Single Family Housing Section 502 Direct and Guaranteed Manufactured Housing Pilots, 82484-82486 [2024-23506]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Housing Service

[Federal Register Volume 89, Number 198 (Friday, October 11, 2024)]
[Rules and Regulations]
[Pages 82484-82486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23506]


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DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Parts 3550 and 3555

[Docket No. RHS-24-SFH-0031]


Single Family Housing Section 502 Direct and Guaranteed 
Manufactured Housing Pilots

AGENCY: Rural Housing Service, USDA.

ACTION: Notification of extension of waivers.

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SUMMARY: The Rural Housing Service (RHS or the Agency), a Rural 
Development agency of the United States Department of Agriculture 
(USDA), is issuing this notification to extend the period to waive two 
regulatory requirements for the Section 502 Direct and Guaranteed 
Manufactured Housing program, while the Agency completes the rulemaking 
to remove regulatory barriers to assist eligible applicants by 
improving the ease of the pilot program (pilot) use for very low to 
moderate-income homeowners that seek to purchase more affordable 
housing. This continues to support the current Administration's Housing 
Supply Action Plan which seeks to boost new financing mechanisms to 
build and supply quality affordable housing units. This document 
briefly discusses the waivers the Agency intends to continue and 
provides contact information for additional details about the pilot.

DATES: The effective date of the two regulatory waivers is November 4, 
2024. The duration of the pilot is anticipated to continue until May 1, 
2025, or the date the Updating Manufactured Housing Provisions Final 
Rule is published and effective, whichever comes first. Additionally, 
the RHS may extend the pilot (with or without modifications) or 
terminate it depending on the workload and resources (i.e., budget and 
other considerations) required to administer the program, feedback from 
the public, and the effectiveness of the program. If the pilot is 
extended or terminated, the RHS will notify the public through a 
document published in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Stephanie Freeman, Finance and Loan 
Analyst, Policy, Analysis, and Communications Branch, Single Family 
Housing Guaranteed Loan Division, Rural Development, U.S. Department of 
Agriculture, Email: [email protected]; Phone: (314) 457-6413 
and Jeremy Anderson, Finance and Loan Analyst, Single Family Housing 
Direct Loan Division, Rural Development, U.S. Department of 
Agriculture, Email: [email protected]; Phone: (202) 690-3971.

SUPPLEMENTARY INFORMATION:

    Authority:  Title V, Section 502 of the Housing Act of 1949, as 
amended; 42 U.S.C. 1472.

Background

    The RHS is committed to helping improve the economy and quality of 
life in rural areas by offering a variety of programs. The Agency 
offers loans, grants, and loan guarantees to help create jobs, expand 
economic development, and provide critical infrastructure investments. 
RHS also provides technical assistance loans and grants by partnering 
with agricultural producers, cooperatives, Indian tribes, non-profits, 
and other local, State, and Federal agencies.
    Affordable housing is essential to the vitality of communities in 
rural America. Rural Development's Single Family Housing Programs give 
families and individuals the opportunity to purchase, build, repair 
their existing home, or to refinance their current mortgage under 
certain criteria. Eligibility for these loans, loan guarantees, or 
grants is based on income which varies according to the average median 
income for each eligible rural area.
    The objective of the Section 502 Direct Loan Program under 7 CFR 
part 3550 is to assist very low and low-income applicants to own 
adequate but modest, decent, safe, and sanitary housing in eligible 
rural areas by providing payment assistance to increase an applicant's 
repayment ability. The payment assistance is a type of subsidy that 
reduces the mortgage payment for a short time and is determined by the 
adjusted family income. There are a number of different factors that 
determine the applicant's eligibility for this program but at minimum 
they must have the adjusted income that is at or below the applicable 
low-income limit for the area where they wish to purchase a home and 
they must demonstrate a willingness and have the ability to repay the 
debt.
    The Section 502 Guaranteed Loan Program, under 7 CFR part 3555,

[[Page 82485]]

provides a 90% loan note guarantee to approved lenders to assist low- 
and moderate-income households the opportunity to own decent, safe, and 
sanitary dwellings as their primary residence in eligible rural areas. 
Eligible applicants may purchase, build, rehabilitate, improve, or 
relocate a dwelling in an eligible rural area. Applicant eligibility 
for this program is determined by the lender.
    RHS may authorize limited demonstration programs to test new 
approaches to offering housing under the statutory authority granted to 
the Secretary, as set forth in 7 CFR 3550.7 and 3555.2(b). Such 
demonstration programs may not be consistent with some of the 
provisions contained in this part. However, any program requirements 
that are statutory will remain in effect.
    In 2022, the Agency extended the existing pilot in order to 
continue assessing the pilots' impact. The first pilot involves 
financing existing manufactured homes; the second pilot involves the 
ownership requirement for new energy-efficient manufactured and modular 
homes in land-lease communities operating on a nonprofit basis. These 
allowances remain unchanged from any previous extensions of this pilot. 
While the number of participating states remain restricted, the pilot 
ensures adequate regional representation.

Existing Manufactured Home Pilot

    The Agency is continuing with the existing pilot, which was 
initially implemented on August 12, 2016, and continued via a document 
published in the Federal Register (at 87 FR 66075 on November 2, 2022), 
which expires on November 4, 2024. In the November 22, 2022, document, 
the Agency waived the regulatory restrictions in 7 CFR parts 3550 and 
3555 and permitted the financing of existing manufactured homes in the 
pilot states even when the home was not currently financed by the 
Agency. Under the current regulations, new manufactured homes are 
eligible for financing through the Section 502 Single Family Housing 
(SFH) Direct and Guaranteed Loan Programs. Existing manufactured homes 
are not eligible unless the home is already financed through Rural 
Development (RD) (7 CFR 3550.52(e)(l); 3550.73(b); 3555.208(b)(3)). The 
Agency anticipates the completion of rulemaking in the near future that 
will codify the waivers into 7 CFR parts 3550 and 3555, and which will 
be applied program wide.

Eligibility Requirements

    Approved lenders in the SFH Guaranteed Loan Program do not require 
additional approval to participate provided the home is in a pilot 
state. The loan request must be from an eligible applicant, all the 
pilot conditions listed in this section must be met, and all other 
program requirements that have not been waived must also be met.
    The following States are included in this pilot:
    Colorado, Iowa, Louisiana, Michigan, Mississippi, Montana, Nevada, 
New Hampshire, New York, North Dakota, Ohio, Oregon, Pennsylvania, 
South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, 
West Virginia, Wisconsin, and Wyoming.
    The following unit requirements below must be met:
    The unit must have been constructed on or after January 1, 2006, in 
conformance with the Federal Manufactured Home Construction and Safety 
Standards (FMHCSS), as evidenced by an affixed Housing and Urban 
Development (HUD) Certification Label, and the unit must not have been 
previously installed on a different homesite, or had any structural 
alterations to it since construction in the factory, except for 
porches, decks, or other structures which were built to engineered 
designs or were approved and inspected by local code officials.
    The unit inspection is required using one of two methods:
    Option 1--Form HUD-309, ``HUD Manufactured Home Installation 
Certification and Verification Report'' completed in accordance with 24 
CFR 3286.511 by a qualified party as follows: A manufactured home or 
residential building inspector employed by the local authority having 
jurisdiction over the site of the home, provided that the jurisdiction 
has a residential code enforcement program; a professional engineer, 
registered architect a HUD-accepted Production Inspection Primary 
Inspection Agency (IPIA) or a Design Approval Primary Inspection Agency 
(DAPIA), or an International Code Council (ICC) certified inspector;
    Or
    Option 2--Obtain a certification that the foundation design meets 
the requirements of either HUD Handbook 4930.3G or HUD Publication 
7584, which updated and revised the pre-1996 version of HUD Handbook 
4930.3G, ``Permanent Foundations Guide for Manufactured Housing 
(PFGMH).'' Certifications referencing either Publication 7584 or 
Handbook 4930.3G are acceptable. The foundation certification must be 
from a licensed professional engineer or registered architect who is 
licensed/registered in the state where the manufactured home is located 
and must attest to current guidelines of the PFGMH. The certification 
must be site specific and contain the engineer's or registered 
architect's signature, seal, and/or state license/certification number. 
This certification can take the place of Form HUD 309.
    Guaranteed loan applications submitted under this pilot must be 
manually submitted and underwritten; however, the documents may be 
submitted through GUS. A job aid for this type of submission is 
available in the USDA LINC Training and Resource Library in the ``Loan 
Origination'' tab or directly here: https://www.rd.usda.gov/sites/default/files/linc_manual_submission_job_aid.pdf. Agency staff will 
need to select ``MANUFACTURED (PILOT)'' for ``Construction Type'' in 
the Property Information section in GLS. This will allow for the proper 
identification of pilot loans for tracking and monitoring purposes.
    Direct loan applications submitted under the pilot are submitted 
directly to the local RD office. Agency staff will need to select 
Program Type Code 1014 (very low income) or 1015 (low income) unless 
the property is located in a persistent poverty county, in which case 
Program Type Code 1114 (very low income) or 1115 (low income) will be 
used. In addition, Agency staff will need to select a Construction Type 
of ``Manuf/Home'' and a Dwelling Type of ``Purchase Old, Refinance, 
Purchase Old/Repair, or Refinance/Repair'' in UniFi. This will allow 
for the proper identification of pilot loans for tracking and 
monitoring purposes.
    The applicant and property must meet all other criteria set forth 
in 7 CFR part 3550 and HB-1-3550 for Direct loans or 7 CFR part 3555 
and HB-1-3555 for Guaranteed loans, as applicable. These criteria 
include, but are not limited to, the following: The unit must have a 
floor area of not less than 400 square feet; the unit must meet the 
Comfort Heating and Cooling Certificate Uo Value Zone for the location; 
the towing hitch and running gear must have been removed; the 
manufactured home must be classified and taxed as real estate; the 
remaining economic life of the property must meet or exceed the 30 year 
term of the proposed loan; and the unit replacement cost coverage must 
be equal to the insured value of the improvements or the unpaid 
principal balance with deductible(s) of up to but not exceeding the 
greater of $1,000 or one percent (1%) of the policy. For

[[Page 82486]]

Guaranteed Loans, the unit should have replacement cost coverage in an 
amount that is at least equal to the guaranteed value of the 
improvements or the unpaid principal balance, with the deductible not 
exceeding five percent (5%) of the total coverage amount.

Ownership Requirement Pilot for Energy Efficient Manufactured and 
Modular Home Financing in Land-Lease Communities Operating on a 
Nonprofit Basis

    The Agency is continuing with the existing pilot that involves the 
ownership requirement for new energy-efficient manufactured and modular 
homes in land-lease communities operating on a nonprofit basis. 
According to 7 CFR 3550.58(b), a leasehold interest must have an 
unexpired term that is at least 150 percent of the term of the mortgage 
for Direct loans. According to 7 CFR 3555.203(b)(3), a leasehold 
interest must have an unexpired term of at least 45 years from the date 
of loan closing for a Guaranteed loan.

Eligibility Requirements

    Under this pilot, RD will accept a lease with an unexpired term 
that is at least two years beyond the term of the promissory note in 
the pilot states.
    The following States are included in this pilot: California, 
Michigan, Minnesota, New Hampshire, Oregon, Pennsylvania, Vermont, and 
Wisconsin.
    The loan request must be from an eligible applicant, all the pilot 
conditions must be met, and new manufactured and modular homes must 
meet the following pilot conditions:
    At a minimum, new manufactured and modular homes must be Energy 
Star compliant. Additionally, the unexpired term of the lease must be 
at least two years longer than the mortgage term. While the lease terms 
in 7 CFR 3550.58(b) and 3555.203(b)(3) offer borrowers some 
protections, many states have statutes that promulgate fair lease terms 
and safeguard residents of land-lease communities.
    For the SFH Guaranteed Loan Program, pilot states should consider 
following the recommendations in HUD's interim guidance related to 24 
CFR 3285.312 on the use of frost-free foundations or frost protected 
shallow foundations.
    For the SFH Direct Loan Program, pilot states may use the 
recommendations from HUD's interim guidance on frost-free or frost-
protected shallow foundations in lieu of RD Instruction 1924-A, Exhibit 
J. Under the HUD interim guidance recommendations, the installer should 
install all footings and piers below the frost line depth, or for Frost 
Free Foundations, have a site investigation performed by a soil 
engineer or geotechnical engineer to verify if the soil condition at 
each home site is of a non-frost susceptible classification and is well 
drained. In lieu of a site soil investigation, a layer of washed 
gravel, or crushed stone, or course or dense sand may be provided to 
the frost line depth. For either of these alternatives, subsurface 
drains need to be provided; or use a Frost Protected Shallow Foundation 
system that utilizes below ground insulation to protect the soil from 
freezing with subsurface drains provided at each site.
    The applicant and property must meet all other criteria set forth 
in 7 CFR part 3550 and HB-1-3550 for Direct loans or 7 CFR part 3555 
and HB-1-3555 for Guaranteed loans, as applicable for application 
guidance. Program Directors should use the tracking tool under the 
``Energy Efficient Housing'' link on the SFH SharePoint tracking site 
to report loans made under this pilot.

Paperwork Reduction Act

    The regulatory waivers for this pilot contains no new reporting or 
recordkeeping burdens under OMB control number 0575-0179 that would 
require approval under the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35).

Non-Discrimination Statement

    In accordance with Federal civil rights laws and 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 711 Federal 
Relay Service.
    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 U.S. Department of Agriculture USDA 
Program Discrimination Complaint 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, Washington, DC 
20250-9410; or (2) Fax: (833) 256-1665 or (202) 690-7442; or (3) Email: 
[email protected].

Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2024-23506 Filed 10-10-24; 8:45 am]
BILLING CODE 3410-XV-P