Multifamily Housing Program Update to the Credit Report Process, 106977-106980 [2024-31388]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Housing Service

[Federal Register Volume 89, Number 250 (Tuesday, December 31, 2024)]
[Rules and Regulations]
[Pages 106977-106980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-31388]



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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. 

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Federal Register / Vol. 89, No. 250 / Tuesday, December 31, 2024 / 
Rules and Regulations

[[Page 106977]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service

7 CFR Parts 1910, 1955, and 3560

[Docket No. RHS-24-MFH-0042]
RIN 0575-AD30


Multifamily Housing Program Update to the Credit Report Process

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

ACTION: Final rule.

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SUMMARY: The Rural Housing Service (RHS or Agency), a Rural Development 
(RD) agency of the United States Department of Agriculture (USDA), is 
publishing a final rule to update its regulation on how credit reports 
are obtained for the purposes of determining eligibility and 
feasibility for Multifamily Housing (MFH) Programs.

DATES: This final rule is effective January 30, 2025.

FOR FURTHER INFORMATION CONTACT: Abby Boggs, Branch Chief, Program 
Support Branch, Production and Preservation Division, Multifamily 
Housing, Rural Development, U.S. Department of Agriculture, 1400 
Independence Avenue SW, Washington, DC 20250, telephone: 615-490-1371; 
or email: [email protected].

SUPPLEMENTARY INFORMATION:

Statutory Authority

    The Direct-MFH Loan and Grant program is authorized under sections 
514, 515, 516 of title V of the Housing Act of 1949, as amended; 42 
U.S.C. 1471 et seq.; and implemented under 7 CFR part 3560. Section 
510(k) of title V the Housing Act of 1949 (42 U.S.C. 1480(k)), as 
amended, authorizes the Secretary of Agriculture to promulgate rules 
and regulations as deemed necessary to carry out the purpose of that 
title.

I. Background

    The RHS, an agency of the USDA, 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 
Multifamily housing, childcare centers, fire and police stations, 
hospitals, libraries, nursing homes, schools, first responder vehicles 
and equipment, and housing for farm laborers. RHS also provides 
technical assistance loans and grants in partnership with non-profit 
organizations, Indian Tribes, State and Federal Government agencies, 
and local communities.
    Title V of the Housing Act of 1949 (Act) authorized the USDA to 
make housing loans to farmers to enable them to provide habitable 
dwellings for themselves or their tenants, lessees, sharecroppers, and 
laborers. The USDA then expanded opportunities in rural areas, making 
housing loans and grants to rural residents through the Single-Family 
Housing (SFH) and Multifamily Housing (MFH) Programs.
    The RHS operates the Direct MFH Loan and Grant Programs. The direct 
loan program provides loans to eligible borrowers unable to get 
financing through traditional lenders. Multifamily direct loans feature 
terms and conditions that support the development or preservation of 
affordable rural rental housing for low-income, elderly, or disabled 
people. Loan funds can be used for all construction hard costs and 
land-related costs, including land acquisition and development.

II. Discussion of Final Rule

    The RHS published a proposed rule in the Federal Register on March 
29, 2024 [89 FR 22094], to change the process by which credit reports 
are obtained to determine credit worthiness, eligibility, and 
feasibility for applicants and borrowers for MFH funding, transfers, 
and servicing actions. A 60-day comment period was provided for the 
proposed rule, which closed on May 28, 2024. The Agency received 
comments from two (2) respondents. Neither comment is applicable to the 
specific contents of the proposed rule. Of the comments received, one 
respondent manages a USDA-RD property and provided concerns for tenants 
providing their own credit report to live in the complex, which is not 
what this rule will allow, and one respondent's comment was made 
anonymously about leasing and selling public land to the government, 
which is not applicable to the subject matter of this rule. No changes 
were made in this final rule as a result of public comments.
    RHS regulation 7 CFR 3560.56(d)(5) provides that for initial loan 
applications, eligibility and feasibility of a housing proposal will be 
determined based on, amongst other requirements, an analysis of current 
credit reports. Currently, the agency collects a credit report fee from 
applicants during the application process and agency staff obtains the 
required credit report through a contract with a credit reporting 
agency. RHS has relied on various internal guidance documents to staff 
to provide information on this credit report process. By not having the 
credit report process clearly codified, the Agency makes the process 
unnecessarily complicated for the applicant and Agency staff. When the 
Multifamily Housing Program realigned all staff members to the National 
Office level, applicants were required to submit the credit report fee 
electronically to the Agency's Business Center Servicing Office using a 
payment link. The process for creating the payment link is cumbersome. 
Agency staff must determine and notify the applicant of the credit 
report fee applicable for the applicant's particular request. Agency 
staff will request the Servicing Office to create a staged payment link 
for the fee through a SharePoint portal. Once the payment link is 
created, the Servicing Office notifies the requesting Agency staff and 
provides the payment link. Agency staff, in turn, notifies the 
applicant of the payment link and the applicant must process the 
payment before the link expires in 30 days. After the applicant's 
payment processes successfully, the Agency orders the credit report 
from a contracted bureau.
    This final rule will amend 7 CFR part 3560 to require that in lieu 
of applicants and borrowers submitting credit report fees, the Agency 
will require applicants and borrowers to provide the credit report(s). 
In accordance with 18 U.S.C. 1001, applicants that submit false, 
fictitious, or fraudulent materials shall be fined or imprisoned not 
more than 5 years.

[[Page 106978]]

    It is the Agency's expectation that this regulation update for 
obtaining credit reports will align the Agency with current industry 
practices and create an efficiency for applicants and borrowers by 
streamlining the application process.

III. Summary of Changes

    The Agency will make the following revisions as published in the 
proposed rule. No changes were made in this final rule as a result of 
public comments.
    (1) Add the definition of Current Comprehensive Credit Report to 7 
CFR 3560.11.
    (2) Update 7 CFR 3560.56(d)(5) to include the requirements of a 
valid credit report which must address both the entity and the actual 
individual principals, partners, members, etc., within the applicant 
entity, including any sub-entities who are responsible for controlling 
the ownership and operations of the entity.
    (3) Update 7 CFR 3560.405 to include the requirement for a credit 
report in cases of change to the borrower's organization structure or 
entity's controlling interest.
    (4) Update 7 CFR 3560.406 to include the requirement for a credit 
report for approval of transfers and sales.
    (5) Establish a new subpart R within 7 CFR part 3560 to provide 
detailed requirements of the credit reporting process.
    In addition, this final rule will include conforming changes to 
rescind 7 CFR part 1910, subparts B and C, and 7 CFR 1955.118, which 
are outdated.

IV. Regulatory Information

Executive Order 12372, Intergovernmental Review of Federal Programs

    These loans and grants are subject to the provisions of Executive 
Order 12372, which requires intergovernmental consultation with State 
and local officials to foster the intergovernmental partnership and 
strengthen federalism by relying on State and local processes for the 
coordination and review of proposed Federal financial assistance and 
direct Federal development.
    Applicants for the Direct Multifamily Housing Loan and Grant 
program are required to contact their State's Single Point of Contact 
(SPOC) to submit their Statement of Activities and find out more 
information on how to comply with the State's process under Executive 
Order 12372. To locate a SPOC for your State, the Office of Management 
and Budget (OMB) has an official SPOC list on its website https://www.whitehouse.gov/omb/office-federal-financial-management/spoc-list/. 
For those States that have a home page for their designated SPCO, a 
direct link has been provided by clicking on the State name. SPOC 
information is also available in any RD Agency office or on the RD 
Agency's website.
    States that are not listed on the OMB website have chosen not to 
participate in the intergovernmental review process, and therefore, do 
not have a SPOC. If you are located within a State that does not have a 
SPOC, you may send application materials directly to the Federal RD 
awarding agency. RHS conducts intergovernmental consultations for each 
loan in accordance with 2 CFR part 415, subpart C.

Executive Order 12866, Regulatory Planning and Review

    This final rule has been determined to be not 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 rulemaking: (1) unless otherwise specifically 
provided, all State and local laws that conflict with this rulemaking 
will be preempted; (2) no retroactive effect will be given to this 
rulemaking except as specifically prescribed in the rule; and (3) 
administrative proceedings of the National Appeals Division of the 
Department of Agriculture (7 CFR part 11) must be exhausted before 
bringing suit in court that challenges action taken under this 
rulemaking.

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 the States, or on the distribution of power and 
responsibilities among the various levels of government. This final 
rule does not impose substantial direct compliance costs on State and 
local governments; therefore, consultation with States 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. 
Consultation is also required for any regulation that preempts Tribal 
law or that imposes substantial direct compliance costs on Indian 
Tribal governments and that is not required by statute.
    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 RHS 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.

Administrative Pay-As-You-Go-Act of 2023

    Section 270 of the Administrative Pay-As-You-Go-Act of 2023 (Pub. 
L. 118-5, div. B, title III, 137 Stat 31) amended 5 U.S.C. 801(a)(2)(A) 
to require U.S. Government Accountability Office (GAO) to assess agency 
compliance with the Act, which establishes requirements for 
administrative actions that affect direct spending, in GAO's major rule 
reports.
    The Act does not apply to this rule because it does not increase 
direct spending.

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.

[[Page 106979]]

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 
final 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 (UMRA)

    Title II of the UMRA, Public Law 104-4, establishes requirements 
for Federal agencies to assess the effects of their regulatory actions 
on state, local, and tribal governments and on the private sector. 
Under section 202 of the UMRA, Federal agencies generally must prepare 
a written statement, including 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 a Federal 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 for the private sector. Therefore, this final rule is 
not subject to the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

    This final rule contains no new reporting or recordkeeping burdens 
under OMB control number 0575-0189 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 and to promote the use of the internet 
and other information technologies to provide increased opportunities 
for citizen access to Government information and services, and for 
other purposes.

Civil Rights Impact Analysis

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

Assistance Listing

    The program affected by this regulation is listed in the Assistance 
Listing Catalog (formerly Catalog of Federal Domestic Assistance) under 
numbers 10.415-Rural Rental Housing Loans and 10.405-Farm Labor Housing 
Loans and Grants.

Non-Discrimination Statement 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, 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 https://www.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
(2) Fax: (833) 256-1665 or (202) 690-7442; or
(3) Email: [email protected].

    USDA is an equal opportunity provider, employer, and lender.

Severability

    It is USDA's intention that the provisions of this rule shall 
operate independently of each other. In the event that this rule or any 
portion of this rule is ultimately declared invalid or stayed as to a 
particular provision, it is USDA's intent that the rule nonetheless be 
severable and remain valid with respect to those provisions not 
affected by a declaration of invalidity or stayed. USDA concludes it 
would separately adopt all of the provisions contained in this final 
rule.

List of Subjects

7 CFR Part 1910

    Agriculture, Credit, Grant programs--agriculture, Grant programs--
housing and community development, Loan programs--agriculture, Loan 
programs--housing and community development, Low and moderate income 
housing, Reporting and recordkeeping requirements, Rural areas.

7 CFR Part 1955

    Agriculture, Drug traffic control, Government property, Loan 
programs--agriculture, Loan programs--housing and community 
development, Low and moderate income housing, Rural areas.

7 CFR Part 3560

    Accounting, Administrative practice and procedure, Aged, Conflicts 
of interest, Government property management, Grant programs--housing 
and community development, Insurance, Loan programs--agriculture, Loan 
programs--housing and community development, Low and moderate-income 
housing, Migrant

[[Page 106980]]

labor, Mortgages, Nonprofit organizations, Public housing, Rent--
subsidies, Reporting and recordkeeping requirements, Rural areas.

    For the reasons set forth in the preamble, the Rural Housing 
Service amends 7 CFR parts 1910, 1955, and 3560 as follows:

PART 1910--[Removed and Reserved]

0
1. Under the authority of 5 U.S.C. 301, 7 U.S.C. 1989, and 42 U.S.C. 
1480, part 1910 is removed and reserved.

PART 1955--PROPERTY MANAGEMENT

0
2. The authority citations for part 1955 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart C--Disposal of Inventory Property

0
3. Amend Sec.  1955.118 by revising paragraphs (b)(2) and (6), 
(b)(8)(iii), and (b)(11) to read as follows:


Sec.  1955.118   Processing cash sales or MFH credit sales on NP terms.

* * * * *
    (b) * * *
    (2) Processing. Purchasers requesting credit on NP terms will be 
required to submit documentation to establish financial stability, 
repayment ability, and creditworthiness. Standard forms used to process 
program applications may be utilized or comparable documentation may be 
accepted from the purchaser with the servicing official having the 
discretion to determine what information is required to support loan 
approval for the type of property involved. Individual credit reports 
will be ordered for each individual applicant and each principal within 
an applicant entity in accordance with subpart R of 7 CFR part 3560. 
Commercial credit reports will be ordered for profit corporations and 
partnerships, and organizations with a substantial interest in the 
applicant entity in accordance with subpart R of 7 CFR part 3560.
* * * * *
    (6) Term of note. The note amount will be amortized over a period 
not to exceed 10 years. If the leadership designee determines more 
favorable terms are necessary to facilitate the sale, the note amount 
may be amortized using a 30-year factor with payment in full (balloon 
payment) due not later than 10 years from the date of closing. In no 
case will the term be longer than the period for which the property 
will serve as adequate security.
* * * * *
    (8) * * *
    (iii) The Agency will provide the closing agent with the necessary 
information for closing the sale. The assistance of OGC will be 
requested to provide closing instructions for all MFH sales.
* * * * *
    (11) Form RD 1910-11, ``Applicant Certification, Federal Collection 
Policies for Consumer or Commercial Debts.'' The Agency must review 
Form RD 1910-11, ``Applicant Certification, Federal Collection Policies 
for Consumer or Commercial Debts,'' with the applicant, and the form 
must be signed by the applicant.

PART 3560--DIRECT MULTI-FAMILY HOUSING LOANS AND GRANTS

0
4. The authority citation for part 3560 continues to read as follows:

    Authority: 42 U.S.C. 1480.

Subpart A--General Provisions and Definitions

0
5. Amend Sec.  3560.11 by adding the definition of Current 
Comprehensive Credit Report in alphabetical order to read as follows:


Sec.  3560.11   Definitions.

* * * * *
    Current Comprehensive Credit Report. A credit report no older than 
six months from the date of issuance, that contains details of both 
current open credit accounts and closed accounts, and that is provided 
by one of the three accredited major credit bureaus (Experian, Equifax, 
or TransUnion).
* * * * *

Subpart B--Direct Loan and Grant Origination

0
6. Amend Sec.  3560.56 by revising paragraph (d)(5) to read as follows:


Sec.  3560.56   Processing section 515 housing proposals.

* * * * *
    (d) * * *
    (5) An analysis of current credit reports in accordance with 
subpart R of this part;
* * * * *

Subpart I--Servicing

0
7. Amend Sec.  3560.405 by adding paragraph (b)(4) to read as follows:


Sec.  3560.405   Borrower organizational structure or ownership 
interest changes.

* * * * *
    (b) * * *
    (4) Borrowers must submit a credit report in accordance with 
subpart R of this part.
* * * * *

0
8. Amend Sec.  3560.406 by adding paragraph (c)(6) to read as follows:


Sec.  3560.406   MFH ownership transfers or sales.

* * * * *
    (c) * * *
    (6) A credit report in accordance with subpart R of this part.
* * * * *

Subpart Q--[Added and Reserved]

0
9. Add reserved subpart Q.

0
10. Add subpart R to read as follows:

Subpart R--Credit Report Requirements

Sec.
3560.851 General.
3560.852 Requirements.


Sec.  3560.851   General.

    This subpart contains the Agency's credit reporting requirements 
for all Multifamily (MFH) programs.


Sec.  3560.852   Requirements.

    When required to submit a credit report under any provision of this 
part, such submission must include a current comprehensive credit 
report for both the entity and the individual principals, partners, 
members, and the individual sub-entities or natural persons who are 
responsible for controlling the ownership and operations of the 
applicant entity, including but not limited to, principals, partners, 
or members. The Agency will also accept combination comprehensive 
credit reports which provides a comprehensive view of the applicant's 
credit profile by combining data from all three major credit bureaus 
(Experian, Equifax, and TransUnion).

Joaquin Altoro,
Administrator, Rural Housing Service.
[FR Doc. 2024-31388 Filed 12-30-24; 8:45 am]
BILLING CODE 3410-XV-P