6418 Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Rules and Regulations 

Subpart O—Sun Grant Program 

§ 3430.1001 [Amended] 

■ 21. In § 3430.1001, in paragraph (d), 

remove the words ‘‘the Department of 

Energy’’ and add in their place ‘‘other 

appropriate Federal agencies (as 

determined by the Secretary)’’. 

§ 3430.1002 [Amended] 

■ 22. In § 3430.1002, remove the 

definition for the term ‘‘gasification.’’ 

§ 3430.1003 [Amended] 

■ 23. In § 3430.1003: 

■ a. In paragraph (a)(1), remove the 

words ‘‘at South Dakota State 

University’’; 

■ b. In paragraph (a)(2), remove the 

words ‘‘at University of Tennessee at 

Knoxville’’; 

■ c. In paragraph (a)(3), remove the 

words ‘‘at Oklahoma State University’’; 

■ d. In paragraph (a)(4), remove the 

words ‘‘at Cornell University’’; 

■ e. In paragraph (a)(5), remove the 

words ‘‘at Oregon State University’’; and 

■ f. In paragraph (a)(6), remove the 

words ‘‘at the University of Hawaii’’. 

§ 3430.1004 [Amended] 

■ 24. In § 3430.1004, in paragraph (a)(1), 

remove the words ‘‘multistate research, 

extension, and education programs on 

technology development and multiinstitutional and multistate integrated 

research, extension, and education 

programs on technology 

implementation’’ and add in their place 

the words ‘‘integrated, multistate 

research, extension, and education 

programs on technology development 

and technology implementation’’. 

§ 3430.1005 [Amended] 

■ 25. In § 3430.1005, in paragraph (b), 

remove the words ‘‘each of the five 

Centers’’ and add in their place the 

words ‘‘the Centers’’. 

§ 3430.1007 [Amended] 

■ 26. In § 3430.1007: 

■ a. In the first sentence of paragraph 

(a), remove the words ‘‘gasification’’ and 

‘‘the Department of Energy’’ and add in 

their place the words ‘‘bioproducts’’ and 

‘‘other appropriate Federal agencies’’ 

respectively; and 

■ b. Remove the second and third 

sentences of paragraph (a). 

■ c. Remove and reserve paragraph (b). 

Done at Washington, DC, this 21 day of 

January, 2016. 

Sonny Ramaswamy, 

Director, National Institute of Food and 

Agriculture. 

[FR Doc. 2016–02213 Filed 2–5–16; 8:45 am] 

BILLING CODE 3410–22–P 

DEPARTMENT OF AGRICULTURE 

Rural Housing Service 

7 CFR Part 3555 

RIN 0575–AC18 

Single Family Housing Guaranteed 

Loan Program 

AGENCY: Rural Housing Service, USDA. 

ACTION: Final rule. 

SUMMARY: This final rule follows 

publication of the December 9, 2013, 

interim final rule and makes changes in 

response to public comment and further 

consideration of certain issues by the 

Rural Housing Service (RHS or Agency) 

to the Single Family Housing 

Guaranteed Loan Program (SFHGLP). 

The changes made by this final rule are 

designed to further improve and clarify 

Agency instructions while strengthening 

and enhancing the SFHGLP process by 

reducing regulations, improving 

customer service to achieve greater 

efficiency, flexibility and effectiveness. 

This rule will allow RHS to manage the 

program more effectively and reduce 

SFHGLP risk of loss. 

DATES: This rule is effective on March 9, 

2016. 

FOR FURTHER INFORMATION CONTACT: 

Lilian Lipton, Finance and Loan 

Analyst, Single Family Housing 

Guaranteed Loan Division, STOP 0784, 

Room 2250, USDA Rural Development, 

South Agriculture Building, 1400 

Independence Avenue SW., 

Washington, DC 20250–0784, telephone: 

(202) 720–1452, email is lilian.lipton@

wdc.usda.gov. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866, Classification 

This final rule has been determined to 

be non-significant by the Office of 

Management and Budget (OMB) under 

Executive Order 12866. 

Executive Order 12988, Civil Justice 

Reform 

This rule has been reviewed under 

Executive Order 12988, Civil Justice 

Reform. Except where specified, all 

State and local laws and regulations that 

are in direct conflict with this rule will 

be preempted. Federal funds carry 

Federal requirements. No person is 

required to apply for funding under this 

program, but if they do apply and are 

selected for funding, they must comply 

with the requirements applicable to the 

Federal program funds. This rule is not 

retroactive. It will not affect agreements 

entered into prior to the effective date 

of the rule. Before any judicial action 

may be brought regarding the provisions 

of this rule, the administrative appeal 

provisions of 7 CFR part 11 must be 

exhausted. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA), Public 

Law 104–4, establishes requirements for 

Federal agencies to assess the effect of 

their regulatory actions on State, local, 

and tribal governments and the private 

sector. Under section 202 of the UMRA, 

the Agency generally must prepare a 

written statement, including a costbenefit analysis, for proposed and final 

rules with ‘‘Federal mandates’’ that may 

result in expenditures to State, local, or 

tribal governments, in the aggregate, or 

to the private sector, of $100 million, or 

more, in any one year. When such a 

statement is needed for a rule, section 

205 of the UMRA generally requires the 

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 final rule contains no Federal 

mandates (under the regulatory 

provisions of Title II of the UMRA) for 

State, local, and tribal governments or 

the private sector. Therefore, this rule is 

not subject to the requirements of 

sections 202 and 205 of the UMRA. 

Environmental Impact Statement 

This document has been reviewed in 

accordance with 7 CFR part 1940, 

subpart G, ‘‘Environmental Program.’’ It 

is the determination of the Agency that 

this action does not constitute a major 

Federal action significantly affecting the 

quality of the human environment, and, 

in accordance with the National 

Environmental Policy Act of 1969, 

Public Law 91–190, 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 States, or on 

the distribution of power and 

responsibilities among the various 

levels of government. Nor does this rule 

impose substantial direct compliance 

costs on State and local governments. 

Therefore, consultation with the States 

is not required. 

Regulatory Flexibility Act 

In compliance with the Regulatory 

Flexibility Act (5 U.S.C. 601 et seq.) the 

undersigned has determined and 


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Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Rules and Regulations 6419 

certified by signature of this document 

that this rule change will not have a 

significant impact on a substantial 

number of small entities. This rule does 

not impose any significant new 

requirements on Agency applicants and 

borrowers, and the regulatory changes 

affect only Agency determination of 

program benefits for guarantees of loans 

made to individuals. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

This executive order imposes 

requirements on Rural Development in 

the development of regulatory policies 

that have Tribal implications or preempt 

tribal laws. Rural Development 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 rule is not subject to the 

requirements of Executive Order 13175. 

If a Tribe determines that this rule has 

implications of which RD is not aware 

and would like to engage with RD on 

this rule, please contact RD’s Native 

American Coordinator at (720) 544– 

2911 or AIAN@wdc.usda.gov. 

Executive Order 12372, 

Intergovernmental Consultation 

This program/activity is not subject to 

the provisions of Executive Order 

12372, which require intergovernmental 

consultation with State and local 

officials. (See the Notice related to 7 

CFR part 3015, subpart V, at 48 FR 

29112, June 24, 1983; 49 FR 22675, May 

31, 1984; 50 FR 14088, April 10, 1985). 

Programs Affected 

This program is listed in the Catalog 

of Federal Domestic Assistance under 

Number 10.410, Very Low to Moderate 

Income Housing Loans (Section 502 

Rural Housing Loans). 

Paperwork Reduction Act 

The information collection and record 

keeping requirements contained in this 

regulation have been approved by OMB 

in accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). The assigned OMB control 

number is 0575–0179. 

E-Government Act Compliance 

The Rural Housing Service is 

committed to complying with the EGovernment Act, to promote the use of 

the Internet and other information 

technologies to provide increased 

opportunities for citizen access to 

Government information and services, 

and for other purposes. 

Non-Discrimination Policy 

The U.S. Department of Agriculture 

(USDA) prohibits discrimination against 

its customers, employees, and 

applicants for employment on the bases 

of race, color, national origin, age, 

disability, sex, gender identity, religion, 

reprisal, and where applicable, political 

beliefs, marital status, familial or 

parental status, sexual orientation, or all 

or part of an individual’s income is 

derived from any public assistance 

program, or protected genetic 

information in employment or in any 

program or activity conducted or funded 

by the Department. (Not all prohibited 

bases will apply to all programs and/or 

employment activities.) 

If you wish to file a Civil Rights 

program complaint of discrimination, 

complete the USDA Program 

Discrimination Complaint Form (PDF), 

found online at http://

www.ascr.usda.gov/complaint_filing_

cust.html, or at any USDA office, or call 

(866) 632–9992 to request the form. You 

may also write a letter containing all of 

the information requested in the form. 

Send your completed complaint form or 

letter to us by mail at U.S. Department 

of Agriculture, Director, Office of 

Adjudication, 1400 Independence 

Avenue SW., Washington, DC 20250– 

9410, by fax (202) 690–7442 or email at 

program.intake@usda.gov. 

Individuals who are deaf, hard of 

hearing or have speech disabilities and 

you wish to file either an EEO or 

program complaint please contact 

USDA through the Federal Relay 

Service at (800) 877–8339 or (800) 845– 

6136 (in Spanish). 

Persons with disabilities who wish to 

file a program complaint, please see 

information above on how to contact us 

by mail directly or by email. If you 

require alternative means of 

communication for program information 

(e.g., Braille, large print, audiotape, etc.) 

please contact USDA’s TARGET Center 

at (202) 720–2600 (voice and TDD). 

I. Background Information 

On December 9, 2013, at 78 FR 73928, 

RHS published for public comment an 

interim final rule (December 2013 

interim final rule) to replace an existing 

rule and process that was outdated. The 

December 2013 interim final rule 

submitted for public comment was 

intended to make the process of 

utilizing the SFHGLP clearer and 

streamlined in an effort to achieve 

greater efficiency, flexibility and 

effectiveness in managing the SFHGLP. 

The principles that guided RHS in the 

development of this rule are included in 

the December 2013 interim final rule. 

The public comment period for the 

December 2013 interim final rule closed 

on January 8, 2014. The effective date of 

implementation was to occur on 

September 1, 2014. In response to 

numerous requests to extend the 

implementation period and the desire of 

RHS to allow ample time for lenders 

and consumers to receive training and 

implement changes that occurred with 

the implementation of the interim final 

rule, RHS announced a delayed 

implementation date. This 

announcement was made by publication 

of a notice in the Federal Register on 

August 22, 2014 (79 FR 49659). Effective 

with the announcement on August 22, 

2014, the effective date of the interim 

final rule was delayed from September 

1, 2014, to December 1, 2014. 

II. This Final Rule; Changes to the 

December 9, 2013, Interim Final Rule 

This final rule follows publication of 

the December 9, 2013, interim final rule 

and takes into consideration the public 

comments received. The public 

comment period on the interim final 

rule closed on January 8, 2014. RHS 

received comments from twelve 

respondents consisting of eight lenders, 

an Agency employee and two interest 

groups. The comments were not 

substantive in nature, resulting in minor 

changes to the final rule. Most 

commenters were supportive of the 

interim final rule and commenters were 

satisfied with the technical guidance 

provided in the accompanying release of 

the Technical Handbook, ‘‘SFH 

Guaranteed Loan Program Technical 

Handbook’’ which accompanied the 

December 2013 interim final rule, 

available at: http://www.rd.usda.gov/

publications/regulations-guidelines/

handbooks. RHS did not receive any 

comments that opposed the rule. 

After careful consideration of the 

issues raised by the commenters, RHS 

will adopt an amended version of the 

interim final rule. None of the changes 

are considered material. Specifically 

RHS has made the following changes to 

the December 2013 interim final rule: 

1. Editorial and technical changes. 

This rule clarifies terminology and 

provides editorial and technical changes 

to correct cross-references in the rule, 

punctuation, grammar and spelling at 

the following Sections: 

§ 3555.5(d)(7) 

§ 3555.101(b)(6)(x) and (xi) 

§ 3555.103(a) 

§ 3555.107(h) 

§ 3555.151(h)(2) 

§ 3555.151(i)(2) 

§ 3555.256(b)(2)(vi) 


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6420 Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Rules and Regulations 

§ 3555.306(f)(1) 

2. Environmental requirements. This 

final rule will expand an applicant’s 

ability to purchase a flood insurance 

policy at § 3555.5(d)(5) and (6) for a 

dwelling in a Special Flood Hazard Area 

(SFHA) from a private insurance 

company meeting the requirements of 

42 U.S.C. 4012a (b)(1)(A). Additionally, 

the word ‘‘habitable’’ has been removed 

from the December 2013 interim final 

rule at § 3555.5(d)(7) to coincide with 

language utilized by the Federal 

Emergency Management Agency 

(FEMA). 

3. Discount points as an eligible loan 

purpose. RHS has reconsidered 

comments received in response to the 

2013 interim final rule regarding 

discount points as a permissible loan 

purpose for moderate-income applicants 

at § 3555.101(b)(6)(vi). In reconsidering 

the comment, RHS will allow discount 

points in the final rule, as a permissible 

loan purpose, to ‘‘buy-down’’ the 

interest rate for moderate income 

applicants in addition to low-income 

applicants. The December 2013 interim 

final rule limited discount points as an 

eligible loan purpose to low-income 

applicants only. The Agency changed its 

position regarding discount points as an 

eligible loan purpose to allow all 

applicants the opportunity to lower the 

interest rate on the home loan. The 

Agency previously argued that moderate 

income borrowers were less likely to 

need to obtain a lower interest rate. 

Purchasing mortgage points is very 

common practice. It doesn’t always 

make financial sense. Since this option 

may reduce the monthly mortgage 

payments and savings in accrued 

interest over the life of the loan, the 

Agency reconsidered its positon by 

allowing the applicant to determine if 

financing discount points will make 

financial sense for the applicant. This 

optional loan purpose is considered a 

prepaid mortgage cost, limiting the 

maximum loan amount to the appraised 

value of the collateral offered with the 

mortgage loan request. If utilized, the 

interest rate prior to reduction must be 

no greater than the maximum rate 

revealed at § 3555.104(a). 

4. Loan terms. At § 3555.104(a)(3) 

under loan terms, the December 2013 

interim final rule adopted the current 

Freddie Mac required net yield in 

addition to the existing Fannie Mae 

posted yield for 90-day delivery to 

establish the interest rate of the loan. 

Freddie Mac has now ceased 

publication of their net yield rate. The 

final rule will permit lenders to 

establish the interest rate with the 

current Fannie Mae posted yield for 90- 

day delivery (actual/actual) for 30-year 

fixed rate conventional loans plus 1 

percent, rounded up to the nearest onequarter of 1 percent and will remove 

language applicable to the Freddie Mac 

required net yield. 

5. Combination construction and 

permanent loan. The December 2013 

interim final rule limited a contractor or 

builder at § 3555.105(b)(6) to 25 units 

per year unless approved by the Agency. 

In response to comments, RHS is 

removing this language. Additionally, 

the final rule provides that the 

combination construction and 

permanent loan feature of the SFHGLP 

may be utilized for a manufactured 

home if the builder’s contract includes 

the sum of the cost of the unit and all 

on-site installation costs. The December 

2013 interim final rule prohibited 

manufactured homes as an eligible loan 

purpose for this feature at § 3555.105(c). 

6. Credit qualifications. Section 

3555.151(i)(3)(ii) required applicants 

who had entered into a bankruptcy debt 

restructuring plan to have 12 months of 

seasoned established credit after 

completion of the plan prior considering 

the applicants credit favorable. 

Respondents to the December 2013 

interim final rule requested RHS align 

the language with that of like Federal 

programs. Like Federal programs, such 

as the U.S. Department of Housing 

Urban and Development and U.S. 

Department of Veterans Affairs allow 

lenders to consider applicants favorable 

with a partially completed bankruptcy 

debt restructuring plan. Having 

considered the comments, the Agency 

will amend the final rule for continuity 

with like Federal programs. The final 

rule will allow applicants who have a 

12 month pay out period under the 

bankruptcy debt restructuring plan 

elapsed to be considered satisfactory, 

provided payment performance was 

satisfactory and permission from the 

Trustee or Bankruptcy Judge is obtained 

to allow additional debt for the 

applicant. 

7. Loan modification plan. The 

December 2013 interim final rule 

established language to extend the terms 

of a loan modification for up to 30 years 

from the date of the loan modification 

at § 3555.303(b)(3)(iii). However it 

limited the guarantee to the date and 

terms established at issuance of the 

guarantee. The guarantee would not 

apply beyond the original 30 year loan 

term. The final rule provides authority 

to extend the guarantee to coincide with 

the terms of a loan modification that 

meets the eligibility criteria as noted in 

§ 3555.303. 

8. Extended-term loan modification. 

The December 2013 interim final rule 

allowed lenders under special servicing 

options at § 3555.304(c) to extend the 

repayment term up to a maximum of 40 

years from the date of loan modification 

through use of an extended-term loan 

modification. However, the December 

2013 interim final rule at 

§ 3555.304(a)(3) limited the existing 

guarantee to the terms of the loan note 

guarantee. The final rule provides 

authority to extend the guarantee to 

coincide with the terms of an extendterm loan modification meeting 

eligibility criteria of that section. 

III. Discussion of Public Comments 

Received on the December 9, 2013, 

Interim Final Rule 

The following section of the preamble 

presents a summary of substantive 

issues raised by the public in response 

to the December 2013 interim final rule 

and the RHS response to these issues. 

§ 3555.4 Mediation and Appeals 

Comment: The final rule should be 

modified to clarify that any participant 

receiving an adverse decision can 

appeal an RHS decision. 

RHS Response: The Technical 

Handbook accompanying the 

implementation of the December 2013 

interim final rule sets forth the criteria 

for appeal in accordance with 7 CFR 

parts 1 and 11. Furthermore, notice of 

any administrative appeal rights will be 

included in adverse decision letters. 

The final rule has not been amended 

based upon this comment. 

§ 3555.5 Environmental Requirements 

Comment: The final rule should be 

amended to accept private flood 

insurance policies. The Biggert-Waters 

Flood Reform Act of 2012 promotes 

acceptance of flood insurance by private 

mortgage companies, as opposed to 

flood policies issued by the Federal 

Government as part of the National 

Flood Insurance Program. 

RHS Response: The final rule has 

been amended based upon this 

comment. RHS will accept flood 

insurance by private mortgage 

companies that meet the requirements 

of 42 U.S.C. 4012a (b)(1)(A). The 

Technical Handbook accompanying 

publication of the December 2013 

interim final rule outlined the eligibility 

of private flood insurance policies. 

Comment. Amend the flood insurance 

language to ensure flood insurance 

coverage coincides with the National 

Flood Insurance Act of 1968, as 

amended. 

RHS Response. Flood insurance 

coverage and policy details are clarified 

in the Technical Handbook 

implemented with the December 2013 


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Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Rules and Regulations 6421 

interim final rule. RHS has not amended 

the final rule based upon this comment. 

§ 3555.7 Exception Authority 

Comment: The final rule should be 

amended to reflect the requirement that 

exception authority reasons be 

documented. 

RHS Response: The Technical 

Handbook accompanying the 

implementation of the December 2013 

interim final rule clarified the internal 

requirements surrounding documenting 

and submitting a request for exception 

authority to the RHS Administrator. The 

Agency has not amended the final rule 

based upon this comment. 

§ 3555.54 Sale of Loans to Approved 

Lenders 

Comment: Provide clarification 

regarding the sale of loans to approved 

lenders. Specifically, provide 

clarification surrounding the liability of 

purchasing and servicing lenders for 

origination errors. 

RHS Response: RHS has not amended 

the final rule based upon these 

comments. Section 3555.54 addresses 

the sale of loans to approved lenders 

and sets forth the policies surrounding 

the eligibility of entities and obligations 

the participating lender is bound to. 

Approved lenders may be an originator, 

a servicer or may hold the loan. The 

eligibility of entities to become an 

approved lender and enter into a lender 

agreement is set forth at § 3555.51. A 

loan may be serviced by an entity that 

does not hold a valid lender agreement. 

The approved lender holding the loan 

remains responsible for the actions of 

the servicer. In reference to the 

purchasing lender’s liability 

surrounding origination errors, 

§ 3555.108(d) sets forth requirements 

surrounding indemnification when an 

approved originating lender fails to 

meet the criteria. 

§ 3555.101 Loan Purposes 

Comment: The respondent requests 

the cost to design and construct access 

to broadband services as an eligible loan 

purpose. 

RHS Response: The Technical 

Handbook accompanying the 

implementation of the December 2013 

interim final rule clarified the 

requirements surrounding eligibility of 

broadband services. RHS has not 

amended the final rule based upon this 

comment. 

Comment: Add language to 

§ 3555.101(d)(3)(vi) to coincide with 

text in the preamble of the December 

2013 interim final rule regarding 

refinancing as an eligible loan purpose. 

The respondent suggested adding 

language ‘‘unless otherwise provided by 

the Agency’’ to the last sentence of the 

section referenced in the final rule to 

coincide with language published in the 

December 2013 interim final rule 

preamble for clarification. 

RHS Response: Paragraph (d)(3)(vi) of 

§ 3555.101 is amended to correct an 

omission of language in the interim final 

rule that led to a discrepancy between 

the statement in the preamble to the text 

of that rule. Some documentation, costs 

and underwriting requirements of 

subparts D, E and F may not apply to 

a refinance transaction. The last 

sentence of paragraph (d)(3)(vi) of 

§ 3555.101 is amended to read: 

‘‘Documentation, costs, and 

underwriting requirements for subparts, 

D, E, and F of this part apply to 

refinances, unless otherwise provided 

by the Agency. 

§ 3555.102 Loan Restrictions 

Comment: The respondent requests 

RHS clarify the language in the final 

rule surrounding seller concession 

limitations. The respondent proposes 

additional language to exclude lender 

credits which can be contributed 

towards an applicant’s closing costs. 

Additionally the respondent requests 

excluding a lender cure payment, as a 

result of undisclosed items on the Good 

Faith Estimate, from the maximum 

concession limitation. 

RHS Response: RHS has not amended 

the rule based upon this comment. 

Internal administrative procedures have 

been removed from the rule and are 

provided in the Technical Handbook 

implemented with the December 2013 

interim final rule. The purpose of the 

Technical Handbook is to remove the 

detailed administrative instructions and 

allow for a responsive update to the 

handbook to mortgage industry changes. 

Details and guidance regarding seller 

concession limitations can be found in 

the Agency’s Handbook. Should 

questions surrounding premium pricing 

and penalties for lender cures arise, the 

Technical Handbook will be updated to 

provide further guidance. 

§ 3555.104 Loan Terms 

Comment: As of January, 2013, 

Freddie Mac no longer publishes the 

Required Net Yield (RNY) information. 

Because it is not published, it is not 

feasible for lenders to be required to 

utilize this rate. The reference to this 

requirement should be removed. 

RHS Response: RHS concurs with this 

respondent and has removed the 

language in the final rule that requires 

a comparison to the maximum interest 

rate of the loan to Freddie Mac’s RNY. 

In addition, the final rule corrects the 

reference to the Web site containing 

information relevant to the calculation 

of maximum interest rate. 

Comment: Respondent supports an 

extended repayment period of 40 years 

since credit unions may offer repayment 

terms of up to 40 years for residential 

mortgage loans. 

RHS Response: RHS is unable to 

amend the final rule based upon this 

comment. The Housing Act of 1949 [42 

U.S.C. 1472], as amended, limits the 

term of the guarantee to 30 years at 

section 502(h)(7)(A) of the Act. 

§ 3555.105 Combination Construction 

and Permanent Loans 

Comment: RHS should clarify 

language with additional detail 

surrounding contractor/builder method, 

the limitation of 25 units per year per 

builder and introductory language. 

RHS Response: The Agency has 

amended the rule based upon this 

comment. The Agency will no longer 

limit the builder to 25 units per year 

without further approval by RHS. 

Instead the Agency will rely upon the 

lender and the technical guidelines set 

forth in the accompanying Technical 

Handbook implemented with the 

December 2013 interim final rule that 

provides the administrative instructions 

and detail of processing the 

combination construction and 

permanent loan feature and qualifying 

the builder for participation in the 

combination construction to permanent 

feature. 

Comment: Respondent requests 

reference to ‘‘annual guarantee fee’’ be 

struck and replaced with ‘‘annual fee’’ 

at § 3555.105(d)(3). 

RHS Response: The Agency agrees 

with the respondent and will amend the 

language at § 3555.105(d)(3) for 

language consistency to coincide with 

language in the final rule that 

implemented the annual fee published 

in the Federal Register (77 FR 40785) on 

July 11, 2012. The word ‘‘guarantee’’ 

will be removed from the section 

reference in the final rule. 

§ 3555.107 Application for and 

Issuance of the Loan Guarantee 

Comment: The Agency should amend 

the rule to allow a validity period for an 

appraisal of 180 days in lieu of 120 

days. The respondent indicates the 

application process together with 

increased federal regulations 

surrounding mortgage loan processing is 

now lengthy and the appraisal could 

expire during the application process. 

RHS Response: RHS has not amended 

the final rule based upon this comment. 

The validity period of the appraisal 

report coincides with that of other 


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6422 Federal Register / Vol. 81, No. 25 / Monday, February 8, 2016 / Rules and Regulations 

Federal agencies, such as the US 

Department of Housing Urban and 

Development, along with Government 

Sponsored Enterprise (Fannie Mae and 

Freddie Mac) who require the age of the 

appraisal report to be no greater than 

four months old on the date of note. 

Additional technical guidance can be 

found in the Technical Handbook 

published and implemented with the 

December 2013 interim final rule. 

§ 3555.108 Full Faith and Credit 

Comment: The December 2013 

interim final rule removed the clear 

distinction between the originating 

lender and servicing lender regarding 

indemnification. This may prevent 

servicing lenders from fully embracing 

the program limiting the benefits of 

servicing competition for the borrower 

and lenders. 

RHS Response: RHS agrees to add the 

word ‘‘originating’’ to the sentence 

referencing the continued eligibility of 

the lender. The use of the word will 

further clarify the intent of 

indemnification when a lender fails to 

originate a loan in accordance with 

requirements. It will coincide with 

language in the final rule implementing 

indemnification for the SFHGLP that 

holds originating lenders accountable in 

the future should the Agency seek 

indemnification from the lender if a loss 

is paid under certain circumstances. 

The final rule implementing 

indemnification was published in the 

Federal Register (76 FR 31217) on May 

31, 2011. The Technical Handbook 

accompanying the implementation of 

the December 2013 interim final rule 

expands upon the details surrounding 

the criteria outlined. 

§ 3555.151 Eligibility Requirements 

Comment: One commenter requests 

clarification at § 3555.151(e) on how the 

‘‘current home no longer adequately 

meets the applicant’s needs’’ when 

considering eligibility of a household 

for the SFHGLP, who owns a home and 

intends to retain it. 

RHS Response: The Agency has not 

amended the final rule based upon this 

comment. The Technical Handbook, 

released with the implementation of the 

December 2013 interim final rule 

provides the administrative procedures 

and details surrounding the language in 

the December 2013 interim final rule. 

The Handbook expands upon further 

guidance and possible examples when a 

home no longer meets the needs of the 

applicant. 

Comment: The respondent requests 

expanded language at § 3555.151(e)(4) to 

require documentation if the applicants 

are unable to secure conventional 

financing. 

RHS Response: RHS has not amended 

the substance of this provision in 

response to this comment. The 

Technical Handbook, implemented with 

the December 2013 interim final rule, 

which provides the administrative 

procedures, expands upon the criteria to 

confirm the applicant’s eligibility for the 

SFHGLP, including eligibility for 

conventional financing. The applicant 

must be ineligible for conventional 

financing, based upon the criteria 

outlined in the Handbook, for a lender 

to continue with the application under 

the SFHGLP. 

Comment: Amend the language to 

include missing text at § 3555.151(h)(2) 

to clarify language of a sentence. The 

sentence pertaining to repayment ability 

should read ‘‘The Handbook will define 

when a debt ratio waiver may be 

granted’’ as opposed to ‘‘The Handbook 

will define when a debt ratio may be 

granted.’’ 

RHS Response: RHS agrees with this 

comment as recommended and will 

amend the final rule to correct an 

editorial omission of text in the 

December 2013 interim final rule. 

Comment: Amend language at 

§ 3555.151(i)(2) to clarify text to indicate 

‘‘a loan’s acceptance’’. 

RHS Response: RHS agrees with this 

editorial comment and will amend the 

text of the final rule to clarify the 

sentence. 

Comment: The commenter proposes 

to amend the final rule at 

§ 3555.151(i)(3)(ii) by allowing 

applicant(s) who are presently in a 

Chapter 13 bankruptcy plan to qualify if 

the applicant has been in the plan for at 

least 12 months and payments under the 

plan have been paid as agreed. 

RHS Response: The Agency agrees 

with this comment. The mortgage 

industry and other like Federal 

Agencies offering insurance and 

guarantees allow the applicant to be in 

an active bankruptcy repayment plan, 

provided 12 months of the pay-out 

period under the bankruptcy has 

elapsed and the applicant’s payment 

performance has been satisfactory with 

all required payments made on time, 

and written permission from the 

bankruptcy court to enter into the 

mortgage transaction is obtained. For 

those lenders who utilize the Agency’s 

automated underwriting system, if the 

Chapter 13 bankruptcy has not been 

discharged for a minimum period of two 

years, the underwriting 

recommendation will generate a Refer 

underwriting recommendation requiring 

manual underwriting. 

Comment: A concern was expressed 

that the language requiring credit 

counseling may be difficult to 

implement based on available financing 

for these programs. The commenter 

requests RHS to publish a list of 

counseling programs readily available to 

all applicants and lenders. Moreover, 

the commenter requests RHS to require 

Agency personnel when conditioning 

for credit counseling in response to a 

lender’s request for Conditional 

Commitment confirm what credit 

counseling programs are available in the 

geographic area of the applicant. 

RHS Response: The language in the 

December 2013 interim final rule is 

consistent with the language and 

process found at 7 CFR part 1980, 

subpart D, § 1980.309(d)(4), which 

expired upon implementation of the 

December 2013 interim final rule. Credit 

counseling remains a supported 

educational opportunity, carried out by 

the lender. The Section 502 direct 

lending program, administered under 7 

CFR part 3550, at § 3550.11 requires the 

State Director to assess the availability 

of certified homeownership education 

providers in their respective states. A 

list of providers, including the 

reasonable costs, if any, to the 

participant is maintained by each state 

as a requirement to the referenced rule 

which is offered by RHS separate to the 

SFHGLP in each state. A list is available 

on each state Web site and can be 

accessed at: http://www.rd.usda.gov/. 

Therefore no change will be 

implemented to this final rule as a result 

of this comment. 

§ 3555.152 Calculation of Income and 

Assets 

Comment: Require applicant’s to be 

employed, maintain employment and 

work towards paying off the loan. 

RHS Response: RHS supports 

individual loan performance in order to 

fulfill its statutory obligation to the 

SFHGLP. The Agency has not changed 

the substance of the language as a result 

of this comment. 

Comment: Section 3555.152(b)(2) 

requires lenders to obtain and verify 

household income for all household 

members in order to determine the 

income eligibility of the household for 

the SFHGLP. Verification of income for 

the past 24 months is a regulatory 

change over the previous rule governing 

the SFHGLP (7 CFR part 1980, subpart 

D, which expired with implementation 

of the December 2013 interim final rule) 

and is excessive and provides no 

additional benefit to the applicant or 

RHS. 

RHS Response: Household income 

eligibility is a critical component of 


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every application. Requiring lenders to 

verify and validate the income of all 

household members for the previous 2 

years assures the public that only truly 

eligible households are provided 

assistance under the SFHGLP. 

Additionally this provision is consistent 

with language provided in RHS Section 

502 direct lending program, found at 7 

CFR part 3550 and was a 

recommendation by the Office of 

Inspector General (OIG) in an audit 

(Audit Report 04703–02–Ch dated 

September 2011) of the SFHGLP. RHS 

has not amended the final rule based 

upon this comment. 

§ 3555.202 Dwelling Requirements 

Comment: Objection to removal of 

minimal thermal efficiency 

requirements for existing homes. The 

commenter was concerned language 

countered the Government’s energy 

reduction and energy independence 

goals. 

RHS Response: As noted in the 

preamble of the December 2013 interim 

final rule, thermal standards for existing 

homes was removed from the rule as 

published in the Federal Register (72 

FR 70220) on December 11, 2007. The 

Agency will make no change to the 

present language in the final rule as a 

result of this comment. Energy efficient 

homes for both new and existing 

construction are encouraged as provided 

under § 3555.209 under the Rural 

Energy Plus loans. 

Comment: One comment was received 

in regards to the amount of funds 

required to cover an interior or exterior 

escrow holdback. Under the rule that 

expired (7 CFR part 1980, subpart D) 

with implementation of the December 

2013 interim final rule, the commenter 

felt the language should require escrow 

accounts for exterior development be 

funded at 150 percent of the cost of 

completion. The commenter requests 

the language in the final rule at 

§ 3555.202(c) be amended to require 

their interpretation of the language 

found at the now expired 7 CFR part 

1980, subpart D. The commenter cited 

risks of fund shortages, cost overruns 

and a builder’s failure to complete 

improvements as their premise for 

modifying the language. 

RHS Response: While the Agency 

appreciates the comment on this issue, 

the final rule regarding funding the 

escrow for future development is 

consistent with the practice found at the 

now expired 7 CFR part 1980, subpart 

D. Under the former rule and the 

December 2013 interim final rule, 

lenders are required to fund an escrow 

account in an amount sufficient to 

assure the completion of the remaining 

work. The language further encourages 

that amount to be 150 percent of the 

cost of completion, but may be higher if 

the lender determines a higher amount 

is needed. The final rule continues to 

encourage the lender to fund the escrow 

at a higher amount, if needed, but at a 

minimum requires the figure to be at 

least 100 percent of the cost of 

completion. Lenders may make an 

internal business decision to fund an 

escrow account at a higher amount. As 

a result of this comment, RHS will make 

no change to the language in the final 

rule. 

§ 3555.205 Special Requirements for 

Condominiums 

Comment: Clarity is requested in the 

language surrounding what 

requirements should be followed and 

when a condominium unit becomes 

ineligible for lending. 

RHS Response: RHS has not amended 

the substance of this provision in 

response to this comment. The 

Technical Handbook implemented with 

the December 2013 interim final rule, 

provides the administrative procedures 

and expands upon the detailed criteria 

to confirm requirements for lending on 

condominium units. 

§ 3555.251 Servicing Responsibility 

Comment: One respondent requested 

more detail in § 3555.251(c) 

surrounding the process of notification, 

the lender’s rights and opportunities to 

cure deficiencies when it is determined 

by the Agency that an approved lender 

has failed to provide acceptable 

servicing. 

RHS Response. The language in this 

final rule remains unchanged by RHS. 

The Technical Handbook implemented 

with the December 2013 interim final 

rule provides the details surrounding 

the expectations of loan servicing and 

monitoring responsibilities of lenders. 

When a lender has uncorrected 

performance problems, the Handbook 

outlines the actions the Agency will 

take regarding notification and appeal 

rights surrounding a termination. 

§ 3555.252 Required Servicing Actions 

Comment: One comment was received 

requesting § 3555.252(c)(2) of the final 

rule be amended to remove language 

requiring the borrower to notify the 

lender when damage occurs to the 

property. 

RHS Response: RHS has not amended 

the rule based on this comment. The 

Agency believes that the regulatory 

language is clear and consistent with 

standard industry practice requiring 

borrowers to notify the lender when 

damage is sustained to a property and 

hazard insurance proceeds will be 

disbursed. The Agency will issue 

additional guidance regarding insurance 

should it determine such clarification is 

necessary. Policy encompassing a 

lender’s responsibility to processing of 

hazard insurance proceeds as a result of 

damage to the security is detailed in the 

accompanying Technical Handbook 

implemented with the December 2013 

interim final rule. 

Comment: The language at 

§ 3555.252(d) should be revised to 

include exceptions to reporting to credit 

bureaus when loans are in 

Presidentially declared disaster areas 

and loans involving the Service 

members Civil Relief Act. 

RHS Response: RHS has not amended 

the rule based upon this comment. The 

provisions of the December 2013 

interim final rule emphasize a lender’s 

existing and continued responsibility to 

reporting defaulted mortgages to credit 

bureaus. Loans involving Service 

members Civil Relief Act will be subject 

to the provisions of the Act. Loans 

located in presidentially declared 

disaster areas may require special 

guidance. RHS will issue additional 

guidance should it determine 

clarification is necessary. The language 

as written pertains to the general 

servicing reporting requirements 

applicable to most SFHGLP loans. 

§ 3555.254 Final Payments 

Comment: One commenter requested 

RHS provide additional clarification 

regarding the release of security 

instruments. Presently the language at 

§ 3555.254 indicates lenders may release 

security instruments only after full 

payment of all amounts have been 

received. The commenter indicated if a 

lender’s decision is to not file a loss 

claim, the final decision to release 

security documents should lie with the 

lender. 

RHS Response: The intent of the 

language is to ensure and enforce that 

lenders cannot release security 

documents until a satisfaction of the 

debt in full has occurred. In response to 

this comment, RHS has amended the 

rule to add clarification. 

§ 3555.256 Transfer and Assumptions 

Comment: The words ‘‘continue with 

guarantee’’ are confusing at 

§ 3555.256(d)(2)(ii). The commenter 

requests clarity. 

RHS Response: RHS has not amended 

the rule based on this comment. The 

Agency believes that the regulatory 

language is clear in that RHS will 

continue with the guarantee, as opposed 

to voiding the guarantee in situations 

meeting the criteria of the section. RHS 


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will issue additional guidance regarding 

a transfer that does not trigger the dueon-sale clause should it determine such 

clarification is necessary. 

Comment: A respondent indicated 

§ 3555.256(d)(2)(iii) should be clarified 

to confirm a concurrent loan 

assumption and modification could 

occur if a transferee meeting the criteria 

assumes the guaranteed loan when the 

loan is past due. The commenter found 

the language ‘‘re-amortized’’ in the 

section confusing since it is not listed 

under § 3555.10 Definition and 

abbreviations of the rule. 

RHS Response: RHS has not amended 

the rule based on this comment. When 

a transferee meets the criteria set forth 

in the section referenced, the regulatory 

language allows the transferee to assume 

on the rates and terms of the original 

promissory note and in the case of a 

delinquent account, allows the 

transferee ‘‘at the time the assumption 

agreement is executed’’ to bring the loan 

current through reamortization. RHS 

believes the language ‘‘at the time the 

assumption agreement is executed’’ is 

clear and concise that the two actions 

would be concurrent. Regarding the 

definition of reamortization, the 

Technical Handbook, accompanying the 

release of the December 2013 interim 

final rule provides an extensive list of 

terminology and definitions, including 

reamortization, while the rule addresses 

substantive definitions. Reamortization 

is a common mortgage industry term 

referring to modifying the loan. 

Comment: The commenter requests 

clarification of § 3555.256(d)(3) and 

restrictions imposed for transfer of title 

triggering the due-on-sale clause. 

RHS Response: RHS released a 

Technical Handbook with 

implementation of the December 2013 

interim final rule, which provides the 

details and restrictions imposed for 

transfer of title triggering the due-onsale clause. As a result of this comment, 

RHS has not modified the final rule. 

§ 3555.257 Unauthorized Assistance 

Comment: In reference to 

§ 3555.277(b), a commenter questioned 

the lender’s ability to prove the 

applicant’s eligibility should the lender 

be challenged on inaccurate information 

in response to unauthorized assistance. 

Specifically in question was if the 

lender utilized RHS’s automated 

underwriting system when submitting 

the loan to the Agency, how the lender 

would prove the applicant was eligible 

if the Agency’s automated underwriting 

system rendered an acceptable 

recommendation. 

RHS Response: Lenders are required 

to retain a permanent record of the 

applicant’s request. The final 

underwriting recommendation obtained 

from the Agency’s automated 

underwriting system becomes part of 

the lender’s permanent record. Data 

reflected in the automated system must 

reflect and support information in the 

permanent file record retained by the 

lender. The records should support the 

lender’s ability to prove the applicant’s 

eligibility. Further, the Agency’s 

automated underwriting system is a tool 

utilized to streamline the decision of the 

lender, but does not replace the lender’s 

final determination to qualify the 

household for the SFHGLP or the loan 

request. No change to the final rule as 

a result of this comment has been made. 

§ 3555.301 General Servicing 

Techniques 

Comment: One comment was received 

in regards to language used surrounding 

past due accounts found at 

§ 3555.301(e). Verbiage in the December 

2013 interim final rule references 

months past due while the Consumer 

Financial Protection Bureau (CFPB) (12 

CFR part 1026) measures payments past 

due in days. It was suggested the 

Agency align our language with CFPB. 

RHS Response: RHS will amend the 

rule in Sections referencing months, as 

applicable, for continuity with CFPB 

when referencing the measurement of 

delinquent past due amounts. The 

Agency publishes, as a tool for lenders, 

a Loss Mitigation Guide. The Agency’s 

Loss Mitigation Guide published at 

https://usdalinc.sc.egov.usda.gov/

USDALincTrainingResourceLib.do 

currently provides for measurement in 

‘‘months/days’’ format in response to 

CFPB language. 

§ 3555.302 Protective Advances 

Comment: One commenter requested 

clarification of protective advances for 

costs other than taxes and insurance. 

They questioned if this section 

pertained to advances incurred prior to 

a foreclosure sale, or those that occur 

once a foreclosure sale occurs. 

RHS Response: RHS has not revised 

the substance of this provision in 

response to the comment. The Agency 

believes the language flow of the rule 

provides for a waterfall of loss 

mitigation workout alternatives from 

general servicing at § 3555.302, followed 

by traditional servicing (§ 3555.303), 

then by special loan servicing 

(§ 3555.304) prior to voluntary or 

involuntary liquidation (§§ 3555.305 

and 3555.306). The language in these 

sections provides the guidance, 

expectations and flow of order for 

servicing non-performing loans. With 

consideration for the comment, this 

final rule makes one minor change to 

the wording of this provision by 

referring to the protective advance 

expense as advances prior to 

liquidation, for clarification. 

§ 3555.303 Traditional Servicing 

Options 

Comment: Several comments were 

received in regard to traditional 

servicing options. The majority of 

comments requested clarification on 

details surrounding servicing options, 

such as if the agreement needs to be in 

writing, the maximum interest rate for 

modifications, fees and costs included 

in a loan modification, and eligibility 

for trial payments. 

RHS Response: RHS published a 

Technical Handbook which 

accompanied the implementation of the 

December 2013 interim final rule. The 

Handbook provides the information 

which responds to the commenters 

request for detailed information for 

offering servicing options to 

homeowners. In response to comments, 

RHS has added clarification at 

§ 3555.303(b)(3) to confirm that the loan 

modification must be a written 

agreement, the interest rate must be 

fixed, the rate of interest cannot exceed 

the original rate of the loan note 

guarantee issued and trial payments for 

traditional loan modifications are not 

required. 

Comment: One comment received 

urged the Agency to adopt, as a 

servicing option, a moratorium of 

payments, similar to that offered in the 

Section 502 SFH Direct lending program 

offered by the Agency under 7 CFR part 

3550. 

RHS Response: Traditional and 

special loan servicing options provide 

for various forbearance agreements, 

which in part could temporarily 

suspend or reduce payments. The 

Agency believes the forbearance 

agreement option (see § 3555.10 

definition of forbearance agreement) 

does provide for a moratorium 

(suspension) of payments temporarily, if 

warranted, based upon the 

circumstances of the loan serviced. The 

Technical Handbook accompanying the 

publication of the December 2013 

interim final rule provides additional 

details and loss mitigation workout 

alternatives. RHS has not amended the 

rule based upon this comment. 

Comment: RHS should extend the 

guarantee at § 3555.303(b)(3)(iii) to 

cover the full term of a loan 

modification as opposed to limiting the 

modification to the original term as 

referenced in the December 2013 

interim final rule. The commenter feels 


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it will expand a lender’s ability to assist 

a homeowner become successful. 

RHS Response: RHS agrees with the 

comment. To that end, the Agency has 

amended the final rule based on this 

comment to extend the guarantee to the 

loan term of the loan modification, 

provided the loan modification meets 

the eligibility criteria set forth in 

§ 3555.303(b)(3). 

§ 3555.304 Special Servicing Options 

Comment: A comment was received 

regarding the required pre-modification 

trial payment period found at 

§ 3555.304(b)(2). The commenter 

indicated that trial payment periods premodification decrease the flexibility to 

assist borrowers and could lead to 

greater losses for the Agency. 

RHS Response: RHS disagrees with 

this comment in regards to trial 

payments required at § 3555.304(b)(2). 

In the waterfall of loss mitigation 

options, once the lender has determined 

the use of traditional loan servicing 

options will not cure the borrower 

default, the use of special loan servicing 

options are considered. The objective of 

special loan servicing options is to offer 

struggling homeowners who are at risk 

of foreclosure reduced monthly 

mortgage payments that are affordable 

and sustainable over the long-term. Trial 

payment periods allow a borrower to 

demonstrate recovery from the financial 

problem by making 3 or 4 payments at 

the modified amount, after which the 

delinquent amount is capitalized into 

the modified loan. A trial period will 

help ensure the borrower can meet the 

modified terms and verify the proposed 

servicing plan will succeed in helping 

the borrower afford their home. If they 

are unable to demonstrate their ability 

to make their modified mortgage 

payment before being placed into a 

permanent modification, the lender can 

assist with a more suitable alternative to 

foreclosure that meets the borrower’s 

needs. Many loan servicers’ guidelines, 

other than RHS, require a trial period. 

Trial payments are a mortgage industry 

standard. Additionally, this provision is 

included to minimize loss to the 

government. RHS has not amended the 

final rule based upon this comment. 

Comment: Comments were received 

regarding the determination of the 

interest rate. Lenders requested 

reconsideration to the requirement to 

reduce an interest rate on an extendedterm loan modification at § 3555.304(c). 

Historically rates have been low. 

Lenders viewed this requirement as an 

impediment to assisting borrowers who 

were delinquent or in imminent default. 

Additionally lenders questioned if the 

interest rate, at execution of the 

modification agreement, was required to 

meet the maximum allowable interest 

rate at noted at § 3555.304(c)(2). 

RHS Response: Maximum interest 

rates cannot exceed the published rate 

as noted in § 3555.304(c)(2) if lowering 

the interest rate; or the interest rate of 

the loan guarantee issued. Reducing the 

rate is not a required condition to an 

extended-term loan modification in 

§ 3555.305(c). RHS will amend the final 

rule to correct language at 

§ 3555.304(c)(2) which references the 

maximum interest rate is tied to the date 

the loan modification is executed. 

Language will be corrected to indicate 

the maximum interest rate will be tied 

to when the loan modification is 

approved. 

RHS Comment: Multiple comments 

were received regarding the waterfall of 

loss mitigation options that must be 

considered prior to utilizing a mortgage 

recovery advance in § 3555.304(c). 

Concern was expressed that lenders 

would be forced to utilize an extendedterm loan modification with a 40 year 

term. When the loan is in a Ginnie Mae 

pool the lender must repurchase it to 

complete a loan modification. Requiring 

a 40 year term together with not 

extending the guarantee beyond the 

original maturity date subjects the 

lender to vulnerability that Ginnie Mae 

may not repurchase the loan after the 

modification occurs and that lenders 

may incur greater future losses if 

liquidated. 

RHS Response: Pursuant to 

§ 3555.304(c)(4), if the targeted mortgage 

payment to income ratio cannot be 

achieved using an extended-term loan 

modification, then the lender may 

consider a mortgage recovery advance. 

Before considering a mortgage recovery 

advance, the lender must extend the 

repayment term for 30 years from the 

date of loan modification. The lender 

may extend the repayment term for 40 

years from the date of loan modification, 

but the lender is not required to do so 

before utilizing a mortgage recovery 

advance. This language affords the 

lenders the flexibility to adhere to 

specific investor loan modification term 

extension requirements while 

encouraging lenders to achieve the 

targeted mortgage payment to income 

ratio using the servicing option(s) that 

will be least expensive for the 

government. Use of the mortgage 

recovery advance is limited because the 

mortgage recovery advance will be most 

expensive for the government. By 

imposing restrictions, RHS will promote 

the reduction of mortgage foreclosures 

in a cost-effective manner. Language at 

this section is unchanged regarding 

extended-term loan modification from 

the final rule implementing special 

servicing options published August 26, 

2010 (75 FR 52429) which became 

effective September 24, 2010. RHS has 

amended § 3555.305(c)(1) and (c) for 

clarity in response to comments. 

Comment: One comment was received 

regarding the mortgage recovery 

advance special servicing option at 

§ 3555.304(d). The commenter felt if the 

agency reimburses the lender for eligible 

advances, additional full financial risk 

and responsibility on the agency 

potentially will increase the cost to the 

overall SFHGLP. 

RHS Response: Lenders will advance, 

after obtaining Agency approval, for any 

Mortgage Recovery Advance that meets 

the criteria set forth in the December 

2013 interim final rule and 

supplemented by a Technical 

Handbook. Pursuant to § 3555.304(d)(7) 

and with language of the published final 

rule (75 FR 52429 published August 26, 

2010) in connection with the 

introduction of special loan servicing 

options, the lender may file a request for 

partial loss claim to obtain 

reimbursement of the eligible funds 

advanced. The claim for reimbursement 

will be processed by the Agency in 

advance of any final loss claim 

reimbursement (occurring after 

liquidation)—provided the lender has 

secured adequate security and the 

borrower is eligible for the advance. A 

future loss claim filed by a lender after 

liquidation will be adjusted by any 

amount of mortgage recovery advance 

reimbursed to the lender by the Agency. 

Borrowers are not required to make any 

monthly or periodic payments on the 

Mortgage Recovery Advance as outlined 

in § 3555.304(d)(6)(ii). The mortgage 

recovery advance is due and payable 

pursuant to § 3555.304(d)(6)(iii). The 

Agency has made no change to their 

collection procedures presently 

exercised on loss payments paid that do 

not involve a mortgage recovery 

advance. In accordance with 

§ 3555.304(d)(6)(v), RHS may pursue 

collection of the Federal debt from the 

borrower by any available means if the 

mortgage recovery advance is not repaid 

based on the terms in the promissory 

note and mortgage or deed-of-trust. This 

same approach is performed on loss 

payments that do not involve a mortgage 

recovery advance. Therefore, additional 

financial risk and responsibility to the 

Agency has not increased with 

publication of this rule. RHS has not 

amended the final rule based on this 

comment. 

Comment: A comment was received 

questioning the maximum Mortgage 

Recovery Advance (MRA) at 

§ 3555.304(d). The respondent 


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questioned how the advance will be 

determined and if the MRA maximum is 

not advanced on an initial MRA, can the 

balance of the maximum calculation of 

MRA be applied to another future MRA. 

RHS Response: RHS released a 

Technical Handbook and Loss 

Mitigation Guide with implementation 

of the December 2013 interim final rule. 

The handbook and guide outlines the 

details surrounding the eligibility and 

calculation of a maximum recovery 

advance. To be eligible, the lender must 

consider an extended-term loan 

modification of at least 30 years and set 

the interest rate not to exceed the 

maximum allowable rate as further 

outlined in § 3555.304(c)(1) and (2). If 

the targeted mortgage payment to 

income cannot be achieved using an 

extended-term loan modification, the 

lender may consider a mortgage 

recovery advance. The maximum 

mortgage recovery advance (up to 30 

percent of the unpaid principal balance 

as of the date of default) consists of the 

sum of arrearages not to exceed 12 

months of principal, interest, taxes and 

insurance (PITI); legal fees and 

foreclosure costs related to a cancelled 

foreclosure action; and principal 

reduction as outlined in 

§ 3555.304(d)(1) and (2). The principal 

deferment on the modified mortgage is 

determined by multiplying the unpaid 

principal balance by 30 percent and 

then reducing that amount by arrearages 

advanced to cure the default and any 

foreclosure costs incurred to that point. 

The principal deferment amount for a 

specific case shall be limited to the 

amount that will bring the borrower’s 

total monthly mortgage payment to 31 

percent of gross monthly income. In 

response to the comment, the following 

is an example of the calculation of a 

maximum Mortgage Recovery Advance 

when utilizing the Special Loan 

Servicing: 

Example. Unpaid Principal Balance = 

$150,000 

• Current Monthly Payment (PITI) = 

$1,220 (Principal and Interest = $920 

+ Taxes and Insurance = $300) 

• Current Other Recurring Debt = $800 

• Monthly Gross Income = $3,500 

• Number of Payments Past Due = 3 

• Total Arrearage = $3,660 

• Maximum Mortgage Recovery 

Advance = $150,000 × 30% = $45,000 

• Maximum Monthly Mortgage 

Payment = $3,500 × 31% = $1,085 

(Front Ratio) 

• Maximum Total Monthly Debt = 

$3,500 × 55% = $1,925 (Back Ratio) 

Special loan servicing is permitted 

one time over the life of the loan. RHS 

has not amended the final rule in 

response to this comment. 

Comment: One commenter felt the 

language in the December 2013 interim 

final rule changed the definition of the 

maximum mortgage recovery advance at 

§ 3555.304(d). 

RHS Response: The December 2013 

interim final rule language at 

§ 3555.304(d) incorporated the 

published final rule introducing the 

special loan servicing options available 

to lenders (75 FR 52429 published 

August 26, 2010). Details on eligibility, 

processing, approval, documentation 

requirements, and reimbursement to the 

lender can be found in the Technical 

Handbook and Loss Mitigation Guide 

implemented with the December 2013 

interim final rule. RHS has not amended 

the final rule in response to this 

comment. 

Comment: Clarification was requested 

on § 3555.304(d)(iv) on collecting the 

Mortgage Recovery Advance from the 

borrower. Concern was expressed if the 

lender was responsible for paying off 

the borrower’s MRA once a borrower 

voluntarily or involuntarily transfers 

title to the property. 

RHS Response: Pursuant to 

§ 3555.304(d)(6) the lender must have 

the borrower execute a promissory note 

payable to RHS and a mortgage or deedof-trust in recordable form perfecting a 

lien naming RHS as the security party 

for the amount of the mortgage recovery 

advance. The lender will record the 

mortgage or deed-of-trust in the 

appropriate local real estate records and 

provide the original promissory note to 

RHS. The Mortgage Recovery Advance 

will be interest free. Borrowers are not 

required to make any monthly or 

periodic payment; however, the 

borrower may voluntarily submit partial 

payment without incurring any 

prepayment penalty. The payment of 

the Mortgage Recovery Advance is not 

due until the earliest of (i) the maturity 

of the modified mortgage; (ii) the 

borrower transfers title to the property 

(by sale or by other voluntary or 

involuntary means), or (iii) a payoff of 

the mortgage. Pursuant to § 3555(d)(8) 

any RHS reimbursement issued for the 

Mortgage Recovery Advance to the 

lender on behalf of the borrower will be 

credited toward the maximum loan 

guarantee amount payable by the 

Agency under the guarantee. This credit 

or reduction in the ultimate loss claim 

payment is necessary since the Mortgage 

Recovery Advance is a partial claim 

under the guarantee. The lender is not 

expected to collect on the Mortgage 

Recovery Advance. RHS has not 

changed the final rule in response to 

this comment as § 3555.304(d) provides 

the provisions a lender must follow and 

additional administrative details are 

available through the Technical 

Handbook and Loss Mitigation Guide 

implemented with the December 2013 

interim final rule. 

§ 3555.305 Voluntary Liquidation 

Comment: To be eligible for a 

voluntary liquidation option, 

§ 3555.305(a)(3) indicates the borrower 

must presently occupy the property, 

unless non-occupancy is related to the 

same involuntary reason leading to the 

default. One comment was received 

asking for further relief and flexibility 

should the borrower act in good faith in 

vacating the premises to facilitate a preforeclosure sale or due to a financial 

hardship. 

RHS Response: RHS has not amended 

the rule based upon this comment. 

Further guidance and detail is provided 

in the Technical Handbook 

accompanying the implementation of 

the December 2013 interim final rule. 

To be eligible to participate in a 

voluntary liquidation, the borrower 

must occupy the property as their 

primary residence. A non-occupant 

borrower who seeks a voluntary 

liquidation option may be eligible 

should the lender verify that the need to 

vacate is related to the cause of the 

default, such as job loss (financial 

hardship), a mandatory employment 

transfer, divorce or death, for example. 

RHS feels the flexibility provided to 

allow non-occupant borrower eligibility 

for voluntary liquidation is a lenient 

standard and any further flexibility is 

not acceptable from a risk management 

perspective. 

§ 3555.306 Liquidation 

Comment: One commenter requested 

that the lender should be able to assign 

the loan to the government when the 

default occurs and prior to liquidation 

in accordance with the Housing Act of 

1949. 

RHS Response: The Housing Act of 

1949, as amended, at section 502(h)(15) 

provides the option to the program to 

allow a lender to transfer a loan in 

default to the government prior to 

liquidation. RHS has not exercised this 

option. RHS has selected a more cost 

effective strategy by requiring lenders to 

liquidate and sell an acquired property, 

while RHS exercises oversight and 

verifies proper use of government funds. 

Should RHS exercise the language 

available in the Housing Act in the 

future, language will be published. RHS 

has not amended the final rule in 

response to this comment. 

Comment: A respondent expressed 

concern regarding the requirement that 

in addition to a borrower paying all 

past-due amounts, advances and any 


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foreclosure costs when reinstating an 

account in liquidation a borrower must 

have the ability to continue making the 

scheduled payments on the loan 

pursuant to language found at 

§ 3555.306(c)(2). Clarification was 

requested on what actions by the lender 

are necessary to perform or comply with 

ensuring the borrower has the ability to 

continue making the scheduled 

payments on the loan if the loan is paid 

current and all fees are paid. 

RHS Response: RHS has considered 

the language and action questioned. 

RHS has omitted reference to the 

borrower’s ability to continue making 

scheduled payments when the loan is 

paid current and all fees are paid as 

noted in § 3555.306(c). 

Comment: One respondent indicated 

§ 3555.306(d)(3) seems to mandate 

creditors to force a debtor to reaffirm a 

debt. The respondent indicated most 

jurisdictions allow a ‘‘retain and pay’’ 

option, so that the debtor continues to 

pay the mortgage but is discharged of 

the personal liability by virtue of the 

Chapter 7 discharge. The respondent 

requested clarification on the language 

in the section in question. 

RHS Response: Language in the 

§ 3555.306(d)(3) provides the flexibility 

the respondent is seeking by instructing 

the lender to seek a reaffirmation under 

the criteria noted, whenever possible. 

RHS has not amended the final rule in 

response to this comment. 

Comment: Concern was expressed by 

a respondent in reference to language 

found at § 3555.306(f)(3) of the 

December 2013 interim final rule. The 

respondent felt the language limited the 

lender in the sale of property once the 

marketing period for an acquired 

property expired. The language 

indicates it is the Agency’s 

responsibility to obtain a liquidation 

value appraisal. Often times the lender’s 

receipt of that appraisal is delayed. The 

respondent is seeking assurance the 

lender can continue to sell the property 

while waiting for the Agency to respond 

with the determined liquidation value. 

Additionally the respondent expressed 

concern on the balance of language at 

§ 3555.306(f)(3) which limited accrued 

interest paid a loss claim to 90 days 

from the foreclosure sale or expiration 

of redemption period when calculating 

a loss claim request of the Agency. 

RHS Response: Pursuant to 

§ 3555.306(f)(3), to ensure the lender 

proactively seeks maximum recovery 

from the sale of the acquired property, 

RHS requires the lender to notify the 

Agency if the security property held for 

disposition remains unsold once the 

marketing period expires. The Agency 

orders a liquidation value appraisal in 

response to notification and provides 

the lender with the results of the report. 

With the value determined, a loss claim 

is calculated based upon a management 

sale factor, which estimates holding and 

resale costs. In response to the 

commenter who is seeking Agency 

approval to allow continued marketing 

while waiting for a liquidation value 

appraisal, once the marketing period has 

expired, and the lender has notified the 

Agency of the expiration, the loss claim 

will be calculated based upon a 

liquidation value appraisal pursuant to 

§ 3555.354(b). Additionally, the 

referenced section caps accrued interest 

to the first 90 days of the marketing 

period. This requirement assures the 

program goals are met in a cost-effective 

manner and minimizes loss to the 

government. The Technical Handbook 

implemented with the December 2013 

interim final rule provides an aggressive 

marketing and sales approach for 

lenders which when followed should 

result in a sale of acquired property 

within 90 days of foreclosure or 

redemption. As a result of guidance 

provided, RHS has not amended the 

final rule in response to this comment. 

§ 3555.307 Assistance in Natural 

Disasters 

Comment: Comments were received 

proposing slight phrase changes for 

clarification regarding special relief 

measures available when a natural 

disaster is designated found at 

§ 3555.307(c). 

RHS Response: The Agency has 

considered the request of commenters. 

While no substantive changes are made 

to the rule as written, the Agency has 

agreed to modify language slightly for 

clarification. 

§ 3555.354 Loss Claim Procedures 

Comment: One comment was received 

reporting the concern that RHS will no 

longer conduct an audit to determine 

why a loan failed and if there was 

reason to reduce or deny the loss claim. 

RHS Response: Details surrounding 

processing loss claim requests and 

reduction or denial of a proposed claim 

can be found in the Technical 

Handbook accompanying the 

implementation of the December 2013 

interim final rule. The Handbook 

indicates the Agency will review each 

loss claim for adherence to program 

regulation and make any reductions 

and/or denial of loss claim with 

information provided by the lender. 

RHS has not amended the final rule 

based upon this comment. 

Comment: One comment was received 

requesting the Agency to implement a 

partial claim payment option as 

provided for in the Housing Act of 1949, 

as amended. 

RHS Response: The December 2013 

interim final rule at § 3555.304(d)(7) 

provides for reimbursement from the 

Agency to the lender for a Mortgage 

Recovery Advance. This claim process 

is a partial claim payment filed by a 

lender in response to a Mortgage 

Recovery Advance under special 

servicing options (§ 3555.304). The 

Housing Act of 1949, as amended, at 

section 502(h)(14) provides this 

authority. The lender must comply with 

requirements set forth in 

§ 3555.304(d)(7) when requesting a 

partial claim. Any future loss claim filed 

by a lender is adjusted by any amount 

of Mortgage Recovery Advance 

reimbursed to the lender by the Agency. 

RHS has not amended the final rule 

based on this comment since language 

in the December 2013 interim final rule 

provided for a partial claim payment 

under the guarantee in response to the 

Mortgage Recovery Advance by the 

lender. 

Comment: Several comments were 

received in response to penalties 

imposed as a result of untimely 

submission of a disposition plan at 

acquisition or loss claim report once a 

property held by the lender is sold. 

Commenters felt the possible penalties 

implied were unduly harsh. 

RHS Response: RHS establishes 

delivery timelines for lenders to report; 

file claims or update records for 

essential documents in the servicing, 

loss mitigation, liquidation, acquisition 

and loss claim process. Time lines 

establish prompt response requiring 

lenders to comply with corresponding 

expectations. Time lines for regulatory 

compliance, for example—filing a claim, 

require actions by the lender and 

impose penalties associated with noncompliance with those timelines. 

Establishing expected timelines are a 

common method in the mortgage 

industry to insure a lender is 

responsibly attentive and focuses with 

reasonable due diligence in carrying out 

tasks associated with non-performing 

borrowers. Curtailment or penalties on 

claims when reasonable diligence and/ 

or reporting requirements are not met 

are common in the mortgage industry as 

with other federal agencies such as HUD 

or VA who insure or guarantee a 

lender’s loan. The December 2013 

interim final rule at § 3555.354 outlines 

what may occur should a lender fail to 

act timely. It also provides for 

extenuating circumstances beyond the 

lenders control by utilizing the language 

‘‘may’’ be imposed when referring to 

denying or reducing a claim. This 

language allows flexibility the 


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commenters are seeking based upon 

circumstances surrounding untimely 

filings. Additional detail regarding 

possible imposed penalties can be found 

in the Agency’s Technical Handbook 

that accompanied the implementation of 

the December 2013 interim final rule. 

RHS has not amended the final rule in 

response to these comments. 

§ 3555.355 Reducing or Denying the 

Claim 

RHS Comment: A comment was 

submitted in response to language in the 

rule that allows the Agency to reduce or 

deny a claim when a lender failed to 

follow regulatory time frames in 

servicing and liquidating, including 

payment of real estate taxes or hazard 

insurance premiums when due. The 

commenter requested that the rule 

define that a direct correlation and 

casual connection between the lender’s 

action or failure to act occurred which 

impaired the collateral and ultimately 

increased the loss. 

RHS Response: In response to the 

comment, the RHS feels language at 

§ 3555.355(a) is consistent with the 

commenter’s request for flexibility in 

that it provides language indicating RHS 

may reduce or deny any loss claim by 

the portion of the loss determined was 

caused by the lender’s action or failure 

to act. Additional detail surrounding 

time frames imposed and penalties for 

a lenders failure to act can be found in 

the Agency’s Technical Handbook that 

was implemented with the December 

2013 interim final rule. The final rule 

does not revise the Agency’s approach 

to reducing or denying a claim for a 

lender’s failure to comply with the 

conditions of the Loan Note Guarantee. 

List of Subjects in 7 CFR Part 3555 

Home improvement, Loan Programs— 

Housing and community development, 

Mortgage insurance, Mortgages, Rural 

areas. 

For the reason stated in the preamble, 

chapter XVIII, part 3555, title 7 of the 

Code of Federal Regulations is amended 

as follows: 

PART 3555—GUARANTEED RURAL 

HOUSING PROGRAM 

■ 1. The authority citation for part 3555 

continues to read as follows: 

Authority: 5 U.S.C. 301, 42 U.S.C. 1471et 

seq. 

Subpart A—General 

■ 2. Amend § 3555.5 by revising 

paragraphs (d)(5) through (7) to read as 

follows: 

§ 3555.5 Environmental requirements. 

* * * * * 

(d) * * * 

(5) The lender must comply with 

Federally mandated flood insurance 

purchase requirements. Existing 

dwellings in a SFHA are not eligible 

under the SFHGLP unless flood 

insurance through the FEMA National 

Flood Insurance Program (NFIP) is 

available for the community and flood 

insurance, whether NFIP, ‘‘write your 

own,’’ or private flood insurance, is 

purchased by the borrower. The lender 

will require the borrower to obtain, and 

maintain for the term of the mortgage, 

flood insurance for any property located 

in a SFHA, listing the lender as a loss 

payee. Purchase of existing structures 

within the federally regulated 

floodplain will not require 

consideration of alternatives to avoid 

adverse effects and incompatible 

development in floodplains; 

(6) The borrower must obtain, and 

continuously maintain for the life of the 

mortgage, flood insurance on the 

security property in an amount 

sufficient to protect the property 

securing the guaranteed loan. Flood 

insurance policies must be issued under 

the NFIP, or by a licensed property and 

casualty insurance company authorized 

to participate in NFIP’s ‘‘Write Your 

Own’’ program or private flood 

insurance policy, as approved by the 

lender. Lenders are required to accept 

private flood insurance policies, when 

purchased by a borrower, that meet the 

requirements of 42 U.S.C. 4012a 

(b)(1)(A). Lenders remain responsible to 

ensure a private flood insurance policy 

meets the requirements of 42 U.S.C. 

4012a (b)(1)(A). 

(7) Rural Development will not 

guarantee loans for new or proposed 

homes in an SFHA unless the lender 

obtains a final Letter of Map 

Amendment (LOMA) or a final Letter of 

Map Revision (LOMR) that removes the 

property from the SFHA, or performs an 

alternatives analysis in compliance with 

the Agencies National Environmental 

Policy Act regulation and obtains a 

FEMA elevation certificate that shows 

that the lowest floor (including 

basement) of the dwelling and all 

related building improvements are built 

at or above the 100-year flood plain 

elevation in compliance with the NFIP. 

Subpart C—Loan Requirements 

■ 3. Amend § 3555.101 by revising 

paragraphs (b)(6)(vi), (b)(6)(x), (b)(6)(xi), 

and (d)(3)(vi) to read as follows: 

§ 3555.101 Loan purposes. 

* * * * * 

(b) * * * 

(6) * * * 

(vi) Reasonable and customary loan 

discount points to reduce the note 

interest rate from the rate authorized in 

§ 3555.104(a). 

* * * * * 

(x) The amount of the loan up-front 

guarantee fee required by § 3555.107(g). 

(xi) The cost of establishing a cushion 

in the mortgage escrow account for 

payment of the annual fee required by 

§ 3555.107(h), not to exceed 2 months. 

* * * * * 

(d) * * * 

(3) * * * 

(vi) Two options for refinancing can 

be offered. Lenders may offer a 

streamlined refinance for existing 

Section 502 Guaranteed loans, which 

does not require a new appraisal. 

Streamlined financing may not be 

available for existing Section 502 Direct 

loans. The lender will pay off the 

principal balance of the existing Section 

502 Guaranteed loan. The new loan 

amount cannot include any accrued 

interest, closing costs or lender fees. The 

refinance up-front guarantee fee as 

established by the Agency can be 

included in the loan to be refinanced to 

the extent financing does not exceed the 

original loan amount. Lenders may offer 

non-streamlined refinancing for existing 

Section 502 Guaranteed or Direct loans, 

which requires a new and current 

market value appraisal. The new loan 

may include the principal and interest 

of the existing Agency loan, reasonable 

closing costs and lenders fees to extent 

there is sufficient equity in the property 

as determined by an appraisal. The 

appraised value may be exceeded by the 

amount of up-front guarantee fee 

financed, if any, when using the nonstreamlined option. Documentation, 

costs, and underwriting requirements of 

subparts D, E, and F of this part apply 

to refinances, unless otherwise provided 

by the Agency. 

* * * * * 

■ 4. Amend § 3555.103 by revising 

paragraph (a) to read as follows: 

§ 3555.103 Maximum loan amount. 

* * * * * 

(a) Market value. The market value of 

the property as determined by an 

appraisal that meets Agency 

requirements plus the amount of the upfront loan guarantee fee required by 

§ 3555.107(g), or 

* * * * * 

■ 5. Amend § 3555.104 by revising 

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

§ 3555.104 Loan terms. 

(a) * * * 


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(3) Does not exceed the Fannie Mae 

rate for 30 year fixed rate conventional 

loans, as authorized in Exhibit B of 

subpart A of part 1810 of this Chapter 

(RD Instruction 440.1, available in any 

Rural Development office) or online at: 

http://www.rd.usda.gov/publications/

regulations-guidelines and 

* * * * * 

■ 6. Amend § 3555.105 by: 

■ a. Removing paragraph (b)(6)and 

redesignating paragraph (b)(7) as (b)(6); 

and 

■ b. Revising paragraphs (c)(1) and 

(d)(3). The revisions read as follows: 

§ 3555.105 Combination construction and 

permanent loans. 

* * * * * 

(c) * * * 

(1) The loan is to finance the 

construction and purchase of a single 

family housing residence. 

Condominiums are ineligible for 

combination construction and 

permanent loans. 

* * * * * 

(d) * * * 

(3) Annual fees will begin in the 

month immediately following loan 

closing and will not be affected by loan 

reamortization following the completion 

of construction. Lenders may fund a 

lender imposed escrow account for 

borrower payments of the annual fee in 

accordance with § 3555.101(b)(6)(xi), as 

an eligible loan purpose, provided the 

market value of the property is not 

exceeded. 

* * * * * 

■ 7. Amend § 3555.107 by revising 

paragraph (h) to read as follows: 

§ 3555.107 Application for and issuance of 

the loan guarantee. 

* * * * * 

(h) Annual fee. The Agency may 

impose an annual fee of the lender not 

to exceed 0.5 percent of the average 

annual scheduled unpaid principal 

balance of the loan for the life of the 

loan to allow the Agency to reduce the 

up-front guarantee in § 3555.107(g). The 

annual fee will be applicable to 

purchase and refinance loan 

transactions. The annual fee may be 

passed on to the borrower by the lender. 

The Agency may assess a late charge to 

the lender if the annual fee is not paid 

by the due date, and the late charge may 

not be passed on to the borrower. 

Further administrative guidance is 

provided in the handbook. 

* * * * * 

■ 8. Amend § 3555.108 by revising 

paragraph (d) introductory text to read 

as follows: 

§ 3555.108 Full faith and credit. 

* * * * * 

(d) Indemnification. If the Agency 

determines that a lender did not 

originate a loan in accordance with the 

requirements in this part and the 

Agency pays a claim under the loan 

guarantee, the Agency may revoke the 

originating lender’s eligibility status in 

accordance with subpart B and may also 

require the lender: 

* * * * * 

Subpart D—Underwriting the Applicant 

■ 2. Amend § 3555.151 by revising 

paragraphs (h)(2) introductory text, 

(i)(2), and (i)(3)(ii) to read as follows: 

§ 3555.151 Eligibility requirements. 

* * * * * 

(h) * * * 

(2) The repayment ratio may exceed 

the percentage specified in paragraph 

(h)(1) of this section if certain 

compensating factors exist. The 

handbook will define when a debt ratio 

waiver may be granted. The automated 

underwriting system will take into 

account any compensating factors in 

determining whether the variance is 

appropriate. For manually underwritten 

loans, the lender must document 

compensating factors demonstrating that 

the household has higher repayment 

ability based on its capacity, willingness 

and ability to pay mortgage payments in 

a timely manner. The presence of 

compensating factors does not 

strengthen a ratio exception when 

multiple layers of risk, such as a 

marginal credit history, are present in 

the application. Acceptable 

compensating factors and supporting 

documentation for a proposed debt ratio 

waiver will be further defined and 

clarified in the handbook. 

Compensating factors include, but are 

not limited to: 

* * * * * 

(i) * * * 

(2) A loan’s acceptance by an Agency 

approved automated underwriting 

system eliminates the need for the 

lender to submit documentation of the 

credit qualification decision as loan 

approval requirements will be 

incorporated in the automated system. 

(3) * * * 

(ii) A bankruptcy in which debts were 

discharged within 36 months prior to 

the date of application by the applicant. 

A lender may give favorable 

consideration to applicants who have 

entered into a bankruptcy debt 

restructuring plan who have completed 

12 months of consecutive payments. 

The payment performance must have 

been satisfactory with all required 

payments made on time, and the 

Trustee or the Bankruptcy Judge must 

approve of the new credit. 

* * * * * 

Subpart E—Underwriting the Property 

■ 3. Amend § 3555.208 by revising 

paragraph (a)(2) to read as follows: 

§ 3555.208 Special requirements for 

manufactured homes. 

* * * * * 

(a) * * * 

(2) Site development work properly 

completed to HUD, state and local 

government standards, as well as the 

manufacturer’s requirements for 

installation on a permanent foundation. 

* * * * * 

Subpart F—Servicing Performing 

Loans 

■ 4. Revise § 3555.254 to read as 

follows: 

§ 3555.254 Final payments. 

Lenders may release security 

instruments only after payment for the 

satisfaction of the full debt, including 

any recapture, has been received and 

verified. 

■ 5. Amend § 3555.256 by revising 

paragraph (b)(2)(vi) to read as follows: 

§ 3555.256 Transfer and assumptions. 

* * * * * 

(b) * * * 

(2) * * * 

(vi) A new guarantee fee, calculated 

based on the remaining principal 

balance, must be paid to Rural 

Development in accordance with 

§ 3555.107(g). 

* * * * * 

Subpart G—Servicing Non-Performing 

Loans 

■ 6. Amend § 3555.301 by revising 

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

§ 3555.301 General servicing techniques 

* * * * * 

(e) Communication. Before an account 

becomes 60 days past due and if there 

is no payment arrangement in place, the 

lender must send a certified letter to the 

borrower requesting an interview for the 

purpose of resolving the past due 

account. 

(f) Prior to liquidation. Before an 

account becomes 60 days past due or 

before initiating liquidation, the lender 

must assess the physical condition of 

the property, determine whether it is 

occupied, and take necessary steps to 

protect the property. 

* * * * * 


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■ 7. In § 3555.302, revise the 

introductory text to read as follows: 

§ 3555.302 Protective advances. 

Lenders may pay the following preliquidation expenses necessary to 

protect the security property and charge 

the cost against the borrower’s account. 

* * * * * 

■ 8. Amend § 3555.303 by: 

■ a. Revising paragraphs (b)(3) 

introductory text and (b)(3)((i) and (iii); 

■ b. Adding paragraph (b)(3)(v); and 

■ c. Revising paragraph (c). 

The revisions and addition read as 

follows: 

§ 3555.303 Traditional servicing options. 

* * * * * 

(b) * * * 

(3) Loan modification plan. A loan 

modification is a permanent change in 

one or more of the terms of a loan that 

results in a payment the borrower can 

afford and allows the loan to be brought 

current. A loan modification must be a 

written agreement. 

* * * * * 

(i) Loan modifications must be a fixed 

interest rate and cannot exceed the 

interest rate of the loan note guarantee 

issued. 

* * * * * 

(iii) If necessary to demonstrate 

repayment ability, the loan term after 

reamortization may be extended for up 

to 30 years from the date of the loan 

modification. 

* * * * * 

(v) The borrower is not required to 

complete a trial payment plan prior to 

making the scheduled payments 

amended by the traditional loan 

servicing loan modification. 

(c) Terms of loan note guarantee. Use 

of traditional servicing options does not 

change the terms of the loan note 

guarantee except when the traditional 

servicing option meets the requirements 

of § 3555.303(b)(3)(iv). The loan 

guarantee will apply to loan terms 

extending beyond the 30 year loan term 

from the date of origination when a loan 

modification meets the criteria set forth 

in § 3555.303(b)(3)(iv). 

■ 8. Amend § 3555.304 by revising 

paragraphs (c) introductory text and 

(c)(1) and (2) to read as follows: 

§ 3555.304 Special servicing options. 

* * * * * 

(c) Extended-term loan modification. 

The Lender may modify the loan by 

reducing the interest rate to a level at or 

below the maximum allowable interest 

rate and extending the repayment term 

up to a maximum of 40 years from the 

date of loan modification. The loan 

guarantee will apply to loan terms 

extending beyond the 30 year loan term 

from the date of origination when a loan 

modification meets the criteria set forth 

in this section. 

(1) The interest rate must be fixed. 

The interest rate cannot exceed the 

interest rate of the loan note guarantee 

issued. When reducing the interest rate, 

the maximum rate is subject to 

paragraph (c)(2) of this section. 

(2) The Agency may establish the 

maximum allowable interest rate by 

publishing a notice of a change in 

interest rate. A notice of change in 

interest rate will be published as 

authorized in Exhibit B of subpart A of 

part 1810 of this chapter (RD Instruction 

440.1, available in any Rural 

Development office) or online at 

http://www.rd.usda.gov/publications/

regulations-guidelines/instructions. If 

the maximum allowable interest rate has 

not been so established, it shall be 50 

basis points greater than the most recent 

Freddie Mac Weekly Primary Mortgage 

Market Survey (PMMS) rate for 30-year 

fixed-rate mortgages (U.S. average) 

rounded to the nearest one-eighth of one 

percent (0.125%), as of the date the loan 

modification is approved. 

* * * * * 

■ 9. Amend § 3555.306 by revising 

paragraphs (c) and (f)(1) to read as 

follows: 

§ 3555.306 Liquidation. 

* * * * * 

(c) Unless State law imposes other 

requirements, the lender may reinstate 

an accelerated account if the borrower 

pays, or makes acceptable arrangements 

to pay, all past-due amounts, any 

protective advances, and any 

foreclosure-related costs incurred by the 

lender. 

* * * * * 

(f) * * * 

(1) The lender must prepare and 

maintain a disposition plan on all 

acquired properties. The lender will 

submit the property disposition plan 

and any subsequent changes for Agency 

concurrence in a timely manner as 

specified by the Agency. The lender 

may obtain a waiver of the concurrence 

requirement as provided for in 

§ 3555.301(h). The plan will include the 

proposed method for sale of the 

property, the estimated value based on 

an appraisal, minimum sale price, 

itemized estimated costs of the sale, and 

any other information that could impact 

the amount of loss on the loan. 

* * * * * 

■ 10. Amend § 3555.307 by revising 

paragraph (c) to read as follows: 

§ 3555.307 Assistance in natural disasters. 

* * * * * 

(c) Special relief measures. The 

servicer must evaluate on an individual 

case-by-case basis a mortgage that is (or 

becomes) seriously delinquent as the 

result of the borrower’s incurring 

extraordinary damages or expenses 

related to the natural disaster. The 

servicer should document its individual 

mortgage file regarding all servicing 

actions taken during this time period. 

The lender must consider all special 

relief alternatives for disaster assistance 

available to the borrower prior to 

suspending collection and foreclosure 

activities. The suspension of servicing 

actions will expire 90 days from the 

declaration date of the natural disaster, 

unless otherwise extended by the 

Agency. 

* * * * * 

Dated: January 4, 2016. 

Tony Hernandez, 

Administrator, Rural Housing Service. 

[FR Doc. 2016–01872 Filed 2–5–16; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF HOMELAND 

SECURITY 

8 CFR Part 212 

[USCBP–2016–0003; CBP Dec. 16–03] 

RIN 1651–AB09 

Elimination of Nonimmigrant Visa 

Exemption for Certain Caribbean 

Residents Coming to the United States 

as H–2A Agricultural Workers 

AGENCY: U.S. Customs and Border 

Protection, DHS. 

ACTION: Interim final rule; solicitation of 

comments. 

SUMMARY: This interim final rule revises 

Department of Homeland Security 

regulations to eliminate the 

nonimmigrant visa exemption for 

certain Caribbean residents seeking to 

come to the United States as H–2A 

agricultural workers and the spouses or 

children who accompany or follow 

these workers to the United States. As 

a result, these nonimmigrants will be 

required to have both a valid passport 

and visa. The Department of State is 

revising its parallel regulations. 

DATES: Effective Date: The effective date 

of the rule is February 19, 2016. 

Comment Date: Comments must be 

received by April 8, 2016. 

ADDRESSES: Please submit comments, 

identified by docket number, by one of 

the following methods: 


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