTION:</HD> Final rule. <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 amending the current regulations for the Single Family Housing (SFH) Direct Loan Program and the SFH Guaranteed Loan Program. The intent of this final rule is to allow the Agency to give borrowers increased purchase options within a competitive market and increase adequate housing along with an enhanced customer experience with the SFH programs. </SUM> <DATES> <HD SOURCE="HED">DATES:</HD> This final rule is effective March 4, 2025. </DATES> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Sonya Evans, Finance & Loan Analyst, SFH Direct Loan Division, Rural Housing Service, Rural Development, United States Department of Agriculture, 1400 Independence Avenue SW, Washington, DC 20250, Phone: 423-268-4333, Email: <E T="03">sonya.evans@usda.gov.</E> Or contact Stephanie Freeman, Finance & Loan Analyst, Policy, Analysis, and Communications Branch, Single Family Housing Guaranteed Loan Division, Rural Housing Service, Rural Development, United States Department of Agriculture, 1400 Independence Avenue SW, Washington, DC 20250, Phone: 314-457-6413, Email: <E T="03">stephanie.freeman@usda.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Background</HD> The USDA RHS 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 multifamily housing, childcare centers, fire and police stations, hospitals, libraries, nursing homes, schools, first responder vehicles and equipment, and housing for farm laborers. The Agency also provides technical assistance loans and grants in partnership with non-profit organizations, Indian tribes, state and federal government agencies, and local communities. Well built, affordable housing is essential to the vitality of communities in rural America. RD Single Family Housing (SFH) Programs give families and individuals the opportunity to buy, build, or repair affordable homes located in rural America. Eligibility for these loans, loan guarantees, and grants is based on income and varies according to the average median income for each area. RHS administers the following SFH Programs under 7 CFR parts 3550 and 3555 authorized by section 502 of the Housing Act of 1949, as amended, (42 U.S.C. 1472): ☐ Section 502 Direct Loan Program assists low- and very low-income applicants who currently do not own adequate housing and cannot obtain other credit, the opportunity to acquire, build, rehabilitate, improve, or relocate dwellings in rural areas. ☐ Section 502 Guaranteed Loan Program assists low- and moderate-income applicants the opportunity to acquire, build, rehabilitate, improve, or relocate dwellings in rural areas. <HD SOURCE="HD1">II. Discussion of Public Comments</HD> RHS published a proposed rule on August 16, 2023 (88 FR 55601) to amend the current regulations for the Single-Family Housing Direct and Guaranteed Programs found in 7 CFR part 3550 and 3555, respectfully. The Agency received comments from 35 respondents, including mortgage lenders, real estate agents, brokers, associations, and other interested parties. Specific public comments are addressed below: <E T="03">Public Comment:</E> Twenty-seven respondents replied favorably to the proposed rule with some indicating that manufactured homes are affordable housing options for homebuyers, will assist in alleviating the nation's housing supply shortages in response to the growing demand for low-price housing, provide a better housing affordability option relative to site-built homes, and the improved quality and durability of these type homes has increased the chances of homeownership for lower-income families. <E T="03">Agency's Response:</E> The Agency appreciates the commenters' support and has determined that no action is required. <E T="03">Public Comment:</E> Three respondents expressed support of the proposed rule but suggested that the program be expanded to include all states and include manufactured homes built after June 15, 1976, to align with the requirements set forth by other agencies and government-sponsored enterprises such as, FHA, VA, Fannie Mae, and Freddie Mac. <E T="03">Agency's Response:</E> The Agency acknowledges the recommendation and would like to note that the final rule will expand the program for financing of eligible existing manufactured housing to include all states. However, the consideration of year in which a manufactured home must be built to for eligibility takes into account the Manufactured Housing Improvement Act of 2000 which set forth Federal guidelines that all factory-built housing must meet and further amendments to the Federal Manufactured Home Construction and Safety Standards (FMHCSS). The January 1, 2006, construction on or after date was initially selected for the pilot period. This final rule changes the regulatory restrictions for the SFH Section 502 Direct Loan Program and the SFH Guaranteed Loan Program and allows the programs to lend on existing manufactured homes built in conformance with FMHCSS standards, on or after a date, as determined by the Agency, considering factors such as industry standards and practices. <E T="03">Public Comment:</E> Two respondents expressed support for the proposed rule but suggested that the existing manufactured construction year date be expanded for homes built prior to 2006. <E T="03">Agency's Response:</E> The Agency appreciates the commenters' responses. The January 1, 2006, construction on or after date was initially selected for the pilot period. This final rule revises the regulation to allow the programs to lend on existing manufactured homes built in conformance with FMHCSS standards, on or after a date, as determined by the Agency, with consideration of factors such as industry standards and practices. Existing manufactured homes financed through the section 502 Direct and Guaranteed programs cannot be built on or after a date as determined by the Agency, as identified on the HUD data plate, at the time of loan closing. <E T="03">Public Comment:</E> One respondent expressed support of the proposal and provided additional responses to the questions posed in the proposed rule. The respondent wanted to know why USDA was restricting eligibility to those homes built on or after January 1, 2006, if VA and FHA allow for manufactured homes built on or after June 15, 1976. <E T="03">Agency's Response:</E> The Agency acknowledges the recommendation. The January 1, 2006, construction on or after date was initially selected for the pilot period. This final rule revises the regulatory restrictions and allows the section 502 Direct and Guaranteed programs to lend on existing manufactured homes built in conformance with FMHCSS standards, on or after a date, as determined by the Agency, considering factors such as industry standards and practices. <E T="03">Public Comment:</E> One respondent expressed support of the proposed rule but believed that the handbook should be updated to clarify that the home must meet HUD handbooks and needs to be on piers and strapped down in accordance with HUD Standards for foundations which would be consistent with FHA guidelines. <E T="03">Agency's Response:</E> The Agency acknowledges the recommendation. RHS will require all existing manufactured homes to have been constructed and placed on a permanent foundation in accordance with 7 CFR part 1924, subpart A, exhibit J, as applicable to the Direct Program, and the FMHCSS, established by HUD and found in 24 CFR part 3280 for both Direct and Guaranteed programs. <E T="03">Public Comment:</E> One respondent replied with concerns of the proposal and believed that although there is a need for affordable housing, adding manufactured homes as an asset class would reduce the opportunity for families to build generational wealth and increase government risk due average life expectancy of a manufactured home. <E T="03">Agency's Response:</E> The Agency appreciates the commenter's response. The regulatory requirement in 7 CFR 3550.67, applicable to the 502 Direct loan program, requires that the remaining economic life of the property based on the appraisal must meet or exceed the loan term. For both the Direct and Guaranteed programs, the maximum term for financing manufactured housing cannot exceed 30 years. Once rulemaking is final, RHS will continue to require that existing manufactured homes be built in conformance with the Manufactured Housing Act of 2000 and FMHCSS, which require higher construction standards such as quality building materials, structural design provisions, and installation improvements, thus increasing the life expectancy and value. <HD SOURCE="HD1">Summary of Changes to Rule</HD> This final rule will amend these program regulations to implement changes to permit the purchase of existing manufactured homes [(§§ 3550.52(e)(1), 3550.73(b)(1), 3555.208(a)(3), 3555.208(b)(3), and 3555.208(e)], allow the Agency to accept a lease with an unexpired term that is at least two years longer than the loan term for new energy efficient manufactured and modular home financing in land-lease communities operating on a nonprofit basis and Tribal lands [§§ 3550.58(b) and 3555.203(b)(3)], and amend the definition of a “New dwelling” ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 31k characters. 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