Single Family Housing Guaranteed Loan Program Changes Related to Special Servicing Options, 66189-66194 [2024-18291]
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66189
Rules and Regulations
Federal Register
Vol. 89, No. 158
Thursday, August 15, 2024
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents.
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3555
[Docket No. RHS–24–SFH–0001]
RIN 0575–AD28
Single Family Housing Guaranteed
Loan Program Changes Related to
Special Servicing Options
Rural Housing Service, U.S.
Department of Agriculture (USDA).
ACTION: Final rule.
AGENCY:
The Rural Housing Service
(RHS or Agency), a Rural Development
(RD) agency of the United States
Department of Agriculture (USDA), is
implementing changes to the SingleFamily Housing Guaranteed Loan
Program (SFHGLP) to amend the current
regulations regarding Special Servicing
Options and adjust the Mortgage
Recovery Advance (MRA) process. This
final rule is intended to benefit
borrowers and lenders by providing
lenders more flexibility in their
servicing options, offering a less
expensive and less cumbersome MRA
process, and reduce program risk of the
guaranteed loan portfolio.
DATES: This final rule is effective
February 11, 2025.
FOR FURTHER INFORMATION CONTACT:
Ticia Weare, 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) 679–
6919; or email: ticia.weare@usda.gov.
SUPPLEMENTARY INFORMATION:
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SUMMARY:
I. Background
The USDA RHS offers a variety of
programs to build or improve housing
and essential community facilities in
rural areas. RHS offers loans, grants, and
loan guarantees for single- and multi-
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family housing, childcare centers, fire
and police stations, hospitals, libraries,
nursing homes, schools, first responder
vehicles and equipment, housing for
farm laborers and much more. RHS also
provides technical assistance loans and
grants in partnership with non-profit
organizations, Indian tribes, State and
Federal Government agencies, and local
communities.
Under the authority of the Housing
Act of 1949 (42 U.S.C. 1471 et seq.), as
amended, the SFHGLP makes loan
guarantees to provide low- and
moderate-income persons in rural areas
an opportunity to own decent, safe, and
sanitary dwellings and related facilities.
The RHS administers the SFHGLP that
provides a 90% Loan Note Guarantee to
approved lenders to reduce the lender’s
risk of extending loans to low- and
moderate-income households in rural
areas. Approved lenders make the initial
eligibility determinations, and the
Agency reviews those determinations to
make a final eligibility decision.
This program helps lenders work with
low- and moderate-income households
living in rural areas to make
homeownership a reality. Providing
affordable homeownership
opportunities promotes prosperity,
which in turn creates thriving
communities and improves the quality
of life in rural areas.
The RHS published a proposed rule
on January 27, 2023 (88 FR 5275) to
amend the current regulation for the
SFHGLP found in 7 CFR part 3555. This
final rule will amend 7 CFR part 3555
to implement changes related to the use
of Special Servicing Options for NonPerforming Loans. The changes to the
current regulation will benefit
borrowers by offering a less
cumbersome option to eliminate
documentation and eligibility
challenges for borrowers who do not
require payment reduction, while
providing lenders more flexibility in
their servicing options and reducing
program risk of the guaranteed loan
portfolio.
The SFHGLP is authorized by section
502(h) of the Housing Act of 1949, (42
U.S.C. 1472(h)), as amended. 7 CFR part
3555 sets forth the regulatory
requirements of the SFHGLP which
includes policies regarding originating,
servicing, holding, and liquidating
SFHGLP loans. SFHGLP approved
lenders make the initial eligibility
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determinations, and the Agency reviews
those determinations to make a final
eligibility decision. In § 3555.303,
lenders are provided several traditional
servicing options for Non-Performing
Loans. The use of special servicing
options in § 3555.304 is provided if the
traditional servicing options provided in
§ 3555.303 have been exhausted or the
lender has determined that the use of
such servicing options would not
resolve the delinquency.
RHS is issuing a final rule to amend
§§ 3555.303 and .304 to incorporate the
MRA as a part of the regular servicing
options in § 3555.303 and allow for
streamline servicing options in
§ 3555.304. This final rule also adjusts
the MRA process to make it less
cumbersome and eliminates
documentation and eligibility
challenges for borrowers who do not
require payment reduction.
II. Discussion of Public Comments
Received on March 28, 2023, Proposed
Rule
The Agency received comments from
12 respondents, including mortgage
lenders, associations, and other
interested parties. Specific public
comments are addressed below:
Public Comment: One respondent
suggested that the Agency combine both
§ 3555.303 (traditional servicing
options) with § 3555.304 to maintain the
COVID–19 loss mitigation waterfall and
provide specific guidance in HB–1–
3555. Further, the respondent suggested
the Agency maintain the standalone
MRA as the first option in the waterfall
for borrowers who do not require
payment reduction; eliminate financial
reviews for seriously delinquent
borrowers; retain a target payment
reduction of 20 percent for borrowers
who cannot resume an affordable new
payment; and allow the MRA to be
combined with a 30 or 40 year loan
modification, allowing borrowers to
defer additional principal if MRA funds
are available.
Agency’s Response: The Agency
appreciates the commenter’s response.
The Agency agrees changes to
§ 3555.303 in addition to changes in
§ 3555.304 may assist in loss mitigation
and amends the proposed rule
accordingly. The final rule incorporates
the MRA into § 3555.303, maintaining
the MRA as either a standalone option
or combined with a loan modification.
The Agency agrees additional flexibility
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in servicing options may assist in
preventing unnecessary foreclosures.
The final rule amends § 3555.304 to
provide streamline servicing options to
provide the borrower with at least a 10
percent reduction to their principal and
interest payment with no consideration
of the borrower’s financials. The Agency
agrees with the respondent that the
option to extend the loan term as
suggested may assist in loss mitigation,
therefore, the final rule provides the
ability to extend the loan term after
reamortization up to 40 years when
necessary to demonstrate repayment
ability. Additionally, the Agency will
amend § 3555.303 to add section
(b)(3)(vi) indicating the order in which
that traditional servicing options will be
established.
Public Comment: Four respondents
replied that they were in favor of the
proposed rule, some indicating that
eliminating the subordinate lien is a
worthy regulatory reform priority for
post-pandemic mortgage servicing.
However, they have expressed their
opinion that this may place an undue
burden on the lender and the borrower
for collection of a balloon payment of
the non-interest-bearing promissory
note at the maturity of the interestbearing loan. These respondents
recommend that the Agency allow
servicers to assign the servicing advance
MRA to USDA at maturity of the
interest-bearing original note, stating
that the Agency has greater flexibility to
help such homeowners avoid
foreclosure.
Agency’s Response: The Agency
appreciates the support, as well as the
suggested revision. It is anticipated that
only a small percentage of loans will
reach maturity. The Agency has not
amended the final rule as
recommended; however, the Agency is
amending § 3555.303 to allow an MRA
to be combined with up to a 40-year
loan modification term, allowing
borrowers to defer the additional
principal if MRA funds are available.
The opportunity to defer the additional
principal will ensure borrowers are able
to achieve the target payment.
Additionally, the Agency is not opposed
to allowing the servicer additional
collection time if the lien is not released
prior to the loan, including the MRA,
being paid in full. The Agency will
continue to work with the industry to
provide alternative solutions.
Public Comment: Four respondents
requested that clarification be provided
in the rule to allow lenders to provide
multiple MRAs throughout the life of
the loan.
Agency’s Response: The Agency
appreciates the commenters’ responses,
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as well as the suggested revision. The
Agency has amended the rule to allow
multiple MRAs and to clarify what
conditions must be present to allow
additional MRAs.
Public Comment: One respondent
suggested that the Agency exempt small
servicers from the provisions of the new
rule, explaining that requiring servicers
to collect the unsecured debt the
homeowner owes to USDA puts them in
the position of becoming third party
debt collectors and creates a different
relationship than what a Housing
Finance Agency servicer agreed to when
their agency agreed to offer and service
SFHGLP loans as part of their singlefamily program offerings.
Agency’s Response: The Agency
appreciates the commenter’s response. It
is anticipated that only a small
percentage of loans will reach maturity.
The Agency has not amended the rule
as recommended; however, the Agency
is amending the CFR to allow an MRA
to be combined with up to a 40-year
loan modification term, allowing
borrowers to defer the additional
principal if MRA funds are available.
The opportunity to defer the additional
principal will ensure borrowers are able
to achieve the target payment.
Additionally, the Agency is not opposed
to allowing the servicer additional
collection time if the lien is not released
prior to the loan, including the MRA,
being paid in full. The Agency will
continue to work with the industry to
provide alternative solutions.
Public Comment: One respondent
suggested that the Agency require
borrowers to execute a standard MRA
agreement.
Agency’s Response: The Agency
appreciates the commenter’s response.
The Agency understands it is important
that variances in State laws are
considered. An optional attachment for
use by the lender will be made available
on the Agency’s LINC Training and
Resource Library, located at
rd.usda.gov/resources/usda-linctraining-resource-library.
Public Comment: One respondent
suggested that the Agency allow
servicers to recover incentives after
completing an MRA.
Agency’s Response: The Agency
appreciates the commenter’s response.
The Agency agrees that an incentive for
completing the MRA is a reasonable
request and will consider them in the
future.
Public Comment: One respondent
suggested that the Agency provide
guidance that specifies how funds are to
be applied when the servicer receives
funds in excess of the Principal,
Interest, Taxes and Insurance (PITI).
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Agency’s Response: The Agency
appreciates the commenter’s response.
The Agency agrees that it is more
beneficial to the borrower to apply any
additional funds to the interest-bearing
loan first, however, the Agency does not
feel it should dictate to the servicer and
borrower how partial prepayments
should be applied.
Public Comment: One respondent
suggested that the Agency provide
guidance that specifies how the MRA
should be addressed in the event of a
short sale or foreclosure bidding
process.
Agency’s Response: The Agency
appreciates the commenter’s response.
The Agency agrees that guidance should
be provided. Such guidance will be
provided in Handbook–1–3555.
Public Comment: Two respondents
suggested that the Agency permit
servicers to modify the repayment date
of the MRA.
Agency’s Response: The Agency
appreciates the commenters’ response.
The Agency is amending § 3555.303 to
allow an MRA to be combined with up
to a 40-year loan modification term,
allowing borrowers to defer the
additional principal if MRA funds are
available. The opportunity to defer the
additional principal will ensure
borrowers are able to achieve the target
payment. The Agency is not opposed to
allowing the servicer additional
collection time if the lien is not released
prior to the loan, including the MRA,
being paid in full. The final rule revises
§ 3555.303 to indicate that the MRA
may be paid to the Agency when the
payment is received from the borrower;
or when the mortgage lien is released;
or when the borrower transfers title to
the property by voluntary or involuntary
means.
Public Comment: One respondent
suggested that the Agency provide
guidance to servicers instructing them
to notify borrowers that the MRA
balance is coming due no later than six
months prior to the maturity of their
mortgage and that the Agency provide
potential solutions for paying off the
remaining MRA balance and that this be
included in § 3555.304.
Agency’s Response: The Agency
appreciates the commenter’s response.
The Agency agrees that servicers
providing advanced notice of the MRA
payoff obligation could prevent
unnecessary foreclosures and will
provide such guidance.
Public Comment: One respondent
suggested that the Agency reassess the
loss mitigation regulations in § 3555.303
and § 3555.304 to allow for more
flexible servicing options to provide
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borrowers with effective solutions to
quickly resolve financial hardships.
Agency’s Response: The Agency
appreciates the commenter’s response.
The Agency agrees that additional
flexibility in servicing options may
assist in preventing unnecessary
foreclosure. The final rule amends
§ 3555.303 to incorporate the MRA into
traditional servicing options and
amends § 3555.304 to provide
streamline servicing options when
traditional servicing options have been
exhausted, the borrower is at least 90
days delinquent, and prior to any
acceleration or foreclosure action.
Public Comment: One respondent
suggested that the Agency ensure
modified loans with a deferred balance
be redelivered to Ginnie Mae.
Agency’s Response: The Agency
appreciates the commenter’s response
and agrees that preserving access to
liquidity is an important component to
preserving affordable homeownership.
The Agency will continue to work with
Ginnie Mae and others to provide
options that preserve liquidity.
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III. Summary of Changes to Rule
The following changes were included
in the proposed rule:
In § 3555.304(b)(3), remove language
pertaining to title search and recording
fees as these services will no longer be
utilized by the lender.
Additional Changes to Rule as a Result
of Comments Received
As a result of the comments received,
§ 3555.303 will be amended as follows:
Move (b)(3)(iv) to (b)(3)(i) to
emphasize that the lender’s lien priority
cannot be affected by providing a loan
modification. This will renumber the
remaining section.
Revise section (b)(3)(iii), formerly (ii),
to clarify that fees and costs associated
with the delinquency may be included
in the loan modification.
Revise section (b)(3)(iv), formerly (iii),
to extend the repayment term for up to
40 years from the date of modification.
Add section (b)(3)(vi) indicating that
traditional servicing options will be
used in the order established to
incorporate the addition of the MRA in
the traditional servicing waterfall.
Add section (b)(3)(vii) to clarify that
a mortgage recovery advance may be
considered if the targeted income to
ratio mortgage payment cannot be
reached.
Add section (b)(4) to incorporate the
MRA as a part of traditional servicing
options.
Add section (b)(4)(V) to clarify that
the lender may file a claim for
reimbursement of reasonable title search
and/or recording fees.
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As a result of the comments received,
§ 3555.304 will be further amended as
follows:
Revise the title of § 3555.304 to
change ‘‘Special’’ to Streamline’’ and
replace throughout the section.
Revise (a)(1) to clarify that the lender
must exhaust all traditional loss
mitigation options prior to offering the
streamline servicing options.
Revise (a)(3) to indicate the streamline
servicing options must provide the
borrower with at least a 10 percent
reduction to their principal and interest
payment.
Remove (a)(4) since it is no longer
applicable to streamlined servicing
options.
Revise (b)(1) to eliminate the ratio cap
for total debt to income and add that the
borrower must be at least 90 days
delinquent and streamline servicing
shall be considered prior to initiation of
any legal acceleration or foreclosure
action.
Revise (b)(3) to remove the sentence
on fees associated with foreclosure due
to the requirement that streamline
servicing must occur prior to any legal
foreclosure action commencing.
Revise (c) to allow the servicer to
extend the repayment term to 40 years,
unless limited to 30 years by the
investor.
Revise (c)(1) to remove reference to
foreclosure fees and costs, as well as tax
and insurance advances since
foreclosure will not have commenced
under the streamline option.
Revise (c)(3) to allow the servicer to
extend the repayment term to 40 years,
unless limited to provide the borrower
a principal and interest reduction of at
least 10 percent.
Revise (c)(4) to clarify that if the
targeted mortgage payment reduction
cannot be achieved using a modification
as described in this section, the loan is
not eligible for streamline loan servicing
and acceleration, or foreclosure may be
initiated.
Delete (d) as the section provides
guidance for the MRA requirements and
procedures, and this entire section has
been modified and reincorporated into
§ 3555.303(b)(4).
This final rule continues the Agency’s
on-going efforts to improve delivery and
mitigate risk of the SFHGLP.
IV. Regulatory Information
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.
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66191
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 12866, Regulatory
Planning and Review
This final rule has been determined to
be non-significant and, therefore, was
not reviewed by the Office of
Management and Budget (OMB) under
Executive Order 12866.
Executive Order 12988, Civil Justice
Reform
This final 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 suing in court that
challenges action taken under this rule.
Executive Order 13132, Federalism
The policies contained in this final
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. This rule does not
impose substantial direct compliance
costs on state and local governments.
Therefore, consultation with the states
is not required and a federal summary
impact statement is not required.
Executive Order 13175, Consultation
and Coordination With Indian Tribal
Governments
This final rule has been reviewed in
accordance with the requirements of
Executive Order 13175, ‘‘Consultation
and Coordination with Indian Tribal
Governments.’’ Executive Order 13175
requires Federal agencies to consult and
coordinate with Tribes on a
government-to-government basis on
policies that have Tribal implications,
including regulations, legislative
comments or proposed legislation, and
other policy statements or actions that
have substantial direct effects on one or
more Indian Tribes, on the relationship
between the Federal Government and
Indian Tribes or on the distribution of
power and responsibilities between the
Federal Government and Indian Tribes.
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The Agency has determined that this
final rule does not, to our knowledge,
have tribal implications that require
formal tribal consultation under
Executive Order 13175. If a Tribe
requests consultation, the Rural Housing
Service will work with the Office of
Tribal Relations to ensure meaningful
consultation is provided where changes,
additions and modifications identified
herein are not expressly mandated by
Congress.
Regulatory Flexibility Act
This final 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.
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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 final 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
and Procedures’’). The Agency has
determined that (i) this action meets the
criteria established in 7 CFR 1970.53(f);
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(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.
Civil Rights Impact Analysis
Rural Development has reviewed this
final 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, gender identity (including
gender expression), genetic information,
political beliefs, sexual orientation,
marital status, familial status, parental
status, veteran status, religion, reprisal
and/or resulting from all or a part of an
individual’s income being derived from
any public assistance program. This
final rule is within a Guarantee-based
program. Guarantees are not covered
under Title VI of the Civil Rights Act of
1964, Section 504 of the Rehabilitation
Act of 1973, and Title IX of the
Education Amendments Act of 1972, as
amended, when the Federal assistance
does not include insurance or interest
credit loans. Lenders must comply with
other applicable Federal laws, including
Equal Employment Opportunities, the
Equal Credit Opportunity Act, the Fair
Housing Act, and the Civil Rights Act of
1964. Guaranteed loans that involve the
construction of or addition to facilities
that accommodate the public must
comply with the Architectural Barriers
Act Accessibility Standard. The
borrower and lender are responsible for
ensuring compliance with these
requirements.
Assistance Listing
The program affected by this final rule
is listed in the Assistance Listing
Catalog (formerly Catalog of Federal
Domestic Assistance) under number
10.410, Very Low to Moderate Income
Housing Loans (Section 502 Rural
Housing Loans).
Paperwork Reduction Act
The information collection
requirements contained in this
regulation have been approved by OMB
and have been assigned OMB control
number 0575–0179. This final rule
contains no new reporting or
recordkeeping requirements that would
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require approval under the Paperwork
Reduction Act of 1995 (44 U.S.C.
Chapter 35).
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.
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; 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, which can be obtained online at
usda.gov/sites/default/files/documents/
ad-3027.pdf 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
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(2) Fax: (833) 256–1665 or (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
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 improvement,
Housing, Loan programs—housing and
community development, Low- and
moderate-income housing,
Manufactured homes, Mortgage
insurance, Mortgages, Reporting and
recordkeeping requirements, Rural
areas.
For the reasons discussed in the
preamble, the Agency is amending 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 G—Servicing Non-Performing
Loans
2. Revise and republish § 3555.303 to
read as follows:
■
khammond on DSKJM1Z7X2PROD with RULES
§ 3555.303
Traditional servicing options.
(a) Eligibility. To be eligible for
traditional servicing, all the following
conditions must be met:
(1) The borrower presently occupies
the property;
(2) The borrower is in default or
facing imminent default for an
involuntary reason. A borrower is
‘‘facing imminent default’’ if that
borrower is current or less than 30 days
past due on the mortgage obligation and
is experiencing a significant reduction
in income or some other hardship that
will prevent him or her from making the
next required payment on the mortgage
during the month in which it is due.
The borrower must be able to document
the cause of the imminent default,
which may include, but is not limited
to, one or more of the following types
of hardship:
(i) A reduction in or loss of income
that was supporting the mortgage loan;
(ii) A change in household financial
circumstances;
(3) The borrower demonstrates a
reasonable ability to support repayment
of the debt in the future;
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16:33 Aug 14, 2024
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(4) There are no adverse property
conditions that inhibit the inhabitability
or use of the property; and
(5) The borrower has not received
assistance due to the submission of false
information by the borrower.
(b) Servicing options. The lender must
consider traditional servicing options in
the following order to resolve the
borrower’s default or imminent default:
(1) Repayment agreement. A
repayment agreement is an informal
plan lasting 3 months or less to cure
short-term delinquencies.
(2) Special forbearance agreement. A
special forbearance agreement is a
longer-term formal plan to cure a
delinquency not to exceed the
equivalent of 12 months of PITI. The
agreement may gradually increase
monthly payments in an amount
sufficient to repay the arrearage over a
reasonable amount of time and/or
temporarily reduce or suspend
payments for a short period. If the
borrower is at least 3 months
delinquent, the special forbearance
agreement may resume normal
payments for several months followed
by a loan modification.
(3) Loan modification plan. A loan
modification is a permanent change in
one or more of the terms of a loan that
results in a payment the borrower can
afford and allows the loan to be brought
current. A loan modification must be a
written agreement. (i) The lender’s lien
priority cannot be adversely affected by
providing a loan modification.
(ii) Loan modifications must be a
fixed interest rate and cannot exceed the
market interest rate at the time of
modification.
(iii) Loan modifications may
capitalize all or a portion of the
arrearage and/or reamortization of the
balance due including foreclosure fees
and costs associated with the
delinquency, tax and insurance
advances, and past due Agency annual
fees imposed by the lender. Late charges
and lender fees may not be capitalized.
(iv) If necessary to demonstrate
repayment ability, the loan term after
reamortization may be extended for up
to 40 years from the date of the loan
modification.
(v) Lenders may require that
borrowers complete a trial payment plan
prior to making scheduled payments
amended by the traditional loan
servicing loan modification.
(vi) Traditional servicing options shall
be used in the order established in this
section to reduce the borrower’s
mortgage payment to income ratio as
close as possible to 31 percent of gross
monthly income.
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66193
(vii) If the targeted mortgage payment
to income cannot be achieved using a
loan modification alone, the lender may
consider a mortgage recovery advance
under this section in addition to the
loan modification.
(4) Mortgage recovery advance. A
mortgage recovery advance is funds
advanced by the lender on behalf of a
borrower to satisfy the borrower’s
arrearage and reduce principal.
(i) Borrowers may be eligible for
multiple Mortgage Recovery Advances
up to a cumulative amount that is less
than or equal to 30 percent of the
unpaid principal balance as of the date
of the initial default.
(ii) If the borrower’s total monthly
mortgage payment is within a
reasonable percent of the borrower’s
ability to repay prior to an extended
term loan modification, the mortgage
recovery advance can be used to cure
the borrower’s delinquency without
changing the terms of the promissory
note.
(iii) The principal deferment amount
for a specific case shall be limited to the
amount that will bring the borrower’s
total monthly mortgage payment to 31
percent of gross monthly income.
(iv) If the borrower is eligible for a
mortgage recovery advance, the servicer
will advance the funds to the borrower’s
account and create a non-interestbearing recoverable servicing advance.
The balance is to be provided on the
mortgage statements along with the
principal balance of the loan, but no
payment arrangement will be required.
(v) Prior to making a mortgage
recovery advance, the lender must
perform an escrow analysis to ensure
that the payment made on behalf of the
borrower accurately reflects the escrow
amount required for taxes and
insurance.
(vi) The lender may request
reimbursement from the Agency for a
mortgage recovery advance. The lender
shall repay any such reimbursement as
provided in this section.
(vii) The following terms apply to the
repayment of a mortgage recovery
advance:
(A) Borrowers are not required to
make any monthly or periodic payments
on the mortgage recovery advance;
however, borrowers may voluntarily
submit partial payments without
incurring any prepayment penalty.
(B) The borrower is responsible for
payment of the mortgage recovery
advance to the lender in full at the
earlier of the following:
(1) When the first lien mortgage and
guaranteed note are paid off; or
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Federal Register / Vol. 89, No. 158 / Thursday, August 15, 2024 / Rules and Regulations
(2) When the borrower transfers title
to the property by voluntary or
involuntary means.
(C) The lender shall remit to the
agency the amount mortgage recovery
advance reimbursed by the Agency for
a mortgage recovery advance, as
described in this part, at the earliest of
the following:
(1) When the lender receives payment
is received from the borrower; or
(2) When the mortgage lien is
released; or
(3) When the borrower transfers title
to the property by voluntary or
involuntary means.
(i) The Agency will collect this
Federal Debt from the lender. The
Agency may use the debt collection and
administrative offset process to collect
money owed.
(ii) In the event of a loss claim, the
mortgage recovery advance will be
considered in calculating the claim paid
by the Agency. The total amount paid
cannot exceed the maximum loss
payment described in § 3555.351(b).
(iii) Borrowers are not required to
make any monthly or periodic payments
on the mortgage recovery advance note;
however, borrowers may voluntarily
submit partial payments without
incurring any prepayment penalty.
(c) Terms of loan note guarantee. Use
of traditional servicing options does not
change the terms of the loan note
guarantee except when the traditional
servicing option meets the requirements
of paragraph (b)(3)(iv) of this section.
The loan guarantee will apply to loan
terms extending beyond the 30-year
loan term from the date of origination
when a loan modification meets the
criteria set forth in paragraph (b)(3)(iv).
■ 3. Revise and republish § 3555.304 to
read as follows:
khammond on DSKJM1Z7X2PROD with RULES
§ 3555.304
Streamline servicing options.
(a) General. (1) Lenders must exhaust
traditional servicing options outlined in
this part without received a completed
package to be used in evaluating the
borrower for traditional servicing
options and have sent a demand letter
in accordance with § 3555.306 to the
borrower prior to consideration of
streamline servicing options.
(2) Use of streamline loan servicing
does not change the terms of the loan
note guarantee.
(3) Streamline options may be
provided to the borrower with at least
a 10 percent reduction to their principal
and interest payment with no
consideration of the borrower’s
financials.
(b) Conditions for streamline servicing
options. In addition to the requirements
in § 3555.303(a), the following
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16:33 Aug 14, 2024
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conditions apply to all special loan
servicing:
(1) The borrower must be at least 90
days past due and prior to initiation of
any acceleration or foreclosure action.
(2) The borrower must successfully
complete a trial payment plan of
sufficient duration, as determined by
the Agency, to demonstrate that the
borrower will be able to make regularly
scheduled payments as modified by the
special loan servicing.
(3) Expenses related to streamline
loan servicing including, but not limited
to, title search and recording fees, shall
not be charged to the borrower.
(4) Capitalization of late charges and
lender fees is not permitted in the
special loan servicing option.
(c) Extended streamline loan
modification. The Lender may modify
the loan by reducing the interest rate to
a level at or below the maximum
allowable interest rate and extending
the repayment term to 40 years from the
date of loan modification. The servicer
may limit the extension to 30 years if
limited by any investor or pooling
restrictions. The loan guarantee will
apply to loan terms extending beyond
the 30-year loan term from the date of
origination when a loan modification
meets the criteria set forth in this
section.
(1) Streamline loan modifications may
capitalize all or a portion of the
arrearage and/or reamortization of the
balance due including, tax and
insurance advances and past due
Agency annual fees imposed by the
lender. Late charges and lender fees may
not be capitalized.
(2) Streamline loan modifications
must be a fixed interest rate and cannot
exceed the current market interest rate
at the time of modification. When
reducing the interest rate, the maximum
rate is subject to paragraph (c)(3) of this
section.
(3) The term shall be extended to a
maximum of 40 years as noted above to
provide the borrower with at least a 10
percent reduction in their principal and
interest payment.
(4) If the targeted mortgage payment
reduction cannot be achieved using a
modification as described in this
section, the loan is not eligible for
streamline loan servicing and
foreclosure may be initiated.
Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2024–18291 Filed 8–14–24; 8:45 am]
BILLING CODE 3410–XV–P
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2023–2502; Airspace
Docket No. 23–ASO–15]
RIN 2120–AA66
Establishment of United States Area
Navigation (RNAV) Route Q–108 and
Revocation of RNAV Route Q–104;
Eastern United States
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:
This action establishes United
States Area Navigation (RNAV) Route
Q–108 and revokes RNAV Route Q–104
in the eastern United States. This action
supports the Northeast Corridor Atlantic
Coast Routes (NEC ACR) Optimization
Project to improve the efficiency of the
National Airspace System (NAS).
DATES: Effective date 0901 UTC, October
31, 2024. The Director of the Federal
Register approves this incorporation by
reference action under 1 CFR part 51,
subject to the annual revision of FAA
Order JO 7400.11 and publication of
conforming amendments.
ADDRESSES: A copy of the Notice of
Proposed Rulemaking (NPRM), all
comments received, this final rule, and
all background material may be viewed
online at www.regulations.gov using the
FAA Docket number. Electronic
retrieval help and guidelines are
available on the website. It is available
24 hours each day, 365 days each year.
FAA Order JO 7400.11H, Airspace
Designations and Reporting Points, and
subsequent amendments can be viewed
online at www.faa.gov/air_traffic/
publications/. You may also contact the
Rules and Regulations Group, Office of
Policy, Federal Aviation
Administration, 800 Independence
Avenue SW, Washington, DC 20591;
telephone: (202) 267–8783.
FOR FURTHER INFORMATION CONTACT:
Brian Vidis, Rules and Regulations
Group, Office of Policy, Federal
Aviation Administration, 800
Independence Avenue SW, Washington,
DC 20591; telephone: (202) 267–8783.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Authority for This Rulemaking
The FAA’s authority to issue rules
regarding aviation safety is found in
Title 49 of the United States Code.
Subtitle I, Section 106 describes the
authority of the FAA Administrator.
Subtitle VII, Aviation Programs,
describes in more detail the scope of the
E:\FR\FM\15AUR1.SGM
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Agencies
[Federal Register Volume 89, Number 158 (Thursday, August 15, 2024)]
[Rules and Regulations]
[Pages 66189-66194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18291]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
========================================================================
Federal Register / Vol. 89, No. 158 / Thursday, August 15, 2024 /
Rules and Regulations
[[Page 66189]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
7 CFR Part 3555
[Docket No. RHS-24-SFH-0001]
RIN 0575-AD28
Single Family Housing Guaranteed Loan Program Changes Related to
Special Servicing Options
AGENCY: Rural Housing Service, U.S. Department of Agriculture (USDA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Rural Housing Service (RHS or Agency), a Rural Development
(RD) agency of the United States Department of Agriculture (USDA), is
implementing changes to the Single-Family Housing Guaranteed Loan
Program (SFHGLP) to amend the current regulations regarding Special
Servicing Options and adjust the Mortgage Recovery Advance (MRA)
process. This final rule is intended to benefit borrowers and lenders
by providing lenders more flexibility in their servicing options,
offering a less expensive and less cumbersome MRA process, and reduce
program risk of the guaranteed loan portfolio.
DATES: This final rule is effective February 11, 2025.
FOR FURTHER INFORMATION CONTACT: Ticia Weare, 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)
679-6919; or email: [email protected].
SUPPLEMENTARY INFORMATION:
I. Background
The USDA RHS offers a variety of programs to build or improve
housing and essential community facilities in rural areas. RHS offers
loans, grants, and loan guarantees for single- and multi-family
housing, childcare centers, fire and police stations, hospitals,
libraries, nursing homes, schools, first responder vehicles and
equipment, housing for farm laborers and much more. RHS also provides
technical assistance loans and grants in partnership with non-profit
organizations, Indian tribes, State and Federal Government agencies,
and local communities.
Under the authority of the Housing Act of 1949 (42 U.S.C. 1471 et
seq.), as amended, the SFHGLP makes loan guarantees to provide low- and
moderate-income persons in rural areas an opportunity to own decent,
safe, and sanitary dwellings and related facilities. The RHS
administers the SFHGLP that provides a 90% Loan Note Guarantee to
approved lenders to reduce the lender's risk of extending loans to low-
and moderate-income households in rural areas. Approved lenders make
the initial eligibility determinations, and the Agency reviews those
determinations to make a final eligibility decision.
This program helps lenders work with low- and moderate-income
households living in rural areas to make homeownership a reality.
Providing affordable homeownership opportunities promotes prosperity,
which in turn creates thriving communities and improves the quality of
life in rural areas.
The RHS published a proposed rule on January 27, 2023 (88 FR 5275)
to amend the current regulation for the SFHGLP found in 7 CFR part
3555. This final rule will amend 7 CFR part 3555 to implement changes
related to the use of Special Servicing Options for Non-Performing
Loans. The changes to the current regulation will benefit borrowers by
offering a less cumbersome option to eliminate documentation and
eligibility challenges for borrowers who do not require payment
reduction, while providing lenders more flexibility in their servicing
options and reducing program risk of the guaranteed loan portfolio.
The SFHGLP is authorized by section 502(h) of the Housing Act of
1949, (42 U.S.C. 1472(h)), as amended. 7 CFR part 3555 sets forth the
regulatory requirements of the SFHGLP which includes policies regarding
originating, servicing, holding, and liquidating SFHGLP loans. SFHGLP
approved lenders make the initial eligibility determinations, and the
Agency reviews those determinations to make a final eligibility
decision. In Sec. 3555.303, lenders are provided several traditional
servicing options for Non-Performing Loans. The use of special
servicing options in Sec. 3555.304 is provided if the traditional
servicing options provided in Sec. 3555.303 have been exhausted or the
lender has determined that the use of such servicing options would not
resolve the delinquency.
RHS is issuing a final rule to amend Sec. Sec. 3555.303 and .304
to incorporate the MRA as a part of the regular servicing options in
Sec. 3555.303 and allow for streamline servicing options in Sec.
3555.304. This final rule also adjusts the MRA process to make it less
cumbersome and eliminates documentation and eligibility challenges for
borrowers who do not require payment reduction.
II. Discussion of Public Comments Received on March 28, 2023, Proposed
Rule
The Agency received comments from 12 respondents, including
mortgage lenders, associations, and other interested parties. Specific
public comments are addressed below:
Public Comment: One respondent suggested that the Agency combine
both Sec. 3555.303 (traditional servicing options) with Sec. 3555.304
to maintain the COVID-19 loss mitigation waterfall and provide specific
guidance in HB-1-3555. Further, the respondent suggested the Agency
maintain the standalone MRA as the first option in the waterfall for
borrowers who do not require payment reduction; eliminate financial
reviews for seriously delinquent borrowers; retain a target payment
reduction of 20 percent for borrowers who cannot resume an affordable
new payment; and allow the MRA to be combined with a 30 or 40 year loan
modification, allowing borrowers to defer additional principal if MRA
funds are available.
Agency's Response: The Agency appreciates the commenter's response.
The Agency agrees changes to Sec. 3555.303 in addition to changes in
Sec. 3555.304 may assist in loss mitigation and amends the proposed
rule accordingly. The final rule incorporates the MRA into Sec.
3555.303, maintaining the MRA as either a standalone option or combined
with a loan modification. The Agency agrees additional flexibility
[[Page 66190]]
in servicing options may assist in preventing unnecessary foreclosures.
The final rule amends Sec. 3555.304 to provide streamline servicing
options to provide the borrower with at least a 10 percent reduction to
their principal and interest payment with no consideration of the
borrower's financials. The Agency agrees with the respondent that the
option to extend the loan term as suggested may assist in loss
mitigation, therefore, the final rule provides the ability to extend
the loan term after reamortization up to 40 years when necessary to
demonstrate repayment ability. Additionally, the Agency will amend
Sec. 3555.303 to add section (b)(3)(vi) indicating the order in which
that traditional servicing options will be established.
Public Comment: Four respondents replied that they were in favor of
the proposed rule, some indicating that eliminating the subordinate
lien is a worthy regulatory reform priority for post-pandemic mortgage
servicing. However, they have expressed their opinion that this may
place an undue burden on the lender and the borrower for collection of
a balloon payment of the non-interest-bearing promissory note at the
maturity of the interest-bearing loan. These respondents recommend that
the Agency allow servicers to assign the servicing advance MRA to USDA
at maturity of the interest-bearing original note, stating that the
Agency has greater flexibility to help such homeowners avoid
foreclosure.
Agency's Response: The Agency appreciates the support, as well as
the suggested revision. It is anticipated that only a small percentage
of loans will reach maturity. The Agency has not amended the final rule
as recommended; however, the Agency is amending Sec. 3555.303 to allow
an MRA to be combined with up to a 40-year loan modification term,
allowing borrowers to defer the additional principal if MRA funds are
available. The opportunity to defer the additional principal will
ensure borrowers are able to achieve the target payment. Additionally,
the Agency is not opposed to allowing the servicer additional
collection time if the lien is not released prior to the loan,
including the MRA, being paid in full. The Agency will continue to work
with the industry to provide alternative solutions.
Public Comment: Four respondents requested that clarification be
provided in the rule to allow lenders to provide multiple MRAs
throughout the life of the loan.
Agency's Response: The Agency appreciates the commenters'
responses, as well as the suggested revision. The Agency has amended
the rule to allow multiple MRAs and to clarify what conditions must be
present to allow additional MRAs.
Public Comment: One respondent suggested that the Agency exempt
small servicers from the provisions of the new rule, explaining that
requiring servicers to collect the unsecured debt the homeowner owes to
USDA puts them in the position of becoming third party debt collectors
and creates a different relationship than what a Housing Finance Agency
servicer agreed to when their agency agreed to offer and service SFHGLP
loans as part of their single-family program offerings.
Agency's Response: The Agency appreciates the commenter's response.
It is anticipated that only a small percentage of loans will reach
maturity. The Agency has not amended the rule as recommended; however,
the Agency is amending the CFR to allow an MRA to be combined with up
to a 40-year loan modification term, allowing borrowers to defer the
additional principal if MRA funds are available. The opportunity to
defer the additional principal will ensure borrowers are able to
achieve the target payment. Additionally, the Agency is not opposed to
allowing the servicer additional collection time if the lien is not
released prior to the loan, including the MRA, being paid in full. The
Agency will continue to work with the industry to provide alternative
solutions.
Public Comment: One respondent suggested that the Agency require
borrowers to execute a standard MRA agreement.
Agency's Response: The Agency appreciates the commenter's response.
The Agency understands it is important that variances in State laws are
considered. An optional attachment for use by the lender will be made
available on the Agency's LINC Training and Resource Library, located
at rd.usda.gov/resources/usda-linc-training-resource-library.
Public Comment: One respondent suggested that the Agency allow
servicers to recover incentives after completing an MRA.
Agency's Response: The Agency appreciates the commenter's response.
The Agency agrees that an incentive for completing the MRA is a
reasonable request and will consider them in the future.
Public Comment: One respondent suggested that the Agency provide
guidance that specifies how funds are to be applied when the servicer
receives funds in excess of the Principal, Interest, Taxes and
Insurance (PITI).
Agency's Response: The Agency appreciates the commenter's response.
The Agency agrees that it is more beneficial to the borrower to apply
any additional funds to the interest-bearing loan first, however, the
Agency does not feel it should dictate to the servicer and borrower how
partial prepayments should be applied.
Public Comment: One respondent suggested that the Agency provide
guidance that specifies how the MRA should be addressed in the event of
a short sale or foreclosure bidding process.
Agency's Response: The Agency appreciates the commenter's response.
The Agency agrees that guidance should be provided. Such guidance will
be provided in Handbook-1-3555.
Public Comment: Two respondents suggested that the Agency permit
servicers to modify the repayment date of the MRA.
Agency's Response: The Agency appreciates the commenters' response.
The Agency is amending Sec. 3555.303 to allow an MRA to be combined
with up to a 40-year loan modification term, allowing borrowers to
defer the additional principal if MRA funds are available. The
opportunity to defer the additional principal will ensure borrowers are
able to achieve the target payment. The Agency is not opposed to
allowing the servicer additional collection time if the lien is not
released prior to the loan, including the MRA, being paid in full. The
final rule revises Sec. 3555.303 to indicate that the MRA may be paid
to the Agency when the payment is received from the borrower; or when
the mortgage lien is released; or when the borrower transfers title to
the property by voluntary or involuntary means.
Public Comment: One respondent suggested that the Agency provide
guidance to servicers instructing them to notify borrowers that the MRA
balance is coming due no later than six months prior to the maturity of
their mortgage and that the Agency provide potential solutions for
paying off the remaining MRA balance and that this be included in Sec.
3555.304.
Agency's Response: The Agency appreciates the commenter's response.
The Agency agrees that servicers providing advanced notice of the MRA
payoff obligation could prevent unnecessary foreclosures and will
provide such guidance.
Public Comment: One respondent suggested that the Agency reassess
the loss mitigation regulations in Sec. 3555.303 and Sec. 3555.304 to
allow for more flexible servicing options to provide
[[Page 66191]]
borrowers with effective solutions to quickly resolve financial
hardships.
Agency's Response: The Agency appreciates the commenter's response.
The Agency agrees that additional flexibility in servicing options may
assist in preventing unnecessary foreclosure. The final rule amends
Sec. 3555.303 to incorporate the MRA into traditional servicing
options and amends Sec. 3555.304 to provide streamline servicing
options when traditional servicing options have been exhausted, the
borrower is at least 90 days delinquent, and prior to any acceleration
or foreclosure action.
Public Comment: One respondent suggested that the Agency ensure
modified loans with a deferred balance be redelivered to Ginnie Mae.
Agency's Response: The Agency appreciates the commenter's response
and agrees that preserving access to liquidity is an important
component to preserving affordable homeownership. The Agency will
continue to work with Ginnie Mae and others to provide options that
preserve liquidity.
III. Summary of Changes to Rule
The following changes were included in the proposed rule:
In Sec. 3555.304(b)(3), remove language pertaining to title search
and recording fees as these services will no longer be utilized by the
lender.
Additional Changes to Rule as a Result of Comments Received
As a result of the comments received, Sec. 3555.303 will be
amended as follows:
Move (b)(3)(iv) to (b)(3)(i) to emphasize that the lender's lien
priority cannot be affected by providing a loan modification. This will
renumber the remaining section.
Revise section (b)(3)(iii), formerly (ii), to clarify that fees and
costs associated with the delinquency may be included in the loan
modification.
Revise section (b)(3)(iv), formerly (iii), to extend the repayment
term for up to 40 years from the date of modification.
Add section (b)(3)(vi) indicating that traditional servicing
options will be used in the order established to incorporate the
addition of the MRA in the traditional servicing waterfall.
Add section (b)(3)(vii) to clarify that a mortgage recovery advance
may be considered if the targeted income to ratio mortgage payment
cannot be reached.
Add section (b)(4) to incorporate the MRA as a part of traditional
servicing options.
Add section (b)(4)(V) to clarify that the lender may file a claim
for reimbursement of reasonable title search and/or recording fees.
As a result of the comments received, Sec. 3555.304 will be
further amended as follows:
Revise the title of Sec. 3555.304 to change ``Special'' to
Streamline'' and replace throughout the section.
Revise (a)(1) to clarify that the lender must exhaust all
traditional loss mitigation options prior to offering the streamline
servicing options.
Revise (a)(3) to indicate the streamline servicing options must
provide the borrower with at least a 10 percent reduction to their
principal and interest payment.
Remove (a)(4) since it is no longer applicable to streamlined
servicing options.
Revise (b)(1) to eliminate the ratio cap for total debt to income
and add that the borrower must be at least 90 days delinquent and
streamline servicing shall be considered prior to initiation of any
legal acceleration or foreclosure action.
Revise (b)(3) to remove the sentence on fees associated with
foreclosure due to the requirement that streamline servicing must occur
prior to any legal foreclosure action commencing.
Revise (c) to allow the servicer to extend the repayment term to 40
years, unless limited to 30 years by the investor.
Revise (c)(1) to remove reference to foreclosure fees and costs, as
well as tax and insurance advances since foreclosure will not have
commenced under the streamline option.
Revise (c)(3) to allow the servicer to extend the repayment term to
40 years, unless limited to provide the borrower a principal and
interest reduction of at least 10 percent.
Revise (c)(4) to clarify that if the targeted mortgage payment
reduction cannot be achieved using a modification as described in this
section, the loan is not eligible for streamline loan servicing and
acceleration, or foreclosure may be initiated.
Delete (d) as the section provides guidance for the MRA
requirements and procedures, and this entire section has been modified
and reincorporated into Sec. 3555.303(b)(4).
This final rule continues the Agency's on-going efforts to improve
delivery and mitigate risk of the SFHGLP.
IV. Regulatory Information
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 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 12866, Regulatory Planning and Review
This final rule has been determined to be non-significant and,
therefore, was not reviewed by the Office of Management and Budget
(OMB) under Executive Order 12866.
Executive Order 12988, Civil Justice Reform
This final 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 suing in court
that challenges action taken under this rule.
Executive Order 13132, Federalism
The policies contained in this final 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. This rule does
not impose substantial direct compliance costs on state and local
governments. Therefore, consultation with the states is not required
and a federal summary impact statement is not required.
Executive Order 13175, Consultation and Coordination With Indian Tribal
Governments
This final rule has been reviewed in accordance with the
requirements of Executive Order 13175, ``Consultation and Coordination
with Indian Tribal Governments.'' Executive Order 13175 requires
Federal agencies to consult and coordinate with Tribes on a government-
to-government basis on policies that have Tribal implications,
including regulations, legislative comments or proposed legislation,
and other policy statements or actions that have substantial direct
effects on one or more Indian Tribes, on the relationship between the
Federal Government and Indian Tribes or on the distribution of power
and responsibilities between the Federal Government and Indian Tribes.
[[Page 66192]]
The Agency has determined that this final rule does not, to our
knowledge, have tribal implications that require formal tribal
consultation under Executive Order 13175. If a Tribe requests
consultation, the Rural Housing Service will work with the Office of
Tribal Relations to ensure meaningful consultation is provided where
changes, additions and modifications identified herein are not
expressly mandated by Congress.
Regulatory Flexibility Act
This final 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.
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 final 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 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.
Civil Rights Impact Analysis
Rural Development has reviewed this final 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,
gender identity (including gender expression), genetic information,
political beliefs, sexual orientation, marital status, familial status,
parental status, veteran status, religion, reprisal and/or resulting
from all or a part of an individual's income being derived from any
public assistance program. This final rule is within a Guarantee-based
program. Guarantees are not covered under Title VI of the Civil Rights
Act of 1964, Section 504 of the Rehabilitation Act of 1973, and Title
IX of the Education Amendments Act of 1972, as amended, when the
Federal assistance does not include insurance or interest credit loans.
Lenders must comply with other applicable Federal laws, including Equal
Employment Opportunities, the Equal Credit Opportunity Act, the Fair
Housing Act, and the Civil Rights Act of 1964. Guaranteed loans that
involve the construction of or addition to facilities that accommodate
the public must comply with the Architectural Barriers Act
Accessibility Standard. The borrower and lender are responsible for
ensuring compliance with these requirements.
Assistance Listing
The program affected by this final rule is listed in the Assistance
Listing Catalog (formerly Catalog of Federal Domestic Assistance) under
number 10.410, Very Low to Moderate Income Housing Loans (Section 502
Rural Housing Loans).
Paperwork Reduction Act
The information collection requirements contained in this
regulation have been approved by OMB and have been assigned OMB control
number 0575-0179. This final rule contains no new reporting or
recordkeeping requirements that would require approval under the
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).
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.
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; 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,
which can be obtained online at usda.gov/sites/default/files/documents/ad-3027.pdf 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
[[Page 66193]]
(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 improvement, Housing, Loan programs--housing and
community development, Low- and moderate-income housing, Manufactured
homes, Mortgage insurance, Mortgages, Reporting and recordkeeping
requirements, Rural areas.
For the reasons discussed in the preamble, the Agency is amending 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 G--Servicing Non-Performing Loans
0
2. Revise and republish Sec. 3555.303 to read as follows:
Sec. 3555.303 Traditional servicing options.
(a) Eligibility. To be eligible for traditional servicing, all the
following conditions must be met:
(1) The borrower presently occupies the property;
(2) The borrower is in default or facing imminent default for an
involuntary reason. A borrower is ``facing imminent default'' if that
borrower is current or less than 30 days past due on the mortgage
obligation and is experiencing a significant reduction in income or
some other hardship that will prevent him or her from making the next
required payment on the mortgage during the month in which it is due.
The borrower must be able to document the cause of the imminent
default, which may include, but is not limited to, one or more of the
following types of hardship:
(i) A reduction in or loss of income that was supporting the
mortgage loan;
(ii) A change in household financial circumstances;
(3) The borrower demonstrates a reasonable ability to support
repayment of the debt in the future;
(4) There are no adverse property conditions that inhibit the
inhabitability or use of the property; and
(5) The borrower has not received assistance due to the submission
of false information by the borrower.
(b) Servicing options. The lender must consider traditional
servicing options in the following order to resolve the borrower's
default or imminent default:
(1) Repayment agreement. A repayment agreement is an informal plan
lasting 3 months or less to cure short-term delinquencies.
(2) Special forbearance agreement. A special forbearance agreement
is a longer-term formal plan to cure a delinquency not to exceed the
equivalent of 12 months of PITI. The agreement may gradually increase
monthly payments in an amount sufficient to repay the arrearage over a
reasonable amount of time and/or temporarily reduce or suspend payments
for a short period. If the borrower is at least 3 months delinquent,
the special forbearance agreement may resume normal payments for
several months followed by a loan modification.
(3) Loan modification plan. A loan modification is a permanent
change in one or more of the terms of a loan that results in a payment
the borrower can afford and allows the loan to be brought current. A
loan modification must be a written agreement. (i) The lender's lien
priority cannot be adversely affected by providing a loan modification.
(ii) Loan modifications must be a fixed interest rate and cannot
exceed the market interest rate at the time of modification.
(iii) Loan modifications may capitalize all or a portion of the
arrearage and/or reamortization of the balance due including
foreclosure fees and costs associated with the delinquency, tax and
insurance advances, and past due Agency annual fees imposed by the
lender. Late charges and lender fees may not be capitalized.
(iv) If necessary to demonstrate repayment ability, the loan term
after reamortization may be extended for up to 40 years from the date
of the loan modification.
(v) Lenders may require that borrowers complete a trial payment
plan prior to making scheduled payments amended by the traditional loan
servicing loan modification.
(vi) Traditional servicing options shall be used in the order
established in this section to reduce the borrower's mortgage payment
to income ratio as close as possible to 31 percent of gross monthly
income.
(vii) If the targeted mortgage payment to income cannot be achieved
using a loan modification alone, the lender may consider a mortgage
recovery advance under this section in addition to the loan
modification.
(4) Mortgage recovery advance. A mortgage recovery advance is funds
advanced by the lender on behalf of a borrower to satisfy the
borrower's arrearage and reduce principal.
(i) Borrowers may be eligible for multiple Mortgage Recovery
Advances up to a cumulative amount that is less than or equal to 30
percent of the unpaid principal balance as of the date of the initial
default.
(ii) If the borrower's total monthly mortgage payment is within a
reasonable percent of the borrower's ability to repay prior to an
extended term loan modification, the mortgage recovery advance can be
used to cure the borrower's delinquency without changing the terms of
the promissory note.
(iii) The principal deferment amount for a specific case shall be
limited to the amount that will bring the borrower's total monthly
mortgage payment to 31 percent of gross monthly income.
(iv) If the borrower is eligible for a mortgage recovery advance,
the servicer will advance the funds to the borrower's account and
create a non-interest-bearing recoverable servicing advance. The
balance is to be provided on the mortgage statements along with the
principal balance of the loan, but no payment arrangement will be
required.
(v) Prior to making a mortgage recovery advance, the lender must
perform an escrow analysis to ensure that the payment made on behalf of
the borrower accurately reflects the escrow amount required for taxes
and insurance.
(vi) The lender may request reimbursement from the Agency for a
mortgage recovery advance. The lender shall repay any such
reimbursement as provided in this section.
(vii) The following terms apply to the repayment of a mortgage
recovery advance:
(A) Borrowers are not required to make any monthly or periodic
payments on the mortgage recovery advance; however, borrowers may
voluntarily submit partial payments without incurring any prepayment
penalty.
(B) The borrower is responsible for payment of the mortgage
recovery advance to the lender in full at the earlier of the following:
(1) When the first lien mortgage and guaranteed note are paid off;
or
[[Page 66194]]
(2) When the borrower transfers title to the property by voluntary
or involuntary means.
(C) The lender shall remit to the agency the amount mortgage
recovery advance reimbursed by the Agency for a mortgage recovery
advance, as described in this part, at the earliest of the following:
(1) When the lender receives payment is received from the borrower;
or
(2) When the mortgage lien is released; or
(3) When the borrower transfers title to the property by voluntary
or involuntary means.
(i) The Agency will collect this Federal Debt from the lender. The
Agency may use the debt collection and administrative offset process to
collect money owed.
(ii) In the event of a loss claim, the mortgage recovery advance
will be considered in calculating the claim paid by the Agency. The
total amount paid cannot exceed the maximum loss payment described in
Sec. 3555.351(b).
(iii) Borrowers are not required to make any monthly or periodic
payments on the mortgage recovery advance note; however, borrowers may
voluntarily submit partial payments without incurring any prepayment
penalty.
(c) Terms of loan note guarantee. Use of traditional servicing
options does not change the terms of the loan note guarantee except
when the traditional servicing option meets the requirements of
paragraph (b)(3)(iv) of this section. The loan guarantee will apply to
loan terms extending beyond the 30-year loan term from the date of
origination when a loan modification meets the criteria set forth in
paragraph (b)(3)(iv).
0
3. Revise and republish Sec. 3555.304 to read as follows:
Sec. 3555.304 Streamline servicing options.
(a) General. (1) Lenders must exhaust traditional servicing options
outlined in this part without received a completed package to be used
in evaluating the borrower for traditional servicing options and have
sent a demand letter in accordance with Sec. 3555.306 to the borrower
prior to consideration of streamline servicing options.
(2) Use of streamline loan servicing does not change the terms of
the loan note guarantee.
(3) Streamline options may be provided to the borrower with at
least a 10 percent reduction to their principal and interest payment
with no consideration of the borrower's financials.
(b) Conditions for streamline servicing options. In addition to the
requirements in Sec. 3555.303(a), the following conditions apply to
all special loan servicing:
(1) The borrower must be at least 90 days past due and prior to
initiation of any acceleration or foreclosure action.
(2) The borrower must successfully complete a trial payment plan of
sufficient duration, as determined by the Agency, to demonstrate that
the borrower will be able to make regularly scheduled payments as
modified by the special loan servicing.
(3) Expenses related to streamline loan servicing including, but
not limited to, title search and recording fees, shall not be charged
to the borrower.
(4) Capitalization of late charges and lender fees is not permitted
in the special loan servicing option.
(c) Extended streamline loan modification. The Lender may modify
the loan by reducing the interest rate to a level at or below the
maximum allowable interest rate and extending the repayment term to 40
years from the date of loan modification. The servicer may limit the
extension to 30 years if limited by any investor or pooling
restrictions. The loan guarantee will apply to loan terms extending
beyond the 30-year loan term from the date of origination when a loan
modification meets the criteria set forth in this section.
(1) Streamline loan modifications may capitalize all or a portion
of the arrearage and/or reamortization of the balance due including,
tax and insurance advances and past due Agency annual fees imposed by
the lender. Late charges and lender fees may not be capitalized.
(2) Streamline loan modifications must be a fixed interest rate and
cannot exceed the current market interest rate at the time of
modification. When reducing the interest rate, the maximum rate is
subject to paragraph (c)(3) of this section.
(3) The term shall be extended to a maximum of 40 years as noted
above to provide the borrower with at least a 10 percent reduction in
their principal and interest payment.
(4) If the targeted mortgage payment reduction cannot be achieved
using a modification as described in this section, the loan is not
eligible for streamline loan servicing and foreclosure may be
initiated.
Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2024-18291 Filed 8-14-24; 8:45 am]
BILLING CODE 3410-XV-P