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**[Section 538 Guaranteed Rural Rental Housing Loans]{.underline}**

*The Section 538 Guaranteed Rural Rental Housing*

*Loan Program is intended to produce new affordable rental housing by
inviting qualified lenders and eligible housing providers to propose
rental complexes that will serve rural residents with low and moderate
incomes. The rural residents will be provided rental housing through the
use of loan guarantees.*

*It is anticipated that complexes developed under this program may
utilize other affordable housing programs such as Low Income Housing Tax
Credit, taxable bonds, HOME Investment Partnerships Program funds, and
other State or locally funded tenant assistance or grants.*

**Eligible Borrower**

May be a non-profit organization, public bodies or for-profit
organizations, including limited partnerships or LLC\'s.

**Lender Eligibility**

Lenders currently approved and considered eligible by Fannie Mae and
Freddie Mac, the Federal Home Loan Bank members, or the Department of
Housing and Urban Development for guaranteed loan programs supporting
multi-family housing are considered approved lenders, as well as state
housing finance agencies.

**Interest Rates And Loan Term**

Must be a fixed rate. Interest rate will be the best rate negotiated
between the lender and the applicant. The loan term can be up to 40
years with at least 25 years minimum term. These requirements are
announced annually in the Federal Register.

**Security**

Tax exempt bonds can be used to finance projects.

**Guarantee Fee**

There is a nonrefundable application fee of \$2,500. Rural Housing
Service will collect one percent of the guaranteed principal amount when
the loan guarantee is issued. An annual servicing fee of ½ percent of
the principal balance will also be charged.

Rural Housing Service will guarantee up to 90 percent of the principal.

**Size And Type Of Housing**

Rural Housing Service will consider proposals for new construction or
acquisition with rehabilitation of at least \$6,500 per unit. Apartment
complexes must consist of five or more rental dwelling units. Complexes
may contain units that are detached, semi-detached, row houses or
multi-family structures. The proposed housing may exceed the size
allowances and amenities prohibited under the RHS Section 515 Rural
Rental Housing program provided such costs and features are generally
found in similar housing proposals for similar income families in the
market area. Such costs, features and amenities may include larger
units, dishwashers, microwaves and increased community spaces.

Section 538 funds may be used for rehabilitation of an existing Section
515 complex.

**Income and Rent Restrictions**

-   Tenant income cannot exceed 115% of area median income, adjusted for
    family size.

-   Rent (including tenant-paid utilities) for any unit at initial
    occupancy cannot exceed 30% of 115% of area median income, adjusted
    for family size.

-   Average rent (including tenant-paid utilities) for all units in a
    project cannot exceed 30% of 100% of area median income.

Tenants are protected by the Fair Housing and Equal Opportunity
regulations.

The above stated criteria are subject to change when regulations are
published annually in the Federal Register.

Applications will be accepted when announced in the Federal Register by
the National Office, USDA Rural Development.

U.S. Department of Agriculture

Rural Development - Rural Housing Program

(Revised December 2007)

National Office Web Site: http://www.rurdev.usda.gov\
South Dakota Web Site: http://www.rurdev.usda.gov/sd/

South Dakota State Office Telephone Number: (605) 352-1100

South Dakota State Office Facsimile Number : (605) 352-1146

South Dakota State Office TDD Number : (605) 352-1147

E-Mail Address: tammi.schone@sd.usda.gov

*The U.S. Department of Agriculture (USDA) prohibits discrimination in
all its programs and activities on the basis of race, color, national
origin, age, disability, and where applicable, sex, marital status,
familial status, parental status, religion, sexual orientation, genetic
information, political beliefs, reprisal, or because all or part of an
individual\'s income is derived from any public assistance program. (Not
all prohibited bases apply to all programs.) Persons with disabilities
who require alternative means for communication of program information
(braille, large print, audiotape, etc.) should contact USDA's TARGET
Center at (202) 720-2600 (voice and TDD). To file a complaint of
discrimination, write to USDA, Director, Office of Civil Rights, 1400
Independence Avenue, S.W. Washington, D.C. 20250-9410, or call (800)
795-3272 (voice), or (202) 720-6382 (TDD). "USDA is an equal opportunity
provider, employer, and lender." (RHS-13)*