Surety Requirements, 50222-50223 [05-17026]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Housing Service

[Federal Register Volume 70, Number 165 (Friday, August 26, 2005)]
[Proposed Rules]
[Pages 50222-50223]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-17026]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

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.

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Federal Register / Vol. 70, No. 165 / Friday, August 26, 2005 / 
Proposed Rules

[[Page 50222]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 1924

RIN 0575-AC60


Surety Requirements

AGENCY: Rural Housing Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Housing Service is amending its regulations to 
change the threshold for surety requirements guaranteeing payment and 
performance from a $100,000 contract amount to the maximum Rural 
Development Single Family Housing area lending limit. This limit will 
vary by locality. This will liberalize the requirement for surety and 
take into account the increased construction cost of single family 
homes in Rural Development's Single Family Housing Program. This will 
ease the burden on small contractors for whom obtaining surety is 
difficult and expensive, thereby reducing costs to our single family 
housing borrowers.

DATES: Written or e-mail comments must be received on or before October 
25, 2005.

ADDRESSES: You may submit to this rule by any of the following methods:
     Agency Web Site: https://rdinit.usda.gov/regs/. Follow the 
instructions for submitting comments on the Web Site.
     E-Mail: comments@one.usda.gov. Include the RIN number 
(0575-AC60) in the subject line of the message.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or another mail courier service requiring a street address 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Suite 701, 
Washington, DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., address listed above.

FOR FURTHER INFORMATION CONTACT: Michel Mitias, Technical Support 
Branch, Program Support Staff, Rural Housing Service, U.S. Department 
of Agriculture, STOP 0761, 1400 Independence Avenue SW., Washington, DC 
20250-0761; Telephone: 202-720-9653; FAX: 202-690-4335; E-mail: 
michel.mitias@usda.gov.

SUPPLEMENTARY INFORMATION: 

Classification

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget (OMB).

Civil Justice Reform

    In accordance with this rule: (1) All State and local laws and 
regulations that are in conflict with this rule will be preempted, (2) 
no retroactive effect will be given to this rule, and (3) 
administrative proceedings in accordance with 7 CFR part 11 must be 
exhausted before bringing suit in court challenging action taken under 
this rule, unless those regulations specifically allow bringing suit at 
an earlier time.

Regulatory Flexibility Act

    The Administrator of the Rural Housing Service has determined that 
this rule will not have a significant economic impact on a substantial 
number of small entities as defined in the Regulatory Flexibility Act 
(5 U.S.C. 601 et seq.). New provisions included in this rule will not 
impact a substantial number of small entities to a greater extent than 
large entities. Therefore, a regulatory flexibility analysis was not 
performed.

Paperwork Reduction Act

    There are no new reporting and recordkeeping requirements 
associated with this rule.

Unfunded Mandates Reform Act

    This rule contains no Federal mandates (under the regulatory 
provisions of title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' RHS has determined that this 
action does not constitute a major Federal action significantly 
affecting the quality of the human environment, and, in accordance with 
the National Environmental Policy Act of 1969, Public Law 91-190, an 
Environmental Impact Statement is not required.

Programs Affected

    The programs affected are listed in the Catalog of Federal Domestic 
Assistance under Number 10.410, Very Low to Moderate Income Housing 
Loans, and Number 10.415, Rural Rental Housing Loans. Rural Rental 
Housing Loans will be affected for those construction contracts above 
the applicable Rural Development area loan limit.

Intergovernmental Review

    RHS conducts intergovernmental consultation in the manner 
delineated in RD Instruction 1940-J, ``Intergovernmental Review of 
Rural Development Programs and Activities,'' and in 7 CFR part 3015, 
subpart V. The Very Low to Moderate Income Housing Loans Program, 
Number 10.410, is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. Rural Rental Housing Loans Program, Number 10.415, 
conducts intergovernmental reviews on a case-by-case basis. An 
intergovernmental review for this revision is not required or 
applicable.

Background

    RHS administers the Direct Single Family Housing Loan and Grant 
program pursuant to 7 CFR part 3550, designed to assist very low and 
low-income households to obtain modest, decent, safe, and sanitary 
housing for use as permanent residences in rural areas. Direct loans 
may be used to buy, build, or improve the applicant's permanent 
residence.

[[Page 50223]]

    RHS regulations in 7 CFR part 1924, subpart A, contain requirements 
for construction which is funded with direct RHS loans, including 
direct single family housing loans. The regulation also applies to 
larger direct funded construction projects by other agencies in the 
Rural Development mission area. This regulation was originally 
promulgated on March 13, 1987 in 52 FR 41833. One of the requirements 
in this regulation is that for construction work performed by the 
contract method (where the borrower contracts with a builder for the 
construction), the builder must obtain a surety bond guaranteeing 
payment and performance in the amount of the contract when the contract 
exceeds $100,000. This amount has remained unchanged since 1987. In 
1987, a single family house constructed and financed under the direct 
single family housing loan program would not exceed $100,000. Since 
1987, construction costs for single family houses financed by RHS have 
dramatically increased so that now construction costs frequently exceed 
$100,000. The requirement that builders obtain surety bonds when the 
construction contract exceeds $100,000 has made it difficult for 
contractors to compete for direct single family housing projects 
financed by RHS. While the regulation contains internal exceptions for 
the $100,000 requirement, none of these exceptions satisfactorily 
resolves the cost burden for builders of direct single family housing.
    The revision to 7 CFR 1924.6(a)(3)(i)(A) will facilitate the 
process of construction by raising the threshold when the contractor 
must acquire surety bonds. The purpose of this regulation is to revise 
the existing surety bond requirement for direct funded single family 
housing. The new threshold will be when the contract exceeds the 
applicable RHS area single family housing loan limit as established 
pursuant to 7 CFR 3550.63 and the limit for any particular area is 
available from any Rural Development office.
    The provisions in 7 CFR 1924.6(a)(3)(i) that require payment and 
performance bonds when construction is under this threshold amount 
remain unchanged. RHS has determined that changing the threshold for 
payment and performance bonds provides for more flexibility, is 
locality based, borrowers are adequately protected, and housing costs 
are reduced.

List of Subjects in 7 CFR Part 1924

    Agriculture, Construction management, Construction and repair, 
Energy conservation, Housing, Loan programs--Agriculture, Low and 
moderate income housing.

    For the reasons set forth in the preamble, Chapter XVIII, Title 7, 
of the Code of Federal Regulations is proposed to be amended as 
follows:

PART 1924--CONSTRUCTION AND REPAIR

    1. The authority citation for part 1924 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart A--Planning and Performing Construction and Other 
Development

    2. Section 1924.6 is amended by revising paragraph (a)(3)(i)(A) to 
read as follows:


Sec.  1924.6  Performing development work.

* * * * *
    (a) * * *
    (3) * * *
    (i) * * *
    (A) The contract exceeds the applicable Rural Development Single 
Family Housing area loan limit as per 7 CFR 3550.63. (Loan limits are 
available at the local Rural Development field office.)
* * * * *

    Dated: July 28, 2005.
Russell T. Davis,
Administrator, Rural Housing Service.
[FR Doc. 05-17026 Filed 8-25-05; 8:45 am]
BILLING CODE 3410-XV-P