Single Family Housing Guaranteed Loan Program, 47646-47652 [2022-16637]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Housing Service

[Federal Register Volume 87, Number 149 (Thursday, August 4, 2022)]
[Proposed Rules]
[Pages 47646-47652]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16637]


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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. 87, No. 149 / Thursday, August 4, 2022 / 
Proposed Rules

[[Page 47646]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Part 3555

[Docket Number RHS-21-SFH-0017]
RIN 0575-AD08


Single Family Housing Guaranteed Loan Program

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

ACTION: Proposed rule.

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SUMMARY: The Rural Housing Service (RHS or Agency), a Rural Development 
agency within the United States Department of Agriculture, is proposing 
to amend its regulations that would grant to Delegated Lenders 
participating in the Single-Family Housing Guaranteed Loan Program 
(SFHGLP) the authority to make loans and issue the Loan Note Guarantees 
after closing using automated loan underwriting and closing systems.

DATES: Comments must be submitted on or before October 3, 2022.

ADDRESSES: Comments may be submitted electronically by the Federal 
eRulemaking Portal: Go to https://www.regulations.gov and in the 
``Search for Rules, Proposed Rules, Notices or Supporting Documents'' 
box, enter the following docket number: (RHS-21-SFH-0017). To submit or 
view public comments, click ``Search'' button, select the ``Documents'' 
tab, then select the following document title: (Single Family Housing 
Guaranteed Loan Program) from the ``Search Results'' and select the 
``Comment'' button. Before submitting your comments, you may also 
review the ``Commenter's Checklist'' (optional). Insert your comments 
under the ``Comment'' title, click ``Browse'' to attach files (if 
available). Input your email address and select ``Submit Comment.'' 
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 through the site's 
``FAQ'' link.
    Other Information: Additional information about Rural Development 
and its programs is available on the internet at https://www.rd.usda.gov.
    All comments will be available for public inspection online at the 
Federal eRulemaking Portal (https://www.regulations.gov).

FOR FURTHER INFORMATION CONTACT: Sara Thieleke, Finance and Loan 
Analyst, Single Family Housing Guaranteed Loan Division, Rural 
Development, U.S. Department of Agriculture, STOP 0784, South 
Agriculture Building, 1400 Independence Avenue SW, Washington, DC 
20250-0784. Telephone: (314) 457-5242; or email: 
[email protected].

SUPPLEMENTARY INFORMATION: 

Abbreviations

CFR Code of Federal Regulations
DA Delegated Authority
FHA Federal Housing Administration
FR Federal Register
OMB Office of Management and Budget
RHS Rural Housing Service
Sec.  Section
SFHGLP Single Family Housing Guaranteed Loan Program
UMRA Unfunded Mandates Reform Act of 1995
U.S.C. United States Code
USDA U.S. Department of Agriculture
VA Veterans Affairs

Background

    The RHS administers the Single-Family Housing Guaranteed Loan 
Program (SFHGLP) that provides a 90% Loan Note Guarantee to approved 
lenders in order to reduce the lender's risk of extending loans to low- 
and moderate-income households in rural areas. The current Agency 
process requires lenders to submit loan documentation for Agency review 
and approval at various stages. Lenders submit application and 
underwriting documentation to the Agency for review before the Agency 
issues a Conditional Commitment for a guarantee (See 7 CFR 
3555.107(f)). After loan closing, lenders submit the closing 
documentation, certifications, and fees to the Agency for another 
review before the Agency issues the Loan Note Guarantee (See 7 CFR 
3555.107(i) and (j)).
    The process can be time-consuming, and given the growing demand for 
SFHGLP loans, the Agency proposes to change its regulation to 
streamline the process of approving SFHGLP loans and issuing Loan Note 
Guarantees.
    Under section 201 of the Housing Opportunity Through Modernization 
Act of 2016 (Pub. L. 114-201), the Congress amended section 502 of the 
Housing Act of 1949 by adding a new subsection (h) authorizing the 
Secretary of Agriculture to delegate, in part or in full, the 
Secretary's guarantee authority to eligible lenders. Therefore, RHS 
proposes to revise the SFHGLP regulation at 7 CFR part 3555 by adding a 
section for delegated approval authority to Delegated Lenders. Although 
subsection (h) of section 502 of the Housing Act of 1949 cites the term 
``Preferred Lender'', the term ``Delegated Lender'' will be used for 
the purpose of this proposal. Currently, the Agency does not delegate 
approval authority to any lender.
    The need for delegated approval authority arises due to issues 
associated with efficiency for loan approvals. A Delegated Lender would 
need limited to no Agency involvement in the pre-closing and post-
closing Loan Note Guarantee approval process. These changes will 
accelerate approval processing timeframes to the benefit of applicants, 
Delegated Lenders, and the Agency. Under the proposed rule, lenders 
meeting certain criteria may receive delegated lender status that 
allows the Delegated Lender to approve SFHGLP loans and obtain Loan 
Note Guarantees with limited to no Agency involvement. Delegated 
Lenders would not need to submit a request for a Loan Note Guarantee, 
and the Conditional Commitment request and approval step would be 
eliminated.
    The Department of Housing and Urban Development's Federal Housing 
Administration's (FHA) and the Department of Veterans Affairs' (VA) 
insurance and guaranty programs currently have delegated approval 
authority. FHA's Lender Insurance program, authorized by the National 
Housing Act section 256 (12 U.S.C. 1715z-21), and VA's Automatic 
Authority program, authorized by the Servicemen's Readjustment Act of 
1944, (Pub. L. 78-346), permit lenders to obtain the insurance or 
guaranty certificates after underwriting and closing the loans with 
limited or no involvement of FHA or VA staff. Federal agencies have 
moved to the delegated process to leverage the processing

[[Page 47647]]

power and expertise of private-sector lenders and to balance growing 
programs with decreasing federal administrative resources. The Agency 
is proposing to mirror the HUD/FHA and VA processes, to the extent 
feasible, in order to create efficiencies, better serve stakeholders, 
and reduce the burden on Agency resources.

Discussion of the Rule

    Under the proposed rule, loan approval and issuance of the Loan 
Note Guarantee would be delegated to the Delegated Lender. Delegated 
Lenders would be required to use Agency automated loan underwriting and 
closing systems to originate, process, close, and service loan 
applications in accordance with the published regulations and handbook 
guidance. In this respect, the Delegated Lender will act as the Agency 
and would require limited to no Agency involvement in the pre-closing 
loan approval process and post-closing issuance of the Loan Note 
Guarantee. The Delegated Lender would approve the loan in the Agency's 
automated system. With delegated authority, Conditional Commitments may 
not be required, and the provisions of Sec.  3555.107(f) for issuance 
of the Conditional Commitment may not be applicable. After loan 
closing, Delegated Lenders would continue to adhere to the proper loan 
closing procedures under Sec.  3555.107(i) and (j) for issuance of the 
Loan Note Guarantee. The Agency proposes to remove Sec.  3555.107(i)(5) 
which provides lenders a self-certification option in lieu of 
submitting full documentation. Delegated Lenders will retrieve the Loan 
Note Guarantee from the Agency's automated system, which would have the 
same force and effect as a Loan Note Guarantee issued directly by the 
Agency. The Loan Note Guarantee would be supported by the full faith 
and credit of the United States, as provided in Sec.  3555.108, 
regardless of whether the Loan Note Guarantee is obtained by a 
Delegated Lender through the Agency's automated system, or from the 
Agency directly. Therefore, unless provided otherwise or inapplicable, 
the Delegated Lender would be responsible for ensuring that both the 
applicant and the property meet the eligibility requirements and 
certification for the loan guarantee under subparts C, D, and E of 7 
CFR part 3555 and the environmental requirements in Sec.  3555.5.
    The Agency proposes to modify the procedures for delegated lenders 
as follows:
    Environmental Reviews--Delegated Lenders would be delegated the 
authority to perform the functions typically carried out by the Agency 
in order to comply with the environmental requirement responsibilities 
in Sec.  3555.5 and 7 CFR part 1970, except in situations with 
extraordinary circumstances, as defined in 7 CFR 1970.52. Delegated 
Lenders would be required to be knowledgeable in reviewing and applying 
categorical exclusions as outlined under Sec.  1970.51 and Sec.  
1970.53. While SFHGLP loans are generally considered categorical 
exclusions for environmental purposes, the Delegated Lender must notify 
the Agency if there is an extraordinary circumstance. The Agency will 
then decide the next best course of action. If an environmental 
assessment or environmental impact statement is necessary and the 
Delegated Lender prepares such document, the Agency must independently 
evaluate such document. In addition, Delegated Lenders may seek the 
assistance of the Agency at any point during the environmental review.
    Appraisal Reviews--Agency administrative appraisal reviews under 
Sec.  3555.107(d)(4) would be inapplicable to loans approved under the 
proposed model. Delegated Lenders would be responsible for ensuring 
that appraisal reports meet all requirements under Sec.  3555.107(d).
    Application priority processing--The requirements under Sec.  
3555.107(a) for prioritizing applications would not apply to Delegated 
Lenders.
    In addition, the proposed rule clarifies a Delegated Lender's 
responsibilities under the conflict-of interest-provisions at Sec.  
3555.8. When a conflict of interest is disclosed by either the borrower 
or a Rural Development employee as described under Sec.  3555.8, the 
Delegated Lender is required to document the disclosure in the 
permanent loan file. Under the proposed rule, a Delegated Lender would 
still be responsible for documenting any conflict of interest. However, 
since Delegated Lenders would process pre-closing and post-closing 
activities with limited to no Agency assistance under the proposed 
rule, reassignment of the application would not be necessary as 
described under Sec.  3555.8(d).
    This proposed delegated authority model could reduce the pre-
closing loan approval processing timeframe by 3 to 4 business days. 
Currently, approved lenders fully underwrite and approve an application 
prior to submitting the application to the Agency for a Conditional 
Commitment. Historically, the average loan processing time for the 
Agency to review an application and provide a response to the lender is 
3 to 4 business days. Under delegated authority, the approved lender 
will be able to obtain the Conditional Commitment upon completion of 
their underwriting and approval, eliminating the 3 to 4 business day 
Agency review time.
    In addition, the proposed rule reduces post-closing issuance of the 
guarantee processing timeframes by an additional 3 to 4 business days. 
Historically, the Agency has taken on average 3 to 4 business days to 
process a request for a Loan Note Guarantee. Under delegated authority, 
the lender will retrieve their own Loan Note Guarantee from the Agency 
automated systems, eliminating the 3 to 4 business day Agency 
processing time. Combining the pre-closing loan approval processing 
timeframe and the post-closing issuance of the guarantee processing 
timeframe, a total of 6 to 8 business days could be eliminated with 
delegated authority.
    Upon implementation, the Agency would be able to reallocate staff 
to mission-critical functions, such as portfolio risk management and 
expanded lender monitoring and oversight. The proposed changes, which 
align Agency processes with industry standards, create efficiencies and 
provide faster and better service to low- and moderate-income 
borrowers, resulting in earlier home move-in dates.
    RHS proposes to delegate this type of pre-closing loan approval and 
post-closing guarantee issuance authority to Delegated Lenders that 
meet specific requirements for portfolio performance and underwriting 
capability. The Agency does not propose changing basic lender 
eligibility requirements, as outlined in 7 CFR 3555.51, ``Lender 
Eligibility,'' but rather proposes to add a section to define a 
Delegated Lender as an entity with delegated authority (DA) approval.
    RHS proposes to add Sec.  3555.55, ``Delegated Lenders,'' to 
delegate the authority to approve and execute loan guarantees with 
limited to no involvement of Agency staff. Proposed paragraphs (a) and 
(b) outline requirements for lenders to qualify for Delegated Lender 
status, which include meeting the general lender eligibility 
requirements in Sec.  3555.51, participation in the SFHGLP for at least 
the previous two years, and higher than average performance standards 
in delinquency, default, and loss claim rates for that two-year period 
prior to approval. Delegated Lenders would need to maintain general 
lender eligibility under Sec.  3555.51 as well as the higher 
performance metrics in delinquency, loss claim, and default rates to 
retain delegated lender status, which would be evaluated every two 
years. The Agency

[[Page 47648]]

may adjust, modify, or cancel the delegated lender program based on 
overall program considerations such as budget, program performance, and 
program integrity. In the event that modifications are made to the 
performance metrics for new Delegated Lenders, existing Delegated 
Lenders would retain their status, and the Agency would provide a 
reasonable timeframe to meet the new performance metrics in order to 
continue retaining delegated lender status. The Agency would perform a 
controlled rollout for the delegated authority of Delegated Lenders to 
foster a smooth implementation. The rollout will be phased-in to allow 
the Agency some control over the number of loans guaranteed by 
Delegated Lenders over a period of at least three years after the final 
rule is published. The top 10 percent performing lenders will be in the 
first phase of the rollout for participation. The Agency will then 
evaluate the performance of the process, the efficiency of the process, 
and necessary adjustments. The Agency will continue to phase in new 
lenders as the process is refined. The number of lenders approved for 
delegated lender status will be contingent on the progress of the 
Agency's systems modifications, budgetary constraints, portfolio 
performance, and availability of resources required to perform lender 
oversight and monitoring. Full implementation is expected by the end of 
the third year.
    Proposed paragraphs (a) and (b) outline the conditions under which 
a lender's delegated status may be removed. As stated in proposed 
paragraph (a), the Agency would have the right to terminate any 
lender's delegated status for reasons including, but not limited to, 
approving loans that do not meet Agency loan program guidelines, 
entering data into the Agency's automated underwriting system which is 
not supported by documentation retained by the lender, maintaining a 
portfolio that does not meet the established delinquency, loss claim, 
and default rate performance metrics, and an inability to meet the 
criteria described in Sec.  3555.51, ``Lender Eligibility.''
    The Agency proposes ongoing monitoring and oversight for Delegated 
Lenders from two perspectives: (1) Monitoring Performance--regular 
collection and analysis of loan level data and performance, and (2) 
Lender Oversight--on-site and off-site reviews and examinations.

(1) Monitoring Performance

    Loan level data is collected from lenders each month through the 
Electronic Status Reporting system. This data is compiled, reviewed, 
and monitored by the Agency every month to determine portfolio 
performance as well as risks and trends in delinquency, default, and 
loss claim rates. This loan level data would be collected and analyzed 
for Delegated Lenders and provide the Agency with information regarding 
the performance of Delegated Lenders.

(2) Lender Oversight (LO) Reviews/Examinations

    The Agency's Quality Assurance and Lender Oversight Division will 
institute a regular LO process specifically for Delegated Lenders to 
ensure adherence to Agency loan program requirements found at 7 CFR 
3555 and continuing eligibility for the program. The process will 
consist of reviews/examinations of multiple elements of the mortgage 
origination and servicing processes based on the review of a 
representative sample of loans, financial requirements, and portfolio 
performance. The Agency will perform these reviews every two years or 
more frequently, as determined by the Agency, on lenders that originate 
more than 50 loans and/or service more than 200 loans per year. The 
Agency would review a stratified random sample of no less than two 
percent of loan files originated by Delegated Lenders. A report would 
be provided, and findings and observations would be recorded and 
reported back to the lender, along with any suggestions for 
improvement. If necessary, the lender would have the opportunity to use 
a Corrective Action Plan (CAP) to resolve any deficiencies; they would 
be counseled, offered training, and given the opportunity to improve. 
Recurring findings identified through the LO process may result in 
additional reviews/examinations and may adversely affect their 
delegated lender status.
    To bolster the Agency's efforts to perform robust monitoring and 
lender oversight across the program (not just for Delegated Lenders), 
the proposed rule also eliminates the self-certification option at 
Sec.  3555.107(i)(5). The Agency is unaware of any lenders using the 
option to self-certify instead of submitting complete loan closing 
documentation. Furthermore, the Agency has determined that such option 
would be inappropriate in balancing streamlining of the program with 
risk mitigation and proposes to eliminate the option so that the Agency 
would have easier and direct access to loan documents.
    The proposed Sec.  3555.55(c)(4) would provide the Agency with the 
authority to revoke the delegated lender status of those lenders that 
fail to meet the delegated lender criteria. This revocation is distinct 
from termination of the program as an approved lender under Sec.  
3555.52. However, if the Agency pursues termination of a Delegated 
Lender's participation under Sec.  3555.52, the Agency need not 
separately pursue a separate revocation of delegated lender status, as 
termination from the program would automatically revoke delegated 
lender status.
    Taken together, this proposed rule would continue the Agency's 
efforts to streamline and improve delivery of the SFHGLP while 
providing measures to mitigate risk. Agency approval of a lender for 
Delegated Authority does not create or imply a warranty or endorsement 
by the Agency of the approved lender, or its employees, nor does it 
represent a warranty of any service provided by the lender or any 
employee of the lender.

Request for Comment

    Stakeholder input is vital to ensure that implementation of the 
proposed rule would continue to support the Agency's mission, while 
ensuring that new regulations and policies are reasonable and do not 
overly burden the Agency's lenders and their customers. Comments must 
be submitted on or before October 3, 2022 and may be submitted 
electronically by going to the Federal eRulemaking Portal: https://www.regulations.gov. Details on how to submit comments to the Federal 
eRulemaking Portal are in the ADDRESSES section of this proposed rule.
    The following questions and discussion items are posed to guide 
stakeholder comments. Where possible, RHS requests that comments 
include specific suggestions regarding ways to improve the proposal. 
RHS welcomes pertinent comments that are beyond the scope of these 
questions.
    1. The Agency is proposing a controlled rollout of delegated 
authority, phasing in Delegated Lenders over a three-year period. The 
three-year period is intended to ensure the process of adding lenders 
is done using a controlled method to identify and address any concerns 
or questions that may arise. Is a three-year rollout period 
appropriate?
    2. The Agency is proposing to define the eligibility criteria for 
Delegated Lenders to include participation in the SFHGLP for at least 
the previous two

[[Page 47649]]

years,\1\ as well as higher than average performance standards in 
delinquency, default, and loss claim rates for the two-year period 
prior to approval. Are there additional criteria that should be 
considered?
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    \1\ Consistent with OMB Circular A-129, the Agency reviews 
lender eligibility every two years. Therefore, the two-year 
participation minimum would ensure that a lender has gone through at 
least one lender recertification process, providing an additional 
review of the lender's processes prior to being eligible for this 
increased authority.
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    3. Is it important that Delegated Lenders retain the option to 
submit loan applications to the Agency for review and approval under 
the current process, at their discretion?
    4. The Agency has identified the following alternatives to the 
rule:
    a. Rather than delegate the complete loan approval process to 
Delegated Lenders, the Agency could delegate the initial underwriting 
review and issuance of the Conditional Commitment, leaving the 
responsibility for issuance of the Loan Note Guarantee with the Agency.
    b. The Agency could assign the post-closing issuance of the Loan 
Note Guarantee to Delegated Lenders, with the initial review, approval, 
and issuance of the Conditional Commitment remaining an Agency 
responsibility.
    Are there additional alternatives that could be considered? Is 
there a preference between the process identified in the proposed rule 
versus the alternatives?
    5. The Agency has identified the following benefits to Delegated 
Lenders, borrowers, and the Agency.
    a. A time savings for Delegated Lenders and borrowers, as 
intervention by the Agency at origination through closing would be 
limited, resulting in fewer delays experienced through the loan 
origination process.
    b. A cost savings to Delegated Lenders, as several Agency forms 
would be eliminated from the process.
    c. A cost savings to the Agency due to the streamlining of 
activities, allowing a reallocation of resources to other important 
initiatives.
    Are there additional benefits of implementing this proposed rule 
that have not been identified?
    6. Delegated Lenders will realize a time savings of approximately 3 
to 4 business days for Conditional Commitment requests and an 
additional 3 to 4 business days for Loan Note Guarantee requests. What 
is the estimated cost savings that will be realized by Delegated 
Lenders with this reduction in Agency processing time?
    7. Consistent with current Agency procedures, the Agency is 
proposing to review a stratified random sample of two percent of 
delegated authority loans post-closing to evaluate lender performance. 
Is two percent a reasonable expectation?
    8. Consistent with OMB Circular A-129, the Agency is proposing to 
review the delegated lender status of participating lenders every two 
years. Is this a reasonable expectation?
    9. The Agency expects to use existing processes and technology 
systems, with substantial modifications, to implement this proposal. As 
described in the Regulatory Impact Analysis, the Agency does not 
anticipate the provisions to results in significant new costs, such as 
additional training, staff time, or staff hires, for the lender. 
However, the Agency requests comment on its evaluation of potential 
costs. In particular, is there any data available regarding the costs 
of implementing this proposal for the public that the Agency hasn't 
considered?
    10. The Agency's proposal is intended to mirror HUD/FHA and VA 
processes, to the extent feasible. Are there additional changes that 
could be made to assist in reconciling these delegated approval 
processes?

Statutory Authority

    The Housing Opportunity Through Modernization Act of 2016 (Pub. L. 
114-201) and Section 510(k) of Title V of 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 Orders 12866 and 13563

    Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Regulatory Review) direct agencies to assess 
the costs and benefits of available regulatory alternatives and, if a 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
This rule has been designated a ``significant regulatory action,'' 
under section 3(f) of Executive Order 12866. Accordingly, the rule has 
been reviewed by the Office of Management and Budget (OMB).
    In accordance with Executive Order 12866, a Regulatory Impact 
Analysis was completed, outlining the costs and benefits of 
implementing this program in rural America. For a complete analysis, 
please see the Regulatory Impact Analysis on https://www.regulations.gov 
using docket number RHS-21-SFH-0017.

Executive Order 12988, Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Except where specified, all state and local laws 
and regulations that are in direct conflict with this rule will be 
preempted. Federal funds carry federal requirements. No person is 
required to apply for funding under SFHGLP, but if they do apply and 
are selected for funding, they must comply with the requirements 
applicable to recipients of SFHGLP federal financial assistance, 
including all applicable nondiscrimination federal laws and 
regulations. 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.

National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
Public Law 91-190, this final rule has been reviewed in accordance with 
7 CFR part 1970 (``Environmental Policies

[[Page 47650]]

and Procedures''). The Agency has determined that (i) this action meets 
the criteria established in 7 CFR 1970.53(f); (ii) no extraordinary 
circumstances exist; and (iii) the action is not ``connected'' to other 
actions with potentially significant impacts, is not considered a 
``cumulative action'' and is not precluded by 40 CFR 1506.1. Therefore, 
the Agency has determined that the action does not have a significant 
effect on the human environment, and therefore, neither an 
Environmental Assessment nor an Environmental Impact Statement is 
required.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on the states, the relationship between the national 
government and the states, or the distribution of power and 
responsibilities among the various levels of government. This rule does 
not impose substantial direct compliance costs on state and local 
governments. Therefore, consultation with the states is not required.

Regulatory Flexibility Act

    Under section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 
605(b), the Agency certifies that this proposed rule will not have a 
significant economic impact on a substantial number of small entities. 
The North American Industry Classification System (NAICS) classifies 
small lenders in the following categories:

------------------------------------------------------------------------
                            NAICS U.S. industry     Size standards  (in
       NAICS code                  title           millions of dollars)
------------------------------------------------------------------------
522120                    Savings Institutions..  $600 million in
                                                   assets.
522130                    Credit Unions.........  600 million in assets.
522190                    Other Depository        600 million in assets.
                           Credit Intermediation.
522292                    Real Estate Credit....  41.5.
522310                    Mortgage and            8.0.
                           Nonmortgage Loan
                           Brokers.
------------------------------------------------------------------------

    This proposed rule affects lenders that utilize the SFHGLP and any 
potential lenders that may utilize the program in the future. There are 
approximately 1,864 lenders currently approved to utilize the SFHGLP. 
The Agency does not maintain data that identifies the number of 
approved lenders that would be considered small lenders, as defined 
above. However, it is estimated that less than 3% of approved SFHGLP 
lenders meet the criteria of a small lender.
    The proposed rule is an enhancement to the SFHGLP, providing an 
opportunity for participating lenders to obtain delegated loan approval 
authority. Applying to become a Delegated Lender is optional. Small 
lenders, as described above, will be afforded the same opportunities to 
become a Delegated Lender as large lenders. Lenders who choose not to 
pursue delegated authority will continue to operate as they do today.
    All lenders are required to maintain a permanent loan file on each 
individual guaranteed borrower. This will remain a requirement for 
lenders utilizing delegating authority, as well as those who do not. 
This is typical for any mortgage loan product and is an action that is 
completed in a lenders' normal course of business. This requirement is 
consistent with standard mortgage industry practices and represents no 
additional burden of recordkeeping placed upon the lender or public.
    The qualifying factors involved in becoming a Delegated Lender will 
be based on a lender's loan performance using the same criteria 
regardless of the size of the lender. There are no costs assessed to 
lenders to apply for delegated authority, to continue participation in 
the program, or to receive Agency training.
    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 would be 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 this proposed 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 proposed 
rule is not subject to the requirements of Executive Order 13175. If 
tribal leaders are interested in consulting with RHS on this proposed 
rule, they are encouraged to contact USDA's Office of Tribal Relations 
or Rural Development's Native American Coordinator at (720) 544-2911 or 
[email protected] to request such a consultation.

Civil Rights Impact Analysis

    Rural Development has reviewed this proposed 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, 
disability, or marital or familial status. Based on the review and 
analysis of the rule and all available data, issuance of this Final 
Rule is not likely to negatively impact low- and moderate-income 
populations, minority populations, women, Indian tribes, or persons 
with disability, by virtue of their age, race, color, national origin, 
sex, disability, or marital or familial status.

Programs Affected

    The program affected by this proposed rule is listed in the 
Assistance Listing (AL) (formerly Catalog of Federal Domestic 
Assistance) Number 10.410, Very Low to Moderate Income Housing Loans 
(Section 502 Rural Housing Loans).

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.), the information collection activities associated with 
this rule are covered under OMB Control Number 0575-0179. This proposed 
rule contains no new reporting or recordkeeping requirements that would 
require approval under the Paperwork Reduction Act of 1995. It is 
anticipated that Agency forms currently required would be eliminated 
for Delegated Lenders. As a result, the Agency

[[Page 47651]]

anticipates a reduction in recordkeeping requirements upon 
implementation of 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 laws and U.S. Department of 
Agriculture (USDA) civil rights regulations and policies, the USDA, its 
Mission Areas, agencies, staff offices, 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.
    In accordance with E.O. 13166, Improving Access to Services for 
Persons with Limited English Proficiency, program information may be 
made available in languages other than English. Persons with 
disabilities who require alternative means of communication to obtain 
program information (e.g., Braille, large print, audiotape, American 
Sign Language) should contact the responsible Mission Area, agency, or 
staff office; the USDA TARGET Center at (202) 720-2600 (voice and TTY); 
or the Federal Relay Service at (800) 877-8339.
    To file a program discrimination complaint, a complainant should 
complete a Form AD-3027, USDA Program Discrimination Complaint Form, 
found online at https://www.ascr.usda.gov/complaint_filing_cust.html, 
from any USDA office, by calling (866) 632-9992, or by writing a letter 
addressed to USDA. The letter must contain the complainant's name, 
address, telephone number, and a written description of the alleged 
discriminatory action in sufficient detail to inform the Assistant 
Secretary for Civil Rights (ASCR) about the nature and date of an 
alleged civil rights violation. The completed AD-3027 form or letter 
must be submitted 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; or
    (2) Fax: (833) 256-1665 or (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

    Administrative practice and procedure; Business and industry; 
Conflicts of interest; Credit, Environmental impact statements; Fair 
housing; Flood insurance; Grant programs-housing and community 
development; Home improvementLoan programs--Housing and community 
development; Low- and moderate-income housing; Mortgages; Reporting and 
recordkeeping requirements; 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 A--General

0
2. Amend Sec.  3555.10 by adding the definition of ``Delegated Lender'' 
to read as follows:


Sec.  3555.10   Definitions and abbreviations.

* * * * *
    Delegated Lender is an entity that meets the requirements under 
Sec.  3555.51 and has been delegated authority by the Agency to 
underwrite and approve loans that meet the requirements of this part 
without prior review and approval by Agency staff, unless provided 
otherwise in this part.
* * * * *

Subpart B--Lender Participation

0
3. Add Sec.  3555.55 to subpart B to read as follows:


Sec.  3555.55   Delegated Lenders.

    (a) The Agency may approve certain lenders for Delegated Lender 
status as defined in Sec.  3555.10. The Delegated Lender assumes the 
responsibility for meeting all loan requirements on behalf of the 
Agency for the purposes of pre-closing loan processing, loan approval, 
and post-closing issuance of loan guarantee under subparts C, D and E 
of this part with the following exceptions and clarifications:
    (1) Application priority processing procedures under Sec.  
3555.107(a) are not applicable to applications processed by Delegated 
Lenders.
    (2) Delegated Lenders must ensure appraisals meet the requirements 
under Sec.  3555.107(d); however, loans made by Delegated Lenders are 
not subject to Agency administrative appraisal reviews prior to loan 
approval under Sec.  3555.107(d)(4).
    (3) Conditional Commitments under Sec.  3555.107(f) may not be 
applicable to Delegated Lenders.
    (b) The following regulatory provisions in subpart A are not 
applicable to Delegated Lenders or are modified as described below:
    (1) Applications processed by Delegated Lenders with a conflict of 
interest under Sec.  3555.8 are not subject to the requirements under 
Sec.  3555.8(d). The other paragraphs in Sec.  3555.8 still apply.
    (2) Delegated Lenders will perform environmental reviews under 
Sec.  3555.5 and 7 CFR part 1970 prior to loan approval. Delegated 
Lenders must be knowledgeable in reviewing and applying categorical 
exclusions as outlined under 7 CFR 1970.51 and 1970.53. The Delegated 
Lender must notify the Agency if there is an extraordinary circumstance 
as defined in 7 CFR 1970.52 so that the Agency may determine the 
appropriate course of action. If an environmental assessment or 
environmental impact statement is necessary and the Delegated Lender 
prepares such document, the Agency will independently evaluate such 
document.
    (c) Eligibility. Lenders must be approved to participate in the 
SFHGLP as provided in Sec.  3555.51 and meet the following 
requirements:
    (1) Have participated in the SFHGLP for at least the previous two 
years.
    (2) Met the performance standards established by the Agency for 
delinquency, default, and loss claims for the previous two years; and
    (3) Complete Agency sponsored training each year.
    (d) Delegated lenders must use the Agency's automated underwriting 
system as described in Sec.  3555.107(b).
    (e) Oversight. The Agency will monitor lender performance through 
the regular use of loan level data and lender oversight and monitoring 
reviews/examinations. If the lender is unwilling or unable to improve 
performance within an acceptable timeframe, the Agency may revoke 
Delegated Lender status.
    (f) Termination of Delegated Authority. (1) The Agency may 
terminate the lender's delegated status for reasons including, but not 
limited to:

[[Page 47652]]

    (i) Approving loans that do not meet Agency guidelines.
    (ii) Entering data into the Agency's automated underwriting system 
which is not supported by documentation retained by the lender.
    (iii) Unacceptable portfolio performance as evidenced by 
delinquency, loss claim, default rates, material deficiencies, or any 
other performance metric established by the Agency; and
    (iv) Noncompliance with other requirements described in Sec.  
3555.51, or if the Agency determines that other good cause exists.
    (2) Termination of a Delegated Lender's participation in the SFHGLP 
under Sec.  3555.52 automatically revokes Delegated Lender status 
without separate Agency action under paragraph 3555.52(g).
    (g) Revocation of Delegated Status. Delegated Lenders will retain 
delegated status until revoked by the Agency or withdrawn by the 
lender. If the Agency revokes the delegated authority of a Delegated 
Lender, the Delegated Lender will be given appeal rights as specified 
in Sec.  3555.4. This is distinct from termination from participation 
in the SFHGLP under Sec.  3555.52.
    (h) Administration of Delegated Program. The Agency may adjust, 
modify, or cancel the Delegated Lender program based on overall program 
considerations such as budget, program performance, and program 
integrity.


Sec.  Sec.  3555.56-3555.99   [Reserved]

0
4. Reserve Sec. Sec.  3555.56-3555.99.
* * * * *

Subpart C--Loan Requirements


Sec.  3555.107  [Amended]

0
5. Amend Sec.  3555.107 by removing paragraph (i)(5).
* * * * *

Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2022-16637 Filed 8-3-22; 8:45 am]
BILLING CODE 3410-XV-P