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Rural Development

Joaquin Altoro 

Administrator 

Rural Housing Service 

1400 Independence Ave, SW 

Room 5011-S 

Washington, D.C. 20250 

Telephone: (202) 692-0268 

TO: State Directors

Rural Development 

ATTN: All Single Family Housing Direct

State and Field Employees 

FROM: Joaquin Altoro

Administrator

Rural Housing Service 

SUBJECT: Temporary Authorizations Related to New Construction

Single Family Housing Direct Loan Programs

PURPOSE:

This memorandum announces the temporary authorizations related to costs, 

shortages, and delays for new construction financed and monitored under the direct 

loan programs. These authorities are a renewal of those offered via a memorandum 

dated December 16, 2021. 

These temporary authorizations are effective as of the date of this 

memorandum; and will remain in effect until this memorandum’s stated 

expiration date or until revoked via a separate memorandum (whichever occurs 

first). 

AUTHORITY: 

The exception authority in 7 CFR 3550.8 permits the Administrator to grant the 

temporary exceptions described in this UL. 

BACKGROUND:

According to the National Association of Home Builders lumber prices have 

increased by $14,345 for an average single-family home, equating to a near 75% 

increase since the COVID-19 pandemic began in early 2020. Since then, the most 

serious material shortages and inflation have been noted with appliances, lumber, 

windows, and doors. Gypsum, and related products (drywall, Portland 

cement/concrete) have also experienced 50% increases in the past 24 months. 

EXPIRATION DATE: FILING INSTRUCTIONS:

January 31, 2024 Housing Programs 

For
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Additionally, contractors have encountered shortages of skilled labor which has had correspond 

impacts on construction scheduling (delays), pricing volatility, and added costs for our borrowers

with their construction projects. While it is unknown when building material and labor costs will 

drop, the current market conditions will likely impact program applicants and borrowers for months 

to come. As a result, RHS has determined that the current requirements are adverse to the 

Government’s interest and flexibilities must be provided at this time. 

IMPLEMENTATION RESPONSIBILITIES:

To address the current issues with new construction, the Agency will temporarily: 

• Increase the construction contingency permitted in Handbook (HB)-1-3550, Paragraph 5.23 

A. from “not to exceed five percent of the construction cost” to “not to exceed 15 percent 

of the construction cost”. The increase would be allowed as a part of closing. The other 

conditions in this paragraph still apply. 

• Ease certain requirements for subsequent loans at the end of construction for cost overruns 

only. 

o Provided change orders were handled in accordance with HB-1-3550, Paragraph 

5.24 D: 

 An appraisal will not be required (HB-1-3550, Paragraph 5.17). 

 Full title clearance is not needed (HB-1-3550, Paragraph 8.4). 

o With the exception of checking the Department of Treasury’s Do Not Pay portal, 

the borrower’s credit history will not be evaluated (regardless of when the 

evaluation tied to the initial loan was made). 

o The applicable ratios (PITI and TD) can be exceeded with approval from the next 

level supervisor. 

RD staff are reminded that:

• Protective advances are only considered when the Agency cannot provide a subsequent 

loan (see HB-1-3550, Paragraph 13.15 for further guidance). 

• A Section 504 loan and/or grant can be extended to an existing Section 502 borrower 

provided the program eligibility requirements are met (e.g., acquisition rehabilitation type

projects). Section 504 loan and/or grant cannot be used to assist in completing new 

construction. 

• The maximum construction period outlined in Rural Development (RD) Instruction 1924-

A, Paragraph 1924.5 (c)(1) permits up to 9 months after closing for non-self-help 

transactions and up to 15 months for self-help transactions. If construction has or will 

exceed the original construction term, RD field staff will need to request that the Servicing 

Office manually change the first payment due date in LoanServ to avoid the system from 

erroneously showing the account as delinquent. The request should be sent to the SFH 

Assistance Section email (RA.mostlouis3.field.support@usda.gov) and should include the 

account number as well as the new proposed first payment due date. 

 
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RD State Offices with questions regarding this memorandum should contact their Single Family 

Housing Direct Point of Contact.