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

80641 

Vol. 88, No. 222 

Monday, November 20, 2023 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

7 CFR Part 3550 

[Docket No. RHS–23–SFH–0016] 

RIN 0575–AD33 

Streamlining and Improvement of 

Single Family Housing Direct 

Programs 

AGENCY: Rural Housing Service, 

Department of Agriculture (USDA). 

ACTION: Proposed rule. 

SUMMARY: The Rural Housing Service 

(RHS or the Agency), an agency in the 

Rural Development (RD) mission area of 

the United States Department of 

Agriculture (USDA), proposes to amend 

the current regulation for the following 

Single Family Housing (SFH) Direct 

Programs: Section 502 Direct Loan 

Program and the Section 504 Loan and 

Grant Program. The Agency also intends 

to update the Section 306C Loan and 

Grant Programs which is a program 

administered under the Rural Utilities 

Service (RUS), and where RHS is 

designated to make grants to eligible 

individuals. The intent of this proposed 

rule is to reduce the regulatory burdens 

on applicants, borrowers, and partners 

by enhancing program delivery, 

expanding customer service, promoting 

consistency between the direct and 

guaranteed SFH loan programs where 

feasible and aligning the programs with 

current housing market conditions and 

mortgage loan practices. 

DATES: Comments on the proposed rule 

must be received on or before January 

19, 2024. 

ADDRESSES: Comments may be 

submitted electronically by the Federal 

eRulemaking Portal: Go to https://

www.regulations.gov and, in the 

‘‘Search for dockets and documents on 

agency actions’’ box, enter the following 

docket number: (RHS–23–SFH–0016) or 

RIN# 0575–AD33. To submit or view 

public comments, click the ‘‘Search’’ 

button, select the ‘‘Documents’’ tab, 

then select the following document title: 

‘‘Streamlining and Improvement of 

Single Family Housing Direct 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 at the following website: 

https://www.rurdev.usda.gov. 

All comments will be available for 

public inspection online at the Federal 

eRulemaking Portal (https://

www.regulations.gov). 

FOR FURTHER INFORMATION CONTACT: 

Sonya Evans, Finance and Loan 

Analyst, SFH Direct Loan Division, 

Rural Housing Service, Rural 

Development, United States Department 

of Agriculture, 1400 Independence 

Avenue SW, Washington, DC 20250, 

Phone: (423) 268–4333, Email: 

Sonya.Evans@usda.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The 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. 

Well built, affordable housing is 

essential to the vitality of communities 

in rural America. The Agency’s SFH 

programs give families and individuals 

the opportunity to buy, build, or repair 

affordable homes located in rural 

America. Eligibility for these loans, loan 

guarantees, and grants is based on 

income and varies according to the 

average median income for each area. 

The RHS administers the following SFH 

Programs: 

Section 502 Direct Loan Program is 

implemented under 7 CFR part 3550 

and authorized by section 502 of the 

Housing Act of 1949, as amended, (42 

U.S.C. 1472). The purpose of the 

program is to assist low- and very lowincome applicants who currently do not 

own adequate housing and cannot 

obtain other credit, the opportunity to 

acquire, build, rehabilitate, improve, or 

relocate dwellings in rural areas. 

Section 502 Guaranteed Loan Program 

is implemented under 7 CFR part 3555 

and is authorized by section 502 of the 

Housing Act of 1949, as amended, (42 

U.S.C. 1472). The purpose of the 

program is to assist low- and moderateincome applicants the opportunity to 

acquire, build, rehabilitate, improve, or 

relocate dwellings in rural areas. 

Section 504 Loan and Grant Program 

is implemented under 7 CFR part 3550 

and is authorized by section 504 of the 

Housing Act of 1949, as amended, (42 

U.S.C. 1474). This program offers loans 

to very low-income homeowners who 

cannot obtain other credit to repair or 

rehabilitate their properties. The Section 

504 program also offers grants to 

homeowners aged 62 or older who 

cannot obtain a loan to correct health 

and safety hazards or to make the unit 

accessible to household members with 

disabilities. 

Another RD mission area agency, the 

RUS, administers the Section 306C Loan 

and Grant Program which is authorized 

by section 306C of the Consolidated 

Farm and Rural Development Act, as 

amended, (7 U.S.C. 1926c), and 

implemented under 7 CFR part 1777 

and 7 CFR part 3550. Under subpart C 

of 7 CFR part 3550, RHS makes 306C 

Water and Waste Disposal (WWD) 

Grants to very low-income individuals 

(i.e., homeowners) in designated 

colonias who cannot obtain other credit 

to facilitate access to community water 

and waste disposal systems. Grant funds 

may be used only to pay for costs 

related to connection fees and related 

costs to connect to a community or 

central water supply or waste system 

which may include installation of 

necessary plumbing and related fixtures, 

and construction or partitioning of a 

bathroom within dwellings lacking such 

facilities. 

The SFH program undertook a 

systematic review of its regulations at 7 


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80642 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Proposed Rules 

CFR part 3550 and procedures currently 

in place to administer its programs. It 

was determined there was a need to 

provide additional clarity and to 

provide consistency between 

interdepartmental regulations. The 

changes also address the need for 

program improvements such as 

revisions related to down payment 

requirements within the Direct 

Programs. 

II. Discussion of the Proposed Rule 

This proposed rulemaking is part of 

the Agency’s efforts to: (1) align, where 

appropriate, the direct and guaranteed 

SFH loan programs, and (2) address 

current housing market conditions and 

mortgage loan practices through 

program improvements. RHS’s intention 

is to streamline its program procedures 

and revise regulations by removing 

outdated regulations and simplifying 

practices and procedures for borrowers 

and applicants. 

As the Agency reviewed its 

regulations at 7 CFR part 3550 and the 

procedures that are currently in place 

for administering the Section 502 Direct 

Loan Program and the Section 504 Loan 

and Grant Program, which includes a 

subpart for application of the 306C 

WWD Grant, it was discovered that 

there is currently no express prohibition 

against lending in lava zones under 

these programs. The Section 502 

Guaranteed Loan Program regulation, 

does, however, expressly prohibit 

lending in lava zones. The proposed 

change will align the aforementioned 

programs on this issue and minimize 

confusion for applicants and partners in 

the affected areas. The proposed 

changes will also clarify the terms for 

new dwellings and new construction for 

applicants and partners. Additionally, 

the proposed changes will assist with 

addressing the lack of affordable 

housing stock by providing flexibility 

for applicants and partners purchasing 

Real Estate Owned (REO) properties or 

through non-program loan terms. 

The following information provides 

further details of the proposed rule 

changes: 

1. Refine the definition of ‘‘New 

Dwelling or unit’’ in 7 CFR 3550.10 

Definitions; add a definition for New 

Construction to alleviate confusion in 

the terminology; and corresponding and 

additional changes to 7 CFR 

3550.53(d)(1)(ii), 7 CFR 3550.63(b)(1), 7 

CFR 3550.63(b)(2), and 7 CFR 

3550.102(e)(1), under which the Section 

502 Direct Loan and Section 504 Loan 

and Grant programs are implemented: 

Section 502 Direct Loans may be used 

by loan recipients to purchase a 

building site and construct new housing 

(‘new construction’) or purchase newly 

constructed housing (‘new dwelling’). 

The builder funds a new dwelling. The 

Agency funds a new construction. 

While the terminology is similar, the 

distinction is important because 

eligibility for the Compensation for 

Construction Defects Program (Section 

509) is based on the construction 

timing, who funds the construction, and 

the applicant’s program eligibility. The 

factors that determine the applicant’s 

eligibility for the Compensation for 

Construction Defects Program can be 

found at 7 CFR 1924.265 and at the 

website: https://www.ecfr.gov/current/ 

title-7/subtitle-B/chapter-XVIII/ 

subchapter-H/part-1924/subpart-F/ 

section-1924.265. 

The Agency considers funding for a 

new construction whether or not the 

construction has started at the time the 

purchase agreement was signed. This 

includes instances where the builder 

will retain ownership of the lot during 

construction, or the construction has 

commenced prior to closing. In these 

instances, the funded construction can 

only be closed after construction of the 

housing is completed. Alternatively, if 

the construction has not started and the 

Agency will provide the construction 

financing, the closing will be prior to 

construction. As noted, closing timing is 

based on when construction occurs and 

who funds the construction. 

The Agency proposes to clarify terms 

by adding the language ‘‘prior to loan 

closing’’ to the phrase ‘‘is to be 

constructed’’ in the definition of ‘‘new 

dwelling or unit’’ for definitions found 

at 7 CFR 3550.10. The Agency proposes 

that this addition will provide 

clarification of the timing of 

construction periods that differentiate a 

new dwelling and a new construction. 

Furthermore, adding the language ‘‘at 

the time of loan approval’’ to the phrase 

‘‘less than 1 year old’’ clarifies the 

parameters of this definition. 

The addition of the term and 

definition for ‘New construction’ in 7 

CFR 3550.10 is proposed to separate the 

terms and provide clarity regarding the 

varying construction quality documents 

required for new dwellings and new 

construction. Furthermore, this 

amendment proposes to support a 

corresponding update in 7 CFR 

3550.63(b)(1). 

Removal of 7 CFR 3550.63(b)(2) will 

streamline market value limitations, 

thereby permitting a corresponding 

change to the program handbook to 

allow for a whole house inspection to 

serve as adequate documentation of 

construction quality for a new dwelling. 

2. Amend 7 CFR 3550.52(d)(6) to 

remove reference to State Director and 

replace with requirement for Agency 

approval when granting allowable 

exceptions for non-certified loan 

packaging bodies, revise language 

regarding application submission 

requirements, and allow certified 

packaging fees to be added to the loan 

in excess of the area loan limit and 

appraised value of the house, which is 

implemented under the Section 502 

Direct Loan Program: 

The revision will clarify that Form 

410–4, Uniform Residential Loan 

Application, is part of the application 

but does not constitute a full application 

package. 

Lastly, a revision is needed to allow 

packaging fees resulting from the 

certified loan application packaging 

process outlined in 7 CFR 3550.75 to be 

added to the Section 502 Direct loan 

amount in excess of the area loan limit 

and appraised value of the house. This 

cost is similar to other allowable excess 

costs for critical loan-related services or 

actions, which include the appraisal fee, 

tax service fee, homeownership 

education fee, and initial contribution to 

the escrow account. Certified 

application packagers provide an 

integral service that allows many 

applicants to access the Direct Program 

who would otherwise not be aware of it, 

or who lack the resources to complete 

the application process on their own. 

Well-developed application packages 

submitted through the certified process 

help to reduce Agency processing time 

and provide the applicant with a higher 

priority for processing. This change will 

reflect the value the service (and its 

cost) provides the applicant. 

3. Add language to 7 CFR 3550.56(b) 

and 7 CFR 3550.105 to prohibit lending 

in U.S. Geological Survey (USGS) LavaFlow Hazard Zones 1 and 2, which will 

provide interdepartmental alignment 

between 7 CFR 3550, which implements 

the Section 502 Direct Loan Program, 

and the Section 504 Loan and Grant 

Program, including the subpart for 

application of the 306C WWD Grant, 

and current regulations in 7 CFR part 

3555 for the Section 502 Guaranteed 

Loan Program: 

A home located in the lava-flow 

hazard zones 1 and 2 represents a 

significantly hazardous risk. 7 CFR 

3550.10 defines a hazard as, ‘‘a 

condition of the property that 

jeopardizes the health or safety of the 

occupants or members of the 

community, that does not make it unfit 

for habitation (See also the definition of 

major hazard in this section.).’’ 

According to 7 CFR 3550.2, the 

purpose of the direct RHS SFH loan 

programs (the Direct Program) is to 

provide low- and very low-income 


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Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Proposed Rules 80643 

people that live in rural areas with an 

opportunity to own adequate, but 

modest, decent, safe, and sanitary 

dwellings and related facilities. 

Currently, the Direct Program does 

not have specific guidance related to 

volcanic/lava hazards. The Agency 

intends to add language to 7 CFR 

3550.56(b) and 7 CFR 3550.105 to 

prohibit lending in U.S. Geological 

Survey (USGS) Lava-Flow Hazard Zones 

1 and 2. Adding this language to the 

regulation will align with the 

guaranteed loan program and others in 

the industry in protecting borrowers. 

4. Amend 7 CFR 3550.64 to increase 

net family asset limits before 

consideration of assets toward a down 

payment requirement and to remove the 

down payment requirement when the 

borrower is purchasing a REO property 

from the Agency, which is implemented 

under the Section 502 Direct Loan 

Program: 

The Agency published a direct final 

rule in the Federal Register on August 

22, 2008, revising the minimum 

insurance deductible amounts, 

removing specific dollar limits with 

regards to insurance deductible clauses, 

clarifying the amount of required 

dwelling coverage, and revising the 

applicant net asset limitation. An 

adjustment to asset limits for nonmetropolitan median household 

income, set at $48,201, has not been 

updated since 2008 (73 FR 49593). Nonmetropolitan median household income 

for 2022 has increased to $71,300. With 

the median household increase, there 

has also been a 37.6% cumulative rate 

of inflation from the years 2008 to 2022, 

thus increasing the cost of living and 

goods. Increasing asset limits will allow 

fixed income households the ability to 

hold onto assets for emergency 

purposes, rather than relying on credit 

in these circumstances, and for elderly 

households to hold onto funds 

potentially set-aside for final expenses. 

The Agency anticipates that removing 

the down payment requirement when 

the borrower is purchasing a REO 

property will: (1) increase borrower 

interest in purchasing REO properties, 

(2) reduce holding times and costs 

incurred by the Agency and 

depreciation of the properties; and (3) 

promote affordable housing in rural 

communities. 

5. Amend 7 CFR 3550.67(b)(1) to 

clarify that amounts included for 

repairs must be part of an initial 

purchase or finance loan to qualify for 

a 38-year term, which is implemented 

under the Section 502 Direct Loan 

Program: 

The intention of this revision is to 

clarify that amounts included for repairs 

must be part of an initial purchase or 

finance loan to qualify for a 38-year 

term; whereas the current language 

could be read to allow a 38-year term for 

initial repair-only loan through the 

Section 502 Direct Loan Program which 

is not consistent with Agency policy. 

6. Remove language in 7 CFR 

3550.74(c)(2) and renumber the list 

accordingly, which is implemented 

under the Section 502 Direct Loan 

Program: 

The Agency proposes the removal of 

the down payment requirement for nonprogram loans. This proposed removal 

would eliminate a burdensome 

requirement for borrowers and 

applicants who request to purchase 

through non-program loan terms and for 

whom a non-program loan has been 

found to be in the Government’s best 

interests. This removal aligns with 

another revision in this proposed rule to 

remove down payment requirements for 

the purchase of REOs in 7 CFR 3550.64. 

7. Remove language in 7 CFR 

3550.75(b)(1)(iv) and (b)(2)(v), that 

states ‘‘if determined necessary by a 

State Director’’ which is contradictory to 

other instructions for certified 

packaging requirements, and is 

implemented under the Section 502 

Direct Loan Program: 

Currently, it is unclear in 7 CFR 

3550.75(b)(1)(iv) and (b)(2)(v) what 

authority a State Director may or may 

not have with regard to waiving the 

requirement that a certified packager 

must use an intermediary. There is 

guidance that addresses an opt-out 

option that State Directors can grant for 

certified loan packagers to separate from 

an intermediary, but it also outlines the 

requirements that a certified packager 

must meet in order to be granted this 

consideration. The removal of ‘‘if 

determined necessary by a State 

Director’’ will avoid any 

misunderstanding that a State Director 

can automatically waive all 

requirements for a certified packager to 

use an intermediary with a revision to 

instead address the allowance for the 

Agency to allow waivers when 

applicable. 

8. Amend 7 CFR 3550.103(e) to 

increase net family household assets for 

elderly families and non-elderly families 

before consideration of funds toward 

reduction of requested assistance, which 

is implemented under the Section 504 

Loan and Grant Program and includes 

a subpart for application of the 306C 

WWD Grant: 

An adjustment to asset limits has not 

been made since the Agency published 

a direct final rule in 2008 (see, 73 FR 

49593 at the website: https://

www.federalregister.gov/documents/ 

2008/08/22/E8-19350/direct-singlefamily-housing-loans-and-grants). In 

2008, the non-metropolitan median 

household income was at $48,201. Nonmetropolitan median household income 

for 2022 increased to $71,300. With this 

median household income increase, 

there has also been a 37.6% cumulative 

rate of inflation from 2008 through 

2022, thus increasing the cost of living 

and goods. Increasing asset limits will 

allow fixed income households the 

ability to maintain assets for emergency 

purposes, rather than relying on credit 

in these circumstances. This change will 

also align with the proposed changes to 

7 CFR 3550.64 regarding excess assets 

considered toward down payment. The 

Agency proposes that amending 7 CFR 

3550.103(e) to increase net family 

household assets for elderly families 

and non-elderly families before 

consideration of funds toward reduction 

of requested assistance will increase the 

number of eligible applicants. 

9. Remove the subdividable lot 

restrictions in 7 CFR 3550.105(b), which 

is implemented under the Section 504 

Loan and Grant Program and includes 

a subpart for application of the Section 

306C WWD Grant: 

The Agency has been conducting a 

pilot program since Fiscal Year 2019 

and has found that the removal of the 

requirement which restricts 

subdividable lots in 7 CFR 3550.105(b) 

held no risk for the Agency. The Agency 

concluded that this prohibition is 

restrictive for the Section 504 program 

considering ownership is previously 

established at the time of application. 

This restriction is a barrier to very lowincome rural homeowners in need of 

repairs. The site must still be 

determined modest for the area and 

cannot be used for income producing 

purposes as currently defined at 7 CFR 

3550.10 and 7 CFR 3550.106(a). If this 

restriction is not removed, modest 

homes that are typical for the area will 

not be eligible for necessary repair 

financing. 

10. Amend 7 CFR 3550.108(a) to 

include the tax service fee as an 

allowable loan cost exceeding security 

value, which is implemented under the 

Section 504 Loan and Grant Program 

which includes a subpart for 

application of the 306C WWD Grant: 

The Agency believes that the 

inclusion of the tax service fee as an 

allowable excess cost is practical for 504 

direct loans that meet the requirement 

to contribute to an escrow account for 

taxes and insurance, which also 

activates the requirement of tax service 

fee payment at closing. The Agency 

proposes that amending 7 CFR 

3550.108(a) to include the tax service 


ddrumheller on DSK120RN23PROD with PROPOSALS1
80644 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Proposed Rules 

fee as an allowable loan cost exceeding 

security value will also align with 

applicable loan costs which may exceed 

security value as designated in 7 CFR 

3550.59(a)(2)(i) for the 502 Direct 

Program. 

11. Amend 7 CFR 3550.111, to revise 

the threshold for requiring an appraisal 

based on total Section 504 

indebtedness, which is implemented 

under the Section 504 Loan and Grant 

Program and includes a subpart for 

application of the Section 306C WWD 

Grant Program: 

Currently, 7 CFR 3550.111 requires an 

appraisal when total Section 504 

indebtedness exceeds $15,000. The 

Agency proposes to amend 7 CFR 

3550.111, to revise the threshold for 

requiring an appraisal based on total 

Section 504 indebtedness. This 

amendment would increase that limit to 

$25,000 and works in tandem with the 

increased Section 504 maximum loan 

amount of $40,000 (previously $20,000). 

The proposed amendment would retain 

the flexibility for the Loan Approval 

Official to determine if an appraisal is 

necessary when the assessed valuation 

by local authorities does not support a 

fully secured interest by the Agency and 

preserve the requirement to ensure 

adequate security value. The Agency 

projects that due to this proposed 

change, multiple benefits are likely, 

such as a reduction in appraisal orders, 

lower cost to loan applicants, and 

decreased application processing times. 

12. Amend 7 CFR 3550.117(d) and (e) 

to remove overly restrictive limitations 

and align with final regulatory revisions 

to 7 CFR 1777.21(b)(4) and (5)—Section 

306C WWD Loans and Grants that 

eliminated these limitations and are 

holding these sections as reserved 

(effective May 2, 2023), which is 

implemented under the 306C WWD 

Grant Program as a subpart of the 

Section 504 Loan and Grant Program: 

The Agency has determined that 

alignment of 306C Colonia programs 

governed by 7 CFR part 1777 and 7 CFR 

part 3550 is necessary to ensure equal 

program application. The current 

prohibitions limit the amount of 

assistance applicants with varying 

household sizes can receive causing 

unnecessary hardship for larger 

families. These proposed rule changes 

will provide the Agency flexibility to 

clarify modest design limitations in the 

program handbook, if needed. The 

Agency proposes that amending 7 CFR 

3550.117 paragraphs (d) and (e) by 

removing overly restrictive limitations 

will align with final regulatory revisions 

that were published at 88 FR 6611 to 

remove 7 CFR 1777.21(b)(4) and (5)— 

Section 306C WWD Loans and Grants, 

which were effective on May 2, 2023. 

13. Amend 7 CFR 3550.118(a) 

Maximum grant to an amount not to 

exceed ten percent of the national 

average area loan limit, which is 

implemented under the 306C WWD 

Grant Program as a subpart of the 

Section 504 Loan and Grant Program: 

The Agency proposed that amending 

7 CFR 3550.118(a) by revising the 

maximum grant amount to not exceed 

ten percent of the national average area 

loan limit will align with the regulatory 

maximum lifetime assistance in the 

Section 504 program. This regulatory 

change will allow the Agency greater 

responsiveness to establish future 

maximum grant amounts for eligible 

applicants. 

Request for Comment 

Stakeholder input is vital to ensure 

the proposed changes in the proposed 

rule would support the Agency’s 

mission, while ensuring that new 

regulations and policies are reasonable 

and do not overly burden the Agency’s 

lenders and their customers. Comments 

must be submitted on or before January 

19, 2024 and may be submitted 

electronically by going to the Federal 

eRulemaking Portal: https://

www.regulations.gov. Details on how to 

submit comments to the Federal 

eRulemaking Portal are in the 

ADDRESSES section of this proposed rule. 

III. Summary of Changes 

The following is a summary of the 

Agency’s intended changes in this 

proposed rule: 

(1) Amend 7 CFR part 3550 by 

revising the definitions found at 7 CFR 

3550.10 by: 

(i) revising the definition of ‘‘New 

dwelling or unit’’; 

(ii) adding a definition for ‘‘New 

construction’’ to clarify the terminology; 

(ii) and revising corresponding 

language at 7 CFR 3550.53(d)(1)(ii), 7 

CFR 3550.63(b)(1), 7 CFR 3550.63(b)(2), 

and 7 CFR 3550.102(e)(1). 

(2) Amend 7 CFR 3550.52(d)(6) by: 

(i) Revising language to remove 

reference to State Director when 

granting allowable exceptions for noncertified loan packing bodies and 

instead address the ability for the 

Agency to provide approval for 

packagers who operate outside of the 

certified process; 

(ii) revising language regarding 

application submission requirements, 

and; 

(iii) adding language that allows 

certified packaging fees to be added to 

the loan in excess of the area loan limit 

and appraised value of the house. 

(3) Add language to 7 CFR 3550.56(b) 

and 7 CFR 3550.105 to prohibit lending 

in U.S. Geological Survey (USGS) LavaFlow Hazard Zones 1 and 2. 

(4) Amend 7 CFR 3550.64 by: 

(i) increasing the net family asset 

limits before consideration of assets 

toward a down payment requirement; 

and 

(ii) removing the down payment 

requirement when the borrower is 

purchasing a REO property from the 

Agency. 

(5) Amend 7 CFR 3550.67(b)(1) to 

clarify that amounts included for repairs 

must be part of an initial purchase or 

finance loan to qualify for a 38-year 

term. 

(6) Remove 7 CFR 3550.74(c)(2) and 

renumber the list accordingly. 

(7) Remove language in 7 CFR 

3550.75(b)(1)(iv) and (b)(2)(v), which 

states ‘‘if determined necessary by a 

State Director’’ and rather state ‘‘unless 

waived by the Agency’’. 

(8) Amend 7 CFR 3550.103(e) to 

increase net family household assets for 

elderly families and non-elderly 

families before consideration of funds 

toward reduction of requested 

assistance. 

(9) Remove 7 CFR 3550.105(b) which 

restricts subdividable lots. 

(10) Amend 7 CFR 3550.108(a) to 

include the tax service fee as an 

allowable loan cost exceeding security 

value. 

(11) Amend 7 CFR 3550.111 to revise 

the threshold for requiring an appraisal 

based on total Section 504 indebtedness. 

(12) Amend 7 CFR 3550.117(d) and (e) 

to remove overly restrictive limitations 

and align with the removal of these 

regulations at 7 CFR 1777.21(b)(4) and 

(5)—Section 306C WWD Loans and 

Grants, which are now held as reserved. 

(13) Amend 7 CFR 3550.118(a) by 

revising the maximum grant amount to 

not exceed ten percent of the national 

average area loan limit. 

IV. Regulatory Information 

Statutory Authority 

These programs are authorized by 

Sections 502 and 504 of the Housing Act 

1949 and by Section 306C of the 

Consolidated Farm and Rural 

Development Act and implemented 

under 7 CFR part 3550. Section 510(k) 

of Title V the Housing Act of 1949 [42 

U.S.C. 1480(k)], 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. 


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Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Proposed Rules 80645 

Executive Order 12372, 

Intergovernmental Review of Federal 

Programs 

These programs are not subject to the 

requirements of Executive Order 12372, 

which require intergovernmental 

consultation with State and local 

officials. RHS conducts 

intergovernmental consultations for 

each loan 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 rule: (1) Unless 

otherwise specifically provided, all 

State and local laws that 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) 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 

proposed rule. 

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 rule, they 

are encouraged to contact USDA’s Office 

of Tribal Relations or RD’s Native 

American 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 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 

rule is not subject to the requirements 

of sections 202 and 205 of the UMRA. 

Paperwork Reduction Act 

This proposed rule does not revise or 

impose any new information collection 

requirements from those approved by 

OMB Control number 0575–0172. 

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 

RHS has reviewed this rule in 

accordance with USDA Regulation 

4300–4, Civil Rights Impact Analysis,’’ 

to identify any major civil rights 

impacts the rule might have on program 

participants on the basis of age, race, 

color, national origin, sex, or disability. 

After review and analysis of the rule 

and available data, implementation of 

the rule is not likely to adversely or 

disproportionately impact very low, 

low- and moderate-income populations, 

minority populations, women, Indian 

tribes, or persons with disability by 

virtue of their race, color, national 

origin, sex, age, disability, or marital or 

familiar status. No major civil rights 

impact is likely to result from this rule. 

Assistance Listing 

The programs affected by this 

regulation are listed in the Assistance 

Listing Catalog (formerly Catalog of 

Federal Domestic Assistance) under 

number 10.410, 10.417, and 10.770. 

Non-Discrimination Statement 

In accordance with Federal civil 

rights laws and USDA civil rights 

regulations and policies, the USDA, its 

Mission Areas, agencies, staff offices, 

employees, and institutions 

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 


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80646 Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Proposed Rules 

Area, agency, staff office; or the Federal 

Relay Service at (800) 877–8339. 

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 

https://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 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 3550 

Administrative practice and 

procedure, Environmental impact 

statements, Fair housing, Grant 

programs—housing and community 

development, Housing, Loan 

programs—housing and community 

development, Low and moderate 

income housing, Reporting and 

recordkeeping requirements, Rural 

areas. 

For the reasons set forth in the 

preamble, chapter XXXV of the title 7, 

Code of Federal Regulations is proposed 

to be amended to read as follows: 

PART 3550—DIRECT SINGLE FAMILY 

HOUSING LOANS AND GRANTS 

■ 1. The authority citation for part 3550 

continues to read as follows: 

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

Subpart A—General 

■ 2. Amend § 3550.10 by adding a 

definition for ‘‘New construction’’ and 

revising the definition for ‘‘New 

dwelling or unit’’ to read as follows: 

§ 3550.10 Definitions. 

* * * * * 

New construction. A dwelling that 

will be constructed after loan closing. 

The Agency will monitor construction 

progress and approve draws during the 

construction period. Only new 

construction meeting this definition can 

be considered for compensation under 

the Section 509, Compensation for 

Construction Defects Program. 

New dwelling or unit. A dwelling that 

is to be constructed prior to loan 

closing, or a dwelling that is less than 

1 year old at the time of loan approval 

as evidenced by an occupancy permit, 

certificate of occupancy or similar 

document issued by the local authority 

and has never been occupied. A new 

dwelling or unit cannot be considered 

for compensation under the Section 509, 

Compensation for Construction Defects 

Program. 

* * * * * 

Subpart B—Section 502 Origination 

■ 3. Amend § 3550.52 by revising 

paragraph (d)(6) to read as follows: 

§ 3550.52 Loan Purposes. 

* * * * * 

(d) * * * 

(6) Packaging fees resulting from the 

certified loan application packaging 

process outlined in § 3550.75. Such fees 

resulting from the certified loan 

application packaging process may be 

added to the loan amount in excess of 

the area loan limit and appraised value 

of the house. The Agency will 

determine the limit, based on factors 

such as the level of service provided 

and the prevailing cost to provide the 

service, and such cap will not exceed 

two percent of the national average area 

loan limit. Nominal packaging fees not 

resulting from the certified loan 

application process are an eligible cost 

provided the fee does not exceed a limit 

determined by the Agency based on the 

level and cost of service factors, but no 

greater than one half percent of the 

national average area loan limit; the 

loan application packager is a nonprofit, 

tax exempt partner approved by the 

Agency to operate outside the certified 

loan application packaging process; and 

the packager gathers and submits the 

information needed for the Agency to 

determine if the applicant is eligible 

along with a complete application. 

* * * 

■ 4. Amend § 3550.53 by revising 

paragraph (d)(1)(ii) to read as follows: 

§ 3550.53 Eligibility Requirements. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) purchase a different dwelling, if 

the current dwelling is deficient 

housing as defined in § 3550.10; or 

* * * * * 

■ 5. Amend § 3550.56 (b)(1) by adding 

a comma after the word ‘‘ordinances’’, 

revising paragraph (b)(2), and adding 

paragraph (b)(3) to read as follows: 

§ 3550.56 Site Requirements. 

* * * * * 

(b) * * * 

(1) The site must not be large enough 

to subdivide into more than one site 

under existing local zoning ordinances, 

and 

(2) The site must not include farm 

service buildings, though small 

outbuildings such as a storage shed may 

be included, and 

(3) The site must not be located in 

U.S. Geological Survey (USGS) lavaflow hazard zones 1 or 2. 

■ 6. Amend § 3550.63 by revising 

paragraph (b) to read as follows: 

§ 3550.63 Maximum Loan Limit. 

* * * * * 

(b) Market value limitation. 

(1) The market value limitation is 100 

percent of market value for existing 

housing, new dwellings, and new 

construction for which RHS will receive 

adequate documentation of construction 

quality and the source of such 

documentation is acceptable to RHS. 

(2) The market value limitation can be 

increased by: 

(i) Up to one percent, if RHS makes 

a subsequent loan for closing costs only, 

in conjunction with the sale of an REO 

property or an assumption. 

(ii) The amount necessary to make a 

subsequent loan for repairs necessary to 

protect the Government’s interest, and 

reasonable closing costs. 

(iii) The amount necessary to 

refinance an existing borrower’s RHS 

loans, plus closing costs associated with 

the new loan. 

■ 7. Revise § 3550.64 to read as follows: 

§ 3550.64 Down payment. 

Elderly families must use any net 

family assets in excess of $30,000 

towards a down payment on the 

property. Non-elderly families must use 

net family assets in excess of $25,000 

towards a down payment on the 

property. Applicants may contribute 

assets in addition to the required down 

payment to further reduce the amount to 

be financed. Agency borrowers or 

applicants purchasing REO properties 

are not required to provide a down 

payment. 

■ 8. Amend § 3550.67 by revising 

paragraph (b)(1) to read as follows: 

§ 3550.67 Repayment period. 

* * * * * 

(b) * * * 

(1) For initial loans (including 

acquisition and repair, but excluding 

initial loans solely for repairs), or 


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Federal Register / Vol. 88, No. 222 / Monday, November 20, 2023 / Proposed Rules 80647 

subsequent loans made in conjunction 

with an assumption, if the applicant’s 

adjusted income does not exceed 60 

percent of the area adjusted median 

income and the longer term is necessary 

to show repayment ability. 

* * * * * 

§ 3550.74 [Amended] 

■ 9. Amend § 3550.74 by removing 

paragraph (c)(2) and redesignating 

paragraph (c)(3) as (c)(2). 

■ 10. Amend § 3550.75 by revising 

paragraphs (b)(1)(iv) and (b)(2)(v) to 

read as follows: 

§ 3550.75 Certified Loan Application 

Packaging Process. 

* * * * * 

(b) * * * 

(1) * * * 

(iv) Submit applications via an 

intermediary, unless otherwise waived 

by the Agency. 

(2) * * * 

(v) Submit applications via an 

intermediary, unless otherwise waived 

by the Agency. 

* * * * * 

Subpart C—Section 504 Origination 

and Section 306C Water and Waste 

Disposal Grants 

■ 11. Amend § 3550.102 by revising 

paragraph (e)(1) to read as follows: 

§ 3550.102 Grant and loan purposes. 

* * * * * 

(e) * * * 

(1) Assist in the construction of a new 

dwelling or new construction. 

* * * * * 

■ 12. Amend § 3550.103 by revising 

paragraph (e) to read as follows: 

§ 3550.103 Eligibility Requirements. 

* * * * * 

(e) Need and use of personal 

resources. Applicants must be unable to 

obtain financial assistance at reasonable 

terms and conditions from non-RHS 

credit or grant sources and lack the 

personal resources to meet their needs. 

Elderly families must use any net family 

assets in excess of $30,000 to reduce 

their section 504 request. Non-elderly 

families must use any net family assets 

in excess of $25,000 to reduce their 

section 504 request. Applicants may 

contribute assets in excess of the 

aforementioned amounts to further 

reduce their request for assistance. The 

definition of assets for the purpose of 

this paragraph (e) is net family assets as 

described in § 3550.54, less the value of 

the dwelling and a minimum adequate 

site. 

* * * * * 

■ 13. Amend § 3550.105 by revising 

paragraph (b) to read as follows: 

§ 3550.105 Site Requirements. 

* * * * * 

(b) Lava-flow hazard zones. The site 

must not be located in U.S. Geological 

Survey (USGS) lava-flow hazard zones 1 

or 2. 

* * * * * 

■ 14. Amend § 3550.108 by revising 

paragraph (a) to read as follows: 

§ 3550.108 Security requirements (loans 

only). 

* * * * * 

(a) RHS does not require first lien 

position, but the total of all debts on the 

secured property may not exceed the 

value of the security, except by the 

amount of any required contributions to 

an escrow account for taxes and 

insurance, tax service fee, and any 

required appraisal fee. 

* * * * * 

■ 15. Revise § 3550.111 to read as 

follows: 

§ 3550.111 Appraisals (loans only). 

An appraisal is required when the 

total section 504 indebtedness exceeds 

$25,000 or whenever RHS determines 

that it is necessary to establish the 

adequacy of the security. RHS may 

charge an appraisal fee. Appraisals must 

be made in accordance with the 

Uniform Standards of Professional 

Appraisal Practices. When other real 

estate is taken as additional security it 

will be appraised if it represents a 

substantial portion of the security for 

the loan. 

■ 16. Amend § 3550.117 by revising 

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

§ 3550.117 WWD grant purposes. 

* * * * * 

(d) Pay for necessary installation of 

plumbing and related fixtures within 

dwellings lacking such facilities. 

(e) Construction and/or partitioning 

off a portion of the dwelling for a 

bathroom which is modest in design. 

* * * * * 

■ 17. Amend § 3550.118 by revising 

paragraph (a) to read as follows: 

§ 3550.118 Grant restrictions. 

(a) Maximum grant. Lifetime 

assistance to any individual for initial or 

subsequent Section 306C WWD grants 

may not exceed ten percent of the 

national average area loan limit. 

* * * * * 

Yvonne Hsu, 

Acting Administrator, Rural Housing Service. 

[FR Doc. 2023–25314 Filed 11–17–23; 8:45 am] 

BILLING CODE 3410–XV–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2023–1893; Project 

Identifier AD–2023–00389–A] 

RIN 2120–AA64 

Airworthiness Directives; FS 2001 

Corp, FS 2002 Corporation, FS 2003 

Corporation, Piper, and Piper Aircraft, 

Inc. Airplanes 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Notice of proposed rulemaking 

(NPRM); extension of comment period. 

SUMMARY: This document announces an 

extension of the comment period for the 

referenced NPRM, which proposed the 

adoption of a new airworthiness 

directive (AD) for certain FS 2001 Corp, 

FS 2002 Corporation, FS 2003 

Corporation, Piper, and Piper Aircraft, 

Inc. (Piper) airplanes. This NPRM 

invited comments concerning the 

proposed requirement of replacing any 

rudder equipped with a rudder post 

made from a certain carbon steel with a 

rudder equipped with a rudder post 

made from a certain low-alloy steel. 

This extension of the comment period is 

necessary to provide all interested 

persons an opportunity to present their 

views on the proposed requirements of 

this NPRM. 

DATES: The comment period for the 

NPRM published on October 6, 2023, at 

88 FR 69556, and scheduled to close on 

November 20, 2023, is extended until 

February 20, 2024. 

ADDRESSES: You may send comments, 

using the procedures found in 14 CFR 

11.43 and 11.45, by any of the following 

methods: 

• Federal eRulemaking Portal: Go to 

regulations.gov. Follow the instructions 

for submitting comments. 

• Fax: (202) 493–2251. 

• Mail: U.S. Department of 

Transportation, Docket Operations, M– 

30, West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE, 

Washington, DC 20590. 

• Hand Delivery: Deliver to Mail 

address above between 9 a.m. and 5 

p.m., Monday through Friday, except 

Federal holidays. 

AD Docket: You may examine the AD 

docket at regulations.gov by searching 

for and locating Docket No. FAA–2023– 

1893; or in person at Docket Operations 

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

through Friday, except Federal holidays. 

The AD docket contains this NPRM, any 

comments received, and other 


ddrumheller on DSK120RN23PROD with PROPOSALS1