Single Family Housing Guaranteed Loan Program, 27949-27951 [2010-11383]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Housing Service

[Federal Register Volume 75, Number 96 (Wednesday, May 19, 2010)]
[Proposed Rules]
[Pages 27949-27951]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-11383]


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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. 75, No. 96 / Wednesday, May 19, 2010 / 
Proposed Rules

[[Page 27949]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 1980

RIN 0575-AC83


Single Family Housing Guaranteed Loan Program

AGENCY: Rural Housing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Housing Service proposes two changes to its Single 
Family Housing Guaranteed Loan Program (SFHGLP) regulation. This action 
is taken to achieve savings for the taxpayer, simplify regulations, and 
promote efficiency in managing the SFHGLP. The proposed changes are in 
accordance with the recommendations of the Inspector General in its 
Audit (Number 04601-0017-CH) of April 2009.
    Under the SFHGLP regulation as it stands today, lenders may set an 
interest rate for a loan under the SFHGLP that either does not exceed 
the Lender's published rate for VA first mortgage loans with no 
discount points or does not exceed the current Federal National 
Mortgage Association (Fannie Mae) posted yield for 90-day delivery 
(Actual/Actual), plus six-tenths of 1 percent for 30-year fixed rate 
conventional loans, rounded up to the nearest one-quarter of 1 percent. 
The first proposed rule change would eliminate the lender's published 
VA rate for first mortgage loans with no discount points as an option 
for a maximum interest rate on loans. The effect of this action would 
be to create a more uniform, simpler standard for interest rates under 
the SFHGLP, whereby lenders would always use the current Fannie Mae 
rate as the rate ceiling. The Fannie Mae rate is the most widely 
utilized interest rate guidance by approved lenders. It is also the 
most accessible to lenders and the Agency when documenting loan files 
to ensure affordable interest rates are extended to Guaranteed Loan 
Program borrowers.
    The second proposed change relates to the rights of the Secretary 
when the Secretary has to pay a claim under the guarantee for the loan, 
but the original lender did not originate the loan in accordance with 
the program requirements. The proposed rule change would allow the 
Secretary in certain circumstances to seek indemnification from the 
originator of the loan for the Secretary's loss. This change promises 
to save taxpayer money and incentivize due care on the part of lenders 
by allowing the Government to recoup the funds it pays out in the event 
of a claim under the guarantee where the original lender did not comply 
with SFHGLP requirements.

DATES: Written or e-mail comments on the proposed rule must be received 
on or before July 19, 2010.

ADDRESSES: You may submit comments on this proposed rule by any one of 
the following methods:
     E-Mail: comments@wdc.usda.gov. Include ``RIN No. 0575-
AC83'' in the subject line of the message.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments electronically.
     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 Ave., SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express mail, or other 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, Washington, 
DC 20024.

All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Joaquin Tremols, Acting Director, 
Single Family Housing Guaranteed Loan Division, USDA Rural Development, 
Room 2241, STOP 0784, 1400 Independence Ave., SW., Washington, DC 
20250, Telephone: (202) 720-1465, E-mail: joaquin.tremols@wdc.usda.gov.

SUPPLEMENTARY INFORMATION:

Classification

    This proposed rule has been determined to be non-significant by the 
Office of Management and Budget (OMB) under Executive Order 12866.

Executive Order 12988

    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 this program, 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 104-4, 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 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, most cost-effective, or least burdensome 
alternative that achieves the objectives of the rule.
    This proposed 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.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940,

[[Page 27950]]

subpart G, ``Environmental Program.'' It is the determination of the 
Agency 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, neither an Environmental Assessment nor an Environmental 
Impact Statement is required.

Federalism--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.

Regulatory Flexibility Act

    In compliance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.) the undersigned has determined and certified by signature of this 
document that this rule change will not have a significant impact on a 
substantial number of small entities. This rule does not impose any 
significant new requirements on Agency applicants and borrowers, and 
the regulatory changes affect only Agency determination of program 
benefits for guarantees of loans made to individuals.

Intergovernmental Consultation

    This program/activity is not subject to the provisions of Executive 
Order 12372, which require intergovernmental consultation with State 
and local officials. (See the Notice related to 7 CFR part 3015, 
subpart V, at 48 FR 29112, June 24, 1983; 49 FR 22675, May 31, 1984; 50 
FR 14088, April 10, 1985).

Programs Affected

    This program is listed in the Catalog of Federal Domestic 
Assistance under Number 10.410, Very Low to Moderate Income Housing 
Loans (Section 502 Rural Housing Loans).

Paperwork Reduction Act

    The information collection and record keeping requirements 
contained in this regulation have been approved by OMB in accordance 
with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.). The 
assigned OMB control number is 0575-AC83.

E-Government Act Compliance

    The Rural Housing Service is committed to complying with the E-
Government Act, to promote the use of the Internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes.

Background

    In the spring of 2009, the Inspector General completed an audit of 
the controls over lending activities in the SFHGLP. The audit was 
initiated because of an investigation by the Inspector General into a 
lender who submitted false documents to the Agency to obtain loan 
guarantees. Additionally, the Inspector General was concerned that some 
lenders were setting interest rates on guaranteed loans that were 
excessive and not in compliance with Agency guidelines. The audit 
evaluated the systems and processes to ensure that lenders (1) submit 
accurate and legitimate borrower eligibility data and (2) set interest 
rates on loans within Agency guidelines. The audit report made a number 
of recommendations for what the SFHGLP can do to streamline operations, 
prevent fraud, and improve efficiency in its mission. In response to 
the audit, the two rules presented here are being proposed.

OMB Control Number

    The report and recordkeeping requirements contained in this 
regulation have been approved by the Office of Management and Budget 
and have been assigned OMB control number 0575-AC83.

List of Subjects in 7 CFR Part 1980

    Home improvement, Loan Programs--Housing and community development, 
Mortgage insurance, Mortgages, Rural areas.
    For the reason stated in the preamble, Chapter XVIII, Title 7 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 1980--RURAL HOUSING LOANS

    1. The authority citation for part 1980 continues to read as 
follows:

    Authority:  5 U.S.C. 301 and 7 U.S.C. 1989. Subpart E also 
issued under 7 U.S.C. 1932(a).

Subpart D--Rural Housing Loans

    2. Section 1980.308 is revised to read as follows:


Sec.  1980.308  Full faith and credit.

    (a) Loan note guarantee. The loan note guarantee constitutes an 
obligation supported by the full faith and credit of the United States 
and is incontestable except for fraud or misrepresentation of which the 
Lender has actual knowledge at the time it becomes such Lender or which 
the Lender participates in or condones. Misrepresentation includes 
negligent misrepresentation. A note which provides for the payment of 
interest on interest shall not be guaranteed. Any guarantee or 
assignment of a guarantee attached to or relating to a note which 
provides for the payment of interest on interest is void. 
Notwithstanding the prohibition of interest on interest, interest may 
be capitalized in connection with reamortization over the remaining 
term with written concurrence of RHS. The loan note guarantee will be 
unenforceable to the extent any loss is occasioned by violation of 
usury laws, negligent servicing, or failure to obtain the required 
security regardless of the time at which RHS acquires knowledge of the 
foregoing. Negligent servicing is defined as servicing that is 
inconsistent with this subpart and includes the failure to perform 
those services which a reasonably prudent lender would perform in 
servicing its own loan portfolio of loans that are not guaranteed. The 
term includes not only the concept of a failure to act, but also not 
acting in a timely manner or acting contrary to the manner in which a 
reasonably prudent lender would act up to the time of loan maturity or 
until a final loss is paid. Any losses occasioned will be unenforceable 
to the extent that loan funds are used for purposes other than those 
authorized in this subpart. When the lender conducts liquidation in an 
expeditious manner, in accordance with the provisions of Sec.  1980.374 
of this subpart, the loan note guarantee shall cover interest until the 
claim is paid within the limit of the guarantee.
    (b) Indemnification. If RHS determines that a Lender did not 
originate a loan in accordance with the requirements in this subpart, 
and RHS pays a claim under the loan guarantee, RHS may revoke the 
Lender's eligibility status in accordance with Sec.  1980.309 (h) of 
this subpart and may also require the Lender:
    (1) To indemnify RHS for the loss, if the payment under the 
guarantee was made within 24 months of loan closing; or
    (2) To indemnify RHS for the loss regardless of how long ago the 
loan closed, if RHS determines that fraud or misrepresentation was 
involved in connection with the origination of the loan.
    3. Section 1980.320 is revised to read as follows:

[[Page 27951]]

Sec.  1980.320  Interest rate.

    The interest rate must not exceed the established, applicable usury 
rate. Loans guaranteed under this subpart must bear a fixed interest 
rate over the life of the loan. The rate shall be agreed upon by the 
borrower and the Lender and must not be more than the current Fannie 
Mae rate as defined in Sec.  1980.302(a) of this subpart. The Lender 
must document the rate and the date it was determined.
    4. Section 1980.353 (c)(4) is revised to read as follows:


Sec.  1980.353  Filing and processing applications.

    (c) * * *
    (4) Anticipated loan rates and terms, the date and amount of the 
Fannie Mae rate used to determine the interest rate, and the Lender's 
certification that the proposed rate is in compliance with Sec.  
1980.320 of this subpart.
* * * * *

    Dated: April 30, 2010.
Tammye Trevi[ntilde]o,
Administrator, Rural Housing Service.
[FR Doc. 2010-11383 Filed 5-18-10; 8:45 am]
BILLING CODE 3410-XV-P