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

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REGISTER issue of each week.

Rules and Regulations Federal Register

1 

Vol. 76, No. 1 

Monday, January 3, 2011 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

7 CFR Part 3565 

RIN 0575–AC80 

Continuous Construction-Permanent 

Loan Guarantees Under the Section 

538 Guaranteed Rural Rental Housing 

Program 

AGENCY: Rural Housing Service, USDA. 

ACTION: Final rule. 

SUMMARY: The Rural Housing Service 

(RHS) (an agency within the Rural 

Development mission area) is amending 

its regulations to add an additional form 

of guarantee that is now available under 

its Guaranteed Rural Rental Housing 

Program. A single, continuous guarantee 

during the construction phase for 

construction advances and the 

permanent financing phase of the 

project (for loans that meet certain 

criteria) will now be provided in 

addition to the two existing forms of 

guarantees under the program. This 

action is taken to enhance efficiency, 

flexibility, and effectiveness in 

managing the program. 

DATES: Effective Date: The final rule is 

effective on February 2, 2011. 

FOR FURTHER INFORMATION CONTACT: 

Tammy S. Daniels, Financial and Loan 

Analyst, USDA Rural Development 

Guaranteed Rural Rental Housing 

Program, Multi-Family Housing 

Guaranteed Loan Division, U.S. 

Department of Agriculture, South 

Agriculture Building, Room 1271, STOP 

0781, 1400 Independence Avenue, SW., 

Washington, DC 20250–0781. E-mail: 

tammy.daniels@wdc.usda.gov. 

Telephone: (202) 720–0021. This 

number is not toll-free. Hearing or 

speech-impaired persons may access 

that number by calling the Federal 

Information Relay Service toll-free at 

(800) 877–8339. 

SUPPLEMENTARY INFORMATION: 

Classification 

This rule has been determined not to 

be significant for the purposes of 

Executive Order 12866 and, therefore, 

has not been reviewed by the Office of 

Management and Budget (OMB). 

Executive Order 12988 

This rule has been reviewed under 

Executive Order 12988, Civil Justice 

Reform. If this rule is adopted: (1) 

Unless otherwise specifically provided, 

all State and local laws and regulations 

that are in 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) the appeal procedures of the 

National Appeals Division (7 CFR part 

11) must be exhausted before bringing 

suit. 

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 effects 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 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, more costeffective or least burdensome alternative 

that achieves the objectives of the rule. 

This 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. 

Executive Order 13132 

The policies contained in this 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. Nor does this rule 

impose substantial direct compliance 

costs on State and local governments. 

Therefore, consultation with the States 

is not required. 

Environmental Impact Statement 

This document has been reviewed in 

accordance with 7 CFR part 1940, 

§ 1940.310(e)(3). Rural Development has 

determined that this action does not 

constitute a major Federal action 

significantly affecting the quality of the 

human environment, and in accordance 

with the National Environmental Policy 

Act (NEPA) of 1969, 42 U.S.C. 4321 et 

seq., an Environmental Impact 

Statement is not required. Loan 

applications will be reviewed 

individually to determine compliance 

with NEPA. 

Regulatory Flexibility Act 

This 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 of 

this document that this rule will not 

have a significant economic impact on 

a substantial number of small entities. 

This rule will affect both small and large 

entities in the same manner. This rule 

has no significant changes in 

information collection or regulatory 

requirements that would have a negative 

impact on either small or large entities 

in an economic way. 

Programs Affected 

This program is listed in the Catalog 

of Federal Domestic Assistance under 

Number 10.438. 

Intergovernmental Consultation 

For the reasons set forth in the Final 

Rule related Notice to 7 CFR part 3015, 

Subpart V, this program is subject to 

Executive Order 12372 which requires 

intergovernmental consultation with 

State and local officials. The Agency has 

conducted intergovernmental 

consultation in the manner delineated 

in RD Instruction 1940–J (available in 

any Rural Development office). 

Paperwork Reduction Act of 1995 

The information collection 

requirements contained in this 

regulation have been approved by OMB 

under the provisions of 44 U.S.C. 

chapter 35 and have been assigned OMB 

control number 0575–0174 in 

accordance with the Paperwork 


srobinson on DSKHWCL6B1PROD with RULES
2 Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Rules and Regulations 

Reduction Act of 1995. No person is 

required to respond to a collection of 

information unless it displays a valid 

OMB control number. 

E-Government Act Compliance 

Rural Development is committed to 

complying with the E-Government Act 

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. 

Background Information 

The Guaranteed Rural Rental Housing 

Program (GRRHP) currently offers two 

forms of guarantees: (1) A guarantee for 

permanent loans and (2) a guarantee 

which provides a limited duration 

guarantee for advances during the 

construction period with the limited 

duration provision being automatically 

removed if certain conditions are met. 

Under this final rule, the Agency 

creates, for loans meeting certain criteria 

and subject to the availability of funds, 

an option for a single, continuous 

guarantee during the construction phase 

for construction advances and the 

permanent financing phase of the 

project. This third option was created in 

response to input from GRRHP 

stakeholders who believe that this 

option will allow the program to serve 

more borrowers thus making affordable 

housing available for more low to 

moderate income families. This final 

rule also includes technical corrections 

and clarifications and removes the 

anachronistic requirement that lenders 

certify that their computer systems 

comply with year 2000 technology. The 

proposed rule can be found at 75 FR 

4707–4710. Additionally, this final rule 

removes the definition for ‘‘combination 

construction and permanent loan’’ and 

added definitions for ‘‘construction and 

permanent loan,’’ ‘‘construction 

contingency reserve,’’ ‘‘lease-up period,’’ 

‘‘lease-up reserve,’’ ‘‘loan-to-cost ratio,’’ 

and ‘‘operating and maintenance 

reserve.’’ 

Comments Received on the Proposed 

Rule 

On January 29, 2010, RHS (an agency 

within the Rural Development mission 

area) proposed an additional form of 

guarantee under the Guaranteed Rural 

Rental Housing Program regulation. The 

Agency received comments from five 

entities in response to the proposed 

rule. Comments were supportive of the 

new guarantee option offered in the 

proposed rule. One commenter stated 

that they supported the additional form 

of guarantee and applauded RHS’ work 

in this area. The commenter believed 

the continuous guarantee will reduce 

the complexity of the program, making 

housing affordable for more low to 

moderate income families. Another 

commenter also stated that the 

continuous guarantee is a good idea and 

that it would provide a financing 

vehicle for additional multifamily 

housing construction. The Agency 

appreciates the support received from 

commenters in regard to the new 

continuous guarantee option. Specific 

comments were also received in three 

particular areas: Construction 

contingency reserve, the guarantee 

requirements, and the processing 

requirements. These comments are 

summarized below. 

Construction Contingency Reserve 

Two comments were received 

regarding the construction contingency 

reserve. The first comment was related 

to the definition provided in the 

proposed rule which read: ‘‘This reserve 

will be held by the lender and will only 

be disbursed for Agency and lender 

approved change order requests.’’ The 

commenter’s concern was that, as 

written, the language could be 

interpreted to mean that change order 

requests need only be approved by the 

Agency or the lender. The commenter 

recommended the language be rewritten 

to provide that the funds will only be 

disbursed for change order[s] requests 

that are approved by both the Agency 

and the lender. In response to this 

comment, the Agency has revised the 

definition to read: ‘‘A cash reserve of at 

least two percent of the construction 

contract, inclusive of the contractor’s fee 

and all hard and soft costs, which must 

be set up and fully funded by the 

closing of the construction loan. This 

reserve will be held by the lender, and 

funds will only be disbursed for change 

order requests approved by the Agency 

and the lender.’’ 

The second comment on construction 

contingency reserve stated that it would 

be useful to clarify the timing of the 

release of unused reserve funds as there 

are inconsistent interpretations among 

various State agencies. The commenter 

recommended releasing these funds at 

the same time that the 90/90 reserve 

funds are released. In response to this 

comment the Agency has revised the 

definition to clarify when the unused 

reserve funds will be released. 

Guarantee Requirements 

The Agency received three comments 

regarding the guarantee requirements. 

One commenter recommended removal 

of the following language in 

§ 3565.52(c)(3) which the commenter 

viewed as unnecessary: ‘‘Only projects 

that have low loan-to-cost ratio, as 

specified by the Agency in a Notice 

published periodically in the Federal 

Register, are eligible for this type of 

guarantee.’’ The Agency believes this 

language serves the purpose of advising 

readers up front that specific eligibility 

criteria in relation to what constitutes 

low loan-to-cost ration is subject to 

change and appropriate notification will 

take place periodically in the Federal 

Register. Accordingly, this language was 

unchanged. 

The second commenter asked what is 

intended by the term ‘‘low loan-to-cost 

ratio’’ in § 3565.52(c)(3). The commenter 

further stated that this [achieving a low 

loan-to-cost ratio] should not be a 

problem for Low Income Housing Tax 

Credit properties but could be for other 

properties, and that RHS should not 

arbitrarily limit the availability of the 

new guarantee. In response to this 

comment, the Agency reserves the right 

in the regulation to periodically publish 

a threshold in the Federal Register to 

define the ratio that will be considered 

‘‘low’’. The definition for ‘‘loan-to-cost 

ratio’’ was unchanged. 

The third commenter stated that it is 

not clear in the proposed rule how the 

required lease-up reserve (in 

§ 3565.52(c)(3)) will be calculated and 

expressed a concern that adding on a 

‘‘substantial’’ lease-up reserve that must 

be funded up front (in § 3565.52(e)(3)) is 

burdensome on the project and would 

make the program much less useful. 

Specific administrative guidance on 

calculating the lease-up reserve will be 

announced through a Notice in the 

Federal Register. Supplemental 

guidance will be included in HB–1– 

3565, the Guaranteed Rural Rental 

Housing Program Origination and 

Servicing Handbook (available in any 

Rural Development office), and will not 

be published in the rule. In response to 

the commenter’s second concern, the 

Agency has revised the final rule to 

require that the lease-up reserve be 

funded 30 days before first Certificate of 

Occupancy is anticipated (rather than 

up front). 

Processing Requirements 

In terms of processing requirements, 

the Agency received three comments. 

The first commenter asked that the word 

‘‘independent’’ be removed from 

§ 3565.303(c)(3). Section 3565.303(c)(3) 

which states that inspections must be 

done by an ‘‘independent’’ inspector. 

The commenter stated the requirement 

is that the inspector must be ‘‘qualified.’’ 

The Agency agrees that the inspector 

must be qualified to perform inspections 

but in order to avoid potential conflicts 


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Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Rules and Regulations 3 

of interest; the inspector must also be 

independent and cannot be affiliated 

with the borrower or lender. This 

language remains in the rule. 

The second comment on this subject 

was to remove in § 3565.303(d)(4) the 

requirement regarding an as-built 

appraisal. The commenter 

recommended making this required 

under certain circumstances in order to 

reduce the number of exemptions that 

would need to be processed. In 

response, the Agency revised the final 

rule to clarify that the as-built appraisal 

is required only for Options 1 and 2, but 

not for Option 3 (the continuous 

guarantee). 

The final comment the Agency 

received on this subject was to change 

the requirement in § 3565.303(d)(4)(iii) 

that the Agency’s guaranteed loan 

balance not exceed 50% (in order to 

qualify for an exception to the as-built 

appraisal). The commenter 

recommended that this figure be revised 

to be 90%. The commenter’s point was 

that if a construction loan can be done 

at 90% and then rolled into a permanent 

loan, there is no difference in risk, and 

loans with less leveraging can be more 

easily moved into the secondary market. 

As noted above, the as-built appraisal is 

required only for Options 1 and 2, but 

not for Option 3 (the continuous 

guarantee) so this provision does not 

apply. 

In addition, a conforming change has 

been added as section 3565.303(f). 

Though the continuous guarantee will 

be seamless from the construction phase 

to the permanent financing phase, the 

loan must still be in compliance with 

7 CFR part 3565. Section 3565.303(f) 

simply clarifies the specific 

requirements. 

List of Subjects in 7 CFR Part 3565 

Bankruptcy, Banks, Banking, Civil 

rights, Conflict of interests, Credit, 

Environmental impact statements, Fair 

housing, Government procurement, 

Guaranteed loans, Hearing and appeal 

procedures, Housing standards, 

Lobbying, Low and moderate income 

housing, Manufactured homes, 

Mortgages, Real property acquisition, 

Surety bonding. 

Accordingly, chapter XXXV, title 7, 

Code of Federal Regulations is amended 

as follows: 

PART 3565—GUARANTEED RURAL 

RENTAL HOUSING PROGRAM 

■ 1. The authority citation for part 3565 

continues to read as follows: 

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

U.S.C. 1480. 

Subpart A—General Provisions 

■ 2. Section 3565.3 is amended by 

removing the definition for 

‘‘combination construction and 

permanent loan’’ and by adding 

alphabetically definitions for 

‘‘construction and permanent loan,’’ 

‘‘construction contingency reserve,’’ 

‘‘lease-up period,’’ ‘‘lease-up reserve,’’ 

‘‘loan-to-cost ratio,’’ and ‘‘operating and 

maintenance reserve’’ to read as follows: 

§ 3565.3 Definitions. 

* * * * * 

Construction and permanent loan. A 

loan which provides advances during 

the construction period and remains in 

place as a permanent loan at the 

completion of construction. 

Construction contingency reserve. A 

cash reserve of at least two percent of 

the construction contract, inclusive of 

the contractor’s fee and all hard and soft 

costs that must be set up and fully 

funded by the closing of the 

construction loan. This reserve will be 

held by the lender, and funds will only 

be disbursed for change order requests 

approved by the Agency and the lender. 

Unused funds from the construction 

contingency reserve will be held in the 

operating and maintenance reserve and 

cannot be released to the borrower until 

the project reaches an occupancy of 

90% for 90 consecutive days. In 

addition the reserve accounts 

established in the conditional 

commitment must be fully funded prior 

to the release of the construction 

contingency reserve. These 

requirements remain in effect regardless 

of whether the lender has established a 

lease-up reserve in lieu of the 

occupancy requirement. 

* * * * * 

Lease-up period. The period of time 

that begins when the first unit in the 

project receives a certificate of 

occupancy until the time that 

occupancy of 90% of the units for a 

minimum of 90 consecutive days is 

achieved. 

Lease-up reserve. A cash deposit 

which is available to a property to help 

pay operating costs and debt service at 

the initiation of operations while units 

are being leased to their initial 

occupants. 

* * * * * 

Loan-to-cost ratio. The amount of the 

loan divided by the total cost to develop 

the project. 

* * * * * 

Operating and maintenance reserve. 

A cash reserve required of all projects of 

at least two percent of the loan amount 

held by the lender that is used for the 

up-keep of the project. 

* * * * * 

Subpart B—Guarantee Requirements 

■ 3. Section 3565.51 is revised to read 

as follows: 

§ 3565.51 Eligible loans and advances. 

Upon approval of an application from 

an eligible or approved lender, the 

Agency will commit to providing a 

guarantee for a permanent loan or a 

construction and permanent loan, 

subject to the availability of funds. 

■ 4. Section 3565.52 is amended by 

revising paragraph (c) and adding new 

paragraphs (d) and (e) to read as follows: 

§ 3565.52 Conditions of guarantee. 

* * * * * 

(c) Types of guarantees. The Agency 

may provide a lesser guarantee based 

upon its evaluation of the credit quality 

of the loan. Penalties incurred as a 

result of default are not covered by the 

guarantee. The Agency liability under 

any guarantee will decrease or increase, 

in proportion to any increase or 

decrease in the amount of the unpaid 

portion of the loan, up to the maximum 

amount specified in the Loan Note 

Guarantee. The Agency will not 

guarantee construction loans only. The 

Agency offers the following types of 

guarantees: 

(1) Option One. The Agency may 

guarantee permanent loans subject to 

the conditions specified in 

§ 3565.303(d). The maximum guarantee 

for a permanent loan will be 90 percent 

[unless the Agency establishes a 

different percent and announces this 

different percent through a Notice in the 

Federal Register] of the unpaid 

principal and interest up to default and 

accrued interest 90 calendar days from 

the date the liquidation plan is 

approved by the Agency, as defined in 

§ 3565.452. 

(2) Option Two. The Agency may 

provide a guarantee which will cover 

construction loan advances (advances) 

during construction. The maximum 

guarantee of construction advances 

related to a construction and permanent 

loan will not at any time exceed the 

lesser of 90 percent [or the percent 

established by the Agency and 

announced through a Notice in the 

Federal Register] of the amount of 

principal and accrued interest up to 

default for amounts which exceed the 

original advance if for eligible uses of 

loan proceeds or 90 percent of the 

original principal amount and accrued 

interest up to default of the loan. The 

Agency’s guarantee will cover losses to 


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4 Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Rules and Regulations 

the extent aforementioned once all 

sureties/insurances and/or performance 

and payment bonds have fully 

performed their contractual obligations. 

A construction contingency reserve is 

required. This guarantee will be 

enforceable during the construction 

period but will cease to be enforceable 

once construction is completed unless 

and until the requirements for the 

continuation of the guarantee contained 

in the Conditional Commitment and this 

part are completed and approved by the 

Agency by the date stated in the 

Conditional Commitment and any 

Agency approved extension(s). The 

Agency will provide written 

confirmation to the lender when all of 

the requirements for continuation of the 

guarantee to cover the permanent loan 

have been satisfied. Any losses 

sustained while the guarantee is 

unenforceable (after the end of the 

construction period and, if applicable, 

before the continuation of the guarantee) 

are not covered by the guarantee. For 

purposes of this guarantee, the 

construction period will end on the 

earlier of: 

(i) Twenty-four months from the 

closing of the construction loan, if the 

certificates of occupancy for all units in 

the project have not been issued by 

then, or 

(ii) The date of the issuance of the last 

certificate of occupancy, if the 

certificates of occupancy for all units in 

the project are issued on or before 24 

months from the closing of the 

construction loan. 

(3) Option Three. The Agency may 

provide a single, continuous guarantee 

for construction and permanent loans. 

Only projects that have low loan-to-cost 

ratios, which will be defined by the 

Agency in a Notice published 

periodically in the Federal Register, are 

eligible for this type of guarantee. A 

construction contingency reserve is 

required. The Agency may require that 

a lease-up reserve, in an amount 

established by the Agency and 

announced through a Notice in the 

Federal Register, be set-aside prior to 

closing the construction loan. This 

lease-up reserve is an additional 

amount, over and above the required 

initial operating and maintenance 

contribution. The maximum guarantee 

of construction advances will not at any 

time exceed the lesser of 90 percent [or 

the percent established by the Agency 

and announced through a Notice in the 

Federal Register] of the amount of 

principal and interest up to default 

advanced for eligible uses of loan 

proceeds or 90 percent of the original 

principal amount and interest up to 

default. 

(d) Maximum loss payment. The 

maximum loss payment to a lender or 

holder is as follows: 

(1) To any holder, 100 percent of any 

loss sustained by the holder on the 

guaranteed portion of the loan and on 

interest due on such portion. 

(2) To the lender, the lesser of: 

(i) Any loss sustained by the lender 

on the guaranteed portion, including 

principal and up to 90 days of accrued 

interest as evidenced by the notes or 

assumption agreements and secured 

advances for protection and 

preservation of collateral made with the 

Agency’s authorization; or 

(ii) The guaranteed principal 

advanced to or assumed by the borrower 

and any interest and accrued interest up 

to 90 days due thereon. 

(e) Funding of reserves. For each 

Option under paragraph (c) of this 

section, the lender must require an 

operating and maintenance reserve and 

provide the Agency adequate evidence 

of the funding of all required reserves. 

(1) For Option 1 under paragraph (c) 

of this section, the funding schedule for 

the lease-up reserve and the operating 

and maintenance reserve must be 

included in the Agency-approved 

construction budget and be fully funded 

before the issuance of the permanent 

guarantee. 

(2) For Option 2 under paragraph (c) 

of this section, the funding schedule for 

the lease-up reserve and the operating 

and maintenance reserve must be 

included in the Agency-approved 

construction budget and be fully funded 

before the issuance of the permanent 

guarantee. 

(3) For Option 3 under paragraph (c) 

of this section, the operating and 

maintenance reserve must be fully 

funded before the issuance of the 

guarantee. The lease-up reserve must be 

funded 30 days before the first 

Certificate of Occupancy is anticipated. 

Subpart C—Lender Requirements 

§ 3565.103 [Amended] 

■ 5. Section 3565.103 is amended by 

removing paragraph (d)(9). 

§ 3565.106 [Amended] 

■ 6. Section 3565.106 is amended by 

removing the word ‘‘combination.’’ 

Subpart G—Processing Requirements 

■ 7. Section 3565.303 is amended by 

revising paragraphs (c) and (d) and 

adding paragraph (f) to read as follows: 

§ 3565.303 Issuance of loan guarantee. 

* * * * * 

(c) Guarantee during construction. 

When requesting a guarantee on 

construction loan advances under 

§ 3565.52(c)(2) and (c)(3), Options 2 and 

3, the Agency will only issue a 

guarantee to an approved lender that the 

Agency determines is eligible under 

§ 3565.106 of this part. 

(1) This guarantee will be subject to 

the limits contained in subpart B of this 

part and in the loan closing 

documentation. 

(2) In all cases, the lender must obtain 

one of the following protections: 

(i) Surety bonding or performance and 

payment bonding acceptable to the 

Agency; 

(ii) An irrevocable letter of credit 

acceptable to the Agency; or 

(iii) A pledge to the lender of 

collateral that is acceptable to the 

Agency. 

(3) The lender must verify amounts 

expended prior to each payment for 

completed work and certify that an 

independent inspector has inspected the 

property and found it to be in 

conformance with Agency standards. 

The lender must provide verification 

that all subcontractors have been paid 

and no liens have been filed against the 

property. 

(d) Permanent loan guarantee. The 

guarantee of a permanent loan provided 

under § 3565.52(c)(1) or (c)(2) will be 

issued once the following items have 

been submitted to and approved by the 

Agency: 

(1) Certification from the lender 

stating that the lender or its qualified 

representative inspected the property 

and found that the construction meets 

the Government’s requirements for the 

standards and conditions for housing 

and facilities in 7 CFR part 1924, 

subpart A and the standards for site 

development in 7 CFR part 1924, 

subpart C, or its successor regulations; 

(2) Cash flow certification—the lender 

certifies, in writing, the project’s cash 

flow assumptions are still valid and 

depict compliance with the section 538 

program’s debt service coverage ratio 

requirement of at least 1.15, based on 

the lender’s analysis of current market 

conditions and comparable properties in 

the project’s market area; 

(3) Documentation that either: 

(i) The project has attained a 

minimum level of acceptable occupancy 

of 90% for 90 continuous days within 

the 120-day period immediately 

preceding the issuance of the permanent 

guarantee, or 

(ii) Additional funds, supplementing 

the funds required under § 3565.303(d), 

have been added to the lease-up reserve 

in an amount the Agency determines is 

necessary to cover projected shortfalls. 

(4) A new appraisal based upon 

completion of construction. Upon a 


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Federal Register / Vol. 76, No. 1 / Monday, January 3, 2011 / Rules and Regulations 5 

lender’s written request, the Agency 

may exempt a project from this 

requirement if requested by the lender 

and the project meets the following 

criteria: 

(i) Original appraisal—the original 

appraisal that meets the Agency’s 

appraisal requirements with a valuation 

date no older than 36 months; 

(ii) Valuation—the appraisal’s lowest 

valuation, regardless of valuation 

approach and rent restrictions 

considered, is greater than the section 

538 guaranteed loan amount; and 

(iii) Guaranteed loan balance—the 

Agency’s guaranteed loan’s principal 

balance does not exceed 50 percent 

[unless a different percent has been 

announced in a Notice published in the 

Federal Register] of the project’s total 

development costs. 

(5) A certificate of substantial 

completion; 

(6) A certificate of occupancy or 

similar evidence of local approval; 

(7) A final inspection conducted by a 

qualified Agency representative; 

(8) A final cost certification in a form 

acceptable to the Agency; 

(9) A submission to the Agency of the 

complete closing docket; 

(10) A certification by the lender that 

the project has reached an acceptable 

minimum level occupancy; 

(11) An executed regulatory 

agreement; 

(12) The Lender certifies that it has 

approved the borrower’s management 

plan and assures that the borrower is in 

compliance with Agency standards 

regarding property management 

contained in subparts E and F of this 

part; 

(13) Necessary information to 

complete an updated necessary 

assistance review by the Agency under 

§ 3565.204(c); and 

(14) Compliance with all conditions 

contained in the conditional 

commitment for guarantee. 

* * * * * 

(f) Continuous Guarantee 

Compliance. The continuous guarantee 

will remain in effect once construction 

is completed. In order to remain in 

compliance with 7 CFR part 3565, the 

following items must be submitted to 

and approved by the Agency. These 

items will be submitted to the Agency 

by the date stated in the Conditional 

Commitment and any Agency approved 

extension(s). 

(1) Certification from the lender 

stating that the lender or its qualified 

representative inspected the property 

and found that the construction meets 

the Government’s requirements for the 

standards and conditions for housing 

and facilities in 7 CFR part 1924, 

subpart A and the standards for site 

development in 7 CFR part 1924, 

subpart C, or its successor regulations; 

(2) Cash flow certification—the lender 

certifies in writing the project’s cash 

flow assumptions are still valid and 

depict compliance with the section 538 

program’s debt service coverage ratio 

requirement of at least 1.15, based on 

the lender’s analysis of current market 

conditions and comparable properties in 

the project’s market area; 

(3) Documentation that either: 

(i) The project has attained a 

minimum level of acceptable occupancy 

of 90% for 90 continuous days within 

the 120-day period immediately 

preceding the issuance of the permanent 

guarantee, or 

(ii) Additional funds, supplementing 

the funds required under § 3565.303(d), 

have been added to the lease-up reserve 

in an amount the Agency determines is 

necessary to cover projected shortfalls. 

(4) An appraisal of the property; 

(5) A certificate of substantial 

completion; 

(6) A certificate of occupancy or 

similar evidence of local approval; 

(7) A final inspection conducted by a 

qualified Agency representative; 

(8) A final cost certification in a form 

acceptable to the Agency; 

(9) A submission to the Agency of the 

complete closing docket; 

(10) A certification by the lender that 

the project has reached an acceptable 

minimum level occupancy; 

(11) An executed regulatory 

agreement; 

(12) The Lender certifies that it has 

approved the borrower’s management 

plan and assures that the borrower is in 

compliance with Agency standards 

regarding property management 

contained in subparts E and F of this 

part; 

(13) Necessary information to 

complete an updated necessary 

assistance review by the Agency under 

§ 3565.204(c); and 

(14) Compliance with all conditions 

contained in the conditional 

commitment for guarantee. 

Subpart J—Assignment, Conveyance, 

and Claims 

§ 3565.457 [Amended] 

■ 8. Section 3565.457 (c)(1)is amended 

in the first sentence by removing the 

word ’’collectibility’’ and adding 

‘‘collectability’’ in its place. 

Dated: December 3, 2010. 

Tammye Trevinˇ o, 

Administrator, Rural Housing Service. 

[FR Doc. 2010–33042 Filed 12–30–10; 8:45 am] 

BILLING CODE 3410–XV–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 1 

[Docket No. FAA–2010–0812; Amendment 

No. 1–66] 

RIN 2120–AJ81 

Feathering Propeller Systems for 

Light-Sport Aircraft Powered Gliders 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; request for 

comments. 

SUMMARY: This final rule with request 

for comments amends the definition of 

light-sport aircraft by removing ‘‘auto’’ 

from the term ‘‘autofeathering’’ as it 

applies to powered gliders. This 

amendment will allow both manual and 

autofeathering propeller operation for 

powered gliders that qualify as lightsport aircraft. 

DATES: This rule becomes effective on 

March 4, 2011. Submit comments on or 

before February 2, 2011. 

ADDRESSES: You may send comments 

identified by Docket Number FAA– 

2010–0812 using any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov and follow 

the instructions for sending your 

comments electronically. 

• Mail: Send comments to the Docket 

Management Facility; U.S. Department 

of Transportation, 1200 New Jersey 

Avenue, SE., West Building Ground 

Floor, Room W12–140, Washington, DC 

20590–0001. 

• Fax: Fax comments to the Docket 

Management Facility at 202–493–2251. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 

5 p.m., Monday through Friday, except 

Federal holidays. 

For more information on the rulemaking 

process, see the SUPPLEMENTARY

INFORMATION section of this document. 

Privacy: We will post all comments 

we receive, without change, to http:// 

www.regulations.gov, including any 

personal information you provide. 

Using the search function of our docket 

Web site, anyone can find and read the 

comments received into any of our 

dockets, including the name of the 

individual sending the comment (or 

signing the comment for an association, 

business, labor union, etc.). You may 

review DOT’s complete Privacy Act 

Statement in the Federal Register 

published on April 11, 2000 (65 FR 

19477–78) or you may visit http:// 

DocketsInfo.dot.gov. 


srobinson on DSKHWCL6B1PROD with RULES