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Proposed Rules
Federal Register Vol. 86, No. 109
Wednesday, June 9, 2021

This section of the FEDERAL REGISTER
contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules.

DEPARTMENT OF AGRICULTURE
Rural Housing Service 7 CFR Part 3555
Docket No. RHS21SFH0003
RIN 0575AD22

Single Family Housing Guaranteed Loan Program Rural Housing Service, Agriculture Department USDA.
ACTION: Proposed rule.
AGENCY:

The Rural Housing Service RHS or Agency, proposes to amend the current regulation for the Single Family Housing Guaranteed Loan Program SFHGLP to update the requirements for Federally supervised lenders, minimum net worth and experience for non-supervised lenders, approved lender participation requirements, treatment of applicants with delinquent child support payments and builder credit requirements. These changes would promote an efficient and robust management and oversight structure of lenders in the SFHGLP, strengthen underwriting practices by denying loan guarantees for applicants who are subject to administrative offset to collect delinquent child support payments and streamline requirements for screening builder-contractors by lenders.
DATES: Comments must be submitted on or before August 9, 2021.
ADDRESSES: Comments may be submitted by going to the Federal eRulemaking Portal: Go to http
www.regulations.gov and in the Search Documents box, enter the Docket Number RHS21SFH0003 or the RIN 0575AD22, and click the Search button. To submit a comment, choose the Comment Now! button.
Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available under the Help tab at the top of the Home page.

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Other Information: Additional information about Rural Development and its programs is available on the internet at http www.rurdev.usda.gov/
index.html.
All comments will be available for public inspection online at the Federal eRulemaking Portal https
www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Ana Placencia, Finance and Loan Analyst, Single Family Housing Guaranteed Loan Division, Rural Development, U.S.
Department of Agriculture, STOP 0784, Room 2250, South Agriculture Building, 1400 Independence Avenue SW, Washington, DC 202500784, telephone:
254 7210770; or email:
ana.placencia@usda.gov.
SUPPLEMENTARY INFORMATION:
Background Rural Housing Service RHS is issuing a proposed rule to amend the Single-Family Housing Guaranteed Loan Program SFHGLP regulations as outlined in 7 CFR part 3555, subparts B, C and D by updating the regulations to strengthen oversight and management of the growing SFHGLP portfolio. The revisions align with the standards for managing credit programs recommended by the Office of Management and Budget OMB for Federally supervised lenders, minimum net worth, minimum experience for non-supervised lenders, and approved lender participation requirements. The revisions would also provide guidance for processing applicants with delinquent child support payments and relaxes builder requirements to better align with the credit program requirements of other Federal agencies.
Discussion of the Rule 1 Minimum Net Worth Requirements for Non-Supervised Lenders Currently, the Agency does not impose minimum financial or experience criteria for non-supervised lenders. Non-supervised lenders i.e., lenders not supervised by federal entities listed in 3555.51a8 that do not meet the minimum capital and financial requirements are considered to have a weak financial position that may pose an incremental risk to the program.
The Agency proposes to amend 3555.51 and add paragraph bi and ii to reflect that non-supervised lenders must have a minimum adjusted
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net worth of $250,000, or at least $50,000 in working capital plus one percent of the total volume in excess of $25 million in guaranteed loans originated, serviced or purchased during the lenders prior fiscal year, up to a maximum required adjusted net worth of $2.5 million and one or more lines of credit with a minimum aggregate of $1
million. The proposed financial thresholds are based on recommendations of a third-party contractors analysis 1 of participating lenders. The contractors recommendation for adopting these capital and financial requirements for non-supervised lenders was derived from an analysis of the capital and net worth requirements of recognized sources or eligibility determinations outlined in 3555.51a. Establishing minimum financial requirements for non-supervised lenders would potentially reduce the Agencys risk of doing business with entities that have insufficient financial resources. Lenders that meet these minimum financial requirements also demonstrate trustworthiness that would contribute to the success of the SFHGLP. The contractor recommendation was determined using a combination approach of the Veterans Administration VA base requirement and adding the volume component, which is structured and capped following the FHA standard, see Falcon Capital Advisor, CLIN 0003 Report. The flexibility would allow the Agency to adjust the requirements in the technical handbook without requiring revisions to the regulatory language.
This action will align lender approval requirements with those of other Federal credit programs and incorporates best practice recommendations outlined in Office of Management and Budget OMB
Circular A129.2
1 Falcon Capital Advisors, CLIN 0003 Report, Capital and Financial Requirements for NonRegulated Lenders available at https
www.rd.usda.gov/page/usda-linc-training-resourcelibrary.
2 Available at: https fiscal.treasury.gov/files/
dms/circ-a129-upd-0113.pdf. OMB requires credit granting agencies to establish and publish in the Federal Register specific eligibility criteria for lender or servicer participation in Federal credit programs, including qualification requirements for principal officers and staff of the lender or servicer.
OMB Circular A129, p. 12.

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