27988 Federal Register / Vol. 72, No. 96 / Friday, May 18, 2007 / Proposed Rules 

This includes, but is not limited to, 

being employed by or contracting with 

any approved insurance provider that 

sells, services, or adjusts policies offered 

under the authority of the Act. FCIC 

may waive this provision if it is satisfied 

that the person who employs the 

suspended or debarred person has taken 

sufficient action to ensure that the 

suspended or debarred person will not 

be involved, in any way, with FCIC or 

receive any benefit from any program 

under the Act. 

7. Amend § 400.456 as follows: 

A. Remove paragraph (a). 

B. Redesignate paragraphs (b) through 

(d) as paragraphs (a) through (c). 

C. Revise newly redesignated 

paragraphs (a) and (b) to read as follows: 

§ 400.456 Governmentwide debarment and 

suspension (nonprocurement). 

* * * * * 

(a) FCIC will proceed under 7 CFR 

part 3017 when taking action to suspend 

or debar persons involved in nonprocurement transactions. 

(b) Any person suspended or debarred 

under the provisions of 7 CFR part 3017, 

will not be eligible to contract with 

FCIC or the Risk Management Agency 

and will not be eligible to participate in 

or receive any benefit from any program 

under the Act during the period of 

ineligibility. This includes, but is not 

limited to, being employed by or 

contracting with any approved 

insurance provider, or its contractors, 

that sell, service, or adjust policies 

either insured or reinsured by FCIC. 

FCIC may waive this provision if it is 

satisfied that the approved insurance 

provider or contractors have taken 

sufficient action to ensure that the 

suspended or debarred person will not 

be involved in any way with the Federal 

crop insurance program or receive any 

benefit from any program under the Act. 

* * * * * 

8. Amend § 400.457 by adding a new 

paragraph (d) to read as follows: 

§ 400.457 Program Fraud Civil Remedies 

Act. 

* * * * * 

(d) Civil penalties and assessments 

imposed pursuant to this section are in 

addition to any other remedies that may 

be prescribed by law or imposed under 

this subpart. 

§ 400.458 [Amended] 

9. Amend § 400.458 by removing 

paragraph (b)(2), adding an ‘‘or’’ at the 

end of paragraph (b)(1) and 

redesignating paragraph (b)(3) as 

paragraph (b)(2). 

§ 400.459 [Removed] 

10. Remove § 400.459 from subpart R. 

Signed in Washington, DC, on May 10, 

2007. 

Eldon Gould, 

Manager, Federal Crop Insurance 

Corporation. 

[FR Doc. E7–9418 Filed 5–17–07; 8:45 am] 

BILLING CODE 3410–08–P 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

Rural Business-Cooperative Service 

Rural Utility Service 

Farm Service Agency 

7 CFR Part 1944 

Rural Housing Service 

7 CFR Part 3551 

RIN 0575–AC20 

Streamlining of the Section 523 Mutual 

and Self-Help Housing Program 

AGENCY: Rural Housing Service, USDA. 

ACTION: Proposed rule. 

SUMMARY: This action proposes to 

replace the Mutual and Self-Help 

Housing Program’s (MSH) 

administration under 7 CFR part 1944, 

Subpart I with 7 CFR part 3551. This 

rule will apply to grants executed after 

the effective date of the final rule. The 

Rural Housing Service (an agency 

within the Rural Development mission 

area) proposes to streamline and clarify 

its regulations for MSH. This action is 

taken to reduce regulations, improve 

customer service and enhance 

efficiency, flexibility, and effectiveness 

in managing the program. 

DATES: Written or e-mail comments 

must be received on or before July 17, 

2007. The comment period for 

information collections under the 

Paperwork Reduction Act of 1995 

continues through July 17, 2007. 

ADDRESSES: You may submit comments 

to this rule by any of the following 

methods: 

• Agency Web Site: http:// 

www.rurdev.usda.gov/regs. Follow 

instructions for submitting comments 

on the Web Site. 

• E-Mail: comments@wdc.usda.gov. 

Include ‘‘RIN No. 0575–AC20’’ in the 

subject line of the message. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Submit written comments via 

the U.S. Postal Service to the Branch 

Chief, Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, STOP 0742, 1400 

Independence Avenue, SW., 

Washington, DC 20250–0742. 

• Hand Delivery/Courier: Submit 

written comments via Federal Express 

Mail or other courier service requiring a 

street address to the Branch Chief, 

Regulations and Paperwork 

Management Branch, U.S. Department 

of Agriculture, 300 7th Street, SW., 7th 

Floor, Washington, DC 20024. 

All written comments will be 

available for public inspection during 

regular work hours at 300 7th Street, 

SW., 7th Floor address listed above. 

FOR FURTHER INFORMATION CONTACT: 

Debra S. Mangrum, Senior Loan 

Specialist, Special Programs and New 

Initiatives Branch, Single Family 

Housing Direct Loan Division, RHS, 

Stop 0783, Room 2209, South 

Agriculture Building, 1400 

Independence Avenue, SW., 

Washington, DC 20250–0783, telephone 

(202) 720–1366. 

SUPPLEMENTARY INFORMATION: 

Classification 

This proposed rule has been 

determined not to be significant for 

purposes of Executive Order 12866 and, 

therefore, has not been reviewed by the 

Office of Management and Budget 

(OMB). 

Executive Order 12988 

This proposed rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. If this proposed 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 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 the 


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Agency to identify and consider a 

reasonable number of regulatory 

alternatives and adopt the least costly, 

more cost-effective 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, 

subpart G, ‘‘Environmental Program.’’ It 

is the determination of the Agency that 

the proposed 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 

of 1969, neither an Environmental 

Assessment nor an Environmental 

Impact Statement is required. 

Regulatory Flexibility Act 

This proposed 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 

proposes 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 10.420, Rural Self-Help 

Housing Technical Assistance. 

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 RD office). 

Paperwork Reduction and EGovernment Sections 

In accordance with the Paperwork 

Reduction Act of 1995, the Agency will 

seek Office of Management and Budget 

(OMB) approval of reporting and 

recordkeeping requirements contained 

in this proposed regulation. 

Estimate of Burden: Public reporting 

burden for this collection of information 

is estimated to average 4.60 hours per 

response. 

Respondents: Public or private nonprofit organizations or state or political 

subdivisions. 

Estimated number of respondents: 

230. 

Estimated number of responses: 

4,063. 

Estimated Number of Responses per 

Respondent: 17.67. 

Estimated Total Annual Burden on 

Respondents: 18,698 hours. 

There have been no new paperwork 

requirements, however; the reporting 

burden and associated costs have 

increased consistent with the growth of 

the program. 

Copies of this information collection 

can be obtained from Brigitte Sumter, 

Regulations and Paperwork 

Management Branch, Support Services 

Division, Rural Development, at 202–

692–0042. 

Comments: Comments are invited on: 

(a) Whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

Agency, including whether the 

information will have practical utility; 

(b) the accuracy of the Agency’s 

estimate of the burden of the proposed 

collection of information including the 

validity of the methodology and 

assumptions used; (c) ways to enhance 

the quality, utility, and clarity of the 

information to be collected; and (d) 

ways to minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology. 

Comments may be sent to Cheryl 

Thompson, Regulations and Paperwork 

Management Branch, Support Services 

Division, U.S. Department of 

Agriculture, Rural Development, STOP 

0742, 1400 Independence Avenue, SW., 

Washington, DC 20250–0742. All 

responses to this notice will be 

summarized and included in the request 

for OMB approval. All comments will 

also become a matter of public record. 

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 Mutual and Self-Help Housing 

(MSH) program is authorized by Section 

523 of Title V of the Housing Act of 

1949 (‘‘Act’’). Under the Act, the 

Secretary of Agriculture is authorized to 

make MSH grants to, or contract with, 

public or private non-profit 

corporations, agencies, institutions, 

organizations, Indian tribes, and other 

associations, to pay part or all of the 

cost of developing, conducting, 

administering, or coordinating programs 

of technical and supervisory assistance 

to aid needy very-low and low-income 

families in carrying out self-help 

housing efforts. One of the primary 

benefits of MSH is to fund organizations 

that are willing to locate and work with 

families that otherwise do not qualify as 

homeowners. Generally, these are 

families with incomes below 50 percent 

of the median income, living in 

substandard housing, and/or lacking the 

skills to be a homeowner. 

The number of MSH families 

participating in the Single Family 

Housing Direct loan program has grown 

from 518 families in 1968 to more than 

41,000 families in 2006. Since 1996 the 

funding level has more than tripled 

from $11 million to the current funding 

level of approximately $34 million. Both 

the numbers of families obtaining 

homeownership through MSH and the 

number of grantees participating have 

increased since the program’s inception. 

The rapid growth of interest in this 

program has necessitated a change in 

how the program is being delivered. 

Therefore, this rule proposes to 

implement a competitive process for 

application processing and awarding of 

grant funds. This process will ensure 

fairness, increase efficiency, and 

minimize the negative impact to the 

customers we serve. Greater 

accountability will be realized for rural 

residents resulting in greater 

investments that enhance rural 

competitiveness, improve and diversify 

community services, and enable rural 

residents to have a better quality of life. 

These proposed revisions are consistent 

with efforts to streamline Government 


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27990 Federal Register / Vol. 72, No. 96 / Friday, May 18, 2007 / Proposed Rules 

functions, improve efficiency and the 

effectiveness of Government activities. 

Enhancements To Improve Program 

Success 

Streamlined Regulation 

The proposed changes will provide 

more flexibility for both grantees and 

Agency staff. Errors will be reduced 

because the proposed guidelines and 

requirements will be clearer and items 

can be found in reduced and betterorganized regulations. This will enable 

the Agency to deliver the program with 

fewer staff resources. The Agency 

believes that streamlining of the 

regulations to make them simpler and 

more direct will enhance the use of the 

program and encourage grantee 

participation. The ultimate benefits are 

increased activity resulting in better 

living standards for residents of rural 

communities. 

This rule proposes policy changes 

consistent with the existing statutory 

authority, clarifies certain requirements 

that have multiple interpretations, and 

amends others that have led to 

unintended consequences as discussed 

below. This streamlining will reduce the 

program’s administrative burden not 

only for the Agency but also for 

applicants and grantees. The following 

contains more detailed information for 

areas in which changes are proposed to 

streamline the program, reduce the 

burden, and make needed policy 

changes: 

Technical Enhancements 

(a) Definitions: This rule proposes to 

make changes to the definitions of 

agreement (now Grant agreement) and 

Mutual self-help (now Mutual self-help 

method of construction) to be more 

consistent with 7 CFR part 3550 and for 

program clarity. New definitions for the 

following terms are added for clarity: 

Administrator, Applicant, Board of 

Directors, Borrower, Bylaws, Close out, 

Colonias, Completed units, Custodial 

account, Debarment, Environmental 

review, Environmental due diligence, 

existing grantee, EZ/EC/REAP areas, 

Family labor contribution, Final grantee 

evaluation, Grantee, High risk, 

household, Housing Act of 1949 as 

amended, HUD, Indian reservation, 

Leveraged assistance, Low-income, 

Member’s agreement, Modest housing, 

Multi-funded applicants, Notice of 

Funding Availability, Program 

requirements, Production based, 

Reasonable costs, Rural area, Rural 

Development, Section 502 loan 

program, Self-help construction cost, 

Specialty tools, Substitute labor, 

Supervised bank account, Technical and 

management assistance provider, Tribe, 

very-low income, and Workout 

agreement. Definitions for the following 

are removed as unnecessary: Date of 

completion, Direct costs, Disallowed 

costs and Termination of a grant. 

(b) Eligibility: This rule proposes to 

clarify or expand several current 

eligibility requirements and to add new 

requirements (§ 3551.51) as discussed 

below. 

The current regulation does not 

specify that organizations that have 

been suspended, debarred, or excluded 

from participation in Federal programs 

based on the ‘‘List of Parties Excluded 

from Federal Procurement and 

Nonprocurement Programs,’’ are not 

eligible for this program. This proposed 

rule includes that requirement in 7 CFR 

3551.51(e). This change is necessary to 

prevent the award of grant funds to 

unreliable organizations and to comply 

with existing Federal Non-Procurement 

Debarment and Suspension regulations 

and USDA regulations at 7 CFR Part 

3017. 

Under the current regulation, grantees 

applying for additional funding must 

have received or will receive at least an 

acceptable rating on their current grant. 

However, the State Director has 

authority to grant an exception to this 

requirement if the grantee has removed 

or will remove the factor that caused the 

unacceptable rating (§ 1944.421). The 

proposed rule requires that an exception 

under this section must be requested 

through the national office and only the 

Administrator can approve such an 

exception (§ 3551.51(f)(1)). This change 

is being proposed to eliminate funding 

of unsuccessful grantees and in an effort 

to assure that only highly qualified 

applicants receive funding. 

The current regulation 

(§ 1944.404(d)(2)) considers only 

organizations classified under section 

501(c)(3) of the Internal Revenue Code 

of 1986 as eligible private nonprofit 

corporations. The proposed rule adds a 

new source of eligibility 

(§ 3551.51(a)(3)(iii) for organizations 

that are classified as tax exempt under 

501(c)(4) of the Code. There are 

considerable overlaps between the two 

and many organizations could qualify 

for exempt status under either. The 

major difference in the two types of 

organizations affecting their 

qualifications with Rural Development, 

is that the § 501(c)(4) classification 

allows organizations the right to lobby. 

However, all organizations applying for 

assistance in the MSH program must 

certify and disclose their lobbying 

activities in accordance with 7 CFR part 

3018 and § 3551.55(b)(10)(iv). Adding 

this additional source of eligibility will 

expand the pool of applicants and 

assure the Agency of highly qualified 

grantees. 

The current regulation also requires 

the organization to have a board of 

directors that consists of not less than 

five members but does not detail 

requirements of those board members 

(§ 1944.404(d)(4)). The proposed rule 

requires that at least one-third of these 

members be very-low or low income, 

their elected representatives, or 

residents of a low income community 

and no more than one-third from the 

public sector (§ 3551.51(3)(v)). This 

change will ensure that the customers 

are being fairly represented by the 

organization. 

Under the current regulation, 

applicants must provide information to 

exhibit financial, legal and 

administrative capacity to carry out the 

requirements of this program 

(§ 1944.404(b)). One of the requirements 

includes submitting a staffing plan that 

reflects they have qualified people to 

carry out the responsibilities of 

administering this program or can be 

hired or contracted. This rule proposes 

to change that requirement and states 

the applicant must have experienced 

staff on board prior to grant approval or 

provide documentation that a paid or 

volunteer consultant is secured with 

similar experience to assist and train 

key staff members (§ 3551.51(b)(3)). This 

change will eliminate steps in 

monitoring the grantee and taking any 

needed enforcement action after the 

grant is closed to ensure required 

staffing levels are reached. 

Under the current regulation, grantees 

must also submit a narrative statement 

detailing the number of homes to be 

constructed, that low income families 

are being served, and those families are 

willing to contribute their labor 

(§ 1944.410(a)(4)). The proposed rule 

expands that requirement to specifically 

require the applicant to propose that no 

fewer than five homes will be built 

simultaneously per participating family 

group, that at least 40 percent of the 

participating families are very low 

income, that all of the participating 

families are either low or very low 

income, and that participating family 

members are willing to contribute at 

least 50 percent of the labor required on 

their home (§ 3551.51(c)). The proposed 

rule also requires applicants to 

document that upon completion of each 

participating family’s home, they will 

have at least 10 percent equity, based on 

the appraised market value at 

completion (§ 3551.51(c)(3)). These 

additional requirements will ensure that 

family members are receiving a quality 

product and the goal to provide 


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affordable housing to very low and low 

income families is being met. Greater 

specificity of expectations will improve 

consistency in grantee success in 

meeting their goals. 

Under the current regulation, grantees 

are generally expected to close out 

grants with all the homes proposed for 

the grant cycle as completed units. This 

method of operation, for the purpose of 

MSH, is considered as ‘‘grant based’’. In 

recognition of existing practices, 

however, the proposed rule adds 

flexibility to allow certain grantees that 

operate on an ongoing, ‘‘production 

line’’ basis, to close out grants with 

incomplete units and continue to 

operate without major lapses between 

funding cycles (§ 3551.51(g)). In such 

case, the grantee must: (1) Have the 

demonstrated capacity to close out the 

grant with incomplete homes and 

continue to meet all program 

requirements; (2) have successfully 

closed out at least two technical 

assistance grants with the Agency; (3) 

have received at least a satisfactory 

rating on their most recent final grantee 

evaluation and not currently be 

designated ‘‘High Risk’’ or operating 

under a workout agreement; (4) be a 

multi-funded applicant (with funding 

from a resource other than the Agency); 

and (5) propose that no more than 10 

percent of the homes to be constructed 

will be incomplete at grant close out 

and that all incomplete homes will be 

completed during the next grant cycle. 

The Agency cannot guarantee that 

successive grants will be made. The 

production line method of operation is 

currently being used by some grantees 

without a negative impact on the 

families. Under this method, no 

construction is begun, on homes within 

a group, unless the grantee is certain 

there will be sufficient funds to 

complete the group project. Therefore, 

no family’s home is left unfinished with 

the uncertainty of completion. 

(c) Authorized Grant Uses: Under the 

current regulation no reference is made 

to expenses that might be incurred by 

the applicant regarding environmental 

reviews (§ 1944.405). The proposed rule 

includes as an authorized grant use the 

payment of costs the applicant may 

incur to obtain information necessary 

for the Agency to complete an 

environmental review, when necessary 

(§ 3551.52(b)(10)). The proposed rule 

also permits payment of other 

reasonable costs the applicant may 

incur associated with the execution of a 

MSH program not covered in this part 

but only when prior written approval by 

Rural Development is obtained 

(§ 3551.52(b)(12)). The Agency believes 

such inclusion of incidental costs 

associated with a grant application will 

encourage highly qualified MSH 

applicants. 

(d) Technical Assistance Grant 

Ceilings: The proposed rule streamlines 

the method by which technical 

assistance grant ceilings are calculated. 

While the current regulation lists four 

different methods in which grant 

ceilings are calculated (§ 1944.407), the 

proposed rule establishes a single, 

consistent method (§ 3551.54(b)(1)). In 

addition, the proposed rule establishes 

some flexibility to permit exceptions by 

the State Director and the Administrator 

only under specific circumstances. 

Under the current regulation, grantees 

generally opt for the method of 

calculating technical assistance that 

produces the highest cost. An even 

higher cost can be approved by the State 

Director with few additional 

requirements and no maximum 

percentage limit. This has resulted in 

many exceptions being made at the state 

level, inconsistent technical assistance 

costs among states, and the depletion of 

funds more rapidly. The proposed rule 

limits technical assistance cost to no 

more than 15 percent of the equivalent 

value of a comparable modest home in 

the subject area for each home that is to 

be constructed. This amount, when 

added to the self-help construction cost, 

shall not exceed the equivalent value of 

a comparable modest home in the area. 

Self-help construction cost is defined 

under proposed § 3551.10. The amount 

is calculated as the total debt to the 

participating family, subtracting land 

costs, closing costs, and impact fees, 

and adding any additional financing 

such as grants that reduce the total debt 

to the participating family. The method 

enables the Agency to make fair and 

consistent comparisons of construction 

costs among grantees in an area to 

determine whether a particular 

requested amount per unit is reasonable. 

The proposed rule allows for an 

exception to this grant ceiling by the 

State Director, but only up to 20 percent 

of the equivalent value of a modest 

home in the area. Special conditions 

must also exist in the marketplace or 

locality, the participant’s situation or 

labor rates must require the additional 

cost, or no Agency-built homes must 

have been built in the past 12 months 

and the cost to construct a modest home 

is obtained by the Agency from a 

nationally recognized residential cost 

provider (§ 3551.54(b)(2)). These 

changes should greatly reduce the 

number of exceptions being made and 

maintain an acceptable technical 

assistance cost among the states. 

The proposed rule also permits for an 

Administrator’s exception to the grant 

ceiling to allow a higher technical 

assistance cost under exigent 

circumstances set out in a notice 

published in the Federal Register. Such 

circumstances should be beyond the 

grantee’s control, and might affect 

market prices such as natural disasters, 

strikes, fuel prices, etc. This proposal is 

necessary to maintain continuity in the 

program, expand the use of grant 

dollars, and establish more 

accountability for the grantees while 

continuing to provide flexibility. The 

Agency understands that the calculation 

of technical assistance grant ceilings is 

a particularly important issue and is 

especially interested in receiving 

comments on this issue. The Agency 

encourages parties providing comments 

to suggest alternative methods for 

calculating grant ceilings if they feel the 

proposed method may not be effective. 

(e) Grant Application Process: Under 

the current regulation, grant 

applications are received and processed 

on a first come-first served basis until 

funding is exhausted 

(§ 1944.410(b)(4)(i)). The number of 

applications received has far exceeded 

the limited amount of grant funds 

available. Therefore, this rule proposes 

a revised grant application process 

(§ 3551.55 and 3551.205) to award 

grants by a competitive process. The 

Agency will publish a ‘‘Notice of 

Funding Availability’’ (NOFA) in the 

Federal Register that lists the specific 

amount of grant funds available, 

establishes deadlines for the submission 

and review of applications, and lists the 

criteria by which the Agency will 

evaluate applications (§ 3551.55(a)) for 

that grant cycle. The NOFA may also 

contain any special criteria designated 

by the Administrator to encourage 

innovation, ensure geographic diversity, 

respond to emergency situations, etc. 

Applications will be scored and ranked 

in accordance with the criteria outlined 

in the NOFA, and grants will be 

awarded to those most qualified to the 

extent of funding availability. 

The current regulation requires 

applicants to provide information at 

three separate stages: Preapplication 

(§ 1944.410(a), (b), and (c)), application 

(§ 1944.410(a), (b), and (c)), and grant 

approval (§ 1944.411). The proposed 

rule eliminates the preapplication stage, 

requires more documentation for the 

eligibility/approval determination 

(§ 3551.55(b)), and minimizes the 

documents required for grant approval/ 

closing (§ 3551.55(d) and (e)) as 

discussed below. These proposed 

changes will reduce the grantees’

workload overall and provide the 

Agency a more simplified review 

process. These changes are also 


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beneficial to establish a competitive 

application and award process. 

In addition, the proposed rule 

eliminates other unnecessary 

application requirements that will 

reduce the paperwork burden on 

existing grantees. Existing grantees who 

are not designated as high risk and who 

received at least a satisfactory rating on 

their most recent final grantee 

evaluation will no longer be required to 

resubmit documentation they have the 

demonstrated capacity to carry out the 

objectives of the MSH program 

(§ 3551.55 (c)(2)) or organizational 

documents that have not changed in the 

interim (§ 3551.55(c)(3)). That 

information is readily available to the 

Rural Development staff and, therefore, 

is an unnecessary requirement. 

The current regulation requires 

applicants to submit a Form RD 1940–

20, ‘‘Request for Environmental 

Information’’ (§ 1944.410(b)(1)(ii)). This 

rule proposes to remove that 

requirement in order to conform with 

the requirements of 7 CFR part 1940, 

subpart G which states this action is 

considered as a categorical exclusion. 

However, the Agency will continue to 

complete the Form RD 1940–22, 

‘‘Environmental Checklist for 

Categorical Exclusions’’ with each 

application. If the Agency determines an 

Environmental Impact Analysis is 

necessary despite the categorical 

exclusion, the applicant must obtain 

and/or assist the Agency in acquiring 

any additional information needed (7 

CFR 3551.55(d)(11)). Such information 

may include delineating wetland areas 

or performing an acheological survey, 

for example. This requirement will help 

to minimize unsuitable properties being 

obtained by grantees for use under this 

program and assist the Agency in 

meeting the environmental 

requirements of 7 CFR part 1940, 

subpart G. 

The proposed rule will add the 

requirement for applicants to submit a 

credit report fee to the Agency to obtain 

a commercial credit report on their 

behalf (§ 3551.55(b)(9). This report will 

be used as a tool in determining the 

financial capacity of the applicant and 

may be waived by the State Director if 

the applicant is an existing grantee or if 

the Agency already obtained a report for 

a predevelopment grant. This will assist 

the Agency in assuring that only highly 

qualified applicants are funded. 

(f) Grantee Responsibility and 

Performance: The proposed rule places 

more focus on and clarifies the 

eligibility requirements and standards 

for evaluating grantee performance as 

discussed below. These changes will 

improve program management and 

oversight, improve the ability of 

grantees to comply with program 

requirements, and ensure the success of 

the MSH program. 

The current regulation does not 

require grantees to provide counseling 

to participating family members. This 

proposed rule will require grantees to 

provide family members with 

counseling throughout the project (7 

CFR 3551.101(b)). Counseling will 

include direct or indirect 

homeownership education in 

accordance with new Single Family 

Housing loan regulations which was 

published on February 5, 2007 at 72 FR 

51537 CFR 3550.11(c) and 3550.53(i) of 

this proposed rule. This rule proposes 

for grantees to counsel family members 

in selecting suitable and modest 

housing designs and assisting them in 

determining contracting and material 

cost estimates. These rule changes will 

ensure that the family receive a quality 

product at minimal cost, provide the 

families with life skills necessary to 

become successful homeowners, and 

minimize any loss to the government. 

The current regulation permits 

amendments to the grant agreement but 

does not clearly define the purpose of 

the amendment (7 CFR 1944.420). 

Consistent with the increased emphasis 

on grantee performance, the proposed 

rule provides that the Agency will 

approve grant agreement amendments 

only to modify the grant amount or 

grant period (7 CFR 3551.151(a)) and if 

other listed criteria are met. The 

proposed rule specifies that the Agency 

will no longer approve grant agreement 

amendments to lower the number of 

homes to be completed (7 CFR 

3551.151(b)(2)). The need must be due 

to circumstances beyond the grantee’s 

control and consistent with the goals of 

MSH. Adequate funds must be 

available, if requested. 

Under the current regulation, the 

State Director may designate a grantee 

‘‘High Risk’’ based on quarterly reports 

and comments received from Agency 

field staff (7 CFR 1944.417(b)). Under 

the proposed rule, greater emphasis is 

being placed on better monitoring at the 

early stages of a grantee’s project (7 CFR 

3551.153). This rule proposes that at 

any time it appears the grantee is not 

meeting performance goals or is not 

complying with program requirements, 

counseling must be initiated by Rural 

Development or its agent. This 

counseling must advise the grantee of 

problems or concerns noted and provide 

the grantee with a reasonable time to 

return to a satisfactory rating. A ‘‘High 

Risk’’ designation cannot be made until 

this process has taken place and only if 

the grantee did not address the issue 

satisfactorily within the specified time 

period. This change is necessary to 

identify problems early and eliminate 

the possibility of project extensions and 

budget shortfalls by the grantee. 

The current regulation does not 

clearly define the process of classifying 

a grantee as ‘‘High Risk’’. The proposed 

rule establishes a step by step procedure 

that leaves little room for flexibility. 

This change will establish a simple, fair 

and consistent process, help to 

minimize the negative impact on 

grantees, and reduce unnecessary 

workload for Rural Development staff. 

The proposed rule more clearly 

delineates the performance goals that 

grantees must meet based upon their 

proposal at the time of application and 

agreed upon by the grant agreement (7 

CFR 3551.152(a)). The grantee’s 

commitment would include, but not 

limited to: The number of homes to be 

complete and/or incomplete at the end 

of the grant cycle, the average per unit 

cost of technical assistance, and the 

completion date of the project. At the 

end of the grant period, the Agency will 

evaluate grantees to see if they have 

attained these goals (7 CFR 3551.152(c). 

Grantees who receive an unsatisfactory 

rating on their performance evaluation 

are ineligible for subsequent grants as 

outlined in the eligibility requirements 

(7 CFR 3551.51). This increased 

emphasis on performance means that 

grantees must deliver the results that 

they have committed to in their grant 

agreement. 

The current regulation allows for a 

self-evaluation by the grantee to be 

submitted as a part of the grantee’s 

performance evaluation (7 CFR 

1944.427). This rule proposes to remove 

this requirement as unnecessary for the 

grantee and an unproductive tool for the 

Agency. The elimination of this 

requirement will reduce both the 

grantee and the Agency’s workload. 

(g) Family Labor Contribution: The 

current regulation (7 CFR 1944.403), 

‘‘participating family’’ requires 

participating families to contribute at 

least 65 percent of the labor of the 

construction tasks as outlined in Exhibit 

B–2 of 7 CFR part 1944. This method of 

measurement is open to a wide variety 

of interpretation by grantees, meaning 

that the amount of labor actually 

contributed by participating families 

may vary greatly from grantee to 

grantee. The proposed rule changes the 

family labor contribution to meet a 

minimum of at least 50 percent of the 

total 100 percent labor required (7 CFR 

3551.7(b)(1)). This percentage was 

derived from surveying non-profit 

organizations that currently participate 

in this type of program and participating 


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families. It is extremely difficult for 

participating families to work a regular 

forty hour work week and then be 

required to perform 65 percent of the 

labor requirements, which calculates to 

approximately thirty hours per week. 

We have determined this is too 

burdensome on the participating 

families and difficult for the non-profit 

organizations to accurately record. The 

required 100 percent labor task list will 

be provided in the agency handbook 

available in any Rural Development 

office. This task list will be more 

detailed than the current Exhibit B–2 

contained in 7 CFR part 1944, subpart 

I. Each individual task will be assigned 

a percentage and will clearly identify 

the labor that can be completed by the 

family under that task in order to 

receive that percentage of work 

completed. The changes proposed in 

this rule will provide a more objectively 

measurable labor requirement and 

establish more consistency among 

grantees. 

(h) Pre-development Grants: The 

current regulation sets a predevelopment grant limit at $10,000 (7 

CFR 1944.410(d)). The proposed rule 

increases the pre-development grant 

limit from $10,000 to $15,000 (7 CFR 

3551.206(a). This increase better reflects 

the costs required for pre-development 

grantees to plan and prepare for the 

operation of a MSH program in all rural 

areas. 

(i) Audits: Under the current 

regulation (7 CFR 1944.422(a) and (b)), 

State and local governments, Indian 

tribes, and nonprofit organizations that 

receive less than $25,000 a year in 

Federal financial assistance are exempt 

from the Federal annual audit 

requirement. The proposed rule makes a 

technical correction to amend the 

threshold for exemption from $25,000 to 

$300,000 a year (7 CFR 3551.103(c)(3)) 

consistent with the Departmental 

requirements of 7 CFR part 3052. Other 

monitoring requirements of 7 CFR parts 

3015, 3016, and 3019 continue to apply. 

(j) Rehabilitation Projects: The current 

regulation includes rehabilitation of 

homes as an eligible activity (7 CFR 

1944.407(d)). The proposed rule 

eliminates any type of rehabilitation as 

an eligible activity. Existing 

rehabilitation grants will continue to be 

honored according to their existing 

grant agreements. This change will not 

have a significant impact on applicants 

because similar programs are available 

to accommodate the requests, and there 

has been little to no demand for this 

service under the MSH program. 

(k) Site Option Loans: The current 

regulation includes authority for site 

option loans to grantees to establish 

revolving funds to obtain options on 

land for families participating in the 

MSH program (7 CFR part 1944, subpart 

I, Exhibit F). The proposed rule removes 

authority for site option loans as 

obsolete. These loans have not been 

funded and requests for this service 

have been nonexistent for several years, 

therefore; there will be no impact by 

this change. The Rural Development 

Section 524 Site Loan Program is still 

available. 

Regulatory Crosswalk 

The following is a crosswalk which 

indicates where subjects can be found 

under the current regulation and under 

the proposed 7 CFR part 3551. 

Topic Current location 7 CFR part 1944 Located in 7 

CFR part 3551 

General Subpart I Subpart A 

Objective and Purpose ............................................................... § 1944.401 and § 1944.402 ........................................................ § 3551.2 

Construction Standards .............................................................. § 1944.424 .................................................................................. § 3551.7 

Executive Order 12372 ............................................................... § 1944.409 .................................................................................. § 3551.8 

Definitions ................................................................................... § 1944.403 .................................................................................. § 3551.10 

Operating Grant Subpart B 

Eligibility requirements ................................................................ § 1944.404 and § 1944.421 ........................................................ § 3551.51 

Authorized use of funds .............................................................. § 1944.405 .................................................................................. § 3551.52 

Prohibited use of funds ............................................................... § 1944.406 .................................................................................. § 3551.53 

Technical assistance grant amounts .......................................... § 1944.407 .................................................................................. § 3551.54 

Application submission and processing ...................................... § 1944.410; § 1944.411; § 1944.412; § 1944.413; § 1944.415; 

and § 1944.416.

§ 3551.55 

Grantee Responsibility Subpart C 

Recruitment and education ......................................................... Numerous ................................................................................... § 3551.101 

Construction supervision ............................................................. None ........................................................................................... § 3551.101 

Accounting for 502 loan funds .................................................... § 1944.425 .................................................................................. § 3551.101 

Request for payments ................................................................. § 1944.417 .................................................................................. § 3551.102 

Audit requirements ...................................................................... § 1944.422 .................................................................................. § 3551.103 

Grant Servicing Subpart D 

Grant agreement amendment ..................................................... § 1944.420 .................................................................................. § 3551.151 

Grantee monitoring ..................................................................... § 1944.417 .................................................................................. § 3551.152 

Grantee performance .................................................................. § 1944.417 and § 1944.419 ........................................................ § 3551.153 

Grant suspension and termination .............................................. § 1944.426 .................................................................................. § 3551.154 

Grant closeout ............................................................................. § 1944.426 .................................................................................. § 3551.155 

Predevelopment Grants Subpart E 

Eligibility requirements ................................................................ § 1944.404 .................................................................................. § 3551.202 

Authorized use of funds .............................................................. § 1944.410 and § 1944.415 ........................................................ § 3551.203 

Prohibited use of funds ............................................................... § 1944.406 .................................................................................. § 3551.204 

Application submission and processing ...................................... § 1944.410; § 1944.412; § 1944.413; § 1944.415; and 

§ 1944.416.

§ 3551.205 

Grant terms ................................................................................. § 1944.410; and § 1944.415 ....................................................... § 3551.206 


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Topic Current location 7 CFR part 1944 Located in 7 

CFR part 3551 

Predevelopment Grants Subpart E 

Grant close out ........................................................................... § 1944.426 .................................................................................. § 3551.207 

List of Subjects 

7 CFR Part 1944 

Home improvement, Loan programs—

Housing and community development, 

Low and moderate income housing—

Rental, Mobile homes, Mortgages, 

Subsidies. 

7 CFR Part 3551 

Home improvement, Loan programs—

Housing and community development, 

Low and moderate income housing—

Rental, Mobile homes, Mortgages, 

Subsidies. 

For the reasons set forth in the 

preamble, Chapters XVIII and XXXV, 

title 7, Code of Federal Regulations are 

proposed to be amended as follows: 

CHAPTER XVIII—RURAL HOUSING 

SERVICE, RURAL BUSINESSCOOPERATIVE SERVICE, RURAL UTILITIES 

SERVICE, AND FARM SERVICE AGENCY, 

DEPARTMENT OF AGRICULTURE 

PART 1944—HOUSING 

1. The authority citation for part 1944 

continues to read as follows: 

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

Subpart I of Part 1944—[Removed] 

2. Subpart I of part 1944 is removed 

and reserved. 

CHAPTER XXXV—RURAL HOUSING 

SERVICE, DEPARTMENT OF 

AGRICULTURE 

3. A new part 3551, consisting of 

subparts A through E, is added to read 

as follows: 

PART 3551—MUTUAL AND SELFHELP HOUSING PROGRAM 

Subpart A—General 

Sec. 

3551.1 Applicability. 

3551.2 Purpose. 

3551.3 Standards of conduct. 

3551.4 Civil rights and equal employment 

opportunity. 

3551.5 Reviews and appeals. 

3551.6 Environmental requirements. 

3551.7 Construction requirements. 

3551.8 Compliance with other Federal, 

State and local requirements. 

3551.9 Exception authority. 

3551.10 Definitions. 

3551.11–3551.49 [Reserved] 

3551.50 OMB Control number [Reserved] 

Subpart B—Technical Assistance Grant 

Application and Approval 

3551.51 Eligibility requirements. 

3551.52 Authorized technical assistance 

grant uses. 

3551.53 Unauthorized technical assistance 

grant uses. 

3551.54 Technical assistance (TA) grant 

amounts. 

3551.55 Application submission and 

processing. 

3551.56–3551.99 [Reserved] 

3551.100 OMB Control number [Reserved] 

Subpart C—Technical Assistance Grantee 

Responsibilities 

3551.101 Provision of technical assistance. 

3551.102 Request for payment. 

3551.103 Audit requirements. 

3551.104–3551.149 [Reserved] 

3551.150 OMB Control number [Reserved] 

Subpart D—Technical Assistance Grant 

Servicing 

3551.151 Grant agreement amendment. 

3551.152 Grantee monitoring. 

3551.153 Grantee performance. 

3551.154 Grant suspension and 

termination. 

3551.155 Grant close out. 

3551.156–3551.199 [Reserved] 

3551.200 OMB Control number [Reserved] 

Subpart E—Predevelopment Grants 

3551.201 General. 

3551.202 Eligibility requirements. 

3551.203 Authorized predevelopment grant 

uses. 

3551.204 Unauthorized predevelopment 

grant uses. 

3551.205 Application submission and 

processing. 

3551.206 Terms of the predevelopment 

grant. 

3551.207 Predevelopment grant close out. 

3551.208–3551.249 [Reserved] 

3551.250 OMB Control number [Reserved] 

Authority: 5 U.S.C. 301: 42 U.S.C. 1480. 

Subpart A—General 

§ 3551.1 Applicability. 

This part contains the policies and the 

requirements for applicants, grantees, 

and contractors who participate in the 

Mutual and Self-Help Housing program 

as authorized under Section 523 of the 

Housing Act of 1949, as amended (42 

U.S.C. 1490c). Copies of applicable 

regulations, Rural Development 

Instructions, Handbooks (HB), 

Department Regulations (DR), and forms 

referenced in this part are available in 

any Rural Development office. 

§ 3551.2 Purpose. 

The Mutual and Self-Help Housing 

program funds organizations to assist 

very-low and low-income families in 

obtaining home financing and building 

their new homes, located in rural areas, 

using the mutual self-help method of 

construction as described in 7 CFR part 

1924, subpart A. To achieve this 

purpose, Rural Development may make 

available: 

(a) Technical assistance (TA) grant 

funds to support programs of technical 

and supervisory assistance. 

(b) Predevelopment grant funds to 

support the development of a technical 

assistance grant application package. 

(c) Grant or contract funds to 

Technical and Management Assistance 

providers for the following services: 

(1) Disseminate information about the 

Mutual and Self-Help Housing program; 

(2) Assist prospective grantees with 

their organizational and grant 

application efforts; 

(3) Assist predevelopment grantees 

with the development of their technical 

assistance grant application packages; 

(4) Assist technical assistance 

grantees in achieving the goals of the 

Mutual Self-Help Program; and 

(5) Assist Rural Development in 

reviewing predevelopment grant and 

technical assistance grant applications, 

evaluating grantee performance, and 

performing other financial and 

administrative responsibilities. 

§ 3551.3 Standards of conduct. 

(a) Prohibition on lobbying. Grantees 

must comply with all restrictions on 

lobbying in accordance with 7 CFR part 

3018 and Rural Development 

Instruction 1940–Q. 

(b) Conflict of interest restrictions. (1) 

Applicants must identify any known 

relationship or association with an 

employee of Rural Development. 

(2) Unless Rural Development grants 

a waiver, grantees must not hire any 

person in a staff position/contractor or 

work with anyone as a participating 

family if that person or a member of that 

person’s household is employed by 

Rural Development. 

(c) Identity of interest. (1) Grantees’

board members and employees and their 

immediate households must not directly 

or indirectly participate, for financial 

gain, in any transactions involving the 


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grantee organization or participating 

families. 

(2) Grantees’ board members must not 

be compensated by the grantee as 

employees, consultants, or independent 

contractors. 

(d) Financial transactions with 

participating families. With the 

following exceptions, any savings 

realized by the grantee on behalf of a 

participating family, such as through 

bulk purchases, must be passed on to 

the participating family. 

(1) Grantees may sell lots to 

participating families at a price up to 

the fair market value of the lot as 

determined by independent appraisal. 

(2) Grantees also may pass on to a 

participating family any holding costs 

related to the purchase, acquisition, and 

development of a participating family’s 

lot, so long as those costs do not result 

in land costs that exceed the fair market 

value of a comparable site. 

(3) Grantees may provide small tools 

for family’s use in construction at a 

reasonable cost to the families. The cost 

may not exceed fair market value of the 

tools plus a 10% (ten percent) fee for 

handling. 

(e) Gifts and gratuities. Grantees’

board members, officers, employees, or 

agents must neither solicit nor accept 

gratuities, favors, or any item of 

monetary value from suppliers, 

contractors, or others doing business 

with the grantee. 

§ 3551.4 Civil rights and equal 

employment opportunity. 

(a) Civil rights. Grantees must comply 

with all applicable civil rights laws and 

USDA regulations found in 7 CFR parts 

15, 15a, and 15b. 

(b) Equal employment opportunity. (1) 

In all hiring or employment made 

possible by or resulting from funding 

provided by Rural Development, the 

grantee must: 

(i) Not discriminate against any 

employee or applicant for employment 

because of race, religion, color, sex, 

marital status, national origin, age, or 

mental or physical disability; and 

(ii) Take affirmative action in 

employing applicants and ensure that 

employees are treated during 

employment without regard to their 

race, religion, color, sex, marital status, 

national origin, age, or mental or 

physical disability. 

(2) If the grantee signs a contract with 

another person or firm and the contract 

is covered by an Executive Order, law, 

or regulation prohibiting discrimination, 

the grantee must include in the contract 

the Equal Opportunity Clause published 

at 41 CFR 60–1.4(a) and (b). 

§ 3551.5 Reviews and appeals. 

Whenever Rural Development makes 

a decision that is adverse to a 

participant, Rural Development will 

provide the participant with written 

notice of such adverse decision and the 

participant’s rights to a USDA National 

Appeals Division hearing in accordance 

with 7 CFR part 11. Any adverse 

decision, whether appealable or nonappealable, may be reviewed by the next 

level Rural Development supervisor. 

§ 3551.6 Environmental requirements. 

(a) All processing and servicing 

actions provided under this part are 

subject to the appropriate level of 

environmental review conducted in 

accordance with the requirements of 7 

CFR part 1940, subpart G, or successor 

regulation. 

(1) Rural Development also will 

review scattered sites and sites in 

existing subdivisions individually. 

(2) Rural Development will also 

review building sites located in a new 

subdivision in which five or more lots 

will be used for this program with an 

environmental review in accordance 

with 7 CFR part 1940, subpart G that 

covers all available lots in the 

subdivision. If more than one 

subdivision meeting this criterion is 

involved, each will be subject to the 

same level of environmental review. 

(b) Environmental due diligence will 

be used on all properties by evaluating 

for potential contamination from 

hazardous wastes, hazardous materials, 

petroleum products or other materials 

having potential for a detrimental effect 

on valuation or usability of the property. 

§ 3551.7 Construction requirements. 

(a) Homes constructed under the 

Mutual and Self-Help Housing program 

must be modest and meet the following 

requirements: 

(1) The construction must be 

performed in accordance with 7 CFR 

part 1924, subpart A, including the 

model building code adopted by the 

Rural Development State Office under 

this part; 

(2) The design and construction must 

meet the dwelling requirements of 7 

CFR part 3550, subpart B; 

(3) The sites and site development 

work must conform to 7 CFR part 1924, 

subpart C; 

(4) The construction must meet all 

applicable State and local construction 

requirements. The more restrictive 

standard shall govern in the case of 

conflicts between local, State, and Rural 

Development requirements; and 

(5) All work by contractors and 

subcontractors must be warranted in 

compliance with the requirements of 7 

CFR part 1924, Subpart A. 

(b) Participating families must agree 

to work together to perform labor on 

their homes in a mutual effort. 

(1) Each family in the group must 

contribute labor on each other’s homes 

to accomplish a minimum of 50 percent 

of the total 100 percent labor required. 

The labor task list is available in any 

Rural Development office. 

(2) A participating family may use 

substitute labor to perform their 

required 50 percent labor only when a 

participating family member is 

physically or mentally incapable of 

performing the required labor and with 

prior written approval by the grantee 

and Rural Development. 

(3) Volunteer labor is permissible in 

conjunction with the family labor but 

cannot replace the 50 percent family 

labor requirement. 

§ 3551.8 Compliance with other Federal, 

State and local requirements. 

The grantee must comply with all 

applicable Federal, State and local 

requirements, including the following: 

(a) Intergovernmental review. For the 

reasons set forth in 7 CFR part 3015, 

Subpart V, the Mutual and Self-Help 

Housing program is subject to Executive 

Order 12372 which calls for an 

intergovernmental partnership with 

state and local officials. Under RD 

Instruction 1940-J, the Agency will 

provide opportunities for consultation 

by elected officials of those state and 

local governments that would provide 

the non-Federal funds for, or that would 

be directly affected by this program. 

(b) Federal assistance regulations 7 

CFR parts 3015, 3016, and 3019. 7 CFR 

part 3015 applies to all Mutual and SelfHelp Housing program applicants. In 

addition, public agencies must comply 

with 7 CFR part 3016, and private 

nonprofit organizations must comply 

with 7 CFR part 3019, as applicable. 

§ 3551.9 Exception authority. 

A Rural Development official may 

request, and the Administrator or 

designee may make, an exception to any 

requirement of this part if it does not 

conflict with applicable statutes and the 

Administrator or designee determines 

that application of the requirement or 

provision, or failure to take action in the 

case of an omission, would adversely 

affect the Government’s interest. 

§ 3551.10 Definitions. 

Administrator. The official of the 

Rural Housing Service within the Rural 

Development mission area (or official of 

its successor agency) delegated 

authority by the Secretary of the U.S. 


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Department of Agriculture (USDA) to 

administer the Agency and its programs. 

Applicant. An organization that 

submits an application for a section 523 

technical assistance grant or 

predevelopment grant. 

Approving Official. The approving 

official for the purposes of this part will 

be the Rural Development State 

Director. 

Board of directors. The governing 

body of an organization and its 

members. 

Borrower. An applicant who has 

received a loan from Rural 

Development. 

Bylaws. Rules adopted by an 

organization to govern the conduct of its 

affairs. 

Close out. The process of taking final 

action connected with a completed or 

terminated grant, including closing of 

grantee accounts, auditing grantee 

expenditures, and completing final 

reports. 

Colonias. A community that meets the 

criteria established in 7 CFR part 1940, 

subpart L, exhibit C, or successor 

regulation. 

Completed unit(s). A home in which 

100 percent of construction has been 

completed and a final inspection has 

been made or a Certificate of Occupancy 

has been issued. 

Custodial account. A bank account 

controlled by a grantee on behalf of a 

participating family. 

Debarment. A determination that a 

party is ineligible to participate in, or 

receive assistance under Federal 

programs in accordance with 7 CFR part 

3017. 

Environmental review. The 

environmental analysis required by the 

National Environmental Policy Act and 

7 CFR part 1940, subpart G (or successor 

regulation). 

Environmental due diligence. The 

process of evaluating real estate for 

potential contamination by hazardous 

wastes, hazardous materials, petroleum 

products or other materials having a 

detrimental effect on valuation or use of 

a property. 

Equivalent unit(s). Equivalent units 

are useful in measuring progress during 

the period of the grant and are not a 

measurement of actual 

accomplishments or completed units. 

Equivalent units represent the 

‘‘theoretical number of units’’ arrived at 

by adding the equivalent percentage of 

construction complete for each family in 

the self-help program together at any 

given date during construction. The sum 

of the percentage complete for all 

participating families represents the 

total number of ‘‘theoretical units’’

completed at any point in time. The 

number of equivalent units for any 

group can never exceed the number of 

planned or completed units for that 

group. 

Equivalent value of a modest house. 

The typical cost of a recent contractorbuilt modest home in the area financed 

by Rural Development plus the actual or 

projected costs of an acceptable site 

including site development. If Rural 

Development has not financed a 

contractor-built house during the last 12 

months, the value is established by 

using data obtained from a nationally 

recognized residential cost provider. 

Rural Development will establish the 

equivalent value of a modest house to 

calculate maximum technical assistance 

grant amounts in accordance with 

§ 3551.54(b). 

Existing grantee. Unless otherwise 

specified, a grantee that is currently 

operating a technical assistance grant 

from Rural Development. 

EZ/EC/REAP areas. Empowerment 

Zones, Enterprise Communities, and 

Rural Economic Area Partnership areas 

are designated areas in which 

communities are targeted for 

opportunities for growth and 

revitalization, including economic 

opportunity, sustainable community 

development, community-based 

partnerships, and strategic planning in 

accordance with 7 CFR part 25. 

Family labor contribution. The 

amount of labor a participating family 

provides for construction of homes 

within a group. The amount of labor a 

family contributes to the construction of 

their home assists in determining the 

amount of equity in the home at the 

time of closing. 

Final grantee evaluation. An 

evaluation performed by Rural 

Development at the end of the grant 

period to determine whether the grantee 

met its projected performance goals and 

complied with program requirements. 

Grant agreement. The contract signed 

by the grantee and Rural Development, 

on the appropriate Agency form, that 

contains the terms and conditions under 

which technical assistance funds are 

being made available. 

Grantee. An organization with which 

Rural Development has closed a section 

523 technical assistance or 

predevelopment grant. 

High risk. A designation that may be 

placed on a grantee for noncompliance 

with the grant agreement and/or failure 

to meet requirements of this part. 

Household. All persons expected to 

be living in the dwelling, except for 

live-in aids, foster children, and foster 

adults. 

Housing Act of 1949, as amended. 

The Act which provides the authority 

for the direct single family housing 

programs. It is codified at 42 U.S.C. 

1471, et seq. 

HUD. The U.S. Department of 

Housing and Urban Development. 

Indian reservation. All land located 

within the limits of any Indian 

Reservation under the jurisdiction of the 

United States notwithstanding the 

issuance of any patent and including 

rights-of-ways running through the 

reservation; trust or restricted land 

located within the boundaries of a 

former reservation of a Federally 

recognized Indian tribe in the State of 

Oklahoma; or all Indian allotments, the 

titles to which have not been 

extinguished if such allotments are 

subject to the jurisdiction of a Federally 

recognized Indian tribe. 

Indirect costs. Those costs that are 

incurred for common or joint objectives 

and therefore, cannot be readily 

identified with a particular project or 

activity. 

Leveraged assistance. Non-Rural 

Development financial assistance such 

as grant or loan funds, from a 

recognized source, which is combined 

with Rural Development financial 

assistance to accomplish a Mutual and 

Self-Help housing program purpose. 

Low-income. An adjusted income that 

is greater than the HUD established very 

low-income limit, but that does not 

exceed the HUD established low-income 

limit (generally 80 percent of median 

income adjusted for household size) for 

the county or Metropolitan Statistical 

Area where the property is or will be 

located. 

Members’ Agreement. The Rural 

Development form that serves as a 

written contract signed by the grantee 

and the participating families to 

establish each party’s responsibilities 

and obligations in the construction of 

the participating families’ homes. 

Modest housing. See 7 CFR 3550.10. 

Multi-funded applicants. Applicants 

who receive some type of funding from 

Rural Development and other funding 

sources. 

Mutual self-help (MSH) method of 

construction. A group of families 

working together to provide mutual 

labor in constructing their homes under 

the direction of a construction 

supervisor. 

Notice of Funding Availability 

(NOFA). An announcement published 

in the Federal Register announcing that 

funds are available for specific programs 

and outlining the process for 

submission and processing of 

applications. 

Organization. A state or political 

subdivision, public nonprofit 

corporation, tribes or tribal 


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corporations, or private nonprofit 

corporations. 

Participating family. A household that 

has executed a Members’ Agreement 

pertaining to a Mutual and Self-Help 

Housing program and, thereby, 

committed itself to joining with other 

households to build each other’s homes 

and uphold the requirements of the 

program. 

Program requirements. Requirements 

set forth in any loan or grant document, 

agreement, statute, or regulation 

applicable to the Mutual and Self-Help 

Housing program. 

Production based. When a grant is 

approved based on technical assistance 

cost for a proposed number of 

equivalent units to be started during the 

grant cycle. 

Reasonable costs. A cost is reasonable 

if, in its nature and amount, it does not 

exceed that which would be incurred by 

a prudent person under the 

circumstances prevailing at the time the 

decision was made to incur the cost. To 

be considered reasonable, costs must 

meet all of the following conditions: 

(1) The cost is of a type generally 

recognized as ordinary and necessary 

for the operation of the organization or 

the performance of the Federal award. 

(2) The cost meets the restraints or 

requirements imposed by such factors as 

sound business practices; arms-length 

bargaining; Federal, State, and other 

laws and regulations; and terms and 

conditions of the award. 

(3) Market prices for similar goods or 

services are comparable. 

(4) The individuals concerned acted 

with prudence in the circumstances 

considering their responsibilities to the 

organization, its members, employees, 

clients, the public at large, and the 

Federal Government. 

(5) In incurring the cost, the 

organization did not deviate 

significantly from its established 

practices and, thereby, unjustifiably 

increase the award’s cost. 

Rural area. The definition of rural 

area provided in § 520 title V of the 

Housing Act of 1949, as amended, (42 

U.S.C. 1490) applies to this part. 

Rural Development (RD). A mission 

area within the USDA that includes 

Rural Housing Service (RHS), Rural 

Utilities Service (RUS), and Rural 

Business-Cooperative Service (RBS). 

Section 502 loan program. A Rural 

Development single family housing loan 

program. (See 7 CFR part 3550) 

Self-Help construction cost. The cost 

of constructing a home under the 

Mutual and Self-Help Housing program. 

This cost is calculated as the total debt 

to the participating family, subtracting 

land costs, closing costs and impact 

fees, and adding any additional 

financing such as grants which reduces 

the total debt to the participating family. 

Specialty tools. Specialty tools are 

those tools needed to complete the 

construction of a home, not including 

hand tools that are commonly needed to 

maintain a home, such as hammers, 

screwdrivers, tape measures, pliers, and 

wrenches. Specialty tools include, but 

are not limited to, power saws, electric 

drills, saber saws, ladders, and 

scaffolds. 

Sponsor. An existing entity that is 

willing and able to assist an applicant, 

with or without charge, in applying for 

a grant and in carrying out 

responsibilities of the grant agreement. 

Substitute labor. A person(s) who 

substitutes their labor for a participating 

family member’s labor. 

Supervised bank account. A bank 

account established through deposit 

agreements between the borrower, Rural 

Development, and the financial 

institution. Rural Development monitors 

and maintains control of the account in 

accordance with 7 CFR part 1902, 

subpart A. 

Technical and management 

assistance provider. An organization 

which receives Rural Development 

funding to provide services to Rural 

Development and training and 

management assistance to grantees and 

prospective grantees. 

Technical assistance. The organizing 

and supervising of groups of families in 

the construction of their own homes. 

Supervision includes counseling and 

assisting families in decision making 

and providing training as needed. 

Tribe. Any Federally-recognized tribe, 

band, pueblo, group, community, or 

nation of American Indian or Alaska 

natives in accordance with § 501 of the 

Housing Act of 1949 as amended. 

Very low-income. An adjusted income 

that does not exceed the HUDestablished very low-income limits 

(generally 50 percent of the median 

income adjusted for household size) for 

the county or Metropolitan Statistical 

Area where the property will be located. 

Workout agreement. A written 

agreement between a grantee and Rural 

Development describing actions to be 

taken over a period of time to correct a 

program compliance violation or 

problem identified by Rural 

Development or the grantee. 

§§ 3551.11–3551.49 [Reserved] 

§ 3551.50 OMB Control number. 

[Reserved] 

Subpart B—Technical Assistance 

Grant Application and Approval 

§ 3551.51 Eligibility requirements. 

To be eligible for a Mutual Self-Help 

technical assistance grant, an applicant 

must meet all of the following 

requirements: 

(a) Be an organization that qualifies as 

one of the following: 

(1) A state or a political subdivision 

thereof; 

(2) A public nonprofit corporation, 

including tribes or tribal corporations, 

that is in good standing with the State 

or States in which it operates; or 

(3) A private nonprofit corporation 

that is organized and operated for 

purposes other than making gains or 

profits for the corporation; and that 

(i) Does not distribute any gains or 

profits to its founders, members, or 

contributors; 

(ii) Is properly organized under state 

and local or Tribal laws; 

(iii) Is qualified under section 501(c) 

(3) or section 501(c)(4) of the Internal 

Revenue Code of 1986; 

(iv) Has the production of affordable 

housing as one of its purposes, as 

evidenced by its charter, articles of 

incorporation, resolutions, or by-laws; 

(v) Has a board of directors with at 

least five members, one-third of whom 

are very low or low income, their 

elected representatives, or residents of a 

low-income community; and no more 

than one-third of whom are from the 

public sector; and 

(vi) Is in good standing with the state 

or states in which it operates. 

(b) Have the financial, legal and 

administrative capacity to carry out the 

relevant program requirements. An 

organization may satisfy this 

requirement by: 

(1) Demonstrating that the 

organization currently has this capacity 

or will be sponsored by an organization 

that does meet these requirements; 

(2) Receiving an acceptable 

commercial credit report obtained by 

Rural Development as a determining 

factor of financial capacity; and 

(3) Documenting that the organization 

has experienced staff members who 

have successfully completed similar 

projects or has secured a consultant 

with similar experience who will assist 

and train appropriate key staff members 

of the organization. 

(c) Agree to administer a Mutual and 

Self-Help Housing program in which: 

(1) No fewer than five homes are 

simultaneously built by participating 

families in a mutual effort; 


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(2) At least 40 percent of the 

participating families are very lowincome and all of the participating 

families are either low-or very lowincome; 

(3) The participating families will 

have equity in their homes of at least 10 

percent of the appraised market value of 

their homes at completion; 

(4) The participating families meet the 

minimum family labor contribution 

requirement of at least 50 percent of the 

total 100 percent labor required; 

(5) The grantee obtains general 

liability insurance coverage, in an 

amount sufficient to cover the proposed 

projects, for activities associated with 

the Mutual and Self-Help Housing 

program; and 

(6) All requirements of this part are 

met. 

(d) Propose to serve a rural area which 

is not currently being served by an 

existing grantee other than the 

applicant. 

(e) Not be suspended, debarred, or 

excluded from participation in Federal 

programs based on the ‘‘List of Parties 

Excluded from Federal Procurement and 

Nonprocurement Programs.’’

(f) In addition to the requirements of 

this section, existing grantees must meet 

the following eligibility criteria: 

(1) Have received at least a 

satisfactory rating on the most recent 

final grantee evaluation performed by 

Rural Development; and 

(2) Be operating successfully on the 

current grant, or is designated as ‘‘High 

Risk’’ but is successfully operating 

under a workout agreement at the time 

of the application and closing. 

(g) If operating under a ‘‘production 

based’’ method and proposing to close 

out the grant with incomplete homes, 

the applicant must also meet all of the 

following requirements: 

(1) Have the demonstrated capacity to 

close out the grant with incomplete 

homes and continue to meet all program 

requirements; 

(2) Have closed out at least two 

technical assistance grants with Rural 

Development; 

(3) Have received at least a 

satisfactory rating on their most recent 

final grantee evaluation, and are not 

currently designated ‘‘High Risk’’ or 

operating under a workout agreement; 

(4) Be a multi-funded applicant; and 

(5) Propose that no more than 10 

percent of the homes to be constructed 

will be incomplete at grant close out 

and that all incomplete homes will be 

completed during the new grant cycle. 

§ 3551.52 Authorized technical assistance 

grant uses. 

(a) All grant funds must be used for 

reasonable costs and in accordance with 

the cost principles outlined in 7 CFR 

parts 3015 and 3016, as applicable. 

(b) The following expenses are 

authorized technical assistance grant 

uses: 

(1) Payment of salaries for consultants 

and personnel to carryout required 

functions as authorized by this part and 

provided in the Grant Agreement; 

(2) Payment of employee benefit costs 

including, but not limited to, worker’s 

compensation, employer’s share of 

Social Security, health benefits, and a 

tax-deferred pension plan for permanent 

employees; 

(3) Payment of office expenses such as 

office rental, office utilities, and office 

equipment, including computers and 

computer software. Office equipment 

may be purchased rather than rented if 

the grantee determines that the cost of 

purchasing is less than the cost of 

renting equipment for the duration of a 

single grant period; 

(4) Purchase of office supplies 

necessary to function as an organization, 

such as paper, pens, and pencils; 

(5) Payment for the cost of 

establishing an accounting system and 

obtaining audits in accordance with 

§ 3551.103; 

(6) Payment of fees for training 

grantee personnel for skills directly 

related to the execution of a Mutual and 

Self-Help Housing activity; 

(7) Payment of board members’ travel 

expenses to attend board meetings; 

(8) Purchase, lease, or maintenance of 

equipment or power or specialty tools 

used for home construction. Power or 

specialty tools may be purchased rather 

than rented if the grantee determines 

that the cost of purchasing is less than 

the cost of renting power and specialty 

tools for the duration of a single grant 

period; 

(9) Payment of general liability 

insurance for the grantee organization 

for activities associated with Mutual 

and Self-Help Housing; 

(10) Payment of costs associated with 

assisting Rural Development in 

obtaining necessary information to 

complete an environmental review for a 

group of participating families, such as 

delineating wetland areas or performing 

an archeological survey, when 

necessary; 

(11) Payment of legal costs, with prior 

Rural Development approval, to resolve 

legal issues that are directly impeding or 

delaying the Mutual and Self-Help 

Housing construction effort, excluding 

any legal fees associated with any action 

against the Federal government; and 

(12) Payment of other reasonable costs 

that are associated with the execution of 

a Mutual and Self-Help Housing 

program objective and not specifically 

excluded by § 3551.53. Written approval 

for any other such costs must be 

obtained in writing from Rural 

Development prior to expenditures. 

§ 3551.53 Unauthorized technical 

assistance grant uses. 

Grantees must repay any funds that 

are used for unauthorized purposes. 

Unauthorized technical assistance grant 

uses include: 

(a) Payment of any cost that is not 

directly related to the purposes of the 

Mutual and Self-Help Housing program; 

(b) Payment of any personnel hired to 

perform any of the construction work 

that is the responsibility of the 

participating families as specified in the 

approved Member’s Agreement; 

(c) Purchase of real estate or property 

of any kind for the participating 

families; 

(d) Purchase of any building materials 

for the participating families; 

(e) Payment of any expense associated 

with the administrative appeal of an 

adverse decision by the grant applicant 

or grantee; 

(f) Payment of any obligations that 

were incurred prior to the date of the 

execution of the grant agreement or after 

the grant termination date; and 

(g) Payment of any expenses not 

authorized by § 3551.52. 

§ 3551.54 Technical assistance (TA) grant 

amounts. 

(a) Rural Development will award 

only technical assistance grants that: 

(1) Are based on the proposed number 

of homes to be completed; 

(2) Reflect a reasonable self-help 

construction cost based on a proposed 

budget; 

(3) Cover authorized grant uses; and 

(4) Comply with paragraph (b) of this 

section. 

(b) Rural Development will limit TA 

cost to: 

(1) No more than 15 percent of the 

equivalent value of a modest house in 

the subject area, comparable in size and 

design, for each home that is to be 

constructed. This TA grant amount, 

when added to the Self-Help cost of 

construction, shall not exceed the 

equivalent value of a comparable 

modest home in the area. 

(2) The State Director may consider 

approval of a TA cost that exceeds 15 

percent but is not greater than 20 

percent, when at least one of the 

following conditions exist: (i) No Rural 

Development contractor built homes 

have been built in the past 12 months 

in the area and the cost to construct a 

modest home is obtained by Rural 

Development from a nationally 

recognized residential cost provider. 


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(ii) Special conditions in the 

marketplace, locality, participant 

situations or labor rates require 

additional costs. Such conditions will 

be documented in writing by the grantee 

prior to Rural Development approval. 

(c) The Administrator may revise 

these grant ceilings in exigent 

circumstances through a prior notice 

published in the Federal Register. 

§ 3551.55 Application submission and 

processing. 

Rural Development will award 

technical assistance grants through a 

competitive process in accordance with 

the following procedure: 

(a) Notification of funding. Rural 

Development will publish a Notice of 

Funding Availability (NOFA) in the 

Federal Register each year that provides 

the following information: 

(1) Notice of funding availability; 

(2) Guidance for obtaining and 

submitting application packages; 

(3) How existing and new grantees 

will be awarded points and ranked on 

various criteria; 

(4) Application deadlines, which will 

be no earlier than 30 days after 

publication of the notice; 

(5) How selections will be made in the 

event of a tie between applicants; and 

(6) If applicable, any special scoring 

criteria, funding limitations, or other 

requirements designated by the 

Administrator for the grant cycle. 

(b) Application requirements. The 

applicant must submit a complete 

application that meets Rural 

Development requirements set forth in 

this part and the NOFA. At a minimum, 

the following documentation is 

required: 

(1) The applicant must submit an 

Application for Federal Assistance as 

specified by Rural Development. The 

application must be signed and dated. 

(2) The applicant must provide 

evidence of its ability to carry out the 

objectives of the Mutual and Self-Help 

Housing program both on an 

organizational and staff member basis. 

The applicant need not provide this 

item if demonstrated capacity was 

established through a predevelopment 

grant awarded within the previous grant 

cycle, or if the grantee is an existing 

grantee with at least a satisfactory rating 

on the most recent final grantee 

evaluation. 

(3) The applicant must provide the 

following organizational documents 

unless the applicant is an existing 

grantee and the item has not been 

changed since last submitted to Rural 

Development: 

(i) A copy of, or accurate reference to, 

the specific provisions of state law 

under which the applicant is organized; 

(ii) A certified copy of the applicant’s 

Articles of Incorporation and Bylaws or 

other evidence of corporate existence, if 

the applicant is a corporation; 

(iii) If not a public body, a certificate 

of incorporation; 

(iv) If not a public body, a tax exempt 

certification under IRS 501(c)(3) or 

501(c)(4); 

(v) Current (no more than 90 days old) 

certification that the organization is in 

good standing from the state or states in 

which the grant is to be awarded; 

(vi) The names and addresses of the 

applicant’s members, directors, and 

officers and evidence of those 

authorized by the board to execute legal 

documents including the grant 

agreement; 

(vii) A dated and signed financial 

statement for the organization no more 

than 12 months old. 

(4) The applicant must provide 

evidence of need and demand for the 

program and income-eligible families 

who wish to participate in the program. 

(5) The applicant must provide 

evidence that it controls suitable land 

for the first group of participating 

families and has access to land for the 

remaining families who will be served 

under the grant. 

(6) The applicant must provide a 

program budget, in a format and form 

approved by the Agency, detailing how 

they plan to spend the technical 

assistance grant funds. 

(7) The applicant must provide 

architectural plans, specifications, and 

an estimate of reasonable costs to build 

the house. 

(8) The applicant must provide a 

monthly activities schedule that 

describes how the program will be 

implemented, including when the 

participating families are expected to be 

qualified and the construction schedule. 

(9) The applicant, other than a Tribe 

or public body, must submit the 

necessary fee to Rural Development for 

completion of a commercial credit 

report. The credit report will be used as 

a tool in determining the applicant’s 

financial capacity. If a credit report was 

obtained with an awarded 

predevelopment grant application, or by 

an existing grantee, this requirement 

may be waived by the State Director. 

(10) The applicant must provide the 

following certifications: 

(i) Compliance with civil rights 

statutes and regulations; 

(ii) That a Statement of Activities 

describing the proposed Mutual and 

Self-Help Housing activity has been 

submitted to the state single point of 

contact in accordance with Executive 

Order 12372 on intergovernmental 

consultation; 

(iii) Whether there is any known 

relationship or association between the 

applicant and a Rural Development 

employee; 

(iv) Certification and disclosure of any 

lobbying activities on the appropriate 

Agency forms; 

(v) That final drawings and 

specifications are in conformance with 

the applicable development standard in 

accordance with 7 CFR part 1924, 

subpart A, or any successor regulation; 

(vi) On the appropriate Agency form, 

that the organization meets drug-free 

workplace requirements; and 

(vii) On the appropriate Agency form, 

that the organization has not been 

debarred and/or suspended from 

Government assistance. 

(11) A multi-funded applicant must 

provide its best estimate of its indirect 

cost rate or a cost allocation plan in 

accordance with 7 CFR parts 3015 and 

3016, as applicable. 

(12) The applicant must include a 

brief narrative that: 

(i) Specifies the number of homes to 

be completed and a proposed technical 

assistance cost which reflects reasonable 

costs for the area, and 

(ii) Describes the extent to which the 

application meets the criteria for 

preference established in this section or 

any NOFA. 

(13) If the grantee is using a sponsor, 

they must provide the sponsor’s name, 

address, experience, ability, and a 

written agreement to assist. 

(14) An applicant must provide a 

comprehensive plan for outreach to 

very-low income families. 

(15) An applicant must provide a 

copy of the organization’s standard 

personnel practices and procedures. 

(c) Scoring and ranking: Rural 

Development will select applications for 

funding in rank order until the available 

funds are no longer sufficient to fund an 

eligible application. Only applications 

that meet the eligibility requirements of 

§ 3551.51 and contain all the necessary 

information required by this section and 

the NOFA will be accepted. Complete 

and timely submitted applications will 

then be awarded points and ranked 

based on the criteria listed in the NOFA. 

The criteria that will be considered may 

include any or all of the following: 

(1) Will serve areas with special needs 

such as state designated targeted 

counties, tribal lands, colonias, or 

EZ/EC/REAP areas that are not in a state 

designated targeted county; 

(2) Will provide an equal amount of 

technical assistance at a lesser cost per 

unit relative to other applications; 

(3) Will serve states that have had no 

MSH grants within the past five years; 


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(4) Obtained a satisfactory 

performance evaluation in the last grant 

cycle; 

(5) Will have leveraged assistance 

home financing for participating 

families; 

(6) Will have leveraged assistance to 

provide the technical assistance 

provided under this part; 

(7) Will exceed the minimum family 

labor contribution requirement; and 

(8) Meets other criteria that the 

Administrator designates, such as those 

that encourage innovation, ensure 

geographic diversity, or respond to 

emergency situations. 

(d) Grant closing conditions. Rural 

Development will notify the otherwise 

eligible applicant in writing of any 

conditions that must be met prior to the 

closing of the grant. Such conditions 

include, but are not limited to, the 

following: 

(1) The applicant must meet its 

staffing needs. 

(2) The applicant must agree in 

writing to comply with all Federal 

statutes and the requirements of 7 CFR 

parts 3015, 3016, and 3019, as 

applicable, such as: 

(i) Fidelity bonding, 

(ii) Worker’s compensation insurance, 

(iii) General liability insurance, and 

(iv) Accounting and recordkeeping. 

(3) The applicant must be authorized 

by its Board of Directors to execute the 

Grant Agreement with Rural 

Development. 

(4) The applicant must establish an 

interest-bearing checking account that 

requires the signatures of at least two 

bonded officials to sign all checks 

which comply with 7 CFR part 3019 and 

Departmental Regulation 2120–1. 

(5) The applicant and the 

participating families must develop a 

Members’ Agreement that describes the 

responsibilities of the grantee and the 

participating families, including a 

description of the tasks that will be 

performed by each of the participating 

families. 

(6) The applicant must show evidence 

that the first group of participating 

families has qualified for mortgage 

financing. 

(7) The applicant must provide a 

schedule of how payments will be 

drawn upon. Generally, this is done on 

a monthly basis. 

(8) The applicant must provide Rural 

Development with a complete set of 

certified building specifications for each 

model home to be built. 

(9) The applicant must provide an 

Affirmative Fair Housing Marketing 

Plan (AFHMP) as required in 7 CFR part 

1901, subpart E, or successor regulation. 

The AFHMP shall be approved by the 

appropriate Rural Development official. 

(10) The applicant must assist Rural 

Development to adequately address any 

findings in the Civil Rights Impact 

Analysis Certification prepared by Rural 

Development. 

(11) Grantee must address any 

environmental issues found by the 

Agency during an environmental 

review, if required, and take the 

necessary steps to correct them. 

(12) The applicant must provide an 

Assurance Agreement indicating their 

obligation to follow all civil rights 

requirements of the Civil Rights Act of 

1964 and regulations of the Agency. 

(13) The applicant must meet any 

other closing conditions specified by the 

Agency as needed to meet the 

requirements of this part or other 

applicable laws. 

(e) Grant Closing. When all the 

conditions for grant closing have been 

met, the grantee and Rural Development 

will execute the Grant Agreement. The 

grant term will be for a 24 month period 

and will begin on the date of the first 

transfer of funds to the grantee. The 

State Director is authorized to approve 

grants in the amount of $300,000 or less. 

Grant requests exceeding $300,000 must 

be submitted to the National Office for 

approval. 

§§ 3551.56–3551.99 [Reserved] 

§ 3551.100 OMB Control number. 

[Reserved] 

Subpart C—Technical Assistance 

Grantee Responsibilities 

§ 3551.101 Provision of technical 

assistance. 

Grantees are responsible for 

organizing and supervising groups of 

participating families in the mutual 

construction of their homes by 

performing the following activities: 

(a) Recruitment and education. (1) 

Conduct outreach activities to recruit 

participating families, with preference 

being given to applicants with very low 

income; 

(2) Provide information to potential 

applicants fully explaining the Mutual 

and Self-Help Housing program; and 

(3) Assist families in applying for 

home financing, including obtaining 

and assisting in the completion of the 

necessary loan application package. 

(b) Counseling. (1) Homeownership 

education must be provided to the 

participating families with certification 

of completion submitted to the Agency 

in accordance with 7 CFR part 3550; 

(2) Counsel and assist participating 

families in selecting suitable and 

modest housing designs; and 

(3) Counsel and assist participating 

families in determining their contracting 

and construction material cost 

estimates. 

(c) Construction supervision. (1) 

Ensure that the participating families’

homes meet the construction 

requirements of § 3551.7; 

(2) Ensure that participating families 

have adequate insurance protection that 

includes liability coverage; 

(3) Provide construction supervision 

and training for families; 

(4) Ensure that the participating 

families perform the mutual labor to 

which they agreed in the Members’

Agreement; 

(5) Ensure that all homes constructed 

by a group of participating families have 

been completed before any of those 

homes are occupied; 

(6) Ensure that all permits for 

construction are obtained from 

appropriate local and state agencies; 

(7) Conduct a preconstruction meeting 

that includes grantee’s construction 

supervisor, all major contractors and the 

family participants to ensure that all are 

aware of the contractual requirements, 

schedules, responsibilities and working 

relationships on the job site. Rural 

Development will be provided notice of 

the meeting(s) and may attend at their 

option; 

(8) Ensure that all inspections 

required by applicable building codes 

and local agencies are called for in a 

timely manner; and 

(9) Conduct periodic inspection of the 

work with the families and 

subcontractors to ensure that all work is 

completed properly. 

(d) Financial supervision for 

participating families with section 502 

loans. (1) Monitor participating families’

section 502 loan funds in supervised 

bank accounts. Rural Development may 

approve the use of custodial accounts 

for existing grantees. In either case, 

debits and credits must be tracked 

separately for each participating 

family’s account; and 

(2) Ensure that contractors and 

material suppliers are paid by the 

participating families. 

(e) Post-closing meeting. Hold at least 

one post-closing meeting with 

participating families to ensure they 

understand the responsibilities of 

homeownership including the loan 

payment process, escrowing of taxes 

and insurance and home maintenance. 

(f) Environmental requirements. The 

applicant will assist Rural Development, 

as necessary, in the gathering of 

information for the environmental 

review of applications filed by the 

participating families. 

§ 3551.102 Request for payment. 

(a) The grantee must request funding 

disbursements from Rural Development 


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on the appropriate Agency form, prior to 

the end of the month to obtain funds for 

the upcoming month. 

(b) The grantee must provide Rural 

Development with documentation of 

projected and actual costs to justify the 

requested payment. 

(c) By the tenth of the month, the 

grantee must provide financial 

information and a progress report for the 

previous month. The progress report 

will be gathered from an approved Rural 

Development tracking system used by 

grantees to track their progress. Progress 

will be based on equivalent units as 

outlined in the grant agreement. 

(d) The grantee must provide 

documentation that the previous 

month’s payments were disbursed 

appropriately. 

(e) If the payment request varies from 

the proposed draw schedule, the grantee 

must provide a written statement 

explaining the reasons for the 

discrepancy. 

§ 3551.103 Audit requirements. 

(a) The grantee must submit an annual 

audit for each year of the grant period 

within 90 days of the grantee’s fiscal 

year end. Rural Development may 

authorize a state or local government 

that conducts less frequent audits to 

submit a biennial audit. In such a case, 

the grantee must submit a biennial audit 

until each year of the grant period has 

been covered in an audit submitted to 

Rural Development. The audit must be 

performed in accordance with Generally 

Accepted Government Auditing 

Standards (GAGAS). 

(b) The grantee must submit an audit 

of the accounts of participating families’

section 502 loan funds if requested by 

Rural Development. 

(c) Audits will be conducted as 

follows: 

(1) State and local governments and 

Indian tribes will be audited in 

accordance with 7 CFR parts 3015 and 

3016, and this subpart. 

(2) Nonprofit organizations will be 

audited in accordance with 7 CFR parts 

3015, 3019, and this subpart. 

(3) State and local governments, 

Indian tribes, and nonprofit 

organizations that receive less than 

$300,000 a year in federal financial 

assistance are exempt from annual 

audits. 

(4) Final audits are required as part of 

grant closeout under § 3551.155. 

(d) Auditors must promptly notify 

Rural Development in writing of any 

indication of fraud, abuse, or illegal acts 

in a grantee’s use of grant funds or in 

the handling of participating families’

accounts. 

§ 3551.104–3551.149 [Reserved] 

§ 3551.150 OMB Control number 

[Reserved] 

Subpart D—Technical Assistance 

Grant Servicing 

§ 3551.151 Grant agreement amendment. 

(a) Rural Development may approve a 

grantee’s written request for a Grant 

Agreement amendment only to modify 

the grant amount and/or the grant 

period. 

(b) Rural Development may approve 

such an amendment only when: 

(1) The request is consistent with the 

goals of the program and will not 

adversely affect the participating 

families; 

(2) The request is within the original 

budget for the Grant Agreement, 

including the original number of homes 

proposed. Amendments will not be 

approved to reduce the number of 

homes; 

(3) The request is made due to 

circumstances beyond the grantee’s 

control; and 

(4) Adequate funds are available, if 

requested. 

§ 3551.152 Grantee monitoring. 

Rural Development will monitor the 

grantee’s performance in meeting grant 

goals and complying with program 

requirements throughout the grant 

period. The grantee must assist Rural 

Development as necessary to permit the 

following monitoring activities: 

(a) Quarterly review of progress. At a 

minimum, each quarter Rural 

Development will meet with the grantee 

to review their progress in meeting the 

performance goals of the grant as 

specified in the Grant Agreement and 

monitor compliance with program 

requirements of this part. 

(b) Physical inspections of 

construction. (1) Rural Development 

will inspect the construction sites to 

verify job progress and conditions, 

information provided by the grantee, 

and the mutual labor contributed by the 

participating families. 

(2) A final inspection of the work will 

be conducted by all parties to the work: 

grantee, contractors, participating 

families and Rural Development. This 

inspection should be done by all parties 

simultaneously, however, if this is not 

practicable the inspection may be 

separately conducted. In all cases, all 

parties will acknowledge satisfactory 

completion by signing off on the final 

inspection in accordance with 7 CFR 

part 1924, subpart A. 

(c) Final grantee evaluation. At the 

end of the grant period, Rural 

Development will perform a final 

grantee evaluation to determine the 

following: 

(1) If the grantee met the 

commitments made in the initial 

application upon which the grant was 

awarded; 

(2) If the grantee met the performance 

goals of the grant agreement; and 

(3) If the grantee complied with 

program requirements under this part. 

§ 3551.153 Grantee performance. 

If it is determined by Rural 

Development, at any time during the 

grant cycle, that a grantee is not meeting 

the performance goals specified in the 

Grant Agreement or is not complying 

with program requirements the 

following procedure must be followed: 

(a) Counseling must be initiated by 

Rural Development or its agent. At a 

minimum, counseling will: 

(1) Identify the problems and/or 

concerns noted by Rural Development, 

the contractor, and/or the grantee; and 

(2) Give the grantee a reasonable time 

to correct any deficiencies noted and 

return to satisfactory performance. 

(b) If after counseling and a 

reasonable time to correct the problems 

identified, the grantee continues not to 

meet performance goals or comply with 

program requirements, Rural 

Development will designate the grantee 

as ‘‘High Risk’’ and require the grantee 

to develop a workout agreement with 

Rural Development. The notice to the 

grantee of ‘‘High Risk’’ designation will 

specify the remaining deficiencies that 

must be corrected, provide proposed 

remedies, and provide a deadline to 

complete the workout agreement. 

(c) Upon expiration of the workout 

agreement, the grantee shall be 

reevaluated and one of the following 

will occur: 

(1) If the deficiencies have been 

corrected, the ‘‘High Risk’’ designation 

will be removed and the grantee so 

notified; or 

(2) If the deficiencies have not been 

corrected, the grantee will be considered 

for suspension or termination as 

described in § 3551.154. 

§ 3551.154 Grant suspension and 

termination. 

(a) Rural Development may approve a 

grantee’s written request for a Grant 

Agreement suspension or termination, if 

it is in the best interest of the Agency 

and does not negatively impact the 

participating families. 

(b) Rural Development may, upon 

written notice, suspend a Grant 

Agreement for up to 90 days if the 

following exists: 

(1) Grantee has failed to comply with 

the terms of the Grant Agreement or 

meet program requirements; 


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(2) Grantee has been designated as 

‘‘High Risk’’; 

(3) A workout agreement was 

implemented and has expired; and 

(4) The additional time under a 

suspension will allow the grantee to 

correct deficiencies specified in the 

workout agreement. 

(c) Rural Development may terminate 

a Grant Agreement for cause in whole or 

in part at any time if Rural Development 

determines that the grantee has failed to 

comply with terms of the agreement or 

meet program requirements. The State 

Director will notify the grantee in 

writing of the action and advise them of 

their right to appeal. Any unused grant 

funds must be returned to Rural 

Development. 

(d) Rural Development or the grantee 

may terminate the Grant Agreement for 

convenience in whole or part when both 

parties agree that the continuation of the 

grant would not produce beneficial 

results. Both parties will agree in 

writing to the conditions of termination, 

including the effective date. Any 

unused grant funds must be refunded to 

Rural Development. 

§ 3551.155 Grant close out. 

In order to close out the grant cycle, 

the grantee must perform the following 

actions within 90 days following the 

Grant Agreement expiration or 

termination date: 

(a) Provide documentation of the 

extent to which the goals in the Grant 

Agreement were met; 

(b) Provide a financial status report on 

an Agency approved form that reflects 

all information (Federal and nonFederal) relating to obligations and 

expenditures of Rural Development 

grant funds; 

(c) Provide a list of all equipment and 

supplies purchased for the project; 

(d) Must return any unused grant 

funds to Rural Development with the 

financial status report; 

(e) Must ensure the participating 

families’ section 502 supervised bank 

accounts are closed out and any residual 

funds returned to the Agency; and 

(f) Provide a final audit. 

§ 3551.156–3551.199 [Reserved] 

§ 3551.200 OMB Control number 

[Reserved] 

Subpart E—Predevelopment Grants 

§ 3551.201 General. 

The objective of predevelopment 

grants is to enable applicants to obtain 

the technical and financial assistance 

necessary to complete a technical 

assistance grant application under this 

part. Award of a predevelopment grant 

does not guarantee the award of a 

technical assistance grant. 

§ 3551.202 Eligibility requirements. 

In order to be eligible for a 

predevelopment grant, an applicant 

must meet all the eligibility 

requirements for a technical assistance 

grant contained in § 3551.51. 

§ 3551.203 Authorized predevelopment 

grant uses. 

The predevelopment grant must be 

used for developing an application for a 

technical assistance grant. Authorized 

predevelopment grant uses include: 

(a) Recruiting and disseminating 

information to prospective participating 

families, and gathering their names and 

addresses for future contact; 

(b) Performing a need and demand 

study for the proposed type and amount 

of Mutual and Self-Help housing in the 

proposed community; 

(c) Attending a self-help or housing 

related training session; 

(d) Visiting another grantee to obtain 

training or guidance in successful 

project management and similar 

purposes, with prior Rural Development 

approval; and 

(e) Performing other activities 

necessary to complete a technical 

assistance grant application under this 

part, when prior written approval is 

obtained from Rural Development. 

§ 3551.204 Unauthorized predevelopment 

grant uses. 

Predevelopment grant funds must not 

be used for any of the unauthorized 

purposes listed in § 3551.53, or either of 

the following purposes: 

(a) Payment of any expenses incurred 

towards completing a technical 

assistance grant activity, such as 

obtaining home financing for 

participating families; or 

(b) Payment of any costs incurred for 

land development. 

§ 3551.205 Application submission and 

processing. 

Rural Development will award 

predevelopment grants through a 

competitive process in accordance with 

the following procedure: 

(a) Notification of funding. Rural 

Development will publish at least one 

NOFA in the Federal Register each year 

that provides the following information: 

(1) Notice of funding availability; 

(2) Guidance for obtaining and 

submitting application packages; 

(3) Application deadline, which will 

be no earlier than 30 days after the 

publication of the notice; 

(4) How selections will be made in the 

event of a tie between applicants; and 

(5) If applicable, any special scoring 

criteria, funding limitations, or other 

requirements designated by the 

Administrator for the grant cycle. 

(b) Application requirements. The 

applicant must submit a complete and 

timely application that meets Rural 

Development requirements set forth in 

this part and the NOFA. At a minimum, 

the following documentation is 

required: 

(1) The applicant must submit an 

Application for Federal Assistance on 

the appropriate Agency form. The 

application must be signed and dated; 

(2) The applicant must provide 

evidence of its ability to carry out the 

objectives of the Mutual and Self-Help 

Housing program both on an 

organizational and staff member basis. 

(3) The applicant must provide the 

following organizational documents: 

(i) A copy of, or accurate reference to, 

the specific provisions of state law 

under which the applicant is organized; 

(ii) A certified copy of the applicant’s 

Articles of Incorporation and Bylaws or 

other evidence of corporate existence, if 

the applicant is a corporation; 

(iii) If not a public body, a certificate 

of incorporation; 

(iv) If not a public body, a tax exempt 

certification under IRS 501(c)(3) or 

501(c)(4); 

(v) Current certification (no more than 

90 days old) that the organization is in 

good standing from the state or states in 

which the grant is to be awarded; 

(vi) The names and addresses of the 

applicant’s members, directors, and 

officers and evidence of those 

authorized by the board to execute legal 

documents for the grant; and 

(vii) A dated and signed financial 

statement for the organization no more 

than 12 months old. 

(4) The applicant must provide 

evidence of need and demand for the 

program and a list that contains the 

names and addresses of families who 

have expressed an interest in the 

program; 

(5) The applicant must provide 

evidence that there is available land 

suitable for the construction of single 

family homes; 

(6) The applicant must provide a 

program budget, in a format and form 

approved by the Agency, detailing how 

they plan to spend the predevelopment 

grant funds; 

(7) The applicant must provide a 

monthly activities schedule that 

describes how the funds will be used. 

(8) The applicant, other than a Tribe 

or public body, must submit the 

necessary fee to Rural Development for 

completion of a commercial credit 

report. The credit report will be used as 

a tool in determining the applicant’s 

financial capacity; 


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(9) The applicant must provide the 

following certifications: 

(i) Compliance with civil rights 

statutes and regulations; 

(ii) Whether there is a known 

relationship or association between the 

applicant and a Rural Development 

employee; 

(iii) That no person or organization 

has been employed or retained to solicit 

or secure the grant for a commission, 

percentage, brokerage, or contingent fee; 

(iv) That the applicant has not been 

debarred or suspended by the 

Government, on the appropriate Agency 

form; and 

(v) That the organization meets drugfree workplace requirements, on the 

appropriate Agency form. 

(c) Scoring and ranking. Rural 

Development will select applications for 

funding in rank order until the available 

funds are no longer sufficient to fund an 

eligible application. Only timely 

applications that meet the eligibility and 

application requirements of this part 

and the NOFA will be accepted. These 

applications will then be awarded 

points and ranked based on the criteria 

in the NOFA. The criteria may include 

any or all of the following: 

(1) Will serve areas with special 

needs, such as state designated targeted 

counties or tribal lands, colonias, or EZ/ 

EC/REAP areas; 

(2) Will serve states that have never 

received grants under this part; and 

(3) Meets other criteria that the 

Administrator designates, including 

those that encourage innovation, ensure 

geographic diversity, or respond to 

emergency situations. 

§ 3551.206 Terms of the predevelopment 

grant. 

(a) The maximum predevelopment 

grant amount is $15,000. 

(b) The predevelopment grant term 

will be 12 months. 

(c) The 12-month term will begin on 

the date of the first transfer of funds. 

(d) The grantee may request an 

amendment to the predevelopment 

grant agreement to extend the term, 

however, no additional funds will be 

provided. 

§ 3551.207 Predevelopment grant close 

out. 

(a) Twelve months after the date of 

the first transfer of funds, Rural 

Development will close out the 

predevelopment grant. The grantee may 

not incur any further costs to the grant 

after close out. 

(b) Within 30 days of grant close out, 

the grantee must submit a final 

accounting of the predevelopment grant 

funds to Rural Development. 

§§ 3551.208–3551.249 [Reserved] 

§ 3551.250 OMB Control number 

[Reserved] 

Dated: April 20, 2007. 

Russell T. Davis, 

Administrator, Housing and Community 

Facilities Program. 

[FR Doc. 07–2406 Filed 5–17–07; 8:45 am] 

BILLING CODE 3410–XV–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2007–27863; Directorate 

Identifier 2007–CE–037–AD] 

RIN 2120–AA64 

Airworthiness Directives; Pacific 

Aerospace Limited, Model 750XL 

Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Notice of proposed rulemaking 

(NPRM). 

SUMMARY: We propose to adopt a new 

airworthiness directive (AD) for the 

products listed above. This proposed 

AD results from mandatory continuing 

airworthiness information (MCAI) 

originated by an aviation authority of 

another country to identify and correct 

an unsafe condition on an aviation 

product. The MCAI describes the unsafe 

condition as: 

To prevent the rudder trim tab upper pivot 

hole in the rudder rib flogging out, which 

may lead to aerodynamic flutter and possible 

loss of aircraft control * * * 

The proposed AD would require actions 

that are intended to address the unsafe 

condition described in the MCAI. 

DATES: We must receive comments on 

this proposed AD by June 18, 2007. 

ADDRESSES: You may send comments by 

any of the following methods: 

• DOT Docket Web Site: Go to 

http://dms.dot.gov and follow the 

instructions for sending your comments 

electronically. 

• Fax: (202) 493–2251. 

• Mail: Docket Management Facility, 

U.S. Department of Transportation, 400 

Seventh Street, SW., Nassif Building, 

Room PL–401, Washington, DC 20590–

0001. 

• Hand Delivery: Room PL–401 on 

the plaza level of the Nassif Building, 

400 Seventh Street, SW., Washington, 

DC, between 9 a.m. and 5 p.m., Monday 

through Friday, except Federal holidays. 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http://dms.dot.gov; or in 

person at the Docket Management 

Facility between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. The AD docket contains this 

proposed AD, the regulatory evaluation, 

any comments received, and other 

information. The street address for the 

Docket Office (telephone (800) 647–

5227) is in the ADDRESSES section. 

Comments will be available in the AD 

docket shortly after receipt. 

FOR FURTHER INFORMATION CONTACT: Karl 

Schletzbaum, Aerospace Engineer, FAA, 

Small Airplane Directorate, 901 Locust, 

Room 301, Kansas City, Missouri 64106; 

telephone: (816) 329–4146; fax: (816) 

329–4090. 

SUPPLEMENTARY INFORMATION: 

Streamlined Issuance of AD 

The FAA is implementing a new 

process for streamlining the issuance of 

ADs related to MCAI. This streamlined 

process will allow us to adopt MCAI 

safety requirements in a more efficient 

manner and will reduce safety risks to 

the public. This process continues to 

follow all FAA AD issuance processes to 

meet legal, economic, Administrative 

Procedure Act, and Federal Register 

requirements. We also continue to meet 

our technical decision-making 

responsibilities to identify and correct 

unsafe conditions on U.S.-certificated 

products. 

This proposed AD references the 

MCAI and related service information 

that we considered in forming the 

engineering basis to correct the unsafe 

condition. The proposed AD contains 

text copied from the MCAI and for this 

reason might not follow our plain 

language principles. 

Comments Invited 

We invite you to send any written 

relevant data, views, or arguments about 

this proposed AD. Send your comments 

to an address listed under the 

ADDRESSES section. Include ‘‘Docket No. 

FAA–2007–27863; Directorate Identifier 

2007–CE–037–AD’’ at the beginning of 

your comments. We specifically invite 

comments on the overall regulatory, 

economic, environmental, and energy 

aspects of this proposed AD. We will 

consider all comments received by the 

closing date and may amend this 

proposed AD because of those 

comments. 

We will post all comments we 

receive, without change, to http:// 


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