Single Family Housing Guaranteed Loan Program, 73241-73244 [2020-24578]

Download as PDF 73241 Proposed Rules Federal Register Vol. 85, No. 222 Tuesday, November 17, 2020 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. DEPARTMENT OF AGRICULTURE Rural Housing Service 7 CFR Part 3555 [Docket No. RHS–20–SFH–0025] RIN 0575–AD21 Single Family Housing Guaranteed Loan Program Rural Housing Service, Agriculture Department (USDA). ACTION: Proposed rule. AGENCY: The Rural Housing Service (RHS or Agency) proposes to amend the current regulation for the Single-Family Housing Guaranteed Loan Program (SFHGLP) to mandate the use of the Guaranteed Underwriting System (GUS) and the Lender Loan Closing System (LLC) by approved lenders. The Agency’s proposal to mandate the use of GUS in loan originations and the LLC for loan closings will allow the Agency to decrease time-consuming and expensive manual file reviews, improve performance monitoring and reduce program risk of the guaranteed loan portfolio. SUMMARY: Comments must be submitted on or before January 19, 2021. ADDRESSES: Comments may be submitted by going to the Federal eRulemaking Portal: Go to https:// www.regulations.gov and in the ‘‘Search Documents’’ box, enter the Docket Number RHS–20–SFH–0025 or the RIN# 0575–AD21, and click the ‘‘Search’’ button. To submit a comment, choose the ‘‘Comment Now!’’ button. Information on using Regulations.gov, including instructions for accessing documents, submitting comments, and viewing the docket after the close of the comment period, is available under the ‘‘Help’’ tab at the top of the Home page. Other Information: Additional information about Rural Development and its programs is available on the internet at https://www.rurdev.usda.gov/ index.html. DATES: VerDate Sep<11>2014 19:46 Nov 16, 2020 Jkt 253001 All comments will be available for public inspection online at the Federal eRulemaking Portal (https:// www.regulations.gov). FOR FURTHER INFORMATION CONTACT: Ana Placencia, Finance and Loan Analyst, Single Family Housing Guaranteed Loan Division, Rural Development, U.S. Department of Agriculture, STOP 0784, Room 2250, South Agriculture Building, 1400 Independence Avenue SW, Washington, DC 20250–0784. Telephone: (254) 721–0770; or email: ana.placencia@usda.gov. SUPPLEMENTARY INFORMATION: Background Rural Housing Service (RHS) is issuing a proposed rule to amend the Single-Family Housing Guaranteed Loan Program (SFHGLP) regulations found in 7 CFR part 5555, subparts C and D, by updating the regulations to align the Agency’s program with the mortgage industry expectations in the domain of information technology. Currently, the Agency allows approved lenders to submit applications for loan guarantee requests by mail, electronic mail (email) or GUS. Loan requests received by email must be saved to a folder on a computer drive before being manually uploaded into the Electronic Case File (ECF) for processing. If the loan request is received in paper format, it must first be scanned, saved and then uploaded to ECF, which imposes a time constraint on both the lender and the agency. Additionally, Agency staff must place the application in ECF for processing in the sequential order in which it was received. In some cases, paper checks are still being submitted and manually processed by Agency staff before being forwarded to the appropriate finance center. Agency staff must also manually upload the documents for review, separately from the uniform residential appraisal report. Approximately 98 percent of lenders are currently utilizing GUS to submit loan applications. The remaining two percent are submitting manually underwritten loan packages by email or mail. This translates to roughly 1093 manually submitted loans per year and 3826 staff hours. Lenders that participate in the SFHGLP generally participate in other federally insured mortgage programs that require utilization of loan origination systems PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 (LOS). Access to GUS is web-based and is compatible with the industry’s leading LOS technology. The goal of updating this regulation is to better streamline the processing of the SFHGLP application using the automated initiatives of the GUS and the LLC for all applications and loan closings transactions. GUS is compatible with the Loan Origination Systems and Point of Sale vendors that are widely accepted throughout the industry. All SFHGLP loan products are supported by GUS, except for streamlined-assist refinance transactions. Lenders will continue to submit manually underwritten files for these types of transactions by electronic means approved by the Agency. These loans are different from loans downgraded in GUS for manual underwriting—the downgraded loans will continue to be submitted via GUS for a manual review. Mandatory use of the automated underwriting system will not only offer ease to lenders when uploading closing documents and payment of the guarantee and technology fees using the LLC, but will efficiently and effectively allow Agency staff the capability to review loan applications, increase lender’s ability to transfer loans to program investors, and lessen the timeframe for underwriting and processing loan approvals. GUS is a robust automated system that processes application requests and provides specific loan closing data to the lender and the Agency. It offers added benefits to the lender’s decisionmaking process by producing underwriting findings reports and reliable credit data for managing borrower risks.1 Expanded use of the system will maximize the impact of core agency programs and drive innovation that will remove obstacles that delay loan production. Discussion of the Rule In order to provide efficient and timely delivery of the SFHGLP, it is necessary to streamline the processing of SFHGLP applications using automation initiatives as much as possible. The Agency proposes to revise the regulation to mandate that lenders 1 GUS is a tool that helps evaluate the credit risk but does not replace the informed judgment of the experienced underwriter’s decision and does not serve the sole basis for making a final loan decision. See 7 CFR 3555.107(b). E:\FR\FM\17NOP1.SGM 17NOP1 73242 Federal Register / Vol. 85, No. 222 / Tuesday, November 17, 2020 / Proposed Rules utilize GUS and LLC systems for all applications and loan closing files. Mandatory use of GUS and LLC will allow uniformity in application submissions, consistency in the timely processing of loan requests and will save time and administrative costs for both lenders and the Agency by eliminating the requirement for paper file storage, shredding costs, and mail with overnight courier fees. A summary of the changes includes amending 7 CFR 3555.107(b) introductory text and (b)(1), to reflect that the use of the Agency’s automated underwriting system would be required for all requests for conditional commitments and loan guarantees. Submissions by alternate means, such as email or hard copy, will not be permitted and therefore the Agency proposes to eliminate references to such submission methods. The Agency also proposes to amend § 3555.107(c) and add paragraphs (c)(1) and (2) to describe the two types of loans that would still be manually underwritten. First, loan products not supported by the automated origination system, such as streamlined-assist refinance transactions, must be manually underwritten and submitted via secure email or other electronic means approved by the Agency. Second, loans downgraded in the agency’s automated origination system require manual underwriting, although lenders would still submit the loan documentation via the Agency’s automated systems. Concurrently, § 3555.107(i)(4) will be amended to require all loan documentation to be submitted via the Agency’s automated systems with the exception of the loan products described in § 3555.107(c)(1). Regulations § 3555.151(h)(2) would also be amended to clarify procedures for manually underwritten loans. The loan files for manually underwritten loans would still be submitted through the automated underwriting system but require full documentation review, and credit score validation or compensating factors. 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. In accordance with this rule: (1) Unless otherwise specifically provided, all state and local laws that conflict with this rule will be preempted; (2) no retroactive effect will be given to this rule except as specifically prescribed in the rule; and (3) administrative proceedings of the National Appeals Division of the Department of Agriculture (7 CFR part 11) must be exhausted before bringing suit in court that challenges action taken under this rule. 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 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. Statutory Authority Section 510(k) of Title V the Housing Act of 1949 (42 U.S.C. 1480(k)), 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. National Environmental Policy Act This document has been reviewed in accordance with 7 CFR part 1970, subpart A, ‘‘Environmental Policies.’’ RHS determined that this action does not constitute a major Federal action significantly affecting the quality of the environment. In accordance with the National Environmental Policy Act of 1969, Public Law 91–190, an Environmental Impact Statement is not required. Executive Order 12866, Classification This rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, Executive Order 13132, Federalism The policies contained in this rule do not have any substantial direct effect on States, on the relationship between the VerDate Sep<11>2014 19:46 Nov 16, 2020 Jkt 253001 PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 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 The rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601–612). The undersigned has determined and certified by signature on this document that this rule will not have a significant economic impact on a substantial number of small entities since this rulemaking action does not involve a new or expanded program nor does it require any more action on the part of a small business than required of a large entity. Executive Order 12372, Intergovernmental Review of Federal Programs This program is not subject to the requirements of Executive Order 12372, ‘‘Intergovernmental Review of Federal Programs,’’ as implemented under USDA’s regulations at 7 CFR part 3015. Executive Order 13175, Consultation and Coordination With Indian Tribal Governments This Executive order imposes requirements on RHS in the development of regulatory policies that have tribal implications or preempt tribal laws. RHS has determined that the rule does not have a substantial direct effect on one or more Indian tribe(s) or on either the relationship or the distribution of powers and responsibilities between the Federal Government and Indian tribes. Thus, this rule is not subject to the requirements of Executive Order 13175. If tribal leaders are interested in consulting with RHS on this rule, they are encouraged to contact USDA’s Office of Tribal Relations or RD’s Native American Coordinator at: AIAN@ wdc.usda.gov to request such a consultation. Programs Affected The program affected by this proposed rule 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 This rule contains no new reporting or recordkeeping burdens under OMB control number 0575–0179 that would E:\FR\FM\17NOP1.SGM 17NOP1 Federal Register / Vol. 85, No. 222 / Tuesday, November 17, 2020 / Proposed Rules require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). Executive Order 13771—Reducing Regulation and Controlling Regulatory Costs Executive Order 13771 directs agencies to reduce regulation and control regulatory costs and provides that the cost of planned regulations be prudently managed and controlled through a budgeting process. This rule has been reviewed in accordance with E.O. 13771 and it has been determined that because the subject program of this rule is considered an income transfer from taxpayers to program beneficiaries, it is not subject to the requirements of E.O. 13771. Civil Rights Impact Analysis Rural Development has reviewed this rule in accordance with USDA Regulation 4300–4, Civil Rights Impact Analysis, to identify any major civil rights impacts the rule might have on program participants on the basis of age, race, color, national origin, sex or disability. After review and analysis of the rule and available data, it has been determined that implementation of the rule will not adversely or disproportionately impact very low, low- and moderate-income populations, minority populations, women, Indian tribes or persons based on their race, color, national origin, sex, age, disability, or marital or familiar status. No major civil rights impact is likely to result from this rule. E-Government Act Compliance Rural Development is committed to the E-Government Act, which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. USDA Non-Discrimination Policy In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in, or administering USDA programs, are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression), sexual orientation, disability, age, marital status, family/ parental status, income derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by USDA VerDate Sep<11>2014 19:46 Nov 16, 2020 Jkt 253001 (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident. Persons who require alternative means of communication for program information (e.g., Braille, large print, audiotape, American Sign Language, etc.) should contact the responsible Agency or USDA’s TARGET Center at (202) 720–2600 (voice and TTY) or contact USDA through the Federal Relay Service at (800) 877–8339. Additionally, program information may be made available in languages other than English. To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD– 3027, found online at https:// www.ascr.usda.gov/complaint_filing_ cust.html and at any USDA office, or write a letter addressed to USDA and provide in the letter all of the information requested on the form. To request a copy of the complaint form, call (866) 632–9992. Submit your completed form or letter to USDA by: (1) Mail: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 20250–9410; (2) Fax: (202) 690–7442; or (3) Email: program.intake@usda.gov. USDA is an equal opportunity provider, employer, and lender. List of Subjects in 7 CFR Part 3555 Construction, Eligible loan purpose, Home improvement, Loan programs— housing and community development, Loan terms, Mortgage insurance, Mortgages, Rural areas. For the reasons discussed in the preamble, the Agency is proposing to amend 7 CFR part 3555 as follows: PART 3555—GUARANTEED RURAL HOUSING PROGRAM 1. The authority citation for part 3555 continues to read as follows: ■ Authority: 5 U.S.C. 301; 42 U.S.C. 1471 et seq. Subpart C—Loan Requirements 2. Amend § 3555.107 by revising paragraph (b) introductory text, (b)(1), (3), and (6), (c), and (i)(4) to read as follows: ■ § 3555.107 Applications for and issuance of the loan guarantee. * * * * * (b) Automated underwriting. Approved lenders are required to process SFHGLP loans using Rural Development’s automated systems. The automated underwriting system is a tool PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 73243 to help evaluate credit risk but does not substitute or replace the careful judgment of experienced underwriters and shall not be the exclusive determination on extending credit. The lender must apply for and receive approval from Rural Development to utilize the automated underwriting system. Rural Development reserves the right to terminate the lender’s use of the automated underwriting system. (1) Lenders are responsible for ensuring all data is true and accurately represented in the automated underwriting system. * * * * * (3) The use of Rural Development’s automated underwriting system subjects the lender to indemnification requirements in accordance with § 3555.108. * * * * * (6) Lenders will validate findings based on the output report of the automated underwriting system. * * * * * (c) Manual underwriting. Loans requiring manual underwriting (manually underwritten loans) are described in paragraphs (c)(1) and (2) of this section. For manually underwritten loans, full documentation and verification in accordance with subparts C, D, and E of this part will be submitted to Rural Development when requesting a guarantee and maintained in the lender’s file. The documentation will confirm the applicant’s eligibility, creditworthiness, repayment ability, eligible loan purpose, adequate collateral, and satisfaction of other regulatory requirements. The following types of loans require manual underwriting: (1) Loans that are not supported by Rural Development’s automated systems. These loans are submitted by secure email or other electronic means approved by the Agency. (2) Loans downgraded by Rural Development’s automated system. These loans are submitted utilizing Rural Development’s automated system. * * * * * (i) * * * (4) Evidence of documentation supporting the properly closed loan will be submitted using Rural Development’s automated systems, with the exception of manually underwritten loans defined in paragraph (c)(1) of this section. * * * * * Subpart D—Underwriting the Applicant 3. Amend § 3555.151 by revising paragraph (h)(2) introductory text to read as follows: ■ E:\FR\FM\17NOP1.SGM 17NOP1 73244 Federal Register / Vol. 85, No. 222 / Tuesday, November 17, 2020 / Proposed Rules § 3555.151 Eligibility requirements. * * * * (h) * * * (2) The repayment ratio may exceed the percentage in paragraph (h)(1) of this section when certain compensating factors exist. The handbook, HB–1– 3555, Appendix I, located at https:// www.rd.usda.gov/sites/default/files/ hb-1-3555.pdf, will provide examples of when a debt ratio waiver may be granted. The automated underwriting system will consider any compensating factors in determining when the variance is appropriate. Loans downgraded in the automated underwriting system which must be manually underwritten will require the lender to document compensating factors. The presence of compensating factors does not strengthen a ratio exception when multiple layers of risk are present in the application. Acceptable compensating factors, supporting documentation, and maximum ratio thresholds, will be further defined and clarified in the handbook. Compensating factors include, but are not limited to: * * * * * Elizabeth Green, Acting Administrator, Rural Housing Service. [FR Doc. 2020–24578 Filed 11–16–20; 8:45 am] BILLING CODE 3410–XV–P DEPARTMENT OF STATE 22 CFR Part 54 [Public Notice: 11237] RIN 1400–AE37 Passports; Procedures for Passport Couriers Department of State. Proposed rule. AGENCY: ACTION: The Department of State (the Department) proposes regulations to continue a registration program and hand delivery procedures for courier companies used by applicants to transport their passport applications, and U.S. passports issued to them, to and from participating passport agencies. The purpose of these proposed rules is to continue the program that was established by policy, to maintain vigilance over the security of the passport application process, require companies to register with the Department prior to providing hand delivery services to certain applicants for U.S. passports, and to follow a uniform set of hand delivery procedures. SUMMARY: VerDate Sep<11>2014 19:46 Nov 16, 2020 Jkt 253001 Written comments must be received on or before January 19, 2021. ADDRESSES: Interested parties may submit comments to the Department by any of the following methods: Visit the Regulations.gov website at: https://www.regulations.gov and search for the Regulatory Information Number (RIN) 1400–AE37 or docket number DOS–2020–0045. Mail (paper, disk, or CD–ROM): Office of Adjudication, Passport Services, U.S. Department of State, 44132 Mercure Circle, P.O. Box 1227, Sterling, VA 20166–1227, ATTN: Courier Regulation. Email: ca-courierreg@state.gov. You must include the RIN (1400–AE37) in the subject line of your message. All comments should include the commenter’s name, the organization the commenter represents, if applicable, and the commenter’s address. If the Department is unable to read your comment for any reason, and cannot contact you for clarification, the Department may not be able to consider your comment. After the conclusion of the comment period, the Department anticipates publishing a final rule (in which it will address relevant comments) as expeditiously as possible. FOR FURTHER INFORMATION CONTACT: Karen A. Pizza, Office of Adjudication, ca-courierreg@state.gov, (202) 485– 8800. SUPPLEMENTARY INFORMATION: DATES: * Why is the Department proposing this rule? The mission of the Passport Services directorate within the Bureau of Consular Affairs, Department of State, is to issue secure travel documents while providing the highest level of customer service, professionalism, and integrity. Passport Services recognizes that some applicants residing in the continental United States who are using expedited passport processing (22 CFR 51.56) might want to hire a private courier company to deliver their passport applications to a domestic passport agency for processing and to retrieve their issued passports. This hand delivery program for registered courier companies recognizes that for these domestic applicants with urgent travel needs, peace of mind comes from the additional support that a courier company may offer. Accordingly, this program is limited to applicants requesting expedited passport processing, and is available both to applicants who are required to submit an application by personal appearance pursuant to 22 CFR 51.21 (i.e., a DS–11), (and in these cases executed before a designated passport acceptance agent PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 pursuant to 22 CFR 51.22(b)), as well as to applicants who may submit a renewal passport application pursuant to 22 CFR 51.21(b) (i.e., a DS–82). As this program applies only to domestic passport agencies, its scope is limited to the continental United States. To facilitate the processing of passport applications and promote fair and efficient use of Department resources, this rule formalizes procedures for private domestic courier companies that applicants use to transport their passport applications and issued passports to and from domestic passport agencies. The procedures proposed in this rulemaking are a formalization and update of practices and procedures already in place, which are familiar to private courier companies. These procedures will be implemented by domestic passport agencies participating in the Department’s passport hand delivery program for registered courier companies. How will the program work? A courier company must be registered at a passport agency before it may hand deliver passport applications or passports to or from that passport agency. The courier company must be registered with each passport agency at which it proposes to offer hand delivery services. The Department will collect identifying information from the courier company for its registration and require the courier company to certify that the requirements set out in this proposed rule are met by all of its employees who will hand deliver passport applications or passports. The Department will notify a courier company and the passport agency or agencies where its registration is accepted, and the start date after which it can provide hand delivery services at each agency. Passport agencies’ resources are utilized to serve customers who apply in person at a passport agency, to process applications of customers who apply at a passport acceptance facility or renew through the mail, and to process applications submitted by registered courier companies. The priority is to serve customers with urgent travel who apply in person. Passport agencies assign resources to each of these work flows based upon historical data and demand projections to best meet the needs of U.S. citizens, particularly those with immediate travel. The total number of companies that may be registered at each passport agency will be established by the Department and is based upon available E:\FR\FM\17NOP1.SGM 17NOP1

Agencies

[Federal Register Volume 85, Number 222 (Tuesday, November 17, 2020)]
[Proposed Rules]
[Pages 73241-73244]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24578]


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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.

========================================================================


Federal Register / Vol. 85, No. 222 / Tuesday, November 17, 2020 / 
Proposed Rules

[[Page 73241]]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3555

[Docket No. RHS-20-SFH-0025]
RIN 0575-AD21


Single Family Housing Guaranteed Loan Program

AGENCY: Rural Housing Service, Agriculture Department (USDA).

ACTION: Proposed rule.

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

SUMMARY: The Rural Housing Service (RHS or Agency) proposes to amend 
the current regulation for the Single-Family Housing Guaranteed Loan 
Program (SFHGLP) to mandate the use of the Guaranteed Underwriting 
System (GUS) and the Lender Loan Closing System (LLC) by approved 
lenders. The Agency's proposal to mandate the use of GUS in loan 
originations and the LLC for loan closings will allow the Agency to 
decrease time-consuming and expensive manual file reviews, improve 
performance monitoring and reduce program risk of the guaranteed loan 
portfolio.

DATES: Comments must be submitted on or before January 19, 2021.

ADDRESSES: Comments may be submitted by going to the Federal 
eRulemaking Portal: Go to https://www.regulations.gov and in the 
``Search Documents'' box, enter the Docket Number RHS-20-SFH-0025 or 
the RIN# 0575-AD21, and click the ``Search'' button. To submit a 
comment, choose the ``Comment Now!'' button. Information on using 
Regulations.gov, including instructions for accessing documents, 
submitting comments, and viewing the docket after the close of the 
comment period, is available under the ``Help'' tab at the top of the 
Home page.
    Other Information: Additional information about Rural Development 
and its programs is available on the internet at https://www.rurdev.usda.gov/.
    All comments will be available for public inspection online at the 
Federal eRulemaking Portal (https://www.regulations.gov).

FOR FURTHER INFORMATION CONTACT: Ana Placencia, Finance and Loan 
Analyst, Single Family Housing Guaranteed Loan Division, Rural 
Development, U.S. Department of Agriculture, STOP 0784, Room 2250, 
South Agriculture Building, 1400 Independence Avenue SW, Washington, DC 
20250-0784. Telephone: (254) 721-0770; or email: 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    Rural Housing Service (RHS) is issuing a proposed rule to amend the 
Single-Family Housing Guaranteed Loan Program (SFHGLP) regulations 
found in 7 CFR part 5555, subparts C and D, by updating the regulations 
to align the Agency's program with the mortgage industry expectations 
in the domain of information technology.
    Currently, the Agency allows approved lenders to submit 
applications for loan guarantee requests by mail, electronic mail 
(email) or GUS. Loan requests received by email must be saved to a 
folder on a computer drive before being manually uploaded into the 
Electronic Case File (ECF) for processing. If the loan request is 
received in paper format, it must first be scanned, saved and then 
uploaded to ECF, which imposes a time constraint on both the lender and 
the agency. Additionally, Agency staff must place the application in 
ECF for processing in the sequential order in which it was received. In 
some cases, paper checks are still being submitted and manually 
processed by Agency staff before being forwarded to the appropriate 
finance center. Agency staff must also manually upload the documents 
for review, separately from the uniform residential appraisal report.
    Approximately 98 percent of lenders are currently utilizing GUS to 
submit loan applications. The remaining two percent are submitting 
manually underwritten loan packages by email or mail. This translates 
to roughly 1093 manually submitted loans per year and 3826 staff hours. 
Lenders that participate in the SFHGLP generally participate in other 
federally insured mortgage programs that require utilization of loan 
origination systems (LOS). Access to GUS is web-based and is compatible 
with the industry's leading LOS technology.
    The goal of updating this regulation is to better streamline the 
processing of the SFHGLP application using the automated initiatives of 
the GUS and the LLC for all applications and loan closings 
transactions. GUS is compatible with the Loan Origination Systems and 
Point of Sale vendors that are widely accepted throughout the industry. 
All SFHGLP loan products are supported by GUS, except for streamlined-
assist refinance transactions. Lenders will continue to submit manually 
underwritten files for these types of transactions by electronic means 
approved by the Agency. These loans are different from loans downgraded 
in GUS for manual underwriting--the downgraded loans will continue to 
be submitted via GUS for a manual review. Mandatory use of the 
automated underwriting system will not only offer ease to lenders when 
uploading closing documents and payment of the guarantee and technology 
fees using the LLC, but will efficiently and effectively allow Agency 
staff the capability to review loan applications, increase lender's 
ability to transfer loans to program investors, and lessen the 
timeframe for underwriting and processing loan approvals.
    GUS is a robust automated system that processes application 
requests and provides specific loan closing data to the lender and the 
Agency. It offers added benefits to the lender's decision-making 
process by producing underwriting findings reports and reliable credit 
data for managing borrower risks.\1\ Expanded use of the system will 
maximize the impact of core agency programs and drive innovation that 
will remove obstacles that delay loan production.
---------------------------------------------------------------------------

    \1\ GUS is a tool that helps evaluate the credit risk but does 
not replace the informed judgment of the experienced underwriter's 
decision and does not serve the sole basis for making a final loan 
decision. See 7 CFR 3555.107(b).
---------------------------------------------------------------------------

Discussion of the Rule

    In order to provide efficient and timely delivery of the SFHGLP, it 
is necessary to streamline the processing of SFHGLP applications using 
automation initiatives as much as possible. The Agency proposes to 
revise the regulation to mandate that lenders

[[Page 73242]]

utilize GUS and LLC systems for all applications and loan closing 
files. Mandatory use of GUS and LLC will allow uniformity in 
application submissions, consistency in the timely processing of loan 
requests and will save time and administrative costs for both lenders 
and the Agency by eliminating the requirement for paper file storage, 
shredding costs, and mail with overnight courier fees.
    A summary of the changes includes amending 7 CFR 3555.107(b) 
introductory text and (b)(1), to reflect that the use of the Agency's 
automated underwriting system would be required for all requests for 
conditional commitments and loan guarantees. Submissions by alternate 
means, such as email or hard copy, will not be permitted and therefore 
the Agency proposes to eliminate references to such submission methods.
    The Agency also proposes to amend Sec.  3555.107(c) and add 
paragraphs (c)(1) and (2) to describe the two types of loans that would 
still be manually underwritten. First, loan products not supported by 
the automated origination system, such as streamlined-assist refinance 
transactions, must be manually underwritten and submitted via secure 
email or other electronic means approved by the Agency. Second, loans 
downgraded in the agency's automated origination system require manual 
underwriting, although lenders would still submit the loan 
documentation via the Agency's automated systems.
    Concurrently, Sec.  3555.107(i)(4) will be amended to require all 
loan documentation to be submitted via the Agency's automated systems 
with the exception of the loan products described in Sec.  
3555.107(c)(1).
    Regulations Sec.  3555.151(h)(2) would also be amended to clarify 
procedures for manually underwritten loans. The loan files for manually 
underwritten loans would still be submitted through the automated 
underwriting system but require full documentation review, and credit 
score validation or compensating factors.

Statutory Authority

    Section 510(k) of Title V the Housing Act of 1949 (42 U.S.C. 
1480(k)), 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. In 
accordance with this rule: (1) Unless otherwise specifically provided, 
all state and local laws that conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule except 
as specifically prescribed in the rule; and (3) administrative 
proceedings of the National Appeals Division of the Department of 
Agriculture (7 CFR part 11) must be exhausted before bringing suit in 
court that challenges action taken under this rule.

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 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.

National Environmental Policy Act

    This document has been reviewed in accordance with 7 CFR part 1970, 
subpart A, ``Environmental Policies.'' RHS determined that this action 
does not constitute a major Federal action significantly affecting the 
quality of the environment. In accordance with the National 
Environmental Policy Act of 1969, Public Law 91-190, an Environmental 
Impact Statement is not required.

Executive Order 13132, Federalism

    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

    The rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned has 
determined and certified by signature on this document that this rule 
will not have a significant economic impact on a substantial number of 
small entities since this rulemaking action does not involve a new or 
expanded program nor does it require any more action on the part of a 
small business than required of a large entity.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This program is not subject to the requirements of Executive Order 
12372, ``Intergovernmental Review of Federal Programs,'' as implemented 
under USDA's regulations at 7 CFR part 3015.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    This Executive order imposes requirements on RHS in the development 
of regulatory policies that have tribal implications or preempt tribal 
laws. RHS has determined that the rule does not have a substantial 
direct effect on one or more Indian tribe(s) or on either the 
relationship or the distribution of powers and responsibilities between 
the Federal Government and Indian tribes. Thus, this rule is not 
subject to the requirements of Executive Order 13175. If tribal leaders 
are interested in consulting with RHS on this rule, they are encouraged 
to contact USDA's Office of Tribal Relations or RD's Native American 
Coordinator at: [email protected] to request such a consultation.

Programs Affected

    The program affected by this proposed rule 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

    This rule contains no new reporting or recordkeeping burdens under 
OMB control number 0575-0179 that would

[[Page 73243]]

require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35).

Executive Order 13771--Reducing Regulation and Controlling Regulatory 
Costs

    Executive Order 13771 directs agencies to reduce regulation and 
control regulatory costs and provides that the cost of planned 
regulations be prudently managed and controlled through a budgeting 
process. This rule has been reviewed in accordance with E.O. 13771 and 
it has been determined that because the subject program of this rule is 
considered an income transfer from taxpayers to program beneficiaries, 
it is not subject to the requirements of E.O. 13771.

Civil Rights Impact Analysis

    Rural Development has reviewed this rule in accordance with USDA 
Regulation 4300-4, Civil Rights Impact Analysis, to identify any major 
civil rights impacts the rule might have on program participants on the 
basis of age, race, color, national origin, sex or disability. After 
review and analysis of the rule and available data, it has been 
determined that implementation of the rule will not adversely or 
disproportionately impact very low, low- and moderate-income 
populations, minority populations, women, Indian tribes or persons 
based on their race, color, national origin, sex, age, disability, or 
marital or familiar status. No major civil rights impact is likely to 
result from this rule.

E-Government Act Compliance

    Rural Development is committed to the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

USDA Non-Discrimination Policy

    In accordance with Federal civil rights law and U.S. Department of 
Agriculture (USDA) civil rights regulations and policies, the USDA, its 
Agencies, offices, and employees, and institutions participating in, or 
administering USDA programs, are prohibited from discriminating based 
on race, color, national origin, religion, sex, gender identity 
(including gender expression), sexual orientation, disability, age, 
marital status, family/parental status, income derived from a public 
assistance program, political beliefs, or reprisal or retaliation for 
prior civil rights activity, in any program or activity conducted or 
funded by USDA (not all bases apply to all programs). Remedies and 
complaint filing deadlines vary by program or incident.
    Persons who require alternative means of communication for program 
information (e.g., Braille, large print, audiotape, American Sign 
Language, etc.) should contact the responsible Agency or USDA's TARGET 
Center at (202) 720-2600 (voice and TTY) or contact USDA through the 
Federal Relay Service at (800) 877-8339. Additionally, program 
information may be made available in languages other than English.
    To file a program discrimination complaint, complete the USDA 
Program Discrimination Complaint Form, AD-3027, found online at https://www.ascr.usda.gov/complaint_filing_cust.html and at any USDA office, or 
write a letter addressed to USDA and provide in the letter all of the 
information requested on the form. To request a copy of the complaint 
form, call (866) 632-9992. Submit your completed form or letter to USDA 
by:
    (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410;
    (2) Fax: (202) 690-7442; or
    (3) Email: [email protected].
    USDA is an equal opportunity provider, employer, and lender.

List of Subjects in 7 CFR Part 3555

    Construction, Eligible loan purpose, Home improvement, Loan 
programs--housing and community development, Loan terms, Mortgage 
insurance, Mortgages, Rural areas.

    For the reasons discussed in the preamble, the Agency is proposing 
to amend 7 CFR part 3555 as follows:

PART 3555--GUARANTEED RURAL HOUSING PROGRAM

0
1. The authority citation for part 3555 continues to read as follows:

    Authority: 5 U.S.C. 301; 42 U.S.C. 1471 et seq.

Subpart C--Loan Requirements

0
2. Amend Sec.  3555.107 by revising paragraph (b) introductory text, 
(b)(1), (3), and (6), (c), and (i)(4) to read as follows:


Sec.  3555.107   Applications for and issuance of the loan guarantee.

* * * * *
    (b) Automated underwriting. Approved lenders are required to 
process SFHGLP loans using Rural Development's automated systems. The 
automated underwriting system is a tool to help evaluate credit risk 
but does not substitute or replace the careful judgment of experienced 
underwriters and shall not be the exclusive determination on extending 
credit. The lender must apply for and receive approval from Rural 
Development to utilize the automated underwriting system. Rural 
Development reserves the right to terminate the lender's use of the 
automated underwriting system.
    (1) Lenders are responsible for ensuring all data is true and 
accurately represented in the automated underwriting system.
* * * * *
    (3) The use of Rural Development's automated underwriting system 
subjects the lender to indemnification requirements in accordance with 
Sec.  3555.108.
* * * * *
    (6) Lenders will validate findings based on the output report of 
the automated underwriting system.
* * * * *
    (c) Manual underwriting. Loans requiring manual underwriting 
(manually underwritten loans) are described in paragraphs (c)(1) and 
(2) of this section. For manually underwritten loans, full 
documentation and verification in accordance with subparts C, D, and E 
of this part will be submitted to Rural Development when requesting a 
guarantee and maintained in the lender's file. The documentation will 
confirm the applicant's eligibility, creditworthiness, repayment 
ability, eligible loan purpose, adequate collateral, and satisfaction 
of other regulatory requirements. The following types of loans require 
manual underwriting:
    (1) Loans that are not supported by Rural Development's automated 
systems. These loans are submitted by secure email or other electronic 
means approved by the Agency.
    (2) Loans downgraded by Rural Development's automated system. These 
loans are submitted utilizing Rural Development's automated system.
* * * * *
    (i) * * *
    (4) Evidence of documentation supporting the properly closed loan 
will be submitted using Rural Development's automated systems, with the 
exception of manually underwritten loans defined in paragraph (c)(1) of 
this section.
* * * * *

Subpart D--Underwriting the Applicant

0
3. Amend Sec.  3555.151 by revising paragraph (h)(2) introductory text 
to read as follows:

[[Page 73244]]

Sec.  3555.151   Eligibility requirements.

* * * * *
    (h) * * *
    (2) The repayment ratio may exceed the percentage in paragraph 
(h)(1) of this section when certain compensating factors exist. The 
handbook, HB-1-3555, Appendix I, located at https://www.rd.usda.gov/sites/default/files/ hb-1-3555.pdf, will provide examples of when a 
debt ratio waiver may be granted. The automated underwriting system 
will consider any compensating factors in determining when the variance 
is appropriate. Loans downgraded in the automated underwriting system 
which must be manually underwritten will require the lender to document 
compensating factors. The presence of compensating factors does not 
strengthen a ratio exception when multiple layers of risk are present 
in the application. Acceptable compensating factors, supporting 
documentation, and maximum ratio thresholds, will be further defined 
and clarified in the handbook. Compensating factors include, but are 
not limited to:
* * * * *

Elizabeth Green,
Acting Administrator, Rural Housing Service.
[FR Doc. 2020-24578 Filed 11-16-20; 8:45 am]
BILLING CODE 3410-XV-P
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