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Federal Register / Vol. 86, No. 109 / Wednesday, June 9, 2021 / Proposed Rules
2 Federally Supervised Lenders Currently, the regulation requires that all lenders approved for participation in the SFHGLP must provide additional information to demonstrate its ability to originate, underwrite and service loans.
However, the Agency has determined that lenders that are Federally supervised and meet the criteria in the current 3555.51a8 have demonstrated ability and should not be required to provide additional documentation. The proposal will alleviate the process for obtaining Agency approval, reduce the required lender documentation and reflect a more streamlined process for Federally supervised lenders.
A summary of the changes includes amending 7 CFR 3555.51a8 to eliminate a8iv because it refers to the Office of Thrift Supervision OTS, which no longer exists. Furthermore, the current 3555.51a9 and 10 is intended to provide a path for lenders that are not regulated by state or federal agencies and do not meet the requirements of a1 through 8 an opportunity to participate in the SFHGLP. Therefore, the Agency also proposes to amend the introductory texts of 3555.51a9 and 10 to clarify that when lenders cannot meet the demonstrated ability criteria outlined under 3555.51a1 through 8, those lenders must submit additional documentation to demonstrate their ability to originate loans.

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3 Approved Lender Participation Requirements Lenders must meet applicable requirements in order to begin and continue participation in the SFHGLP.
Currently, the Agency generally reviews each lender every 2 years to ensure compliance. However, this process is not codified in the regulations.
Therefore, the Agency proposes to amend 3555.51 and add paragraph c under SFHGLP participation requirements, to clarify that lender eligibility will be reviewed every 2 years for continued participation in the SFHGLP. The proposal will also add a requirement that principal officers of lenders must have a minimum of 2 years of experience in originating or servicing guaranteed mortgage loans as recommended in OMB Circular A129.
In order to be deemed eligible for continued lender participation in the SFHGLP, the lender and its principal officers must continue to meet all the criteria as outlined in 3555.51 which, as proposed to be amended, would include a specific experience in
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underwriting and servicing loans, b financial requirements for nonsupervised lenders, and c SFHGLP
participation requirements.
4 Builder-Contractor Requirements At present, 3555.105b4 and 5
require that builder-contractors have acceptable credit histories free of judgments, collections, or liens related to previous projects the buildercontractor was involved with and that they not have a criminal history.
Currently, the lender is responsible for obtaining the builder-contractors credit history and background checks.
However, the Agency has determined that these requirements are not the industry standard. The buildercontractors ability to participate in such projects should be based on the applicants and lenders review of the builder-contractors experience, reputation and financial ability to complete the project in a timely, efficient and competent manner. The proposal would remove 3555.105b4
and 5. The changes would streamline screening requirements, reduce administrative burden on the lender and would also align with other Federal programs, including the Direct Section 502 loan program, which do not have such requirements for buildercontractors. The Agency is specifically soliciting comments on the impact of eliminating the credit and criminal background checks for building contractors.
5 Applicants Delinquent on Child Support Currently, the Agency does not have explicit instructions on how lenders should treat an applicants delinquent child support payments that are subject to collection by federal administrative offset. The Agency considers delinquent child support payments subject to administrative offset a significant derogatory obligation and an indication that an applicant does not have the reasonable ability or willingness to meet their obligations. Furthermore, it would be against the federal governments interest to guarantee a loan for an applicant from whom the federal government is simultaneously pursuing collection for a delinquent debt.
Therefore, RHS proposes to amend 3555.151i to specify that borrowers with delinquent child support payments subject to collection by administrative offset are ineligible unless the payments are brought current, the debt is paid in full, or otherwise satisfied.

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Statutory Authority Section 510k of Title V the Housing Act of 1949 42 U.S.C. 1480k, as amended, authorizes the Secretary of the Department of Agriculture to promulgate rules and regulations as deemed necessary to carry out the purpose of that title.
Executive Order 12866, Classification This rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget OMB.
Executive Order 12988, Civil Justice Reform This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Except where specified, all state and local laws and regulations that are in direct conflict with this rule will be preempted. Federal funds carry federal requirements. No person is required to apply for funding under SFHGLP, but if they do apply and are selected for funding, they must comply with the requirements applicable to the federal program funds. This rule is not retroactive. It will not affect agreements entered into prior to the effective date of the rule. Before any judicial action may be brought regarding the provisions of this rule, the administrative appeal provisions of 7 CFR part 11 must be exhausted.
Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 UMRA, Public Law 1044, establishes requirements for Federal agencies to assess the effect of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the Agency generally must prepare a written statement, including a costbenefit 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 the Agency to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most 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.

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