This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents.

Rules and Regulations Federal Register

11275 

Vol. 87, No. 40 

Tuesday, March 1, 2022 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

7 CFR Part 3560 

[Docket No. RHS–21–MFH–0026] 

RIN 0575–AD17 

Multi-Family Housing (MFH) Direct 

Loan Programs 

AGENCY: Rural Housing Service, USDA. 

ACTION: Final rule. 

SUMMARY: The Rural Housing Service 

(RHS or Agency), an agency in the 

United States Department of Agriculture 

(USDA) Rural Development Mission 

area, published a proposed rule in the 

Federal Register on September 23, 2020, 

to amend its regulations for the MultiFamily Housing Direct Loans and Grants 

Programs to implement changes related 

to the development of a sustainable plan 

for the Rental Assistance (RA) program. 

Through this action, RHS is adopting 

the changes as proposed. The regulation 

updates are intended to provide 

additional RA program flexibility and 

transparency, and to improve the 

efficiency of managing assets in the 

Direct Loan portfolio. 

DATES: The final rule is effective March 

31, 2022. 

FOR FURTHER INFORMATION CONTACT: 

Jennifer Larson, Multi-Family Housing 

Asset Management Division, Rural 

Housing Service, Stop 0782, 1400 

Independence Avenue SW, Washington, 

DC 20250–0782. Telephone 202–720– 

1615. 

SUPPLEMENTARY INFORMATION: 

I. Background Information 

Rural Development (RD) is a mission 

area within the United States 

Department of Agriculture (USDA) 

comprised of the Rural Utilities Service 

(RUS), Rural Housing Service (RHS) and 

Rural Business-Cooperative Service 

(RBCS). RD’s mission is to increase 

economic opportunity and improve the 

quality of life for all rural Americans. 

RD meets its mission by providing 

loans, loan guarantees, grants, and 

technical assistance through more than 

40 programs aimed at creating and 

improving housing, businesses, and 

infrastructure throughout rural America. 

We help rural residents buy or rent safe, 

affordable housing and make health and 

safety repairs to their homes. 

The RHS Multi-Family Housing 

(MFH) programs, provide affordable 

multi-family rental housing in rural 

areas by financing projects geared for 

low-income, elderly and disabled 

individuals and families as well as 

domestic farm laborers. MFH Programs 

extends its reach by guaranteeing loans 

for affordable rental housing designed 

for low to moderate-income residents in 

rural areas and towns. MFH Programs 

are administered, subject to 

appropriations, by the USDA as 

authorized under Sections 514, 515 and, 

516 and 521 of the Housing Act of 1949, 

as amended. The Agency operates a 

multifamily rural rental housing direct 

loan program under section 515 for offfarm labor housing and section 514 for 

farm labor housing. The Agency also 

provides grants under the section 516 

farm labor housing program and section 

521 provides project-based rental 

assistance payments to property owners. 

The RHS published a proposed rule 

on September 23, 2020 (85 FR 59682) to: 

(1) Implement programmatic changes 

related to development of a 

‘‘sustainability plan’’ for the Rental 

Assistance (RA) Program, including new 

Agency flexibilities in managing the RA 

distribution; (2) integrate new asset 

management policies; and (3) 

incorporate technical corrections to 

clarify reference and formatting issues 

in the regulation. The purpose of this 

action is to finalize these provisions as 

proposed in the proposed rule on 

September 23, 2020. 

RHS published an interim rule on 

November 26, 2004 (69 FR 69032), with 

an effective date of 2/24/2005. On 

February 22, 2005, a delay of effective 

date was published in the Federal 

Register (70 FR 8503) to indefinitely 

delay the following sections: 

3560.152(a)(1), 3560.154(a)(7), 

3560.156(c)(12), and 3560.254(c)(3). The 

delay of effective date remains in effect 

for these sections until a future final 

rule is published to lift the stay. 

II. Comments and Responses 

The 60-day comment period for the 

proposed rule ended on November 23, 

2020. A total of 16 comments were 

received. Commenters included nonprofit housing organizations or 

associations representing housing 

providers and private citizens. 

The following actions in the proposed 

rule will be included in the final rule 

with full consideration of public 

comments, included below, with the 

Agency’s responses. 

Issue 1: A Commenter pointed to 

include change to § 3560.72 to 

consistently use ‘‘Leadership Designee,’’ 

instead of MFH Leadership Designee. As 

noted in the proposed rule, page 59684, 

the Agency’s intent is to change State 

Director to Leadership Designee to allow 

flexibility for future staff. The 

commenter supported not limiting the 

change to only ‘‘MFH Leadership 

Designee,’’ for even greater flexibility. 

Agency Response 1: The Agency 

acknowledges the commenter’s support 

for this modification. The Agency 

agrees, as the commenter stated, that the 

language under § 3560.72 should be 

amended by removing the words ’State 

Director’ and adding in their place 

’Leadership Designee’ in the second 

sentence of paragraph (b). 

Issue 2: Several commenters 

requested more contact information 

about the Leadership Designee positions 

throughout the Agency. 

Agency Response 2: The Agency has 

established a list of Field Operations 

servicing officials for all projects 

available on the public Rural 

Development website with email 

contact information provided for each 

team member. The Regional Director for 

each region is also provided on the 

public Rural Development website. 

Issue 3: Several commenters 

requested more detail on the MFH 

program eligibility requirements 

regarding domestic farm laborers. This 

included persons legally admitted on a 

temporary or permanent basis, 

including the U.S. Citizenship and 

Immigration Services (USCIS) H2A 

Program for Temporary Agricultural 

Workers. 

Agency Response 3: The proposed 

‘‘Domestic Farm Laborer’’ definition 

reflects the Agency’s compliance with 

the statutory requirements of the 

Consolidated Appropriations Act of 

2018, permanently amending Section 


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514(f)(3)(A) of the Housing Act of 1949 

(42 U.S.C. 1484(f)(3)(A)). The Agency 

believes that additional clarification is 

not required. 

Issue 4: One commenter expressed 

concern that clarification regarding the 

Agency’s authority to establish agencyheld escrows in the proposed rule did 

not include an explanation as to why 

this authority is needed and did not 

place any conditions on the Agency’s 

exercise of this authority. The 

commenter urged the Agency to remove 

this provision without an explanation of 

the need and establish standards for 

when this requirement can be imposed 

on a borrower. 

Agency’s Response 4: The proposed 

rule clarified that in § 3560.65, the 

authorization of an agency-held escrow 

account only applies to the Reserve 

Account. ‘‘The Agency may establish an 

escrow account for the collection and 

disbursement of reserve account funds.’’ 

This authority was historically included 

in the loan documents but was not 

addressed in the regulation. This 

provision was prompted by MFH 

borrowers that had identified 

Supervised Bank Account requirements 

in RD’s regulations, which made it 

difficult to obtain these accounts with 

commercial banks. This amendment 

will allow the Agency, if needed, to 

establish an escrow reserve account to 

collect and disperse an MFH project’s 

funds. The Agency finds that no change 

to the proposed regulatory language is 

needed. 

Issue 5: Several commenters 

concurred that self-managed properties 

must also sign the Management 

Certification. Two commenters 

requested that additional tasks be 

mentioned as a project expense or an 

add-on fee to the management fee if 

required of the management agent. They 

also requested that outside payroll 

companies used to pay on-site staff, be 

an allowable expense to the property. 

Agency’s Response 5: The Agency 

finds that no change is required to the 

proposed rule language. The rule 

expands the language at § 3560.102(b) to 

clarify that performance assessments of 

management agents will be used when 

determining the allowable management 

fee, and that the management plan 

should describe whether administrative 

expenses are to be paid from 

management agent fees or project 

operations, including a task list of 

charges covered by the fee. 

Issue 6: One commenter noted the 

Affirmative Fair Housing Marketing 

Plan (AFHMP) change in minimum 

required rental units to prepare and 

maintain an AFHMP increased from 4 to 

5 units, and requested details on how 

many projects, would be affected by this 

change. This update allows the Agency 

to align with the Affirmative Fair 

Housing Marketing Plan (AFHMP) as 

defined in 24 CFR part 200, subpart M. 

Borrowers must comply with the 

requirements of the Fair Housing 

Amendments Act of 1988, and this 

section to meet their fair housing 

responsibilities. 

Agency’s Response 6: Currently, there 

are 95 4-unit Rural Rental Housing and 

Farm Labor Housing properties in the 

Multi-Family Housing portfolio. These 

properties will no longer be required to 

maintain an AFHMP. 

Issue 7: Three commenters included 

praise for the proposed rule’s changes to 

management flexibilities that would 

provide a more streamlined process by 

which RA funds can be made available. 

The commenters did not request any 

changes to the rule. 

Agency’s Response 7: The Agency 

acknowledges the commenters support. 

Issue 8: One commenter requested 

that there first be notice and 

opportunity to resolve a late tenant 

certification submission to the Agency, 

so that the owner and manager can 

resolve the matter amongst themselves. 

The commenter did not approve of 

requiring the owner to pay overage, i.e., 

to pay for a paperwork delay. 

Agency’s Response 8: The parameters 

established for timely tenant 

certification submission are beyond the 

scope of the proposed rule. The Agency 

notes that the timely submission of 

tenant certifications is a basic 

responsibility of the borrower/ 

management agent under the MFH 

program’s existing Loan Documents 

requirements. The proposed language 

clarifies that the borrower may lose RA 

as well. No change to the language is 

needed. 

Issue 9: Two commenters expressed 

concern regarding the admission of 

persons with criminal histories. They 

pointed to the regulations not specifying 

whether a disqualification is only 

authorized when there was a conviction 

or if a mere arrest is sufficient. 

Additional concern regarded the privacy 

implications of checks on criminal 

history. 

Agency’s Response 9: The Agency 

finds that the proposed change has no 

impact on allowing exceptions for 

denial under the U.S. Department 

Housing and Urban Development (HUD) 

regulations in 24 CFR 5.854, 5.855, 

5.856, 5.857. This also allows a time 

frame of 3 years from conviction. The 

Borrower must establish their own 

standards that prohibit admission of 

applicants with a criminal history, 

based on their determination of 

reasonable cause. This qualifies the 

individualized assessment requirement 

of an applicant’s criminal background as 

per HUD’s Office of General Counsel 

Guidance on Application of Fair 

Housing Act Standards to the Use of 

Criminal Records by Providers of 

Housing and Real Estate-Related 

Transactions issued on April 4, 2016, 

and the Fair Housing Act, 42 U.S.C. 

Sections 3601–19. 

Issue 10: Several commenters 

requested that the Agency crossreference the existing HUD Violence 

Against Women Act (VAWA) 

regulations or amend MFH program 

requirements in the lease requirement 

section so that owners and residents 

know what their respective rights and 

responsibilities are, including notices of 

VAWA rights, documentation, 

confidentiality, evictions, and transfers. 

Agency Response 10: The Agency is 

working to update guidance on VAWA 

and will take recommendations into 

consideration. Additional changes may 

be included at that time. 

Issue 11: Three of the commenters 

questioned whether there were 

unnecessary restrictions being placed on 

the eligibility for a Letter of Priority 

Engagement (LOPE). 

Agency’s Response 11: This is a 

misinterpretation of the change to this 

section. The regulation does not discuss 

the benefits for residents specifically 

due to a Federally declared disaster, 

under the Uniform Relocation Act. The 

LOPE would be based on the 

termination of occupancy beyond the 

resident’s control, such as the 

unavailability of the unit due to 

rehabilitation, which may be due to a 

disaster. Further, the proposed changes 

reduce restrictions on timing of LOPE 

requests. This effectively adds that they 

do not have to wait until the expiration 

of the declaration. 

Issue 12: Several commenters pointed 

out that the change in § 3560.205, 

regarding the notification of rent 

change, would better serve tenants to 

include ‘‘at least’’ 30 calendar days from 

the date of notification. 

Agency’s Response 12: The Agency 

agrees that this suggestion allows more 

ample notification, in some instances. 

The proposed revision will include ‘‘at 

least’’ before the 30 days from the date 

of notification. 

Issue 13: Several commenters 

provided positive support for the 

clarification in RA eligibility 

requirements, for tenants or applicants 

with delinquent Agency unauthorized 

assistance repayment agreements. 

Several commenters discussed 

citizenship requirements under other 


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sections of the regulation, not included 

in the proposed rule. 

Agency’s Response 13: The Agency 

acknowledges the commenters’ support. 

The citizenship requirement is not 

under the purview of the published 

amendments. This amendment applies 

only to tenants with unauthorized RA 

who are delinquent on their repayment 

agreement. This would apply in cases 

where it is known that the tenant is 

delinquent directly with the Agency. 

The requested changes would require an 

additional CFR to be removed, since the 

existing CFR does not require 

citizenship requirements. We will be 

providing more guidance on 

implementation on future handbook 

updates. 

Issue 14: Several commenters 

provided positive support for the update 

in the proposed rule regarding the 

optional use of the remaining obligation 

balances of RA units, identified in 

§ 3560.259(a)(2) and (3), for renewal 

purposes. However, some commenters 

were concerned that the ability to use 

‘‘inactive’’ RA obligations will assist 

fewer residents (MFH tenants). 

Agency’s Response 14: The Agency 

acknowledges these concerns. The 

ability, however, to use ‘‘inactive’’ 

remaining RA obligations will assist 

more residents, rather than less 

residents. Further, the use of these 

‘‘inactive’’ funds would not decrease the 

overall RA budget so in following years, 

new units of RA could be offered. By 

utilizing these funds, the Agency is 

protecting properties from payment 

shortfalls where the predicted amount 

of RA was misjudged. Furthermore, RA 

is funded through dollar amount and 

not by unit amount. 

Issue 15: Several commenters stated 

opposition to the proposed change to 

§ 3560.259, which clarifies that when 

any RA units have not been used for a 

6-month period (for Section 515 

properties) or 12 months (for Section 

514 properties), they will be eligible for 

transfer. These commenters believed 

that this may reduce the total number of 

RA units and restrict eligible uses of RA. 

Additional concern regarded restricting 

the unused RA obligations to be used 

only for ‘‘renewal purposes’’. The 

inference is that this would reduce the 

number of RA units available for 

servicing or preservation. 

Agency’s Response 15: The Agency 

notes these concerns about the ability to 

use ‘‘inactive’’ RA obligations. This 

amendment will allow the Agency the 

flexibility to assist more residents, 

rather than fewer. Furthermore, the use 

of these ‘‘inactive’’ funds would not 

decrease the overall RA budget, so in 

following years new units of RA could 

be offered. By utilizing these funds, the 

Agency is protecting properties from 

payment shortfalls, where the predicted 

amount of RA was misjudged. 

Furthermore, RA is funded through 

dollar amount and not by unit amount. 

RA is not tied to a specific unit within 

the property; revolving vacancies would 

not affect whether there was unused RA 

over a 6-month period. 

Issue 16: Some commenters suggested 

that the Agency include various project 

and management expenses, as allowable 

project expenses. 

Agency’s Response 16: The Agency 

acknowledges the need for consistency 

when appropriate; and acknowledges 

the need for clarity in eligible Section 

514 and 515 property expenses. 

Property expenses are monitored by the 

Agency to ensure they are proper and 

reasonable; but as expenses increase, 

more income is needed, which results in 

rent increases and additional cost to 

rental assistance. Borrowers have often 

sought clarification on how expenses 

should be treated. Implementing this 

change will improve compliance, 

reduce unnecessary and unsupportable 

expenses, and result in stronger, more 

financially stable properties. 

Issue 17: A commenter suggested nonad valorem and special assessments 

need to be included as allowable project 

expenses as they are frequently 

included in a project’s received tax 

notices. 

Agency’s Response 17: The Agency 

agrees with the comments and will 

include clarification to staff in the 

internal agency guidance to clarify that 

‘‘expenses relating to controlling or 

reducing taxes’’ may include special 

assessments and service charges which 

are not based upon the value of the 

property and mileage. 

Issue 18: One commenter requested a 

clarification of why asset management 

costs incurred by a non-profit entity 

must be prorated across all entities, and 

why this does not extend to all project 

owners. Other commenters requested 

more information on regulatory 

requirements not included in the 

proposed rule. 

Agency’s Response 18: The Agency 

appreciates the opportunity to address 

the issue on non-profit entities’ asset 

management fee reimbursement of 

specifically identified costs. 

Specifically, for-profit entities are 

excluded due to the availability of 

financial means, such as the Return to 

Owner, to cover these costs. 

The Agency acknowledges the 

additional questions on this section of 

the regulation, although not currently 

being revised. This will be taken under 

future consideration. 

Issue 19: One commenter offered 

support for the requirement that needed 

capital improvements be completed 

within a reasonable time frame. The 

commenter requested guidance on what 

would be considered a ‘‘reasonable time 

frame,’’ particularly emergency 

improvements. 

Agency’s Response 19: The Agency 

appreciates the support on this revision, 

and notes that ‘‘reasonable time frame’’ 

allows flexibility for the property 

manager, the borrower, and the 

property. 

Issue 20: One commenter objected to 

a conversion of project loans from the 

Daily Interest Accrual System (DIAS) to 

the Predetermined Amortization 

Schedule System (PASS). The 

commenter added that many owners are 

anticipating their loan maturity under 

DIAS, would be materially harmed if 

they de facto have their loan terms 

extended by a slower pay-down or 

recasting of principal and interest 

payments. 

Agency’s Response 20: The Agency 

notes the commenter’s concerns about 

borrowers under the DIAS loan terms. 

The Agency finds that no change is 

needed since the proposed rule only 

shortens the sentence to ‘‘loan servicing 

action’’. 

Issue 21: One commenter noted that 

the proposed rule changes from ‘‘will’’ 

to ‘‘may’’ in § 3560.656, which 

authorizes the Agency to offer an 

incentive to avoid prepayment. They 

noted that it would imply that the 

Agency will exercise discretion in 

offering incentives. The commenter 

believes that would be contrary to the 

current law. 

Other commenters opposed the 

change, as they saw it as inconsistent 

with the mandatory obligation that 

Congress adopted for the express 

purpose of preserving and retaining to 

the maximum extent practicable. They 

commented that the Agency should 

abandon this change and continue to 

offer incentives to all owners seeking to 

prepay their loans. 

Agency’s Response 21: The Agency is 

implementing section 502(c)(4)(B) of the 

Housing Act, which uses the term 

‘‘may.’’ The Agency finds that this 

correction is necessary, to align 

regulations with the Housing Act. 

III. Summary of Changes 

To increase transparency, improve 

efficiency in managing portfolio assets, 

and ensure compliance with program 

requirements; RHS will implement the 

following updates to 7 CFR part 3560 for 

the Section 514 Farm Labor Direct Loan, 

Section 515 Multi-family Housing Direct 

Loan, Section 516 Farm Labor Grant, 


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and Section 521 Rental Assistance 

Program. 

(1) Update language to § 3560.259(d) 

regarding the optional use of the 

remaining obligation balances of units 

identified in § 3560.259(a)(2) and (3) for 

renewal purposes. 

(2) Update § 3560.259(a)(4) to clarify 

that when any rental assistance units 

have not been used for a 6-month period 

(for Section 515 properties) or 12 

months (for Section 514 properties) they 

will be eligible for transfer. 

(3) The definitions of Domestic farm 

laborer, Management agreement, and 

Management fee will be revised to 

reflect requirements in the Consolidated 

Appropriations Act, 2018 (Pub. L. 115– 

141, March 23, 2018) permanently 

amending Section 514(f)(3)(A) of the 

Housing Act of 1949 (42 U.S.C. 

1484(f)(3)(A)) that the FLH tenant 

eligibility includes ‘‘a person legally 

admitted to the United States and 

authorized to work in agriculture.’’ 

(4) Adding a paragraph at § 3560.65 to 

allow the Agency to establish an escrow 

account to collect and disperse funds. 

This will allow the Agency to establish 

agency-held escrows which historically 

was provided for in the loan documents 

but was not addressed in the regulation. 

(5) In § 3560.303(a)(1), the Agency 

will require that the annual project 

budget include anticipated expenditures 

on the project’s long-term capital needs 

as specified in § 3560.103(c) and will 

provide a metric for the Agency to 

determine current or future rent 

increase requests based on the 

Borrower’s utilization of the reserve 

account. This will ensure that borrowers 

are utilizing project revenue for ongoing 

capital improvements needed to 

maintain compliance and reduced risk 

of the property. 

(6) A change will be made to 

§ 3560.303(c) to add payables as a 

priority for budget expenditures. This 

will allow for the Agency to ensure that 

all payables are being paid from project 

revenues in a timely manner and not 

accrued, without agency consent, 

causing increased costs and penalties 

and adding risk. 

(7) In § 3560.303, the Agency will 

clarify what are allowable project 

expenses and provide for a comparable 

‘‘reasonableness’’ test by the Agency. 

Generally, expenses charged to project 

operations for expenses, must be 

reasonable, typical, necessary and show 

a clear benefit to the residents of the 

property. 

(8) In § 3560.303(b)(1)(vii), the Agency 

will add the requirements for a nonprofit entity to pro-rate certain 

organizational reimbursable costs across 

all properties owned by that entity. 

(9) In § 3560.105(f)(10), the Agency 

will clarify that if an insurance 

deductible is met, there is no need to 

track with a replacement reserve 

account. 

(10) The Agency has updated the 

wording of ‘‘State Director’’ to 

‘‘Leadership Designee’’ to allow for 

future staff flexibility. 

(11) Update § 3560.152 by removing 

term ‘‘elderly units in mixed housing’’. 

(12) The Agency will revise 

§ 3560.154 to correct ‘‘sex’’ to ‘‘gender’’ 

and update policy on criminal activity 

for admissions. 

(13) Update § 3560.205 to include the 

notification of all household members of 

rent change effective at least 30 days 

from date of notification. 

(14) Section 3560.252 will now 

include the Agency’s housing voucher 

program to allow for the proper 

allowance of rental subsidies. 

(15) In § 3560.402 the Agency will 

clarify that any loan servicing action 

will require DIAS accounts to be 

converted to the current PASS system of 

accounting. 

Executive Order 12866 

The Office of Management and Budget 

(OMB) has designated this final rule as 

not significant under Executive Order 

12866. 

Executive Order 12988, Civil Justice 

Reform 

This final 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 bringing suit in court 

that challenges action taken under this 

rule. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act (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 

cost-benefit 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, more cost-effective, or least 

burdensome alternative that achieves 

the objectives of the rule. 

This final 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. 

National Environmental Policy Act 

In accordance with the National 

Environmental Policy Act of 1969, 

Public Law 91–190, this final rule has 

been reviewed in accordance with 7 

CFR part 1970 (‘‘Environmental Policies 

and Procedures’’). The Agency has 

determined that (i) this action meets the 

criteria established in 7 CFR 1970.53(f); 

(ii) no extraordinary circumstances 

exist; and (iii) the action is not 

‘‘connected’’ to other actions with 

potentially significant impacts, is not 

considered a ‘‘cumulative action’’ and is 

not precluded by 40 CFR 1506.1. 

Therefore, the Agency has determined 

that the action does not have a 

significant effect on the human 

environment, and therefore neither an 

Environmental Assessment nor an 

Environmental Impact Statement is 

required. 

Executive Order 13132, Federalism 

The policies contained in this 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 rule does not 

impose substantial direct compliance 

costs on State and local governments; 

therefore, consultation with States is not 

required. 

Regulatory Flexibility Act 

The final 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 

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. 


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Executive Order 12372, 

Intergovernmental Review of Federal 

Programs 

These loans are subject to the 

provisions 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 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 imposes 

requirements on RHS in the 

development of regulatory policies that 

have tribal implications or preempt 

tribal laws. RHS has determined that the 

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 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. 

Programs Affected 

The programs affected by this 

regulation are listed in the Assistance 

Listing Catalog (formerly Catalog of 

Federal Domestic Assistance) under 

number 10.427—Rural Rental 

Assistance Payments. 

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 final 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 in order to 

provide increased opportunities for 

citizen access to Government 

information, services, and other 

purposes. 

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 

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; the USDA 

TARGET Center at (202) 720–2600 

(voice and TTY); 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.ocio.usda.gov/document/ 

ad-3027, 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 

moderate income housing, Migrant 

labor, Mortgages, Nonprofit 

organizations, Public housing, Rent 

subsidies, Reporting and recordkeeping 

requirements, Rural areas. 

For the reasons set forth in the 

preamble, the Rural Housing Service 

amends 7 CFR part 3560 as follows: 

PART 3560—DIRECT MULTI-FAMILY 

HOUSING LOANS AND GRANTS 

■ 1. The authority citation for part 3560 

continues to read as follows: 

Authority: 42 U.S.C. 1480. 

Subpart A—General Provisions and 

Definitions 

§ 3560.8 [Amended] 

■ 2. Amend § 3560.8 by removing the 

words ‘‘State Director’’ and adding in 

their place ‘‘Leadership Designee’’ in 

the last sentence. 

■ 3. Amend § 3560.11 as follows: 

■ a. Remove the acronym ‘‘MFHMFH’’ 

wherever it appears in the section and 

adding ‘‘MFH’’ in its place; and 

■ b. Revise the definitions of ‘‘Domestic 

farm laborer’’, ‘‘Management 

agreement’’, and ‘‘Management fee’’. 

The revisions read as follows: 

§ 3560.11 Definitions. 

* * * * * 

Domestic farm laborer. A person who, 

consistent with the requirements in 

§ 3560.576(b)(2), receives a substantial 

portion of his or her income from farm 

labor employment (not self-employed) 

in the United States, Puerto Rico, or the 

Virgin Islands and either is a citizen of 

the United States or resides in the 

United States, Puerto Rico, or the Virgin 

Islands after being legally admitted for 

permanent residence, or a person legally 

admitted to the United States and 

authorized to work in agriculture. This 

definition may include the immediate 

family members residing with such a 

person. 

* * * * * 

Management agreement. A written 

agreement between a borrower and an 

identity-of-interest (IOI) management 

agent or independent fee management 

agent setting forth the management 

agent’s responsibilities and fees for 

management services. 

Management fee. The compensation 

provided to a management agent for 

services provided in accordance with an 

approved management certification, 

Form RD 3560–13, ‘‘Multi-Family 

Project Borrower’s/Management Agent’s 

Management Certification.’’ 

* * * * * 


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Subpart B—Direct Loan and Grant 

Origination 

■ 4. Amend § 3560.65 by adding 

paragraph (d) to read as follows: 

§ 3560.65 Reserve account. 

* * * * * 

(d) The agency may establish an 

escrow account for the collection and 

disbursement of reserve account funds. 

§ 3560.72 [Amended] 

■ 5. Amend § 3560.72 by removing the 

words ‘‘State Director’’ and adding in 

their place ‘‘Leadership Designee’’ in 

the second sentence of paragraph (b). 

Subpart C—Borrower Management and 

Operations Responsibilities 

■ 6. Amend § 3560.102 as follows: 

■ a. Revise paragraph (b); 

■ b. Remove the word ‘‘and’’ at the end 

of paragraph (g)(1)(ii); 

■ c. Remove ‘‘any of the above.’’ at the 

end of paragraph (g)(1)(iii) and adding 

‘‘anyone listed in paragraphs (g)(1)(i) 

and (ii) of this section;’’ in its place; 

■ d. Add paragraph (g)(1)(iv); and 

■ e. Revise paragraphs (i) and (j). 

The revisions and addition read as 

follows: 

§ 3560.102 Housing project management. 

* * * * * 

(b) Management plan. Borrowers must 

develop and maintain a management 

plan for each housing project covered by 

their loan or grant. The management 

plan must establish the systems and 

procedures necessary to ensure that 

housing project operations comply with 

Agency requirements in this part. The 

management plan should describe 

whether administrative expenses are to 

be paid from management agent fees or 

project operations, including a task list 

of charges covered by the fee as outlined 

in paragraph (i)(3)(i)(A) of this section. 

The management plan must meet the 

standards set out in this part. 

* * * * * 

(g) * * * 

(1) * * * 

(iv) Any borrower’s entity control, or 

interest held or possessed by a person’s 

spouse, parent, child, grandchild, or 

sibling or other relation by blood or 

marriage is attributed to that person for 

the determination under this paragraph 

(g)(1). 

* * * * * 

(i) Management fees. Management 

fees will be an allowable expense to be 

paid from the housing project’s general 

operating account only if the fee is 

approved by the Agency as a reasonable 

cost to the housing project and 

documented on the management 

certification. Management fees must be 

developed in accordance with the 

following: 

(1) The management fee may 

compensate the management entity for 

the following costs and services: 

(i) Supervision by the management 

agent and its staff (time, knowledge, and 

expertise) of overall operations and 

capital improvements of the site. 

(ii) Hiring, supervision, and 

termination of on-site staff. 

(iii) General maintenance of project 

books and records (general ledger, 

accounts payable and receivable, 

payroll, etc.). Preparation and 

distribution of payroll for all on-site 

employees, including the costs of 

preparing and submitting all 

appropriate tax reports and deposits, 

unemployment and workers’ 

compensation reports, and other IRS- or 

state-required reports. 

(iv) In-house training provided to onsite staff by the management company. 

(v) Preparation and submission of 

proposed annual budgets and 

negotiation of approval with the 

Agency. 

(vi) Preparation and distribution of 

the Agency forms and routine financial 

reports to borrowers. 

(vii) Preparation and distribution of 

required year-end reports to the Agency. 

(viii) Preparation of requests for 

reserve withdrawals, rent increases, or 

other required adjustments. 

(ix) Arranging for preparation by 

outside contractors of utility allowance 

analysis. 

(x) Preparation and implementation of 

Affirmative Fair Housing Marketing 

Plans as well as general marketing plans 

and efforts. 

(xi) Review of tenant certifications 

and submission of monthly rental 

assistance requests, and overage. 

Submission of payments where 

required. 

(xii) Preparation, approval, and 

distribution of operating disbursements; 

oversight of project receipts; and 

reconciliation of deposits. 

(xiii) Overhead of management agent, 

including: 

(A) Establish, maintain, and control 

an accounting system sufficient to carry 

out accounting supervision 

responsibilities. 

(B) Maintain agent office 

arrangements, staff, equipment, 

furniture, and services necessary to 

communicate effectively with the 

properties, to include consultation and 

support to site-staff, the Agency and 

with the borrowers. 

(C) Postage expenses unrelated to site 

operation. 

(D) Expense of telephone and 

facsimile communication, unrelated to 

site operations. 

(E) Direct costs of insurance (fidelity 

bonds covering central office staff, 

computer and data coverage, general 

liability, etc.) directly related to 

protection of the funds and records of 

the borrower. Insurance coverage for 

agent’s office and operations (Property, 

Auto, Liability, Errors and Omissions, 

Casualty, Workers Compensation, etc.). 

(F) Central office staff training and 

ongoing certifications. 

(G) Maintenance of all required 

profession and business licenses and 

permits. (This does not include project 

site office permits or licenses.) 

(H) Travel of agent staff to the 

properties for on-site inspection, 

training, or supervision activities. 

(I) Agent bookkeeping for their own 

business. 

(xiv) Attendance at meetings 

(including travel) with tenants, owners, 

and the Agency or other governmental 

agency. 

(xv) Development, preparation, and 

revision of management plans, 

agreements, and management 

certifications. 

(xvi) Directing the investment of 

project funds into required accounts. 

(xvii) Maintenance of bank accounts 

and monthly reconciliations. 

(xviii) Preparation, request for, and 

disbursement of borrower’s initial 

operating capital (for new projects) as 

well as administration of annual 

owner’s return on investment. 

(xix) Account maintenance, 

settlement, and disbursement of security 

deposits. 

(xx) Working with auditors for initial 

Agency annual financial reports. 

(xxi) Storage of records, to include 

electronic records, and adherence to 

records retention requirements. 

(xxii) Assist on-site staff with tenant 

relations and problems. Provide 

assistance to on-site staff in severe 

actions (eviction, death, insurance loss, 

etc.). 

(xxiii) Oversight of general and 

preventive maintenance procedures and 

policies. 

(xxiv) Development and oversight of 

asset replacement plans. 

(xxv) Oversight of preparation of 

section 504 reviews, development of 

plans, and implementation of 

improvements necessary to comply with 

plans and section 504 requirements. 

(2) Management fees may consist of a 

base per occupied revenue producing 

unit fee and add-on fees for specific 

housing project characteristics. 

Management entities may be eligible to 

receive the full base per occupied unit 


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fee for any month or part of a month 

during which the unit is occupied. 

(i) Periodically, the Agency will 

develop a range of base per occupied 

unit fees that will be paid in each state. 

The Agency will develop the fees based 

on a review of housing industry data. 

The final base for occupied unit fees for 

each state will be made available to all 

borrowers. 

(ii) Periodically, the Agency will 

develop the amount and qualifications 

to receive add-on fees. The final set of 

qualifications will be made available to 

all borrowers. 

(3) Management plans and agreements 

must describe if administrative 

expenses are to be paid from the 

management fee or paid for as a project 

cost. 

(i) A task list should be used to 

identify which services are included in 

the management fee, which services are 

included in project operations, and 

which are pro-rated along with the 

methodology used to pro-rating of 

expenses between management agent 

fees and project operations. Some 

property responsibilities are completed 

at the property and some offsite. Agent 

responsibilities may be performed at the 

property, the management office, or at 

some other location. 

(ii) Disputes may arise as to who 

performs certain services. The 

management plan and job descriptions 

should normally provide sufficient 

clarity to avoid or resolve any such 

disputes; however, sometimes 

clarifications and supporting materials 

may be required to resolve disputes. The 

decision must be made based on the 

most complete evaluation of the facts 

presented. 

(j) Management certification. (1) As a 

condition of approval of project 

management, including borrowers who 

self-manage, borrower and management 

agents must execute an Agencyapproved certification certifying that: 

(i) Borrowers and management agent 

agree to operate the housing project in 

accordance with the management plan; 

(ii) Borrowers and the management 

agent will comply with Agency 

requirements, loan or grant agreements, 

applicable local, State, Tribal, and 

Federal laws and ordinances, and 

contract obligations, will certify that no 

payments have been made to anyone in 

return for awarding the management 

contract to the management agent, and 

will agree that such payments will not 

be made in the future; 

(iii) Borrowers and the management 

agent will comply with Agency notices 

or other policy directives that relate to 

the management of the housing project; 

(iv) Management agreement between 

the borrower and management agent 

complies with the requirements of this 

section; 

(v) Allowable management fees are 

assessed and paid out of the housing 

projects’ general operating account. 

Borrowers and management agents will 

comply with Agency requirements 

regarding management fees as specified 

in paragraph (i) of this section, and 

allocation of management costs between 

the management fee and the housing 

project financial accounts specified in 

§ 3560.302(c)(3); 

(vi) The borrower and the 

management agent will not purchase 

goods and services from entities that 

have an identity-of-interest (IOI) with 

the borrower or the management agent 

until the IOI relationship has been 

disclosed to the Agency according to 

paragraph (g) of this section, not denied 

by the Agency under paragraph (d)(3) of 

this section, and it has been determined 

that the costs are as low as or lower than 

arms-length, open-market purchases; 

and 

(vii) The borrower and the 

management agent agree that all records 

related to the housing project are the 

property of the housing project and that 

the Agency, OIG, or GAO may inspect 

the housing records and the records of 

the borrower, management agent, and 

suppliers of goods and services having 

an IOI with the borrower or with a 

management agent acting as an agent of 

the borrower upon demand. 

(2) A certification will be executed 

each time new management is proposed 

and/or a management agreement is 

executed or renewed. Any amendment 

to a management certification must be 

approved by the Agency and the 

borrower. 

* * * * * 

■ 7. Amend § 3560.104 by revising 

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

§ 3560.104 Fair housing. 

* * * * * 

(b) * * * 

(1) Borrowers with housing projects 

that have five or more rental units must 

prepare and maintain an Affirmative 

Fair Housing Marketing Plan (AFHMP) 

as defined in 24 CFR part 200, subpart 

M. 

* * * * * 

■ 8. Amend § 3560.105 by revising 

paragraphs (c)(4) and (f)(10) to read as 

follows: 

§ 3560.105 Insurance and taxes. 

* * * * * 

(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 prior to loan 

or grant approval. 

* * * * * 

(f) * * * 

(10) Deductible amounts (excluding 

flood, windstorm, earthquake and 

sinkhole insurance, or mine subsidence 

insurance) must be accounted for in the 

replacement reserve account, unless the 

deductible does not exceed the 

maximum deductible allowable as 

indicated in paragraph (f)(9)(i) of this 

section. Borrowers who wish to increase 

the deductible amount must deposit an 

additional amount to the reserve 

account equal to the difference between 

the Agency’s maximum deductible and 

the requested new deductible. The 

Borrower will be required to maintain 

this additional amount so long as the 

higher deductible is in force. 

* * * * * 

Subpart D—Multi Family Housing 

Occupancy 

■ 9. Amend § 3560.152 by revising 

paragraphs (c) heading and introductory 

text, (c)(1) introductory text, and 

(e)(2)(iv) to read as follows: 

§ 3560.152 Tenant eligibility. 

* * * * * 

(c) Requirements for elderly housing, 

congregate housing, and group homes. 

In addition to the requirements of 

paragraph (a) of this section, the 

following occupancy requirements 

apply to elderly housing and congregate 

housing or group homes: 

(1) For elderly housing and congregate 

housing, the following provisions apply: 

* * * * * 

(e) * * * 

(2) * * * 

(iv) Since tenant certifications are 

used to document interest credit and 

rental assistance eligibility and are a 

basic responsibility of the borrower 

under the loan documents, borrowers 

who fail to submit annual or updated 

tenant certification forms within the 

time period specified in paragraph 

(e)(2)(iii) of this section will be charged 

overage, as specified in § 3560.203(c) 

and lost rental assistance. Unauthorized 

assistance, if any, will be handled in 

accordance with subpart O of this part. 

* * * * * 

■ 10. Amend § 3560.154 by revising 

paragraphs (a)(9) introductory text and 

(j) to read as follows: 


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§ 3560.154 Tenant selection. 

(a) * * * 

(9) Race, ethnicity, and gender 

designation. The following disclosure 

notice shall be used: 

* * * * * 

(j) Criminal activity. Borrowers will 

deny admission for criminal activity or 

alcohol abuse by household members in 

accordance with the provisions of 24 

CFR 5.854, 5.855, 5.856, and 5.857. 

■ 11. Amend § 3560.156 as follows: 

■ a. Revise paragraph (c)(1); 

■ b. Remove ‘‘and’’ at the end of 

paragraph (c)(6)(iii); 

■ c. Remove the period at the end of 

paragraph (c)(6)(iv) and add ‘‘; and’’ in 

its place; 

■ d. Add paragraph (c)(6)(v); and 

■ e. Revise paragraphs (c)(15) and (16). 

The revisions and addition read as 

follows: 

§ 3560.156 Lease requirements. 

* * * * * 

(c) * * * 

(1) Leases for tenants who hold a 

Letter of Priority Entitlement (LOPE) 

issued according to § 3560.660(c) and 

are temporarily occupying a unit for 

which they are not eligible must include 

a clause establishing the tenant’s 

responsibility to move when a suitable 

unit becomes available in the housing 

project. 

* * * * * 

(6) * * * 

(v) The Violence Against Women 

Reauthorization Act of 2013 and any 

amendments thereto. 

* * * * * 

(15) Leases, including renewals, must 

include the following language: 

‘‘It is understood that the use, or 

possession, manufacture, sale, or 

distribution of an illegal controlled 

substance (as defined by local, State, 

Tribal or Federal law) while in or on 

any part of this apartment complex 

premises or cooperative is an illegal act. 

It is further understood that such action 

is a material lease violation. Such 

violations (hereafter called a ‘‘drug 

violation’’) may be evidenced upon the 

admission to or conviction of the use, 

possession, manufacture, sale, or 

distribution of a controlled substance 

(as defined by local, State, Tribal, or 

Federal law) in any local, State, Tribal 

or Federal court. 

The landlord may require any lessee 

or other adult member of the tenant 

household occupying the unit (or other 

adult or non-adult person outside the 

tenant household who is using the unit) 

who commits a drug violation to vacate 

the leased unit permanently, within 

timeframes set by the landlord, and not 

thereafter to enter upon the landlord’s 

premises or the lessee’s unit without the 

landlord’s prior consent as a condition 

for continued occupancy by the 

remaining members of the tenant’s 

household. The landlord may deny 

consent for entry unless the person 

agrees to not commit a drug violation in 

the future and is either actively 

participating in a counseling or recovery 

program, complying with court orders 

related to a drug violation, or has 

successfully completed a counseling or 

recovery program. 

The landlord may require any lessee 

to show evidence that any non-adult 

member of the tenant household 

occupying the unit, who committed a 

drug violation, agrees not to commit a 

drug violation in the future, and to show 

evidence that the person is either 

actively seeking or receiving assistance 

through a counseling or recovery 

program, complying with court orders 

related to a drug violation, or has 

successfully completed a counseling or 

recovery program within timeframes 

specified by the landlord as a condition 

for continued occupancy in the unit. 

Should a further drug violation be 

committed by any non-adult person 

occupying the unit the landlord may 

require the person to be severed from 

tenancy as a condition for continued 

occupancy by the lessee. 

If a person vacating the unit, as a 

result of the above policies, is one of the 

lessees, the person shall be severed from 

the tenancy and the lease shall continue 

among any other remaining lessees and 

the landlord. The landlord may also, at 

the option of the landlord, permit 

another adult member of the household 

to be a lessee. 

Should any of the above provisions 

governing a drug violation be found to 

violate any of the laws of the land the 

remaining enforceable provisions shall 

remain in effect. The provisions set out 

above do not supplant any rights of 

tenants afforded by law.’’ 

(16) Leases for rental units accessible 

to individuals with disabilities occupied 

by those not needing the accessibility 

features must establish the tenant’s 

responsibility to move to another unit 

within 30-days of written notification 

that the unit is needed by an eligible 

qualified person with disabilities who 

requires the accessibility features of the 

unit. Additionally, the lease clause must 

ensure that the household may remain 

in the rental unit with accessibility 

features until an appropriately sized 

vacant unit within the project becomes 

available and then must move or vacate 

within 30 days of notification from 

borrower. 

* * * * * 

■ 12. Amend § 3560.158 by revising 

paragraph (d)(3) introductory text to 

read as follows: 

§ 3560.158 Changes in tenant eligibility. 

* * * * * 

(d) * * * 

(3) After the death of a tenant or cotenant in elderly housing, the surviving 

members of the household, regardless of 

age but taking into consideration the 

conditions of paragraph (d)(1) of this 

section, may remain in the rental unit in 

which they were residing at the time of 

the tenant’s or co-tenant’s death, even if 

the household is over housed according 

to the housing project’s occupancy rules 

except as follows: 

* * * * * 

■ 13. Amend § 3560.159 by revising 

paragraph (c) to read as follows: 

§ 3560.159 Termination of occupancy. 

* * * * * 

(c) Other terminations. Should 

occupancy be terminated due to 

conditions which are beyond the control 

of the tenant, such as a condition related 

to required repair or rehabilitation of the 

building, or a natural disaster, and prior 

to expiration of the disaster declaration, 

the tenants who are affected by such a 

circumstance are entitled to benefits 

under the Uniform Relocation Act and 

may request a Letter of Priority 

Entitlement (LOPE) from the Agency. If 

tenants need additional time to secure 

replacement housing, the Agency may, 

at the tenant’s request, extend the LOPE 

entitlement period. 

* * * * * 

Subpart E—Rents 

■ 14. Amend § 3560.205 by revising 

paragraph (e) to read as follows: 

§ 3560.205 Rent and utility allowance 

changes. 

* * * * * 

(e) Approval. If the Agency approves 

a rent or utility allowance increase 

request on which the comments were 

solicited, tenants or members receiving 

notice of a proposed rent or utility 

allowance change in accordance with 

paragraph (d)(2) of this section shall be 

notified of the rent or utility allowance 

change to be effective, at least 30 

calendar days from the date of the 

notification. 

* * * * * 

■ 15. Amend § 3560.207 by revising 

paragraph (b) to read as follows: 

§ 3560.207 Annual adjustment factors for 

Section 8 units. 

* * * * * 


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(b) Establishing rents in housing with 

HUD rent assistance. Borrowers will set 

basic, note, and HUD contract rents for 

housing receiving HUD project-based 

Section 8 assistance, as specified in 

§ 3560.202(c). 

* * * * * 

Subpart F—Rental Subsidies 

■ 16. Amend § 3560.252 as follows: 

■ a. Redesignate paragraphs (b)(2) 

through (4) as paragraphs (b)(3) through 

(5), respectively, and add new 

paragraph (b)(2); and 

■ b. Revise paragraph (c)(2) introductory 

text. 

The addition and revisions read as 

follows: 

§ 3560.252 Authorized rental subsidies. 

* * * * * 

(b) * * * 

(2) Agency housing vouchers; 

* * * * * 

(c) * * * 

(2) Tenants with subsidies from 

sources other than the Agency may be 

eligible for Agency rental assistance if 

all the following conditions are met. 

* * * * * 

■ 17. Amend § 3560.254 by revising 

paragraphs (c)(1), (2), (4), and (5) and 

adding paragraph (c)(6) to read as 

follows: 

§ 3560.254 Eligibility for rental assistance. 

* * * * * 

(c) * * * 

(1) With very low- or low-incomes 

who are eligible to live in MFH; 

(2) Whose net tenant contribution to 

rent determined in accordance with 

§ 3560.203(a)(1) is less than the basic 

rent for the unit; 

* * * * * 

(4) Who meet the occupancy rules/ 

policies established by the borrower in 

accordance with § 3560.155(e); 

(5) Who have a signed, unexpired 

tenant certification form on file with the 

borrower; and 

(6) Who is not delinquent on any 

Agency unauthorized assistance 

repayment agreements. 

■ 18. Revise § 3560.258 to read as 

follows: 

§ 3560.258 Terms of agreement. 

(a) Term of agreement. Rental 

assistance agreements will have a term 

of the later of 12 months from the first 

disbursement of the obligation or when 

funds under the agreement are 

exhausted. 

(b) Replacing expiring obligations. 

Rental assistance agreements may be 

renewed in accordance with 

§ 3560.255(a)(1). 

■ 19. Amend § 3560.259 by revising 

paragraphs (a)(3) and (4) and adding 

paragraph (d) to read as follows: 

§ 3560.259 Transferring rental assistance. 

(a) * * * 

(3) After a liquidation, prepayment, or 

natural maturity; 

(4) To the extent permitted by law, 

when any rental assistance units have 

not been used for a 6-month period 

(Section 515) or a 12-month period 

(Section 514 or 516); or 

* * * * * 

(d) Agency use of obligation balances. 

In lieu of transferring rental assistance 

units, the Agency may elect to utilize 

the remaining obligation balances of 

units identified in paragraphs (a)(2) and 

(3) of this section for renewal purposes. 

Subpart G—Financial Management 

■ 20. Amend § 3560.302 by revising 

paragraphs (c)(3)(ii) and (iii) and 

(c)(5)(i), (ii), and (iv) to read as follows: 

§ 3560.302 Accounting, bookkeeping, 

budgeting, and financial management 

systems. 

* * * * * 

(c) * * * 

(3) * * * 

(ii) Real estate tax and insurance 

account (if not part of the general 

operating account or unless escrowed by 

the Agency); 

(iii) Reserve account (unless escrowed 

by the Agency in accordance with 

§ 3560.65); 

* * * * * 

(5) * * * 

(i) All housing project funds must be 

held only in financial institution 

accounts insured by an agency of the 

Federal Government or held in 

securities meeting the conditions in this 

subpart. 

(ii) Funds maintained in an 

institution may not exceed the limit 

established for Federal deposit 

insurance. Funds exceeding the 

Federally insured limit under a Tax ID 

Number must be moved to a different 

qualified banking institution that will 

ensure the funds unless the current 

financial institution provides additional 

surety such as a collateral pledge that 

may already be in place. 

* * * * * 

(iv) All funds received and held in 

any account, except the tenant security 

deposit, membership fee, and patron 

capital accounts, are considered assets 

of the property and must be held in trust 

by the borrower for the loan obligations 

until used and serve as security, through 

transfers or assumptions for the Agency 

loan or grant until all outstanding 

balances are satisfied. 

* * * * * 

■ 21. Revise § 3560.303 to read as 

follows: 

§ 3560.303 Housing project budgets. 

(a) General requirements. (1) Using an 

Agency-approved format, borrowers 

must submit to the Agency for approval 

a proposed annual housing project 

budget prior to the start of the housing 

project’s fiscal year. The capital budget 

section of the annual project budget 

must include anticipated expenditures 

on the project’s long-term capital needs 

as specified in § 3560.103(c) and will 

assist the Agency on utilization of the 

reserve account for current or future 

rent increase requests. 

(2) Budget projections regarding 

income, expenses, vacancies, and 

contingencies must be realistic given the 

housing project’s history, current 

circumstances, and market conditions. 

(3) Borrowers must document that the 

operating expenses included in the 

budget accurately reflect reasonable and 

necessary costs to operate the housing 

project in a manner consistent with the 

objectives of the loan and in accordance 

with the applicable Agency 

requirements in this part. 

(4) Borrower must submit supporting 

documentation to justify housing project 

utility allowances. 

(5) Upon Agency request, borrowers 

must submit any additional 

documentation necessary to establish 

that applicable Agency requirements in 

this part have been met. 

(b) Allowable and unallowable project 

expenses. Expenses charged to project 

operations, whether for management 

agent services or other expenses, must 

be reasonable, typical, necessary and 

show a clear benefit to the residents of 

the property. Services and expenses 

charged to the property must show 

value added and be for authorized 

purposes. 

(1) Allowable expenses. Allowable 

expenses include those expenses that 

are directly attributable to housing 

project operations and are necessary to 

carry out successful operations. 

(i) Housing project expenses must not 

duplicate expenses included in the 

management fee as defined in 

§ 3560.102(i). 

(ii) Actual costs for direct personnel 

costs of permanent and part-time staff 

assigned directly to the project site. This 

includes managers, maintenance staff, 

and temporary help including their: 

(A) Gross salary; 

(B) Employer Federal Insurance 

Contributions Act (FICA) contribution; 


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11284 Federal Register / Vol. 87, No. 40 / Tuesday, March 1, 2022 / Rules and Regulations 

(C) Federal unemployment tax; 

(D) State unemployment tax; 

(E) Workers compensation insurance; 

(F) Health insurance premiums; 

(G) Cost of fidelity or comparable 

insurance; 

(H) Leasing, performance incentive, or 

annual bonuses that are clearly 

provided for by the site manager salary 

contract; 

(I) Direct costs of travel to off-site 

locations by on-site staff for property 

business or training; and/or 

(J) Retirement benefits. 

(iii) Legal fees directly related to the 

operation and management of the 

property including tenant lease 

enforcement actions, property tax 

appeals and suits, and the preparation 

of all legal documents. 

(iv) All outside account and auditing 

fees, if required by the Agency, directly 

related to the preparation of the annual 

audit, partnership tax returns, and 401– 

K’s, as well as other outside reports and 

year-end reports to the Agency, or other 

governmental agency. 

(v) All repair and maintenance costs 

for the project including: 

(A) Maintenance staffing costs and 

related expenses. 

(B) Maintenance supplies. 

(C) Contract repairs to the projects 

(e.g., heating and air conditioning, 

painting, roofing). 

(D) Make ready expenses including 

painting and repairs, flooring 

replacement, and appliance replacement 

as well as drapery or mini-blind 

replacement. (Turnover maintenance.) 

(E) Preventive maintenance expenses 

including occupied unit repairs and 

maintenance as well as common area 

systems repairs and maintenance. 

(F) Snow removal. 

(G) Elevator repairs and maintenance 

contracts. 

(H) Section 504 and other Fair 

Housing compliance modifications and 

maintenance. 

(I) Landscaping maintenance, 

replacements, and seasonal plantings. 

(J) Pest control services. 

(K) Other related maintenance 

expenses. 

(vi) All operational costs related to the 

project including: 

(A) The costs of obtaining and 

receiving credit reports, police reports, 

and other checks related to tenant 

selection criteria for prospective 

residents. 

(B) Photocopying or printing expense 

related to actual production of project 

brochures, marketing pieces, forms, 

reports, notices, and newsletters are 

allowable project expenses no matter 

what location or point of origin the 

work is performed including 

outsourcing the work to a professional 

printer. 

(C) All bank charges related to the 

property including purchases of 

supplies (e.g., checks, deposit slips, 

returned check fees, service fees). 

(D) Costs of site-based telephone 

including initial installation, basic 

services, directory listings, and longdistances charges. 

(E) All advertising costs related 

specifically to the operations of that 

project. This can include advertising for 

applicants or employees in newspapers, 

newsletters, social media, radio, cable 

TV, and telephone books. 

(F) Postage expense to mail out rental 

applications, third-party (asset income 

and adjustments to income) 

verifications, application processing 

correspondence (acceptance or denial 

letters), mailing project invoice 

payments, required correspondence, 

report submittals to various regulatory 

authorities for the managed property are 

allowable project expenses no matter 

what location or point of origin the mail 

is generated. 

(G) State taxes and other mandated 

Tribal, State, or local fees as well as 

other relevant expenses required for 

operation of the property by a thirdparty governmental unit. Costs of 

continuation financing statements and 

site license and permit costs. 

(H) Expenses related to site utilities. 

(I) Site office furniture and equipment 

including site-based computer and 

copiers. Service agreements and 

warranties for copiers, telephone 

systems and computers are also 

included (if approved by the Agency). 

(J) Real estate taxes (personal tangible 

property and real property taxes) and 

expenses related to controlling or 

reducing taxes. 

(K) All costs of insurance including 

property liability and casualty as well as 

fidelity or crime and dishonesty 

coverage for on-site employees and the 

owners. 

(L) All bookkeeping supplies and 

recordkeeping items related to costs of 

collecting rents on-site. 

(M) All office supplies and copies 

related to costs of preparing and 

maintaining tenant files and processing 

tenant certifications to include 

electronic storage. 

(N) Public relations expense relative 

to maintaining positive relationships 

between the local community and the 

tenants with the management staff and 

the borrowers. Chamber of Commerce 

dues, contributions to local charity 

events, and sponsorship of tenant 

activities, are examples. 

(O) Tax credit compliance monitoring 

fees imposed by Housing Finance 

Authorities (HFAs). 

(P) All insurance deductibles as well 

as adjuster expenses. 

(Q) Professional service contracts 

(audits, owner-certified submissions in 

accordance with § 3560.308(a)(2), tax 

returns, energy audits, utility 

allowances, architectural, construction, 

rehabilitation and inspection contracts, 

capital needs assessments (CNA), etc.). 

(R) Association dues to be paid by the 

project should be related to training for 

site managers or management agents. To 

the extent that association dues can 

document training for site managers or 

management agents related to project 

activities by actual cost or pro-ration, a 

reasonable expense may be billed to the 

project. 

(S) Legal fees if found not guilty of 

civil lawsuits, commercially reasonable 

legal expenses and costs for defending 

or settling lawsuits. 

(vii) With prior Agency approval, 

cooperatives and nonprofit 

organizations may use housing project 

funds to reimburse actual and typical 

asset management expenses directly 

attributable to ownership 

responsibilities. Such expenses may 

include: 

(A) Errors and omissions insurance 

policy for the Board of Directors. The 

cost must be prorated if the policy 

covers multiple Agency housing 

properties. 

(B) Board of Directors review and 

approval of proposed Agency’s annual 

operating budgets, including proposed 

repair and replacement outlays and 

accruals. The cost must be prorated if 

the policy covers multiple Agency 

housing properties. 

(C) Board of Directors review and 

approval of capital expenditures, 

financial statements, and consideration 

of any management comments noted. 

The cost must be prorated if the policy 

covers multiple Agency housing 

properties. 

(D) The cost must be prorated if the 

policy covers multiple Agency housing 

properties. 

(viii) Agency approved third party 

debt service for the project. 

(2) Unallowable expenses. Housing 

project funds may not be used for any 

of the following: 

(i) Equity skimming as defined in 42 

U.S.C. 543(a); 

(ii) Purposes unrelated to the housing 

project; 

(iii) Reimbursement of inaccurate or 

false claims; 

(iv) Court ordered settlement 

agreements, court ordered decrees, legal 

fees, or other costs that result from the 


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Federal Register / Vol. 87, No. 40 / Tuesday, March 1, 2022 / Rules and Regulations 11285 

filing of civil rights complaints or legal 

action alleging the borrower, or a 

representative of the borrower, has 

committed a civil rights violation. It is 

inappropriate to charge for legal services 

to represent any interest other than the 

borrower’s interest (i.e., representing a 

general partner or limited partner to 

defend their individual owner interest is 

not allowable); 

(v) Fines, penalties, and legal fees 

where the borrower or a borrower’s 

representative has been found guilty of 

violating laws, including, but not 

limited to, civil rights, and building 

codes. Charging for payment of 

penalties including opposition legal fees 

resulting from an award finding 

improper actions on the part of the 

owner or management agent is generally 

an inappropriate project expense. The 

party responsible generally pays such 

expenses for violating the standards or 

by their insurance carriers; 

(vi) Association dues unless related to 

training for site managers or 

management agents. To the extent that 

association dues can document training 

for site managers or management agents 

related to project activities by actual 

cost or pro-ration, a reasonable expense 

may be billed to the project; 

(vii) Pay for bonuses or monetary 

performance awards to site managers or 

management agents that are not clearly 

provided for by the site manager salary 

contract; 

(viii) Billing for parties or gifts to 

management agent staff; 

(ix) Billing for practices that are 

inefficient such as routine use of collect 

calls from a site manager to a 

management agent office; 

(x) Billing the project for computer 

hardware, some software, and internal 

connections that are beyond the scope 

and size reasonably needed for the 

services supplied (i.e., purchasing 

equipment or software for use by a site 

manager that is clearly beyond that 

needed to support project operations). 

Note that computer learning center 

activities benefiting tenants are not 

covered in this prohibition; or 

(xi) Costs of tenant services. 

(c) Priorities. The priority order of 

planned and actual budget expenditures 

will be: 

(1) Senior position lienholder, if any; 

(2) Operating and maintenance 

expenses, including taxes and 

insurance; 

(3) Agency debt payments; 

(4) Reserve account requirements; 

(5) All accounts payable; 

(6) Other authorized expenditures; 

and 

(7) Return on owner investment. 

(d) Determining if expenses are 

reasonable. Generally, expenses charged 

to project operations, whether for 

management agent services or other 

expenses, must be reasonable, typical, 

necessary and show a clear benefit to 

the residents of the property. Services 

and expenses charged to the property 

must show value added and be for 

authorized purposes. If such value is not 

apparent, the service or expense should 

be examined. 

(1) Administrative expenses for 

project operations exceeding 23 percent, 

or those typical for the area, of gross 

potential basic rents and revenues (i.e., 

referred to as gross potential rents in 

industry publications) highlight a need 

for closer review for unnecessary 

expenditures. Budget approval is 

required, and project resources may not 

always permit an otherwise allowable 

expense to be incurred if it is not 

fiscally prudent in the market. 

(2) Excessive administrative expenses 

can result in inadequate funds to meet 

other essential project needs, including 

expenditures for repair and 

maintenance needed to keep the project 

in sound physical condition. Actions 

that are improper or not fiscally prudent 

may warrant budget denial and/or a 

demand for recovery action. 

(e) Agency review and approval. (1) 

The Agency will only approve housing 

project budgets that meet the 

requirements of paragraphs (a) through 

(d) of this section. 

(2) If no rent change is requested, 

borrowers must submit budget 

documents for Agency approval 60 

calendar days prior to the start of the 

housing project’s fiscal year. The 

Agency will notify borrowers if the 

budget submission does not meet the 

requirements of paragraphs (a) through 

(d) of this section. The borrower will 

have 10 days to submit the additional 

material. 

(3) If a rent change is requested, the 

borrower must submit budget 

documents to the Agency and notify 

tenants of the requested rent change at 

least 90 calendar days prior to the start 

of the housing project’s fiscal year. 

(i) The Agency will notify borrowers 

if the budget submission does not meet 

the requirements of paragraphs (a) 

through (d) of this section, or if the rent 

and utility allowance request has been 

denied in accordance with § 3560.205(f). 

The borrower will have 10 days to 

submit the additional material to 

address any issues raised by the Agency. 

(ii) The rent change is not approved 

until the Agency issues a written 

approval. If there is no response from 

the Agency within the 30-day period, 

the rent change is considered automatic. 

The following budgets are not eligible 

for automatic approval: 

(A) Budgets with rent increases above 

$25 per unit; and 

(B) Budgets that are submitted late or 

that miss other deadlines set by the 

Agency. 

(4) If the Agency denies the budget 

approval, the Agency will notify the 

borrower in writing. 

(5) If budget approval is denied, the 

borrower shall continue to operate the 

housing project based on the most 

recently approved budget. 

■ 22. Amend § 3560.306 as follows: 

■ a. Revise paragraphs (a), (b), (d), and 

(e)(2); 

■ b. Redesignate paragraphs (g)(2) 

through (5) as paragraphs (g)(3) through 

(6), respectively, and add new 

paragraph (g)(2); and 

■ c. Redesignate paragraph (j)(2) as 

paragraph (j)(3) and add new paragraph 

(j)(2). 

The revisions and additions read as 

follows: 

§ 3560.306 Reserve account. 

(a) Purpose. To meet the major capital 

expense needs of a housing project, 

borrowers must establish and maintain 

a reserve account, unless escrowed by 

the Agency. 

(b) Financial management of the 

reserve account. Unless otherwise 

approved by the Agency, borrower 

management of the reserve account is 

subject to the requirements of 7 CFR 

part 1902, subpart A, regarding 

supervised bank accounts. 

* * * * * 

(d) Transfer of surplus general 

operating account funds. (1) The general 

operating account will be deemed to 

contain surplus funds when the balance 

at the end of the housing project’s fiscal 

year, after all payables and priorities, 

exceeds 20 percent of the operating and 

maintenance expenses. If the borrower 

is escrowing taxes and insurance 

premiums, include the amount that 

should be escrowed by year end and 

subtract such tax and insurance 

premiums from operating and 

maintenance expenses used to calculate 

20 percent of the operating and 

maintenance expenses. 

(2) If a housing project’s general 

operating account has surplus funds at 

the end of the housing project’s fiscal 

year as defined in paragraph (d)(1) of 

this section, the Agency will require the 

borrower to use the surplus funds to 

address capital needs, make a deposit in 

the housing project’s reserve account, 

reduce the debt service on the 

borrower’s loan, or reduce rents in the 

following year. At the end of the 

borrower’s fiscal year, if the borrower is 

required to transfer surplus funds from 


jspears on DSK121TN23PROD with RULES1
11286 Federal Register / Vol. 87, No. 40 / Tuesday, March 1, 2022 / Rules and Regulations 

1PSLF Report, September 2021 available at 

https://studentaid.gov/sites/default/files/fsawg/ 

datacenter/library/pslf-sep2021.xls. 

2 34 CFR 685.219(c). 

3See Press Release, Federal Student Aid, Public 

Service Loan Forgiveness Limited Waiver 

Opportunity, available at https://studentaid.gov/ 

announcements-events/pslf-limited-waiver. 

the general operating account to the 

reserve account, the transfer does not 

change the future required contributions 

to the reserve account. 

(e) * * * 

(2) Reserve accounts must be 

supervised accounts that require the 

Agency to approve all withdrawals; 

except, this requirement is not 

applicable when loan funds guaranteed 

by the Section 538 GRRH program are 

used for the construction and/or 

rehabilitation of a direct MFH loan 

project. Direct MFH loan borrowers, 

who are exempted from the supervised 

account requirement, as described in 

this section, must follow Section 538 

GRRH program regulatory requirements 

pertaining to reserve accounts. In all 

cases, Section 538 lenders must get 

prior written approval from the Agency 

before reserve account funds involving 

a direct MFH loan project can be 

disbursed to the borrower. 

* * * * * 

(g) * * * 

(2) Borrowers should include any 

needed capital improvements based on 

the needs identified in an Agency 

approved Capital Needs Assessment (if 

obtained) are completed within a 

reasonable timeframe. 

* * * * * 

(j) * * * 

(2) The Agency will allow for an 

annual adjustment to increase reserve 

account funding levels by Operating 

Cost Adjustment Factor (OCAF) as 

published by HUD annually. This will 

require a modification to the Loan 

agreement and the increase documented 

with budget submission as outlined in 

§ 3560.303. 

* * * * * 

Subpart I—Servicing 

■ 23. Amend § 3560.402 by revising 

paragraph (b) to read as follows: 

§ 3560.402 Loan payment processing. 

* * * * * 

(b) Required conversion to PASS. 

Borrowers with Daily Interest Accrual 

System (DIAS) accounts must convert to 

PASS with any loan servicing action. 

* * * * * 

Subpart L—Off Farm Labor Housing 

§ 3560.576 [Amended] 

■ 24. Amend § 3560.576 by removing 

the words ‘‘State Director’s’’ and adding 

in their place ‘‘MFH Leadership 

Designee’s’’ in paragraph (e). 

Subpart N—Housing Preservation 

§ 3560.656 [Amended] 

■ 25. Amend § 3560.656 by removing 

the word ‘‘will’’ and replacing it with 

‘‘may’’ in paragraph (a) introductory 

text. 

Joaquin Altoro, 

Administrator, Rural Housing Service. 

[FR Doc. 2022–03837 Filed 2–28–22; 8:45 am] 

BILLING CODE 3410–XV–P 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Chapter X 

Bulletin 2022–03: Servicer 

Responsibilities in Public Service Loan 

Forgiveness Communications 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Compliance bulletin and policy 

guidance. 

SUMMARY: The Consumer Financial 

Protection Bureau (CFPB) is issuing this 

Compliance Bulletin and Policy 

Guidance (Bulletin) regarding the 

servicing of Federal student loans, 

including Federal Family Education 

Loan Program and Perkins loans, for 

borrowers who may be eligible for 

Public Service Loan Forgiveness (PSLF). 

The Limited PSLF Waiver announced 

by the Department of Education on 

October 6, 2021 (PSLF Waiver) 

significantly changes the program’s 

eligibility criteria for a limited period. 

In communicating with borrowers about 

the PSLF program, servicers should 

consider taking certain actions to ensure 

compliance with the Dodd-Frank Wall 

Street Reform and Consumer Protection 

Act’s (Dodd-Frank Act’s) prohibition on 

unfair, deceptive, or abusive acts or 

practices (collectively, UDAAPs). In its 

oversight, the CFPB will be paying 

particular attention to whether student 

loan servicers provide complete and 

accurate information to consumers 

about the benefits they can receive 

under the PSLF Waiver and eligibility 

for PSLF generally. 

DATES: This bulletin is applicable on 

March 1, 2022. 

FOR FURTHER INFORMATION CONTACT: Matt 

Liles, Counsel, Office of Supervision 

Policy at 202–435–7435 or Carolyn 

Hahn, Senior Counsel, Office of 

Enforcement at 202–435–7212. If you 

require this document in an alternative 

electronic format, please contact CFPB_

Accessibility@cfpb.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Student debt in the United States 

recently topped over $1.75 trillion. 

PSLF is a benefit provided by Congress 

to Federal student loan borrowers to 

earn forgiveness of their Federal student 

loans after 10 years of public service. 

The U.S. Department of Education 

estimates that over 1.3 million student 

loan borrowers work in jobs that qualify 

for PSLF; moreover, hundreds of 

thousands of these borrowers have 

expressed interest in PSLF by filing 

forms to certify their public service 

employment.1

The CFPB’s supervisory work has 

revealed unfair or deceptive practices by 

student loan servicers that prevented 

many borrowers from making progress 

towards forgiveness. Accordingly, the 

CFPB is issuing this Bulletin to 

highlight the significant changes to 

PSLF eligibility criteria under the new 

waiver and the CFPB’s supervision and 

enforcement priorities with respect to 

PSLF and the PSLF Waiver. 

The Public Service Loan Forgiveness 

Program 

To qualify for PSLF under the original 

requirements, a borrower had to make 

120 on-time payments on a Direct Loan, 

while on a qualifying repayment plan, 

and while working in a qualifying 

public service job.2 In 2018, Congress 

created Temporary Expanded Public 

Service Loan Forgiveness (TEPSLF) 

which allows some borrowers to qualify 

for forgiveness based on payments made 

under repayment plans that were 

previously ineligible. 

The PSLF Waiver 

In October 2021, in response to the 

COVID–19 national emergency, the 

Department of Education announced a 

temporary easing of some PSLF program 

requirements to help many previously 

ineligible borrowers receive forgiveness 

based on their qualifying public service 

employment regardless of their loan 

type or repayment plan.3 Importantly, 

the PSLF Waiver allows borrowers with 

Federal Family Education Loan Program 

(FFELP) and Perkins loans to 

consolidate into a Direct Loan and 

receive credit toward loan forgiveness 

under PSLF for periods of repayment on 

the earlier loan(s). It also provides the 

same benefit to existing Direct 

Consolidation Loan borrowers resulting 


jspears on DSK121TN23PROD with RULES1