This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

73245 

Vol. 88, No. 205 

Wednesday, October 25, 2023 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

7 CFR Part 3560 

[Docket No. RHS–23–MFH–0019] 

RIN 0575–AD29 

Changes Related to Insurance 

Requirements in Multi-Family Housing 

(MFH) Direct Loan and Grant Programs 

AGENCY: Rural Housing Service, 

Department of Agriculture (USDA). 

ACTION: Proposed rule. 

SUMMARY: The Rural Housing Service 

(RHS or the Agency), a Rural 

Development (RD) agency of the United 

States Department of Agriculture 

(USDA), proposes to amend its 

regulation to implement changes related 

to insurance requirements under the 

Multi-Family Housing (MFH) Direct 

Loan and Grant programs. The intent of 

this proposed rule is to align RD 

insurance coverage types, amounts, and 

deductibles with affordable housing 

industry standards to simplify the 

coverage amounts, deductible limits, 

and improve the customer experience 

with updated and understandable 

insurance requirements. 

DATES: Comments on the proposed rule 

must be received on or before December 

26, 2023. 

ADDRESSES: Comments may be 

submitted electronically by the Federal 

eRulemaking Portal: Go to https://

www.regulations.gov and, in the 

‘‘Search Field’’ box, labeled ‘‘Search for 

dockets and documents on agency 

action,’’ enter the following docket 

number: (RHS–23–MFH–0019) or RIN# 

0575–AD29. To submit or view public 

comments, click the ‘‘Search’’ button, 

then select the following document title: 

(Changes Related to Insurance 

Requirements in Multi-Family Housing 

(MFH) Direct Loan and Grant Programs) 

from the ‘‘Search Results,’’ and select 

the ‘‘Comment’’ button. Before inputting 

your comments, you may also review 

the ‘‘Commenter’s Checklist’’ (optional). 

Insert your comments under the 

‘‘Comment’’ title, click ‘‘Browse’’ to 

attach files (if available). Input your 

email address and select ‘‘Submit 

Comment.’’ Information on using 

Regulations.gov, including instructions 

for accessing documents, submitting 

comments, and viewing the docket after 

the close of the comment period, is 

available through the site’s ‘‘FAQ’’ link. 

Other Information: Additional 

information about RD and its programs 

is available on the internet at https://

www.rurdev.usda.gov/index.html. 

All comments will be available for 

public inspection online at the Federal 

eRulemaking Portal (https://

www.regulations.gov). 

FOR FURTHER INFORMATION CONTACT: 

Michael Resnik, Director, Multi-Family 

Housing Asset Management Division, 

Rural Housing Service, United States 

Department of Agriculture, 1400 

Independence Avenue SW, Washington, 

DC 20250–0782, Telephone: (202) 430– 

3114 (this is not a toll-free number), or 

email: Michael.Resnik@usda.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Rural Housing Service (RHS) 

offers a variety of programs to build or 

improve housing and essential 

community facilities in rural areas. RHS 

offers loans, grants, and loan guarantees 

for single and multifamily housing, 

childcare centers, fire and police 

stations, hospitals, libraries, nursing 

homes, schools, first responder vehicles 

and equipment, and housing for farm 

laborers. RHS also provides technical 

assistance loans and grants in 

partnership with non-profit 

organizations, Indian tribes, state and 

Federal government agencies, and local 

communities. 

The Title V of the Housing Act of 

1949 (Act) authorized USDA to make 

housing loans to farmers to enable them 

to provide habitable dwellings for 

themselves or their tenants, lessees, 

sharecroppers, and laborers. USDA then 

expanded opportunities in rural areas, 

making housing loans and grants to 

rural residents through the SingleFamily Housing (SFH) and Multi-Family 

Housing (MFH) Programs. 

RHS operates the MFH direct loan 

and grant programs by providing direct 

loans or grants to affordable multifamily rental housing for low income, 

elderly, disabled individuals and 

families, or domestic farm workers in 

eligible rural areas. The programs are 

covered by the 7 CFR part 3560, Direct 

Multi-Family Housing Loans and Grants 

and are: (1) Section 515, Rural Rental 

Housing loans, which finances multifamily units in rural areas; (2) Section 

514 and 516 Farm Labor Housing loans 

and grants, which finances farm labor 

housing; or (3) Section 521, Rental 

Assistance, which finances projectbased tenant rent subsidy. 

As required by the Agency under the 

7 CFR part 3560, borrowers are required 

to purchase and maintain property 

insurance on all buildings included as 

security for an Agency loan, to avoid a 

non-monetary loan default. Regulations 

require borrowers to provide fidelity 

coverage, liability insurance and various 

other insurance coverage to protect 

against losses or damages. 

II. Purpose of This Regulatory Action 

Currently, 7 CFR part 3560 consists of 

outdated insurance requirements. The 

coverage amounts and deductible limits 

were established in the interim rule (69 

FR 69031–69176) that was published 

November 26, 2004. The changes 

proposed by this regulatory action will 

update insurance coverage and 

deductible requirements to current 

dollar values. The agency intends to 

align RD insurance coverages and 

deductible limits with affordable 

housing industry standards. The intent 

of this proposed rule is to improve the 

customer experience with updated and 

understandable insurance requirements. 

The insurance premiums, including 

those for hazard/property insurance 

required by the Agency, are increasing 

due to changes in the insurance 

industry, such as the increasing of 

insurance rates in part due to increase 

catastrophic events. Our stakeholders 

will benefit from these proposed 

changes through lower insurance 

premiums and more flexibility in 

choices of coverage and deductibles. 

The current low deductible limits result 

in higher premiums. This proposed rule 

will allow higher deductible limits and 

will provide flexibility to the owner to 

select a deductible that can lower the 

premium costs. 

When a disaster has occurred and the 

coverage was less than the industry 

standard of 80% of replacement cost 

value, the Agency has seen the loss of 

needed multifamily housing properties. 

Due to insufficient coverage amounts, 


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the property was not able to be rebuilt 

and the communities in need of 

affordable housing have lost housing 

units. This proposed rule intends to 

assist stakeholders by providing the 

financial capacity to build-back needed 

affordable housing units. Our rural 

communities will benefit and be able to 

maintain affordable housing units. 

This proposed rule is expected to 

result in a stronger, more resilient 

portfolio of properties, improved 

oversight of critical areas and will 

reduce portfolio financial risk with 

more consistent coverage amounts and 

deductible limits. This proposed rule 

will create a more streamlined and 

positive customer experience with RHS 

MFH programs. 

III. Summary of Changes 

RHS proposes to amend 7 CFR 3560.4, 

3560.62, and 3560.105 to implement 

changes related to insurance 

requirements for the MFH Direct 

Housing Loans and Grants program. 

The proposed changes are highlighted 

as follows: 

7 CFR 3560, Subpart A 

(1) In § 3560.4(b), the Agency is 

removing the reference to 7 CFR part 

1806, subpart B—National Flood 

Insurance. The flood insurance 

requirement for the covered programs is 

required in § 3560.105. 

7 CFR 3560, Subpart B 

(2) In § 3560.62(d), the Agency is 

updating the current format to be more 

reader friendly and adding changes that 

would require Worker’s Compensation 

insurance and business income 

insurance. The Worker’s Compensation 

insurance requirement would 

implement current Agency policy. The 

business income insurance requirement 

would provide protection and financial 

relief to borrowers who suffer income 

loss due to damage or destruction at 

their rental property. 

7 CFR 3560, Subpart C 

(3) The Agency proposes to update 

the insurance coverages and deductible 

requirements for the MFH Direct Loan 

and Farm Labor Housing programs to 

current dollars. The Agency’s research 

for the proposed updates include a 

review of data from other federal 

housing agencies such as Housing and 

Urban Development (HUD) and Freddie 

Mac, coupled with state agencies and 

private sector affordable housing data. 

This data is used by the Agency as an 

indicator of industry standards for the 

insurance requirements. 

Adding Worker’s Compensation 

insurance and Business Income 

insurance requirements, would be 

consistent with housing industry 

standards. This change would also be 

consistent with the proposed change for 

7 CFR 3560.62(d). 

In § 3560.105, the Agency is making 

the following changes: 

(i) Update language in paragraph 

(b)(1) to state that insurance is required, 

on or prior to loan or grant closing 

rather than prior to loan approval. Also, 

update language to clarify when 

insurance is required if there is interim 

financing or the Agency is providing 

multiple loan advances. 

(ii) Update paragraph (b)(4) to state 

that the Agency must be named as loss 

co-payee or mortgagee, regardless of lien 

position, which provides consistency 

with Agency subordination agreement 

documents. 

(iii) Update paragraph (c)(4) to state 

that insurance is required on or prior to 

loan or grant closing rather than prior to 

loan approval. This is consistent with 

the proposed change to § 3560.105(b)(1). 

(iv) Include windstorm coverage in 

the general types of coverage as noted in 

hazard insurance in paragraph (f)(1)(i). 

And add a caveat to (f)(2)(i) that 

Windstorm Coverage is an other type of 

insurance the Agency may require when 

it is specifically excluded from the AllRisk policy. This is consistent with 

current hazard (or property) insurance 

industry standard. 

(v) Update paragraph (f)(1)(iii) to 

include the amount of coverage 

requirement to provide consistency with 

current Agency policy. 

(vi) Add paragraph (f)(1)(v) to include 

business income loss insurance in the 

list of minimum property insurance that 

borrowers must acquire. This change is 

consistent with the proposed change for 

7 CFR part 3560.62(d). 

(vii) Update paragraph (f)(3) from a 

depreciated replacement value or 

unpaid loan balance, to a ‘‘not less than 

a percentage of insurable replacement 

cost value,’’ which is a percentage that 

is consistent with affordable housing 

industry standards for the minimum 

property insurance coverage. 

(viii) Remove paragraph (f)(3)(ii) 

because its intent is duplicative of 

paragraph (f)(3)(i). And paragraph 

(f)(3)(iii) will be redesignated to the new 

paragraph (f)(3)(ii) and revise the 

minimum flood insurance coverage to 

the lesser of, not less than a percentage 

of insurable replacement cost value, or 

maximum amount of insurance 

available under the National Flood 

Insurance Act, which is consistent with 

affordable housing industry standards. 

(ix) Update the language in paragraph 

(f)(4) to consolidate the relevant content 

of this paragraph and remove the subbullet content that references 

depreciated replacement value which is 

no longer relevant. 

(x) Update the language in paragraph 

(f)(7) by adding an additional option for 

insurance settlement claims to be placed 

in an other supervised account. 

(xi) Update the language in 

paragraph(f)(9)(i)(A) and (B) and adding 

a paragraph (f)(9)(i)(C) to the hazard/ 

property insurance deductible limits to 

a ‘‘not to exceed’’ amount that is based 

on the coverage amount, instead of the 

current deductible calculation formula. 

The current Agency limitations on the 

deductible limit contributes to rising 

premium costs for the project. This 

change will allow for larger deductible 

limits which in turn, will make the 

project’s insurance premiums more 

affordable. 

(xii) Update the language in paragraph 

(f)(9)(iii) regarding the deductible 

amount of windstorm coverage to have 

the same deductible limits as hazard/ 

property insurance, which will create 

consistency among deductibles and in 

turn, makes it easier for the borrower to 

be in compliance with insurance 

requirements. 

(xiii) Update the language in 

paragraph (f)(9)(iv) regarding the 

earthquake deductible limit to allow 

deductibles that do not exceed 20 

percent of the coverage amount. This 

will increase the deductible limit and 

align the deductible with affordable 

housing industry standards. 

(xiv) Add new paragraph (f)(11) to 

include policy requirements for 

cancellation, standard form of NonContribution Mortgage Clause, and loss 

payee. 

(xv) Revise language in paragraph 

(h)(2)(ii) by removing the fidelity 

coverage deductible chart and replacing 

it with a new deductible limit based on 

a ‘‘not to exceed amount.’’ Also, revising 

the fidelity coverage amount to a 

specific percentage of proposed annual 

rental income with a minimum limit, 

instead of the Agency’s current policy of 

a formula based calculation. This 

change will simplify the coverage 

calcuation, align the coverage amount 

and deductible limit with affordable 

housing industry standard, create 

consistency among insurance 

deductibles, and in turn make it easier 

for the borrower to be in compliance 

with insurance requirements. 

(xvi) Update to the definition of 

worker’s compensation insurance based 

on industry standards will be added and 

becomes paragraph (i). The current 

paragraph (i) (Taxes) will become 

paragraph (j). 


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IV. Regulatory Information 

Statutory Authority 

Title V the Housing Act of 1949 (42 

U.S.C. 1480 et. seq.), as amended, 

authorizes the Secretary of the 

Department of Agriculture to 

promulgate rules and regulations as 

deemed necessary to carry out the 

purpose of that title, as implemented 

under 7 CFR part 3560. 

Executive Order 12372, 

Intergovernmental Review of Federal 

Programs 

These loans and grants are subject to 

the provisions of Executive Order 

12372, which requires 

intergovernmental consultation with 

state and local officials. RHS conducts 

intergovernmental consultations for 

each loan and grants in accordance with 

2 CFR part 415, subpart C. 

Executive Order 12866, Regulatory 

Planning and Review 

This proposed rule has been 

determined to be non-significant and, 

therefore, was not reviewed by the 

Office of Management and Budget 

(OMB) under Executive Order 12866. 

Executive Order 12988, Civil Justice 

Reform 

This proposed rule has been reviewed 

under Executive Order 12988. In 

accordance with this proposed rule: (1) 

Unless otherwise specifically provided, 

all state and local laws that conflict with 

this rulemaking will be preempted; (2) 

no retroactive effect will be given to this 

rulemaking except as specifically 

prescribed in the rulemaking; and (3) 

administrative proceedings of the 

National Appeals Division of the 

Department of Agriculture (7 CFR part 

11) must be exhausted before suing in 

court that challenges action taken under 

this rulemaking. 

Executive Order 13132, Federalism 

The policies contained in this 

proposed rule do not have any 

substantial direct effect on States, on the 

relationship between the National 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of Government. This proposed 

rule does not impose substantial direct 

compliance costs on State and local 

Governments; therefore, consultation 

with States is not required. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

This Executive order imposes 

requirements on RHS in the 

development of regulatory policies that 

have tribal implications or preempt 

tribal laws. RHS has determined that the 

proposed rule does not have a 

substantial direct effect on one or more 

Indian tribe(s) or on either the 

relationship or the distribution of 

powers and responsibilities between the 

Federal Government and Indian tribes. 

Thus, this proposed rule is not subject 

to the requirements of Executive Order 

13175. If tribal leaders are interested in 

consulting with RHS on this 

rulemaking, they are encouraged to 

contact USDA’s Office of Tribal 

Relations or RD’s Tribal Coordinator at: 

AIAN@usda.gov to request such a 

consultation. 

National Environmental Policy Act 

This document has been reviewed in 

accordance with 7 CFR part 1970, 

subpart A, ‘‘Environmental Policies.’’ 

RHS determined that this action does 

not constitute a major Federal action 

significantly affecting the quality of the 

environment. In accordance with the 

National Environmental Policy Act of 

1969, Public Law 91–190, an 

Environmental Impact Statement is not 

required. 

Regulatory Flexibility Act 

This proposed rule has been reviewed 

with regards to the requirements of the 

Regulatory Flexibility Act (5 U.S.C. 

601–612). The undersigned has 

determined and certified by signature 

on this document that this proposed 

rule will not have a significant 

economic impact on a substantial 

number of small entities since this 

rulemaking action does not involve a 

new or expanded program nor does it 

require any more action on the part of 

a small business than required of a large 

entity. 

Unfunded Mandates Reform Act 

(UMRA) 

Title II of the UMRA, Public Law 104– 

4, establishes requirements for Federal 

agencies to assess the effects of their 

regulatory actions on state, local, and 

tribal governments and on the private 

sector. Under section 202 of the UMRA, 

Federal agencies generally must prepare 

a written statement, including 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 a 

Federal Agency to identify and consider 

a reasonable number of regulatory 

alternatives and adopt the least costly, 

most cost-effective, or least burdensome 

alternative that achieves the objectives 

of the rule. 

This proposed rule contains no 

Federal mandates (under the regulatory 

provisions of title II of the UMRA) for 

State, local, and tribal Governments or 

for the private sector. Therefore, this 

rulemaking is not subject to the 

requirements of sections 202 and 205 of 

the UMRA. 

Paperwork Reduction Act 

The information collection 

requirements contained in this 

regulation have been approved by OMB 

and have been assigned OMB control 

number 0575–0189. This proposed rule 

contains no new reporting and 

recordkeeping requirements that would 

require approval under the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

chapter 35). 

E-Government Act Compliance 

RHS is committed to complying with 

the E-Government Act by promoting the 

use of the internet and other 

information technologies to provide 

increased opportunities for citizen 

access to government information, 

services, and other purposes. 

Civil Rights Impact Analysis 

Rural Development has reviewed this 

proposed rule in accordance with USDA 

Regulation 4300–4, Civil Rights Impact 

Analysis, to identify any major civil 

rights impacts the proposed rule might 

have on program participants on the 

basis of age, race, color, national origin, 

sex, or disability. After review and 

analysis of the proposed rule and 

available data, it has been determined 

that implementation of the rulemaking 

will not adversely or disproportionately 

impact very low, low- and moderateincome populations, minority 

populations, women, Indian tribes, or 

persons with disability by virtue of their 

race, color, national origin, sex, age, 

disability, or marital or familial status. 

No major civil rights impact is likely to 

result from this proposed rule. 

Assistance Listing 

The programs affected by this 

regulation is listed in the Assistance 

Listing Catalog (formerly Catalog of 

Federal Domestic Assistance) under 

numbers 10.405 and, 10.415. 

Non-Discrimination Statement 

In accordance with Federal civil 

rights laws and U.S. Department of 

Agriculture (USDA) civil rights 

regulations and policies, the USDA, its 

Mission Areas, agencies, staff offices, 

employees, and institutions 


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participating in or administering USDA 

programs are prohibited from 

discriminating based on race, color, 

national origin, religion, sex, gender 

identity (including gender expression), 

sexual orientation, disability, age, 

marital status, family/parental status, 

income derived from a public assistance 

program, political beliefs, or reprisal or 

retaliation for prior civil rights activity, 

in any program or activity conducted or 

funded by USDA (not all bases apply to 

all programs). Remedies and complaint 

filing deadlines vary by program or 

incident. 

Program information may be made 

available in languages other than 

English. Persons with disabilities who 

require alternative means of 

communication to obtain program 

information (e.g., Braille, large print, 

audiotape, American Sign Language) 

should contact the responsible Mission 

Area, agency, or staff office; or the 

Federal Relay Service at 711. 

To file a program discrimination 

complaint, a complainant should 

complete a Form AD–3027, USDA 

Program Discrimination Complaint 

Form, which can be obtained online at, 

www.usda.gov/sites/default/files/ 

documents/ad-3027.pdf from any USDA 

office, by calling (866) 632–9992, or by 

writing a letter addressed to USDA. The 

letter must contain the complainant’s 

name, address, telephone number, and a 

written description of the alleged 

discriminatory action in sufficient detail 

to inform the Assistant Secretary for 

Civil Rights (ASCR) about the nature 

and date of an alleged civil rights 

violation. The completed AD–3027 form 

or letter must be submitted to USDA by: 

from any USDA office, by calling (866) 

632–9992, or by writing a letter 

addressed to USDA. The letter must 

contain the complainant’s name, 

address, telephone number, and a 

written description of the alleged 

discriminatory action in sufficient detail 

to inform the Assistant Secretary for 

Civil Rights (ASCR) about the nature 

and date of an alleged civil rights 

violation. The completed AD–3027 form 

or letter must be submitted to USDA by: 

(1) Mail: U.S. Department of 

Agriculture, Office of the Assistant 

Secretary for Civil Rights, 1400 

Independence Avenue SW, Washington, 

DC 20250–9410; or 

(2) Fax: (833) 256–1665 or (202) 690– 

7442; or 

(3) Email: Program.Intake@usda.gov. 

USDA is an equal opportunity 

provider, employer, and lender. 

List of Subjects in 7 CFR Part 3560 

Accounting, Administrative practice 

and procedure, Aged, Conflict of 

interest, Government property 

management, Grant programs-housing 

and community development, 

Insurance, Loan programs-agriculture, 

Loan programs-housing and community 

development, Low- and moderateincome housing, Migrant labor, 

Mortgages, Nonprofit organizations, 

Public housing, Rent subsidies, 

Reporting and recordkeeping 

requirements, Rural areas. 

For the reasons set forth in the 

preamble, RHS proposes to amend 7 

CFR part 3560 as follows: 

PART 3560—DIRECT MULT-FAMILY 

HOUSING LOANS AND GRANTS 

■ 1. The authority citation for part 3560 

continues read as follows: 

Authority: 42 U.S.C. 1480. 

■ 2. Amend § 3560.4 by revising 

paragraph (b) to read as follows: 

§ 3560.4 Compliance with other Federal 

requirements. 

* * * * * 

(b) National flood insurance. The 

National Flood Insurance Act of 1968, 

as amended by the Flood Disaster 

Protection Act of 1973; and the National 

Flood Insurance Reform Act of 1994. 

* * * * * 

■ 3. Amend § 3560.62 by revising 

paragraph (d) to read as follows: 

§ 3560.62 Technical, legal, insurance, and 

other services. 

* * * * * 

(d) Insurance. Applicants must meet 

the property, liability, flood, Worker’s 

Compensation, business income loss, 

and fidelity insurance requirements in 

§ 3560.105. 

(1) Applicants must have property 

and liability coverage at loan closing as 

well as flood insurance, if needed. 

(2) Fidelity coverage must be in force 

as soon as there are assets within the 

organization, and it must be obtained 

before any loan funds or interim 

financing funds are made available to 

the borrower. 

(3) If the property has permanent and/ 

or part-time employees assigned directly 

to the project, Worker’s Compensation, 

also known as employer’s liability 

coverage, must be obtained before 

interim financing funds are made 

available to the borrower, or prior to 

loan or grant closing, whichever occurs 

first. 

(4) Upon completion of construction 

or rehabilitation of the project, or any 

portion thereof that allows for 

occupancy, the Owner shall obtain 

business income loss insurance. 

* * * * * 

■ 4. Amend § 3560.105 by: 

■ a. Revising paragraphs (b)(1) and (4), 

(c)(4), and (f)(1)(i) and (iii); 

■ b. Adding paragraph (f)(1)(v); 

■ c. Revising paragraphs (f)(2)(i), (f)(3) 

introductory text, and (f)(3)(ii); 

■ d. Removing paragraph (f)(3)(iii); 

■ e. Revising paragraphs (f)(4), (f)(7) 

introductory text, and (f)(9)(i), (iii), and 

(iv); 

■ f. Adding paragraph (f)(11); 

■ g. Revising paragraph (h)(2)(ii); 

■ h. Redesignating paragraph (i) as 

paragraph (j); and 

■ i. Adding a new paragraph (j). 

The revisions and additions read as 

follows: 

§ 3560.105 Insurance and taxes. 

* * * * * 

(b) * * * 

(1) On or prior to the date of loan or 

grant closing, applicants must provide 

documentary evidence that insurance 

requirements have been met. The 

borrower must maintain insurance in 

accordance with requirements of their 

loan or grant documents and this 

section until the loan is repaid or the 

terms of the grant expire. If interim 

financing is obtained or the Agency 

provides for multiple advances for 

construction or rehabilitation, evidence 

of builder’s risk insurance is required 

prior to the start of construction or 

rehabilitation. 

* * * * * 

(4) The Agency must be named as loss 

co-payee or mortgagee as it appears on 

all property insurance policies. 

* * * * * 

(c) * * * 

(4) If the best insurance policy a 

borrower can obtain at the time the 

borrower receives the loan or grant 

contains a loss deductible clause greater 

than that allowed by paragraph (f)(9) of 

this section, the insurance policy and an 

explanation of the reasons why more 

adequate insurance is not available must 

be submitted to the Agency for approval 

prior to the date of loan or grant closing. 

* * * * * 

(f) * * * 

(1) * * * 

(i) Hazard insurance. A policy which 

generally covers loss or damage by fire, 

smoke, lightning, windstorms, hail, 

explosion, riot, civil commotion, 

aircraft, and vehicles. These policies 

may also be known as ‘‘Property 

Insurance,’’ ‘‘Fire and Extended 

Coverage,’’ ‘‘Homeowners,’’ ‘‘All 

Physical Loss,’’ or ‘‘Broad Form’’ 

policies. 

* * * * * 

(iii) Builder’s risk insurance. A policy 

that insures 100 percent of the estimated 


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cost value of the project under 

construction or rehabilitation, or 

applicable State required coverage 

limits, if more stringent. 

* * * * * 

(v) Business income loss. Business 

income or rent loss coverage provides 

coverage for the loss of rental income 

incurred due to a property loss during 

a 12-month period. 

(2) * * * 

(i) Windstorm Coverage if specifically 

excluded from the All-Risk policy. 

* * * * * 

(3) For property insurance, the 

minimum coverage amount must equal 

the ‘‘Total Estimated Reproduction Cost 

of New Improvements,’’ as reflected in 

the housing project’s most recent 

appraisal. At a minimum, property 

insurance coverage must not be less 

than 80 percent of the insurable 

replacement cost value, unless such 

coverage is financially unfeasible for the 

housing project. 

* * * * * 

(ii) When required by paragraph (f)(1) 

of this section, the coverage amount for 

flood insurance must not be less than 80 

percent of the insurable replacement 

value, or the maximum amount of 

insurance available with respect to the 

project under the National Flood 

Insurance Act, whichever is less. The 

policy shall show the Owner as insured 

and shall show loss, if any, payable to 

the United States of America acting 

through the RHS Service or its successor 

agency. 

(4) Except for flood insurance, 

property insurance is not required if the 

housing project is in a condition which 

the Agency determines makes insurance 

coverage not economical. 

* * * * * 

(7) When the Agency is in the first 

lien position and an insurance 

settlement represents a satisfactory 

adjustment of a loss, the insurance 

settlement will be deposited in the 

housing project’s general operating 

account unless the settlement exceeds 

$5,000. If the settlement exceeds $5,000, 

the funds will be placed in the reserve 

account or other supervised account for 

the housing project. 

* * * * * 

(9) * * * 

(i) Hazard/property insurance. * * * 

(A) For a project with less than or 

equal to $1,000,000 of coverage, no 

deductible greater than $10,000 per 

occurrence. 

(B) For a project with more than 

$1,000,000 but less than or equal to 

$2,000,000 of coverage, no deductible 

greater than $25,000 per occurrence. 

(C) For a project with more than 

$2,000,000 of coverage, no deductible 

greater than $50,000 per occurrence. 

* * * * * 

(iii) Windstorm coverage. When 

windstorm coverage is excluded from 

the ‘‘All Risk’’ policy, the deductible is 

as identified in (f)(9)(i) of this section. 

(iv) Earthquake coverage. If the 

borrower obtains earthquake coverage, 

the Agency is to be named as a loss 

payee. The deductible should be no 

more than 20 percent of the coverage 

amount. 

* * * * * 

(11) Each policy shall meet the 

following requirements: 

(i) Policy may not be cancelled or 

modified without at least thirty (30) 

days prior written notice to the Agency 

(the clause shall not state that the 

insurer will ‘‘endeavor’’ to send such 

notice or that no liability attaches to the 

insurer for failure to send such notice.) 

(ii) Policy shall provide that any loss 

otherwise payable thereunder shall be 

payable notwithstanding any act or 

negligence of Borrower which might, 

absent such agreement, result in a 

forfeiture of all or part of such insurance 

payment. 

(iii) Such insurance policies shall 

name the Owner as the Insured and 

shall carry a standard form of NonContribution Mortgage Clause showing 

loss or damage, if any, payable to the 

Owner and the ‘‘United States of 

America acting through the Rural 

Housing Service or its successor 

agency,’’ as its interest may appear. 

* * * * * 

(h) * * * 

(2) * * * 

(ii) Fidelity coverage amount and 

deductible as follows: 

(A) Coverage amount. An amount at 

least equal to 25 percent of the 

operational cash sources per the 

project’s proposed annual budget or 

$50,000 whichever is greater, unless 

greater amounts are required by the 

Owner. Where the operational cash 

sources for a project are substantially 

below the minimum $50,000 bonding 

requirement for operation, with Agency 

approval, the bond may be reduced to 

an amount sufficient to cover at least 25 

percent of the operational cash sources. 

(B) Deductible. No greater than 

$15,000 per occurrence. 

* * * * * 

(i) Workers’ compensation insurance. 

This insurance coverage, which may 

also be known as employer’s liability 

coverage, provides benefits to 

employees who suffer work-related 

injuries or illnesses. Workers’ 

compensation insurance is required for 

permanent and part-time staff assigned 

directly to the project. 

(j) Taxes. The borrower is responsible 

for paying all taxes and assessments on 

a housing project before they become 

delinquent. 

* * * * * 

Yvonne Hsu, 

Acting Administrator, Rural Housing Service. 

[FR Doc. 2023–23344 Filed 10–24–23; 8:45 am] 

BILLING CODE 3410–XV–P 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 745 

[NCUA–2023–0082] 

RIN 3133–AF53 

Simplification of Share Insurance 

Rules 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Proposed rule. 

SUMMARY: The NCUA Board (Board) is 

seeking comment on proposed 

amendments to its regulations governing 

share insurance coverage. The proposed 

rule would address the following items: 

simplify the share insurance regulations 

by establishing a ‘‘trust accounts’’ 

category that would provide for 

coverage of funds of both revocable 

trusts and irrevocable trusts deposited at 

federally insured credit unions (FICUs); 

provide consistent share insurance 

treatment for all mortgage servicing 

account balances held to satisfy 

principal and interest obligations to a 

lender; and provide more flexibility for 

the NCUA to consider various records in 

determining share insurance coverage in 

liquidations. 

DATES: Comments must be received on 

or before December 26, 2023. 

ADDRESSES: You may submit written 

comments by any of the following 

methods (Please send comments by one 

method only): 

• Federal eRulemaking Portal: 

https://www.regulations.gov. The docket 

number for this proposed rule is NCUA– 

2023–0082. Follow the instructions for 

submitting comments. 

• Mail: Address to Melane ConyersAusbrooks, Secretary of the Board, 

National Credit Union Administration, 

1775 Duke Street, Alexandria, Virginia 

22314. 

• Hand Delivery/Courier: Same as 

mail address. 

Public inspection: All public 

comments are available on the Federal 

eRulemaking Portal at https:// 


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