Single Family Housing Loans, Payment Assistance, 73252-73256 [E7-25107]
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Federal Register / Vol. 72, No. 247 / Thursday, December 27, 2007 / Rules and Regulations
to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller
General of the United States before
publication of this rule in the Federal
Register. This rule is not a major rule as
defined at 5 U.S.C. 814(2).
List of Subjects in 5 CFR Part 1601
Government employees, Pensions,
Retirement.
Gregory T. Long,
Executive Director, Federal Retirement Thrift
Investment Board.
For the reasons set forth in the
preamble, the Agency amends 5 CFR
chapter VI as follows:
I
Classification
PART 1601—PARTICIPANTS’
CHOICES OF TSP FUNDS
1. The authority citation for part 1601
continues to read as follows:
I
Authority: 5 U.S.C. 8351, 8438, 8474(b)(5)
and (c)(1).
2. Amend § 1601.32, by revising
paragraph (b) to read as follows:
I
§ 1601.32
This Final Rule follows the publication
of the Proposed Rule on February 17,
2006, and takes into consideration the
public comments received in response
to the Proposed Rule.
EFFECTIVE DATE: April 1, 2008.
FOR FURTHER INFORMATION CONTACT:
Michael S. Feinberg, Chief, Loan
Origination Branch, Rural Housing
Service, USDA, Ag Box 0783, Room
2214, 1400 Independence Avenue, SW.,
Washington, DC 20250–0783,
Telephone: 202–720–1474.
SUPPLEMENTARY INFORMATION:
Timing and Posting Dates.
*
*
*
*
*
(b) Limit. There is no limit on the
number of contribution allocation or
interfund transfer requests that may be
made by a participant. In order to
mitigate excessive trading expenses, the
Executive Director may write to any
participant who engages in excessive
trading and ask the participant to stop
this practice. If the participant
continues to engage in excessive
trading, the participant may be required
to request interfund transfers by mail.
[FR Doc. E7–25007 Filed 12–26–07; 8:45 am]
BILLING CODE 6760–01–P
DEPARTMENT OF AGRICULTURE
Rural Housing Service
This rule has been determined to be
significant by the Office of Management
and Budget (OMB) under Executive
Order 12866 and has been reviewed by
OMB.
Regulatory Flexibility Act
In compliance with the Regulatory
Flexibility Act (5 U.S.C. 601–602), the
undersigned has determined and
certified by signature of this document
that this rule will not have a significant
economic impact on a substantial
number of small entities. This rule does
not impose any new requirements on
Agency applicants and borrowers, and
the regulatory changes affect only
Agency determination of program
benefits for individual loans.
Environmental Impact Statement
This document has been reviewed in
accordance with 7 CFR part 1940,
subpart G, ‘‘Environmental Program.’’ It
is the determination of RHS that this
proposed 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.
7 CFR Part 3550
Unfunded Mandates Reform Act
RIN 0575–AC59
Title II of the Unfunded Mandates
Reform Act of 1995 (UMRA), Public
Law 104–4, establishes requirements for
Federal agencies to assess the effects 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
Single Family Housing Loans, Payment
Assistance
Rural Housing Service, USDA.
Final rule.
AGENCY:
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ACTION:
SUMMARY: This Final Rule implements a
change in the regulations for the Rural
Housing Service (RHS) 502 Direct Single
Family Housing Loans by amending the
formula that calculates payment
assistance for which a borrower
qualifies. This action is being taken to
improve the distribution of program
benefits, simplify the application
process and improve customer service.
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Agency to identify and consider a
reasonable number of regulatory
alternatives and adopt the least costly,
more 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.
Executive Order 13132
The policies contained in this rule do
not have any substantial direct effect on
States, on the relationship between the
national government and States, or on
the distribution of power and
responsibilities among the various
levels of government. Nor does this rule
impose substantial direct compliance
costs on State and local governments.
Therefore, consultation with the States
is not required.
Programs Affected
This program is listed in the Catalog
of Federal Domestic Assistance under
No. 10.410, Low Income Housing Loans.
Intergovernmental Consultation
For the reasons set forth in the final
rule to 7 CFR part 3015, subpart V, and
related notice (48 FR 29115) this
program is excluded from the scope of
Executive Order (E.O.) 12372, which
requires intergovernmental consultation
with State and local officials.
Civil Justice Reform
This proposed rule has been reviewed
under Executive Order 12988, Civil
Justice Reform. In accordance with this
Executive Order: (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 the regulations of
the Agency at 7 CFR part 11 must be
exhausted before bringing litigation
challenging action taken under this rule.
Paperwork Reduction Act
The information collection
requirements contained in these
regulations have been approved by OMB
under the provisions of 44 U.S.C.
chapter 35 and have been assigned OMB
control number 0575–0172 in
accordance with the Paperwork
Reduction Act. This rule does not revise
or impose any new information
collection requirements.
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E-Gov Statement
RHS is committed to compliance with
the E-Government Act of 2002 (E-Gov),
which requires Government agencies, in
general, to provide the public the option
of submitting information or transacting
business electronically to the maximum
extent possible.
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Economic Impact Analysis
In 2004, USDA Rural Development
engaged Bearing Point to study the
methodology used to determine the
amount of Payment Assistance provided
on direct single family housing loans
made pursuant to the Housing Act of
1949, as amended. Payment assistance
is the subsidy on the interest rate
charged to the borrower and reduces the
amount of their principal and interest
payment to as low as a 1 percent interest
rate. The study was done in response to
concerns expressed by the program’s
stakeholders that the use of Area
Median Income (AMI) to establish
individual borrower subsidy resulted in
disparate treatment and was
unnecessarily complicated. In
addressing the concerns, the Agency
wanted to assure that the program
would continue to serve the same target
market without additional cost to the
program.
Payment assistance is the largest
component of the subsidy cost for this
program, estimated to be 9.37 percent
for FY 2008.
Comments on the proposed rule
expressed concern about the effect of
the changes. As a result, further analysis
was performed, again with the
assistance of Bearing Point. The
concerns focused on the treatment of
leveraged loans and the potential
adverse impact on the lower income
customers within the target market.
The Bearing Point studies are
available for public inspection during
working hours at Room 2214, 1400
Independence Avenue, SW.,
Washington, DC 20250–0783.
Telephone: 202–720–1474.
The proposed formula eliminated the
consideration of AMI addressing the
disparity between higher and lower
income areas. As a result, borrowers
with the same income will receive the
same amount of payment assistance
based on the same housing costs
(Principal, Interest, Taxes, and
Insurance) regardless of where they live.
The proposed change also required that
borrowers pay a minimum of 25% of
their income towards repayment of the
loan. The current formula bases
minimum payment on a range from 22
to 26 percent depending on the
borrower’s income relative to AMI.
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In the final rule, the Agency reduced
the minimum payment to 24% of
income and also allowed for
consideration of a leveraged loan when
the loan is based on an affordable
housing product. An eligible leveraged
loan is a loan with payments amortized
over a period of not less than 30 years
and an interest rate that does not exceed
three percent.
Implementing this revised payment
assistance formula directly addresses
the concerns expressed in the comments
that the proposed new formula will
increase the cost burden on very-low
income borrowers. While the PITI
contribution of some very-low income
borrowers will still rise (from 22% to
24%), the impact will not be as great as
it would have been with a rise in
borrower’s PITI contribution from (22%
to 25% of AAI) as was originally
suggested in the Proposed Rule.
Implementation of this payment
assistance formula will also address the
concerns raised in the comments that
the proposed new formula adversely
affects the leveraged loan program. This
adjustment provides incentives for
borrowers who receive affordable
leverage loans.
The program will continue to assist
very-low and low-income, rural
residents to improve their living
conditions and economic situation by
building equity through
homeownership. Based on the new
study the payment assistance formula
will not have an adverse economic
impact on potential borrowers and will
provide fair and equitable treatment to
all borrowers. In addition, the study also
concluded that the new formula will not
increase the cost of the program and
will continue to serve the same target
population.
The methodology for determining
payment assistance upon
implementation of the Final Rule will
have no significant economic impact
and will result in a small decrease in the
subsidy cost of the program to a level of
9.31% in FY 2008.
I. Background
The U.S. Department of Agriculture’s
(USDA’s) Rural Development is revising
the regulations for its Direct Single
Family Housing Loans. This Program
provides loans to low and very-low
income households to purchase homes
in rural areas. Rural Development
provides rural homeownership credit to
those who otherwise could not obtain it.
These loans provide financing at
reasonable rates and terms with no
downpayments required. Since 1995,
resultant mortgage payments and
payment assistance amounts have been
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based on a percentage of the
participating household’s adjusted
annual income (AAI). However, in
recent years, Rural Development began
to gather anecdotal information that
suggested the formula implemented in
1995 may be resulting in disparate
treatment for some borrowers, especially
those located in more rural counties.
Additionally, the Agency received
complaints that the payment assistance
calculation was too complex, relying
upon multiple variables that change
from year to year, making the formula
difficult to explain to both borrowers
and other parties involved in the loan
origination and servicing processes. As
a response, Rural Development
contracted for a study of the payment
assistance formula, and requested the
development of alternative formulas.
After extensive analysis, one alternative
formula was chosen and proposed in the
Federal Register on February 17, 2006.
This formula differed from the current
formula in that it removed the average
median income (AMI) component from
the payment assistance calculation,
reduced the emphasis on the use of
leveraged loan funding by applying a
single payment assistance formula to all
households (versus the current formula,
which has different criteria for
borrowers who do not use leveraged
loans versus borrowers who do) and
increased the minimum household’s
principal, interest, taxes, and insurance
(PITI) contribution floor payment from
22% to 25%.
II. New Payment Assistance Formula
Proposed in Federal Register on
February 17, 2006
Below is the proposed new payment
assistance formula for all borrowers:
Payment Assistance = Note Rate PITI ¥
Borrower’s PITI Contribution
Regardless of the use of leveraged
loans, the borrower’s PITI contribution
is the higher of:
• 25 percent of borrower’s adjusted
annual income (‘‘AAI’’).
• Principal and Interest (‘‘P&I’’)
calculated at 1 percent plus Taxes and
Insurance (‘‘T&I’’).
III. Discussion of Public Comments
Received on the February 17, 2006
Proposed Rule
The Agency received 51 comments in
response to the Proposed Rule. These
comments came predominantly from
non-profit organizations, advocacy
groups, and community development
organizations. Several comments
supported the new formula. 14
comments supported the removal of
AMI from the current formula, 7
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comments supported the increased
simplification, and 2 comments
supported the consideration of taxes
and income. Rural Development also
received comments that expressed
concern regarding some unintended
consequences of the new formula. The
three largest concerns included: The
impact on the leveraged loan program
(36 comments); the impact on very-low
income borrowers (21 comments); and
the impact on the target market (7
comments). The Agency has examined
these three concerns in detail and
amended the proposed formula to
minimize the unintended consequences
arising from the implementation of a
new payment assistance formula.
A. Concern #1—The Impact of the
Proposed New Formula on the
Leveraged Loan Program
Under the current program, state setasides are established to fund Rural
Development loans with leveraged
funding based on certain partnership
arrangements. This means that
applications using leveraged loans do
not have to compete with applications
that do not use leveraged loans.
Additionally, under the current
regulations, borrowers who use
leveraged loans are not subject to the
floor rate portion of the payment
assistance formula. Payment assistance
for a borrower who uses a leveraged
loan is determined using only the
effective interest rate (EIR). This
provision has, on average, increased the
payment assistance for those borrowers
who have leveraged loans, providing an
incentive for borrowers to seek out
leveraged funding. The payment
assistance formula, as proposed, will no
longer distinguish between the two
types of borrowers. All borrowers,
regardless of their use of leveraged
loans, will be treated equally under the
new formula. Many comments opposed
this reduced emphasis on the use of
leveraged loans.
Agency Response: While it is true that
the proposed new formula will reduce
the incentive to use leveraged loan
funding, this does not necessarily
translate into affecting target borrowers
in a materially detrimental way.
Consider:
1. The leveraged portion of the
average borrower’s principal is
relatively insignificant. Out of 10,502
new borrowers in Fiscal Year 2003,
4,548 (43%) were under the leveraged
loan program. However, leveraged loan
dollars accounted for only 8.2% of the
total loan level.
2. Borrowers who use leveraged loans
have, on average, higher adjusted
annual incomes than the average
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income of all borrowers in the Direct
Single Family Housing Loan Program.
3. Pursuant to their first lien position
and insulation from credit risk, private
lenders accrue much of the subsidy
benefit, rather than borrowers.
Adjustment made to reflect comment
concerns: In light of the strong response
against the reduced incentive for
leveraged lending, the Agency has
amended the proposed payment
assistance formula to recognize
payments made on leveraged loans that
meet certain criteria as part of the
borrower’s minimum PITI contribution.
In order to be recognized under the new
formula, leveraged loans must have:
• An interest rate that is equal to or
less than 3%, and
• A long-term amortization (not less
than 30 years).
This adjustment sustains an incentive
for leveraged loan participation, but
limits that incentive to housing loans at
interest rates reflective of affordable
housing products (i.e., rates of 3% or
less).
B. Concern #2—The Impact of the
Proposed New Formula on the Very-Low
Income Households
Another concern expressed in the
comments was that the proposed new
formula would have a potentially
adverse affect on very-low income
borrowers. Comments expressed
concern that the amount of payment
assistance received by very-low income
borrowers would decrease as a result of
the proposed new formula. Comments
also expressed apprehension that the
new formula would narrow the window
of eligibility for very-low income
borrowers by raising the borrower’s PITI
contribution against fixed underwriting
standards. Currently, the maximum
front-end ratio (a borrower’s
contribution toward total housing
products as a percentage of AAI) is fixed
at 29% for very-low income borrowers
and 33% for low income borrowers, and
the maximum back-end ratio (total debt
as a percentage of AAI) for all borrowers
is fixed at 41%. As very-low income
borrowers have the tightest
underwriting criteria, they have the
potential of being the most affected by
the new formula.
Agency Response: Rural Development
acknowledges that, by definition, the
new formula will decrease the amount
of payment assistance some very-low
income borrowers receive, as their
expected borrower’s contribution will
rise from 22% of AAI to 25%. However,
it is important to note that the new
formula will alleviate inequitable
distribution of Program benefits that has
been occurring under the current
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formula, and therefore will be more
beneficial as a whole to the market
served by the Direct Single Family
Housing Loan Program. Further, the
elimination of the stair steps associated
with the old formula will have a
positive impact on the stability of the
borrower’s payments, improving their
ability to stay current on their loans.
The Agency is required by law to
maintain that at least 40 percent of
appropriated funds for the Program are
used to assist families with an annual
income of less than 50 percent of area
median income to ensure this part of the
market continues to receive maximum
benefit.
Analysis revealed that using the
proposed new formula, when compared
to the current formula, only a negligible
number of borrowers would be excluded
from qualifying for participation in the
Direct Single Family Housing Loan
Program based on current underwriting
criteria.
Adjustment made to reflect comment
concerns: Rural Development has
amended the proposed formula by
lowering the borrower’s minimum PITI
contribution from 25% of AAI to 24%
of AAI. While the PITI contribution of
some very-low income borrowers will
still rise (from 22% to 24% of AAI), the
impact will not be as great as it would
have been with a rise in borrower’s PITI
contribution from 22% to 25% of AAI,
as was originally suggested in the
Proposed Rule.
C. Concern #3—The Impact of the
Proposed New Formula on the Target
Market
One of the original objectives in
choosing a new payment assistance
formula was that the new formula serve
the same target market of borrowers.
Some comments received in response to
the Proposed Rule expressed concern
that the proposed new formula would
not meet this objective. To address this
issue, Rural Development examined
three areas to assess whether the
proposed new formula would serve the
same target market:
• The level of payment assistance
received.
• The number of borrowers served.
• The type of borrower served.
Agency Response: Rural Development
found that the proposed new payment
assistance formula would not
significantly alter the average monthly
payment assistance received by
participating borrowers. It also
concluded that the proposed new
formula would not increase the number
of borrowers who were excluded from
participating in the Program as a result
of underwriting criteria. However, the
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new payment assistance formula would
exclude some borrowers because under
the new formula, the PITI contributions
of these affected borrowers would
exceed the monthly payments they
would pay at the note rate. In other
words, the new formula would increase
their expected PITI contributions to a
level where they would no longer
receive payment assistance from the
Agency. It is important to note,
however, that these affected borrowers
have, on average, relatively higher
incomes than the overall average
income of all borrowers, and are
predominately borrowers who use
leveraged loans.
Adjustments made to reflect comment
concerns: The two adjustments
described above seek to minimize the
number of borrowers impacted by this
phenomenon—first, by lowering the
borrower’s PITI contribution, and
second, by recognizing payments made
toward leveraged loans in the
determination of the level of payment
assistance a borrower will receive.
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IV. Final Payment Assistance Formula
Below is the final payment assistance
formula to be implemented in the Direct
Single Family Housing Loan Program
for all borrowers:
Payment Assistance = Note Rate PITI ¥
Borrower’s PITI Contribution
Regardless of the use of leveraged
loans, the borrower’s PITI contribution
is the higher of:
• 24 percent of borrower’s adjusted
annual income (‘‘AAI’’) for the total
PITI.
• Principal and Interest (‘‘P&I’’)
calculated at 1 percent on the Rural
Development loan plus Taxes and
Insurance (‘‘T&I’’).
Rural Development is allowing the
recognition of payments made on
leveraged loans that meet certain criteria
to be included in the calculation of the
borrower’s minimum PITI contribution
of 24% of AAI. These criteria include:
• An interest rate that is equal to or
less than 3%; and
• A long-term amortization (not less
than 30 years).
This final payment assistance formula
preserves some incentive for
participating borrowers to retain
leveraged loans and reduces the impact
the new formula will have on very-low
income households. Additionally, it
also maintains the objectives of
increasing the equitability of program
benefits and simplifying the application
process, while still serving the same
target market.
A borrower who is currently on
payment assistance or interest credit
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will remain on the current formula as
long as they continue to qualify. A
borrower who never received payment
assistance or interest credit or one who
stopped receiving said assistance and
later qualifies for payment subsidy will
receive Payment Assistance 2.
Due to credit reform considerations, a
borrower may not voluntarily switch
from one method to another.
It should be noted that recapture of
payment assistance is not changed by
this rule.
List of Subjects in 7 CFR Part 3550
Accounting, Housing, Loan
programs—Housing and community
development, low and moderate income
housing, Manufactured homes,
Reporting and recordkeeping
requirements, Rural areas, Subsidies.
I Therefore, Chapter XXXV, title 7,
Code of Federal Regulations is amended
to read as follows:
PART 3550—DIRECT SINGLE FAMILY
HOUSING LOANS AND GRANTS
1. The authority citation for part 3550
continues to read as follows:
I
Authority: 5 U.S.C. 301; 42 U.S.C. 1480.
Subpart B—Section 502 Origination
2. Section 3550.10 is amended by
revising the definitions for ‘‘leveraged
loan’’ and ‘‘payment assistance’’ to read
as follows:
I
§ 3550.10
Definitions.
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*
*
*
*
Leveraged loan. An affordable
housing product loan or grant to an
Agency borrower property, closed
simultaneously with an RHS loan.
Affordable leveraged loans are
characterized by long term (not less than
30 years), amortized payments with a
note interest rate equal to or less than
3 percent .
*
*
*
*
*
Payment assistance. A payment
subsidy available to eligible section 502
borrowers that reduces the effective
interest rate of a loan (see § 3550.68(c)).
Borrowers eligible for a payment
subsidy receive payment assistance
unless they are currently eligible for and
receive interest credit. There are two
methods of payment assistance.
Payment assistance method 1 is found at
3550.68(c)(2). Payment assistance
method 2 is found at 3550.68(c)(1).
*
*
*
*
*
I 3. Section 3550.68 is revised to read
as follows:
§ 3550.68
Payment subsidies.
RHS administers three types of
payment subsidies: interest credit,
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payment assistance method 1, and
payment assistance method 2. Payment
subsidies are subject to recapture when
the borrower transfers title or ceases to
occupy the property.
(a) Eligibility for payment subsidy. (1)
Applicants or borrowers who receive
loans on program terms are eligible to
receive payment subsidy if they
personally occupy the property and
have adjusted income at or below the
applicable moderate-income limit.
(2) Payment subsidy may be granted
for initial loans or subsequent loans
made in conjunction with an
assumption only if the term of the loan
is 25 years or more.
(3) Payment subsidy may be granted
for subsequent loans not made in
conjunction with an assumption if the
initial loan was for a term of 25 years
or more.
(b) Determining type of payment
subsidy. (1) A borrower currently
receiving interest credit will continue to
receive it for the initial loan and for any
subsequent loan for as long as the
borrower is eligible for and remains on
interest credit.
(2) A borrower currently receiving
payment assistance using payment
assistance method 1 will continue to
receive it for the initial loan and for any
subsequent loan for as long as the
borrower is eligible for and remains on
payment assistance method 1.
(3) A borrower who has never
received payment subsidy, or who has
stopped receiving interest credit or
payment assistance method 1, and at a
later date again qualifies for a payment
subsidy, will receive payment assistance
method 2.
(4) A borrower may not opt to change
payment assistance methods.
(c) Calculation of payment assistance.
Regardless of the method used, payment
assistance may not exceed the amount
necessary if the loan were amortized at
an interest rate of one percent.
(1) Payment Assistance Method 2. The
amount of payment assistance granted is
the lesser of the difference between:
(i) The annualized promissory note
installments for the combined RHS loan
and eligible leveraged loans plus the
cost of taxes and insurance less twentyfour percent of the borrower’s adjusted
income, or
(ii) The annualized promissory note
installment for the RHS loan less
amount the borrower would pay if the
loan were amortized at an interest rate
of one percent.
(2) Payment Assistance Method 1. The
amount of payment assistance granted is
the difference between the annualized
note rate installment as prescribed on
the promissory note and the lesser of:
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(i) The floor payment, which is
defined as a minimum percentage of
adjusted income that the borrower must
pay for PITI: 22 percent for very lowincome borrowers, 24 percent for lowincome borrowers with adjusted income
below 65 percent of area adjusted
median, and 26 percent for low-income
borrowers with adjusted incomes
between 65 and 80 percent of area
adjusted median; or
(ii) The annualized note rate
installment and the payment at the
equivalent interest rate, which is
determined by a comparison of the
borrower’s adjusted income to the
adjusted median income for the area in
which the security property is located.
The following chart is used to determine
the equivalent interest rate.
When the applicant’s adjusted income
is:
PERCENTAGE OF MEDIAN INCOME AND
THE EQUIVALENT INTEREST RATE
Equal to
or more
than:
00% .........
50.01% ....
55% .........
60% .........
65% .........
70% .........
75% .........
80.01% ....
90% .........
100% .......
110% .......
THEN the
equivalent
interest
rate is*
BUT less than:
50.01 of adjusted
median income.
55 of adjusted median income.
60 of adjusted median income.
65 of adjusted median income.
70 of adjusted median income.
75 of adjusted median income.
80.01 of adjusted
median income.
90 of adjusted median income.
100 of adjusted median income.
110% of adjusted
median income.
Or more than adjusted median income.
1%
2%
3%
4%
5%
6%
6.5%
7.5%
8.5%
9%
9.5%
pwalker on PROD1PC71 with RULES
Jkt 214001
BILLING CODE 3410–XV–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2005–20856; Directorate
Identifier 2004–NE–25–AD; Amendment 39–
15315; AD 2007–26–13]
RIN 2120–AA64
Airworthiness Directives; MT-Propeller
Entwicklung GmbH Propellers
Federal Aviation
Administration (FAA), Department of
Transportation (DOT).
ACTION: Final rule.
(d) Calculation of interest credit. The
amount of interest credit granted is the
difference between the note rate
installment as prescribed on the
promissory note and the greater of:
(1) Twenty percent of the borrower’s
adjusted income less the cost of real
estate taxes and insurance, or
(2) The amount the borrower would
pay if the loan were amortized at an
interest rate of 1 percent.
(e) Annual review. The borrower’s
income will be reviewed annually to
determine whether the borrower is
16:06 Dec 26, 2007
Dated: December 13, 2007.
Thomas C. Dorr,
Under Secretary, Rural Development.
[FR Doc. E7–25107 Filed 12–26–07; 8:45 am]
AGENCY:
* Or note rate, whichever is less; in no case
will the equivalent interest rate be less than
one percent.
VerDate Aug<31>2005
eligible for continued payment subsidy.
The borrower must notify RHS
whenever an adult member of the
household changes or obtains
employment, there is a change in
household composition, or if income
increases by at least 10 percent so that
RHS can determine whether a review of
the borrower’s circumstances is
required.
SUMMARY: The FAA is superseding an
existing airworthiness directive (AD) for
certain MT-Propeller Entwicklung
GmbH variable pitch and fixed pitch
propellers manufactured before 1995,
which had not been overhauled since
April 1994. That AD currently requires
overhauling the propeller blades and
performing initial and repetitive visual
inspections of affected propeller blades.
That AD also requires removing all
propeller blades from service with
damaged erosion sheath bonding or
loose erosion sheaths and installing any
missing or damaged polyurethane
protective strips. This AD requires the
same actions. This AD results from the
need to clarify the population of
affected propellers previously listed in
AD 2006–05–05. We are issuing this AD
to prevent erosion sheath separation
leading to damage of the airplane.
DATES: This AD becomes effective
January 31, 2008.
ADDRESSES: You can get the service
information identified in this AD from
MT-Propeller USA, Inc., 1180 Airport
Terminal Drive, Deland, FL 32724;
telephone (386) 736–7762, fax (386)
736–7696, or visit https://www.mtpropeller.com.
The Docket Operations office is
located at Docket Management Facility,
PO 00000
Frm 00006
Fmt 4700
Sfmt 4700
U.S. Department of Transportation, 1200
New Jersey Avenue, SE., West Building
Ground Floor, Room W12–140,
Washington, DC 20590–0001.
FOR FURTHER INFORMATION CONTACT:
Terry Fahr, Aerospace Engineer, Boston
Aircraft Certification Office, FAA,
Engine and Propeller Directorate, 12
New England Executive Park,
Burlington, MA 01803; e-mail
terry.fahr@faa.gov; telephone (781) 238–
7155, fax (781) 238–7170.
SUPPLEMENTARY INFORMATION: The FAA
proposed to amend 14 CFR part 39 with
a proposed AD. The proposed AD
applies to certain MT-Propeller
Entwicklung GmbH variable pitch and
fixed pitch propellers manufactured
before 1995, which had not been
overhauled since April 1994. We
published the proposed AD in the
Federal Register on December 13, 2006
(71 FR 74878). That action proposed to
require:
• Overhauling the propeller blades
and performing initial and repetitive
visual inspections of affected propeller
blades.
• Removing all propeller blades from
service with damaged erosion sheath
bonding or loose erosion sheaths and
installing any missing or damaged
polyurethane protective strips.
The proposed AD resulted from the
need to clarify the population of
affected propellers previously listed in
AD 2006–05–05. Since AD 2006–05–05
was issued, MT-Propeller Entwicklung
GmbH Propellers and EASA have
clarified the population of affected
propellers. AD 2006–05–05 described
the affected propellers as variable pitch
and fixed pitch propellers with serial
numbers (SNs) below 95000.
Because propellers with SNs starting
with 00, 01, 02, 03, 04, 05, and 06, were
manufactured in the years 2000, 2001,
2002, 2003, 2004, 2005, and 2006
respectively, some operators are
confused as to whether their propeller
SN is part of the affected population.
For example, propeller SN 00246,
manufactured in 2000, would appear to
be part of the affected population
because the number is below 95000. For
clarification, we are identifying the
affected population as variable pitch
and fixed pitch propellers manufactured
before 1995 which had not been
overhauled since April 1994.
Examining the AD Docket
You may examine the AD docket on
the Internet at https://
www.regulations.gov; or in person at the
Docket Operations office between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal holidays. The AD docket
E:\FR\FM\27DER1.SGM
27DER1
]]>Agencies
[Federal Register Volume 72, Number 247 (Thursday, December 27, 2007)]
[Rules and Regulations]
[Pages 73252-73256]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25107]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3550
RIN 0575-AC59
Single Family Housing Loans, Payment Assistance
AGENCY: Rural Housing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This Final Rule implements a change in the regulations for the
Rural Housing Service (RHS) 502 Direct Single Family Housing Loans by
amending the formula that calculates payment assistance for which a
borrower qualifies. This action is being taken to improve the
distribution of program benefits, simplify the application process and
improve customer service. This Final Rule follows the publication of
the Proposed Rule on February 17, 2006, and takes into consideration
the public comments received in response to the Proposed Rule.
Effective Date: April 1, 2008.
FOR FURTHER INFORMATION CONTACT: Michael S. Feinberg, Chief, Loan
Origination Branch, Rural Housing Service, USDA, Ag Box 0783, Room
2214, 1400 Independence Avenue, SW., Washington, DC 20250-0783,
Telephone: 202-720-1474.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be significant by the Office of
Management and Budget (OMB) under Executive Order 12866 and has been
reviewed by OMB.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
602), the undersigned has determined and certified by signature of this
document that this rule will not have a significant economic impact on
a substantial number of small entities. This rule does not impose any
new requirements on Agency applicants and borrowers, and the regulatory
changes affect only Agency determination of program benefits for
individual loans.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' It is the determination of RHS
that this proposed 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.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects 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 cost-
benefit 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, more 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.
Executive Order 13132
The policies contained in this rule do not have any substantial
direct effect on States, on the relationship between the national
government and States, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on State and local
governments. Therefore, consultation with the States is not required.
Programs Affected
This program is listed in the Catalog of Federal Domestic
Assistance under No. 10.410, Low Income Housing Loans.
Intergovernmental Consultation
For the reasons set forth in the final rule to 7 CFR part 3015,
subpart V, and related notice (48 FR 29115) this program is excluded
from the scope of Executive Order (E.O.) 12372, which requires
intergovernmental consultation with State and local officials.
Civil Justice Reform
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. In accordance with this Executive Order: (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 the
regulations of the Agency at 7 CFR part 11 must be exhausted before
bringing litigation challenging action taken under this rule.
Paperwork Reduction Act
The information collection requirements contained in these
regulations have been approved by OMB under the provisions of 44 U.S.C.
chapter 35 and have been assigned OMB control number 0575-0172 in
accordance with the Paperwork Reduction Act. This rule does not revise
or impose any new information collection requirements.
[[Page 73253]]
E-Gov Statement
RHS is committed to compliance with the E-Government Act of 2002
(E-Gov), which requires Government agencies, in general, to provide the
public the option of submitting information or transacting business
electronically to the maximum extent possible.
Economic Impact Analysis
In 2004, USDA Rural Development engaged Bearing Point to study the
methodology used to determine the amount of Payment Assistance provided
on direct single family housing loans made pursuant to the Housing Act
of 1949, as amended. Payment assistance is the subsidy on the interest
rate charged to the borrower and reduces the amount of their principal
and interest payment to as low as a 1 percent interest rate. The study
was done in response to concerns expressed by the program's
stakeholders that the use of Area Median Income (AMI) to establish
individual borrower subsidy resulted in disparate treatment and was
unnecessarily complicated. In addressing the concerns, the Agency
wanted to assure that the program would continue to serve the same
target market without additional cost to the program.
Payment assistance is the largest component of the subsidy cost for
this program, estimated to be 9.37 percent for FY 2008.
Comments on the proposed rule expressed concern about the effect of
the changes. As a result, further analysis was performed, again with
the assistance of Bearing Point. The concerns focused on the treatment
of leveraged loans and the potential adverse impact on the lower income
customers within the target market.
The Bearing Point studies are available for public inspection
during working hours at Room 2214, 1400 Independence Avenue, SW.,
Washington, DC 20250-0783. Telephone: 202-720-1474.
The proposed formula eliminated the consideration of AMI addressing
the disparity between higher and lower income areas. As a result,
borrowers with the same income will receive the same amount of payment
assistance based on the same housing costs (Principal, Interest, Taxes,
and Insurance) regardless of where they live. The proposed change also
required that borrowers pay a minimum of 25% of their income towards
repayment of the loan. The current formula bases minimum payment on a
range from 22 to 26 percent depending on the borrower's income relative
to AMI.
In the final rule, the Agency reduced the minimum payment to 24% of
income and also allowed for consideration of a leveraged loan when the
loan is based on an affordable housing product. An eligible leveraged
loan is a loan with payments amortized over a period of not less than
30 years and an interest rate that does not exceed three percent.
Implementing this revised payment assistance formula directly
addresses the concerns expressed in the comments that the proposed new
formula will increase the cost burden on very-low income borrowers.
While the PITI contribution of some very-low income borrowers will
still rise (from 22% to 24%), the impact will not be as great as it
would have been with a rise in borrower's PITI contribution from (22%
to 25% of AAI) as was originally suggested in the Proposed Rule.
Implementation of this payment assistance formula will also address the
concerns raised in the comments that the proposed new formula adversely
affects the leveraged loan program. This adjustment provides incentives
for borrowers who receive affordable leverage loans.
The program will continue to assist very-low and low-income, rural
residents to improve their living conditions and economic situation by
building equity through homeownership. Based on the new study the
payment assistance formula will not have an adverse economic impact on
potential borrowers and will provide fair and equitable treatment to
all borrowers. In addition, the study also concluded that the new
formula will not increase the cost of the program and will continue to
serve the same target population.
The methodology for determining payment assistance upon
implementation of the Final Rule will have no significant economic
impact and will result in a small decrease in the subsidy cost of the
program to a level of 9.31% in FY 2008.
I. Background
The U.S. Department of Agriculture's (USDA's) Rural Development is
revising the regulations for its Direct Single Family Housing Loans.
This Program provides loans to low and very-low income households to
purchase homes in rural areas. Rural Development provides rural
homeownership credit to those who otherwise could not obtain it. These
loans provide financing at reasonable rates and terms with no
downpayments required. Since 1995, resultant mortgage payments and
payment assistance amounts have been based on a percentage of the
participating household's adjusted annual income (AAI). However, in
recent years, Rural Development began to gather anecdotal information
that suggested the formula implemented in 1995 may be resulting in
disparate treatment for some borrowers, especially those located in
more rural counties. Additionally, the Agency received complaints that
the payment assistance calculation was too complex, relying upon
multiple variables that change from year to year, making the formula
difficult to explain to both borrowers and other parties involved in
the loan origination and servicing processes. As a response, Rural
Development contracted for a study of the payment assistance formula,
and requested the development of alternative formulas. After extensive
analysis, one alternative formula was chosen and proposed in the
Federal Register on February 17, 2006. This formula differed from the
current formula in that it removed the average median income (AMI)
component from the payment assistance calculation, reduced the emphasis
on the use of leveraged loan funding by applying a single payment
assistance formula to all households (versus the current formula, which
has different criteria for borrowers who do not use leveraged loans
versus borrowers who do) and increased the minimum household's
principal, interest, taxes, and insurance (PITI) contribution floor
payment from 22% to 25%.
II. New Payment Assistance Formula Proposed in Federal Register on
February 17, 2006
Below is the proposed new payment assistance formula for all
borrowers:
Payment Assistance = Note Rate PITI - Borrower's PITI Contribution
Regardless of the use of leveraged loans, the borrower's PITI
contribution is the higher of:
25 percent of borrower's adjusted annual income (``AAI'').
Principal and Interest (``P&I'') calculated at 1 percent
plus Taxes and Insurance (``T&I'').
III. Discussion of Public Comments Received on the February 17, 2006
Proposed Rule
The Agency received 51 comments in response to the Proposed Rule.
These comments came predominantly from non-profit organizations,
advocacy groups, and community development organizations. Several
comments supported the new formula. 14 comments supported the removal
of AMI from the current formula, 7
[[Page 73254]]
comments supported the increased simplification, and 2 comments
supported the consideration of taxes and income. Rural Development also
received comments that expressed concern regarding some unintended
consequences of the new formula. The three largest concerns included:
The impact on the leveraged loan program (36 comments); the impact on
very-low income borrowers (21 comments); and the impact on the target
market (7 comments). The Agency has examined these three concerns in
detail and amended the proposed formula to minimize the unintended
consequences arising from the implementation of a new payment
assistance formula.
A. Concern 1--The Impact of the Proposed New Formula on the
Leveraged Loan Program
Under the current program, state set-asides are established to fund
Rural Development loans with leveraged funding based on certain
partnership arrangements. This means that applications using leveraged
loans do not have to compete with applications that do not use
leveraged loans. Additionally, under the current regulations, borrowers
who use leveraged loans are not subject to the floor rate portion of
the payment assistance formula. Payment assistance for a borrower who
uses a leveraged loan is determined using only the effective interest
rate (EIR). This provision has, on average, increased the payment
assistance for those borrowers who have leveraged loans, providing an
incentive for borrowers to seek out leveraged funding. The payment
assistance formula, as proposed, will no longer distinguish between the
two types of borrowers. All borrowers, regardless of their use of
leveraged loans, will be treated equally under the new formula. Many
comments opposed this reduced emphasis on the use of leveraged loans.
Agency Response: While it is true that the proposed new formula
will reduce the incentive to use leveraged loan funding, this does not
necessarily translate into affecting target borrowers in a materially
detrimental way. Consider:
1. The leveraged portion of the average borrower's principal is
relatively insignificant. Out of 10,502 new borrowers in Fiscal Year
2003, 4,548 (43%) were under the leveraged loan program. However,
leveraged loan dollars accounted for only 8.2% of the total loan level.
2. Borrowers who use leveraged loans have, on average, higher
adjusted annual incomes than the average income of all borrowers in the
Direct Single Family Housing Loan Program.
3. Pursuant to their first lien position and insulation from credit
risk, private lenders accrue much of the subsidy benefit, rather than
borrowers.
Adjustment made to reflect comment concerns: In light of the strong
response against the reduced incentive for leveraged lending, the
Agency has amended the proposed payment assistance formula to recognize
payments made on leveraged loans that meet certain criteria as part of
the borrower's minimum PITI contribution. In order to be recognized
under the new formula, leveraged loans must have:
An interest rate that is equal to or less than 3%, and
A long-term amortization (not less than 30 years).
This adjustment sustains an incentive for leveraged loan
participation, but limits that incentive to housing loans at interest
rates reflective of affordable housing products (i.e., rates of 3% or
less).
B. Concern 2--The Impact of the Proposed New Formula on the
Very-Low Income Households
Another concern expressed in the comments was that the proposed new
formula would have a potentially adverse affect on very-low income
borrowers. Comments expressed concern that the amount of payment
assistance received by very-low income borrowers would decrease as a
result of the proposed new formula. Comments also expressed
apprehension that the new formula would narrow the window of
eligibility for very-low income borrowers by raising the borrower's
PITI contribution against fixed underwriting standards. Currently, the
maximum front-end ratio (a borrower's contribution toward total housing
products as a percentage of AAI) is fixed at 29% for very-low income
borrowers and 33% for low income borrowers, and the maximum back-end
ratio (total debt as a percentage of AAI) for all borrowers is fixed at
41%. As very-low income borrowers have the tightest underwriting
criteria, they have the potential of being the most affected by the new
formula.
Agency Response: Rural Development acknowledges that, by
definition, the new formula will decrease the amount of payment
assistance some very-low income borrowers receive, as their expected
borrower's contribution will rise from 22% of AAI to 25%. However, it
is important to note that the new formula will alleviate inequitable
distribution of Program benefits that has been occurring under the
current formula, and therefore will be more beneficial as a whole to
the market served by the Direct Single Family Housing Loan Program.
Further, the elimination of the stair steps associated with the old
formula will have a positive impact on the stability of the borrower's
payments, improving their ability to stay current on their loans. The
Agency is required by law to maintain that at least 40 percent of
appropriated funds for the Program are used to assist families with an
annual income of less than 50 percent of area median income to ensure
this part of the market continues to receive maximum benefit.
Analysis revealed that using the proposed new formula, when
compared to the current formula, only a negligible number of borrowers
would be excluded from qualifying for participation in the Direct
Single Family Housing Loan Program based on current underwriting
criteria.
Adjustment made to reflect comment concerns: Rural Development has
amended the proposed formula by lowering the borrower's minimum PITI
contribution from 25% of AAI to 24% of AAI. While the PITI contribution
of some very-low income borrowers will still rise (from 22% to 24% of
AAI), the impact will not be as great as it would have been with a rise
in borrower's PITI contribution from 22% to 25% of AAI, as was
originally suggested in the Proposed Rule.
C. Concern 3--The Impact of the Proposed New Formula on the
Target Market
One of the original objectives in choosing a new payment assistance
formula was that the new formula serve the same target market of
borrowers. Some comments received in response to the Proposed Rule
expressed concern that the proposed new formula would not meet this
objective. To address this issue, Rural Development examined three
areas to assess whether the proposed new formula would serve the same
target market:
The level of payment assistance received.
The number of borrowers served.
The type of borrower served.
Agency Response: Rural Development found that the proposed new
payment assistance formula would not significantly alter the average
monthly payment assistance received by participating borrowers. It also
concluded that the proposed new formula would not increase the number
of borrowers who were excluded from participating in the Program as a
result of underwriting criteria. However, the
[[Page 73255]]
new payment assistance formula would exclude some borrowers because
under the new formula, the PITI contributions of these affected
borrowers would exceed the monthly payments they would pay at the note
rate. In other words, the new formula would increase their expected
PITI contributions to a level where they would no longer receive
payment assistance from the Agency. It is important to note, however,
that these affected borrowers have, on average, relatively higher
incomes than the overall average income of all borrowers, and are
predominately borrowers who use leveraged loans.
Adjustments made to reflect comment concerns: The two adjustments
described above seek to minimize the number of borrowers impacted by
this phenomenon--first, by lowering the borrower's PITI contribution,
and second, by recognizing payments made toward leveraged loans in the
determination of the level of payment assistance a borrower will
receive.
IV. Final Payment Assistance Formula
Below is the final payment assistance formula to be implemented in
the Direct Single Family Housing Loan Program for all borrowers:
Payment Assistance = Note Rate PITI - Borrower's PITI Contribution
Regardless of the use of leveraged loans, the borrower's PITI
contribution is the higher of:
24 percent of borrower's adjusted annual income (``AAI'')
for the total PITI.
Principal and Interest (``P&I'') calculated at 1 percent
on the Rural Development loan plus Taxes and Insurance (``T&I'').
Rural Development is allowing the recognition of payments made on
leveraged loans that meet certain criteria to be included in the
calculation of the borrower's minimum PITI contribution of 24% of AAI.
These criteria include:
An interest rate that is equal to or less than 3%; and
A long-term amortization (not less than 30 years).
This final payment assistance formula preserves some incentive for
participating borrowers to retain leveraged loans and reduces the
impact the new formula will have on very-low income households.
Additionally, it also maintains the objectives of increasing the
equitability of program benefits and simplifying the application
process, while still serving the same target market.
A borrower who is currently on payment assistance or interest
credit will remain on the current formula as long as they continue to
qualify. A borrower who never received payment assistance or interest
credit or one who stopped receiving said assistance and later qualifies
for payment subsidy will receive Payment Assistance 2.
Due to credit reform considerations, a borrower may not voluntarily
switch from one method to another.
It should be noted that recapture of payment assistance is not
changed by this rule.
List of Subjects in 7 CFR Part 3550
Accounting, Housing, Loan programs--Housing and community
development, low and moderate income housing, Manufactured homes,
Reporting and recordkeeping requirements, Rural areas, Subsidies.
0
Therefore, Chapter XXXV, title 7, Code of Federal Regulations is
amended to read as follows:
PART 3550--DIRECT SINGLE FAMILY HOUSING LOANS AND GRANTS
0
1. The authority citation for part 3550 continues to read as follows:
Authority: 5 U.S.C. 301; 42 U.S.C. 1480.
Subpart B--Section 502 Origination
0
2. Section 3550.10 is amended by revising the definitions for
``leveraged loan'' and ``payment assistance'' to read as follows:
Sec. 3550.10 Definitions.
* * * * *
Leveraged loan. An affordable housing product loan or grant to an
Agency borrower property, closed simultaneously with an RHS loan.
Affordable leveraged loans are characterized by long term (not less
than 30 years), amortized payments with a note interest rate equal to
or less than 3 percent .
* * * * *
Payment assistance. A payment subsidy available to eligible section
502 borrowers that reduces the effective interest rate of a loan (see
Sec. 3550.68(c)). Borrowers eligible for a payment subsidy receive
payment assistance unless they are currently eligible for and receive
interest credit. There are two methods of payment assistance. Payment
assistance method 1 is found at 3550.68(c)(2). Payment assistance
method 2 is found at 3550.68(c)(1).
* * * * *
0
3. Section 3550.68 is revised to read as follows:
Sec. 3550.68 Payment subsidies.
RHS administers three types of payment subsidies: interest credit,
payment assistance method 1, and payment assistance method 2. Payment
subsidies are subject to recapture when the borrower transfers title or
ceases to occupy the property.
(a) Eligibility for payment subsidy. (1) Applicants or borrowers
who receive loans on program terms are eligible to receive payment
subsidy if they personally occupy the property and have adjusted income
at or below the applicable moderate-income limit.
(2) Payment subsidy may be granted for initial loans or subsequent
loans made in conjunction with an assumption only if the term of the
loan is 25 years or more.
(3) Payment subsidy may be granted for subsequent loans not made in
conjunction with an assumption if the initial loan was for a term of 25
years or more.
(b) Determining type of payment subsidy. (1) A borrower currently
receiving interest credit will continue to receive it for the initial
loan and for any subsequent loan for as long as the borrower is
eligible for and remains on interest credit.
(2) A borrower currently receiving payment assistance using payment
assistance method 1 will continue to receive it for the initial loan
and for any subsequent loan for as long as the borrower is eligible for
and remains on payment assistance method 1.
(3) A borrower who has never received payment subsidy, or who has
stopped receiving interest credit or payment assistance method 1, and
at a later date again qualifies for a payment subsidy, will receive
payment assistance method 2.
(4) A borrower may not opt to change payment assistance methods.
(c) Calculation of payment assistance. Regardless of the method
used, payment assistance may not exceed the amount necessary if the
loan were amortized at an interest rate of one percent.
(1) Payment Assistance Method 2. The amount of payment assistance
granted is the lesser of the difference between:
(i) The annualized promissory note installments for the combined
RHS loan and eligible leveraged loans plus the cost of taxes and
insurance less twenty-four percent of the borrower's adjusted income,
or
(ii) The annualized promissory note installment for the RHS loan
less amount the borrower would pay if the loan were amortized at an
interest rate of one percent.
(2) Payment Assistance Method 1. The amount of payment assistance
granted is the difference between the annualized note rate installment
as prescribed on the promissory note and the lesser of:
[[Page 73256]]
(i) The floor payment, which is defined as a minimum percentage of
adjusted income that the borrower must pay for PITI: 22 percent for
very low-income borrowers, 24 percent for low-income borrowers with
adjusted income below 65 percent of area adjusted median, and 26
percent for low-income borrowers with adjusted incomes between 65 and
80 percent of area adjusted median; or
(ii) The annualized note rate installment and the payment at the
equivalent interest rate, which is determined by a comparison of the
borrower's adjusted income to the adjusted median income for the area
in which the security property is located. The following chart is used
to determine the equivalent interest rate.
When the applicant's adjusted income is:
Percentage of Median Income and the Equivalent Interest Rate
------------------------------------------------------------------------
THEN the
Equal to or more than: BUT less than: equivalent
interest rate is*
------------------------------------------------------------------------
00%............................. 50.01 of adjusted 1%
median income.
50.01%.......................... 55 of adjusted 2%
median income.
55%............................. 60 of adjusted 3%
median income.
60%............................. 65 of adjusted 4%
median income.
65%............................. 70 of adjusted 5%
median income.
70%............................. 75 of adjusted 6%
median income.
75%............................. 80.01 of adjusted 6.5%
median income.
80.01%.......................... 90 of adjusted 7.5%
median income.
90%............................. 100 of adjusted 8.5%
median income.
100%............................ 110% of adjusted 9%
median income.
110%............................ Or more than 9.5%
adjusted median
income.
------------------------------------------------------------------------
* Or note rate, whichever is less; in no case will the equivalent
interest rate be less than one percent.
(d) Calculation of interest credit. The amount of interest credit
granted is the difference between the note rate installment as
prescribed on the promissory note and the greater of:
(1) Twenty percent of the borrower's adjusted income less the cost
of real estate taxes and insurance, or
(2) The amount the borrower would pay if the loan were amortized at
an interest rate of 1 percent.
(e) Annual review. The borrower's income will be reviewed annually
to determine whether the borrower is eligible for continued payment
subsidy. The borrower must notify RHS whenever an adult member of the
household changes or obtains employment, there is a change in household
composition, or if income increases by at least 10 percent so that RHS
can determine whether a review of the borrower's circumstances is
required.
Dated: December 13, 2007.
Thomas C. Dorr,
Under Secretary, Rural Development.
[FR Doc. E7-25107 Filed 12-26-07; 8:45 am]
BILLING CODE 3410-XV-P
